QANTAS MANAGEMENT: ADDING VALUE?
Thread Starter
Join Date: May 2006
Location: Paradise
Posts: 9
Likes: 0
Received 0 Likes
on
0 Posts
QANTAS MANAGEMENT: ADDING VALUE?
As a Qantas shareholder who has direct share holdings, and indirect holdings through managed funds, I have found some of the debate on this forum quite illuminating. It is easy to see why staff are disengaged, and I have to wonder if it is time for a shareholder revolt against those at the top? While they have delivered profit and produced good dividends, there has been little or no value added to shareholdings unlike most companies in the ASX200.
Why is management so engrossed with loss making enterprises instead of getting the Qantas brand right? How many millions were 'invested' in setting up Australia Airlines and now, how much is to be spent converting Australian Airlines to Qantas? Was the establishment of Australian a sound proposal?
How much has been so far invested in Jetstar Asia? Unfortunately not a lot is known about this millstone - seat factors aren't even published yet the Qantas shareholder is expected to put up and shut up. What would the losses have been at both Australian and Jetstar Asia if these companies were genuine stand-alone enterprises as much has been written here and elsewhere about Qantas providing a lot of support on a daily basis to these failures. Do they pay Qantas the full cost for these services that would have been paid if purchased elsewhere?
Maybe this is an inherent defect with Australian company law in that little detail has to be released about subsidiaries of listed companies but that said, the operating health of all the subsidiaries should be made known in the same way as the holding company.
Is there anyone here who can shed light on these questions that I would like to see put to Jackson and Dixon at the next AGM, or who can provide some ammunition for other questions that could be raised?
1. How much did it cost Qantas to paint 5 767's for Australian Airlines, and what is the cost now of having to paint them in Qantas livery?
2. What was the cost of putting the all economy seats to the Australian Airlines aircraft and what is now the cost of converting them back to Qantas standards?
3. What was the cost of the recent Australian Airlines uniform change and within but a few monthgs are being ditched to kit the crew in antas uniform?
4. How much was spent ferrying aircraft from Australia and Singapore during the time when Jetstar Asia scaled down its operations?
5. What is the daily aircraft utilisation at Australian Airlines and Jetstar Asia, and how do these rates compare with industry standards?
6. What are the cumulative losses of Australian Airlines and Jetstar Asia?
7. Would the Qantas bottom line have been better off were these two losses makers not set-up?
In view of the hefty bonuses and options those at the top of Qantas receive, some emphasis has to be put on their performance, and quite often the views of the workforce are the best guide, and can show us about other not so public difficult investments and problems. Shareholders not only expect profit but they expect growth, and need to know whay a company can't deliver. Qantas has produced the former but not the latter. Is that a feature of airlines?
Let it all hang out in an objective manner.
Regards all,
Mel.
Why is management so engrossed with loss making enterprises instead of getting the Qantas brand right? How many millions were 'invested' in setting up Australia Airlines and now, how much is to be spent converting Australian Airlines to Qantas? Was the establishment of Australian a sound proposal?
How much has been so far invested in Jetstar Asia? Unfortunately not a lot is known about this millstone - seat factors aren't even published yet the Qantas shareholder is expected to put up and shut up. What would the losses have been at both Australian and Jetstar Asia if these companies were genuine stand-alone enterprises as much has been written here and elsewhere about Qantas providing a lot of support on a daily basis to these failures. Do they pay Qantas the full cost for these services that would have been paid if purchased elsewhere?
Maybe this is an inherent defect with Australian company law in that little detail has to be released about subsidiaries of listed companies but that said, the operating health of all the subsidiaries should be made known in the same way as the holding company.
Is there anyone here who can shed light on these questions that I would like to see put to Jackson and Dixon at the next AGM, or who can provide some ammunition for other questions that could be raised?
1. How much did it cost Qantas to paint 5 767's for Australian Airlines, and what is the cost now of having to paint them in Qantas livery?
2. What was the cost of putting the all economy seats to the Australian Airlines aircraft and what is now the cost of converting them back to Qantas standards?
3. What was the cost of the recent Australian Airlines uniform change and within but a few monthgs are being ditched to kit the crew in antas uniform?
4. How much was spent ferrying aircraft from Australia and Singapore during the time when Jetstar Asia scaled down its operations?
5. What is the daily aircraft utilisation at Australian Airlines and Jetstar Asia, and how do these rates compare with industry standards?
6. What are the cumulative losses of Australian Airlines and Jetstar Asia?
7. Would the Qantas bottom line have been better off were these two losses makers not set-up?
In view of the hefty bonuses and options those at the top of Qantas receive, some emphasis has to be put on their performance, and quite often the views of the workforce are the best guide, and can show us about other not so public difficult investments and problems. Shareholders not only expect profit but they expect growth, and need to know whay a company can't deliver. Qantas has produced the former but not the latter. Is that a feature of airlines?
Let it all hang out in an objective manner.
Regards all,
Mel.
Join Date: Mar 2002
Location: bumf*ck, idaho
Posts: 447
Likes: 0
Received 0 Likes
on
0 Posts
The answer is easy.
As with any listed company, if you don't like the way management are doing business you either don't buy at all or if you own, you sell.
This will reflect in the share price (it does already) and the company will be considered poorly by the market. (it is)
Unfortunately for the staff, it is that simple.
As with any listed company, if you don't like the way management are doing business you either don't buy at all or if you own, you sell.
This will reflect in the share price (it does already) and the company will be considered poorly by the market. (it is)
Unfortunately for the staff, it is that simple.
Join Date: Aug 2001
Location: Sydney
Posts: 731
Likes: 0
Received 0 Likes
on
0 Posts
Here is another question or two for you to ask Mel.
Q1. How much did it cost the QF group to train A330 pilots for a 14 aircraft mainline fleet, then give four of those aircraft to a subsidiary for 18 months-2 years and not utilise their already trained pilots on those aircraft?
Q2. Why have they seen fit to employ outside pilots on these aircraft at further cost, whilst keeping the original pilots of those aircraft on reserve duties doing F*all? (but still getting paid of course.)
Q1. How much did it cost the QF group to train A330 pilots for a 14 aircraft mainline fleet, then give four of those aircraft to a subsidiary for 18 months-2 years and not utilise their already trained pilots on those aircraft?
Q2. Why have they seen fit to employ outside pilots on these aircraft at further cost, whilst keeping the original pilots of those aircraft on reserve duties doing F*all? (but still getting paid of course.)
Join Date: Feb 2004
Location: Australia
Posts: 182
Likes: 0
Received 0 Likes
on
0 Posts
And a few others:
Why is Jetstar flying to Perth when it is a fact that, per ASK, the A330-200’s as operated by Qantas Mainline are actually cheaper, but gets significantly higher revenue, this is why the A330-200’s make in excess of $100 Million (which is 10% of the profit from only 2% of the aircraft).
Can the board confirm that the $100Million dollars plus that these 4 aircraft generate in profit will be made up for by the profit that Jetstar make from these 4 aircraft (it would seem unlikely as the “Wildly Successful” Jetstar Domestics 20+ A320’s only make $40 Mil).
Will the board confirm that they have considered the competition aspects of the Jetstar international business. For example, each of the routes they compete on will be up against a DIFFERENT and LARGER competitor. This means that for the opposition to undercut against Jetstar they are only doing it on one of their many routes, maybe 2 to 5% of their entire route network, yet 20 to 25% of Jetstars network. If they are all aggressive Jetstar cannot survive. The market that exists for Jetstar Australia where you have one major competitor who is rational (VB) is not even close to what the International market will be. This is the lesson from Jetstar Asia that has not been learnt. This whole exercise will make Jetstar Asia look like a good investment!
Why is Jetstar flying to Perth when it is a fact that, per ASK, the A330-200’s as operated by Qantas Mainline are actually cheaper, but gets significantly higher revenue, this is why the A330-200’s make in excess of $100 Million (which is 10% of the profit from only 2% of the aircraft).
Can the board confirm that the $100Million dollars plus that these 4 aircraft generate in profit will be made up for by the profit that Jetstar make from these 4 aircraft (it would seem unlikely as the “Wildly Successful” Jetstar Domestics 20+ A320’s only make $40 Mil).
Will the board confirm that they have considered the competition aspects of the Jetstar international business. For example, each of the routes they compete on will be up against a DIFFERENT and LARGER competitor. This means that for the opposition to undercut against Jetstar they are only doing it on one of their many routes, maybe 2 to 5% of their entire route network, yet 20 to 25% of Jetstars network. If they are all aggressive Jetstar cannot survive. The market that exists for Jetstar Australia where you have one major competitor who is rational (VB) is not even close to what the International market will be. This is the lesson from Jetstar Asia that has not been learnt. This whole exercise will make Jetstar Asia look like a good investment!
Join Date: Mar 2004
Location: USA
Posts: 206
Likes: 0
Received 0 Likes
on
0 Posts
there has been little or no value added to shareholdings unlike most companies in the ASX200
Shareholders not only expect profit but they expect growth, and need to know why a company can't deliver
Join Date: Oct 2005
Location: REAL WORLD
Posts: 352
Likes: 0
Received 0 Likes
on
0 Posts
there is more
why has Qf paid A$ 48 million via secret bidding (the only other serious competitior was BA and they pushed the price up for QF) for the landing slot in london heathrow they cant use to full extend. rumor has it BA wants to lease it from qf rather cheaply.
Jetstar Asia is burning several millions a month. depends who you listen too
A330-200 would have been ideal to fly direct to bombay and other asian cities. but they cant fit a skybed due to flooring problems. another genius in qf management most likely got a promotion for that.
My favourite at the moment is J*star international. the original model is constantly changing. as one insider said after a few beers. "every day something new gets thrown in the equation, another change".
never a dull moment in the industry. time will tell.
Jetstar Asia is burning several millions a month. depends who you listen too
A330-200 would have been ideal to fly direct to bombay and other asian cities. but they cant fit a skybed due to flooring problems. another genius in qf management most likely got a promotion for that.
My favourite at the moment is J*star international. the original model is constantly changing. as one insider said after a few beers. "every day something new gets thrown in the equation, another change".
never a dull moment in the industry. time will tell.
Thread Starter
Join Date: May 2006
Location: Paradise
Posts: 9
Likes: 0
Received 0 Likes
on
0 Posts
Originally Posted by mrpaxing
why has Qf paid A$ 48 million via secret bidding (the only other serious competitior was BA and they pushed the price up for QF) for the landing slot in london heathrow they cant use to full extend.
Join Date: Sep 2000
Location: Sydney, Australia
Posts: 108
Likes: 0
Received 0 Likes
on
0 Posts
It's an interesting question. Given the double digit returns on equity that have (at least until today
)been available from sectors like resources and banking, you have to ask the other obvious question "why invest in an airline at all?" Take a look at the stats - ICAO estimates that international airlines lost a net $4bn last year (mainly as a result of US carriers losing $10bn, whilst the rest of the world's airlines were at least marginally profitable, making around $6bn). In this context, you'd have to concede that QANTAS did pretty well up to June 05 - NPAT (profit) up 18% on revenue growth of 11.4%. This year's results are of course looking an awful lot bloodier on the back of the oil price.
Still, as anyone who's done Business 101 knows, making a profit is not the same thing as providing an adequate return on the funds invested in the business. Given that QANTAS has such a good credit rating, and therefore enjoys relatively cheap access to debt, it should have a major cost of capital advantage (although this is limited to some extent by the foreign ownership millstone). Even though QANTAS won't disclose what its actual cost of capital is, it's widely known that the company's return on equity of less than 12% is less than its cost of capital - and hence by definition, the company has not been adding shareholder value.
Fortunately, the company generates so much cash from operating sources that it hasn't had to conduct an equity raising to fund the aircraft purchases etc - because if it did, the negative spread on its cost of capital would probably be quite embarrassing.
To go to the question that was asked though - is this the fault of QANTAS management? Looking at the historic figures for operating ratio (net profit or loss as a percentage of revenues), the global airline business has rarely averaged above 3-4%. (By comparison, the global car industry has averaged around 12%). Revenues have been declining in real terms for 30 years. There is constant downward pressure on yields because of cyclical over-capacity and the advent of low cost carriers.
Yields can be raised in one of two ways - increase load factors or cut costs, and preferably both. With fuel and personnel comprising an ever increasing percentage of total costs, is there any alternative but for management to look for more areas for efficiencies or cuts? This is why those who moan about Jetstar, VB and the other LCC's are wasting their breath - they might as well demand that the CEO stop the tide from coming in tomorrow.
There's a line in the Lord of the Rings that I think is apposite. Talking about the "doom of choice", Aragorn says of Rohan : "None may now live as they have lived - and few shall keep what they call their own". Sums up the future of the airline business over the next 20 years pretty neatly I reckon...
SW
)been available from sectors like resources and banking, you have to ask the other obvious question "why invest in an airline at all?" Take a look at the stats - ICAO estimates that international airlines lost a net $4bn last year (mainly as a result of US carriers losing $10bn, whilst the rest of the world's airlines were at least marginally profitable, making around $6bn). In this context, you'd have to concede that QANTAS did pretty well up to June 05 - NPAT (profit) up 18% on revenue growth of 11.4%. This year's results are of course looking an awful lot bloodier on the back of the oil price.Still, as anyone who's done Business 101 knows, making a profit is not the same thing as providing an adequate return on the funds invested in the business. Given that QANTAS has such a good credit rating, and therefore enjoys relatively cheap access to debt, it should have a major cost of capital advantage (although this is limited to some extent by the foreign ownership millstone). Even though QANTAS won't disclose what its actual cost of capital is, it's widely known that the company's return on equity of less than 12% is less than its cost of capital - and hence by definition, the company has not been adding shareholder value.
Fortunately, the company generates so much cash from operating sources that it hasn't had to conduct an equity raising to fund the aircraft purchases etc - because if it did, the negative spread on its cost of capital would probably be quite embarrassing.
To go to the question that was asked though - is this the fault of QANTAS management? Looking at the historic figures for operating ratio (net profit or loss as a percentage of revenues), the global airline business has rarely averaged above 3-4%. (By comparison, the global car industry has averaged around 12%). Revenues have been declining in real terms for 30 years. There is constant downward pressure on yields because of cyclical over-capacity and the advent of low cost carriers.
Yields can be raised in one of two ways - increase load factors or cut costs, and preferably both. With fuel and personnel comprising an ever increasing percentage of total costs, is there any alternative but for management to look for more areas for efficiencies or cuts? This is why those who moan about Jetstar, VB and the other LCC's are wasting their breath - they might as well demand that the CEO stop the tide from coming in tomorrow.
There's a line in the Lord of the Rings that I think is apposite. Talking about the "doom of choice", Aragorn says of Rohan : "None may now live as they have lived - and few shall keep what they call their own". Sums up the future of the airline business over the next 20 years pretty neatly I reckon...
SW
Guest
Posts: n/a
You might also ask how much is qantas paying to prop up Jetstar, to make sure they make a paper profit.
All those overheads that qantas pay for and provide. Those prime departure arrival gates, check in counters, baggage belts, staff car parking, use of flight training facilities at Essendon just to name a few.
No other start up airline gets this for nothing.
And how about the handing over of prime domestic routes to prop up Jetstar.
Tasmania, Gold coast, Hammo island, Sunshine coast. And now Melbourne- Darwin direct. Theres no way you can fly this route with qantas anymore without going via some other port.
They are spoon fed what they need. Obviously Geoffs love child.
A perusal of comparison airfares on the Flightcentre website shows an interesting trend. Qantas appear to be leaving the deep discounting to Jetstar by pricing their product higher. If this means flying around half empty so be it. Won't compete against the subsidiary golden child.
But are they really making a profit on those $49 specials, or are they desperate for cash flow. The shareholders should be given the picture.
All those overheads that qantas pay for and provide. Those prime departure arrival gates, check in counters, baggage belts, staff car parking, use of flight training facilities at Essendon just to name a few.
No other start up airline gets this for nothing.
And how about the handing over of prime domestic routes to prop up Jetstar.
Tasmania, Gold coast, Hammo island, Sunshine coast. And now Melbourne- Darwin direct. Theres no way you can fly this route with qantas anymore without going via some other port.
They are spoon fed what they need. Obviously Geoffs love child.
A perusal of comparison airfares on the Flightcentre website shows an interesting trend. Qantas appear to be leaving the deep discounting to Jetstar by pricing their product higher. If this means flying around half empty so be it. Won't compete against the subsidiary golden child.
But are they really making a profit on those $49 specials, or are they desperate for cash flow. The shareholders should be given the picture.
Join Date: Apr 2006
Location: Vietnam
Posts: 29
Likes: 0
Received 0 Likes
on
0 Posts
Not to mention...
'They are proud and wilful, but they are true-hearted, generous in thought and deed; bold but not cruel; wise but unlearned, writing no books but singing many songs, after the manner of the children of Men before the Dark Years.
Join Date: Jul 2003
Location: House
Posts: 173
Likes: 0
Received 0 Likes
on
0 Posts
Dear Qantas Board,
Could you please answer the following questions?
"How much has Qantas paid for the services of Ian Oldmeadow and his company during their tenure with the organisation?"
"What value does Ian Oldmeadow bring to Qantas and what percentage of the Hewitt survey levels of disengagement would you directly attribute to his activities?"
"What amount of money was spent on the Hewitt survey and why were the results never presented in full to the employees?"
"Does the Board endorse the management style of Mr Dixon and his quickly increasing reputation as a man who uses bad news for his own good?"
Could you please answer the following questions?
"How much has Qantas paid for the services of Ian Oldmeadow and his company during their tenure with the organisation?"
"What value does Ian Oldmeadow bring to Qantas and what percentage of the Hewitt survey levels of disengagement would you directly attribute to his activities?"
"What amount of money was spent on the Hewitt survey and why were the results never presented in full to the employees?"
"Does the Board endorse the management style of Mr Dixon and his quickly increasing reputation as a man who uses bad news for his own good?"
Join Date: Jan 2006
Location: Straya
Posts: 537
Likes: 0
Received 0 Likes
on
0 Posts
Get a bit more fundamental - this is after all a once government (public) owned asset - resold back to the public (thru direct or super investment). The executive who now drive it - what is their primary goal? Is it the long term sustainability of the business? I think not. Is it customer (and customer service) driven? I think not.
The only reason many funds are invested in QANTAS is that they basically have to be to spread their risk exposure across the market.
If you based the investment on the motivation and strategy of the executive, you would drop it like a cold spat-on chiko roll and watch the share price tumble south.
In fairness, QF are not alone on having a company run this way - it is partly why the unsustainable expectations of the market and the market makers is going to lead to a very nasty correction in the near future which will leave many of these funds looking sick. The executives with their multi-million dollar parachutes will be ok however.
The only reason many funds are invested in QANTAS is that they basically have to be to spread their risk exposure across the market.
If you based the investment on the motivation and strategy of the executive, you would drop it like a cold spat-on chiko roll and watch the share price tumble south.
In fairness, QF are not alone on having a company run this way - it is partly why the unsustainable expectations of the market and the market makers is going to lead to a very nasty correction in the near future which will leave many of these funds looking sick. The executives with their multi-million dollar parachutes will be ok however.
Join Date: Nov 2005
Location: R1P
Posts: 102
Likes: 0
Received 0 Likes
on
0 Posts
GD will do anything to make his illegitemate bastard child J* succeed. Even if it means the destruction of Qantas LH over the next few years. All the so called "money saving" ideas that have been inflicted on Qantas, creating huge " bonus payments" for management pale into insignificance when compared to the tragic bleeding of funds by J* asia and the ongoing setup of J* Int. The biggest joke is the LHR Base, saving 18M per annum but apparently costing an estimated 23M to run and escalating. It's all Smoke and Mirrors till the current Management destroy Qantas and then move on to the next victim with their pockets bulging.
Join Date: Jul 2003
Location: House
Posts: 173
Likes: 0
Received 0 Likes
on
0 Posts
Qantas staff low on corporate spirit
By Robert Wainwright
The Age February 15, 2005
The Flying Kangaroo may be one of our most famous logos but it appears Qantas staff do not feel particularly warm and fuzzy about the airline.
A six-month survey of more than 8000 staff has thrown up mixed results about their "engagement" with the company and its future. Though senior managers will not confirm the figures, staff say they were told the results, in some areas, were among the lowest recorded by human resources company Hewitt Associates, which carried out the survey.
While about three-quarters of the staff employed by companies such as Hewlett-Packard, Virgin Blue and Australian Airlines were found to be "engaged" in their work, Qantas domestic, or short-haul, staff rated only 53 per cent and international, or long-haul staff, 22 per cent.
It comes as the company pursues controversial plans to move as many as 7000 jobs offshore while preparing, next week, to announce record interim profits on the back of improved international operations and cost-cutting.
Kevin Brown, Qantas' executive general manager of people, would not discuss specific results except to say the company, overall, had been rated as "stable" and there was a range of results.
By Robert Wainwright
The Age February 15, 2005
The Flying Kangaroo may be one of our most famous logos but it appears Qantas staff do not feel particularly warm and fuzzy about the airline.
A six-month survey of more than 8000 staff has thrown up mixed results about their "engagement" with the company and its future. Though senior managers will not confirm the figures, staff say they were told the results, in some areas, were among the lowest recorded by human resources company Hewitt Associates, which carried out the survey.
While about three-quarters of the staff employed by companies such as Hewlett-Packard, Virgin Blue and Australian Airlines were found to be "engaged" in their work, Qantas domestic, or short-haul, staff rated only 53 per cent and international, or long-haul staff, 22 per cent.
It comes as the company pursues controversial plans to move as many as 7000 jobs offshore while preparing, next week, to announce record interim profits on the back of improved international operations and cost-cutting.
Kevin Brown, Qantas' executive general manager of people, would not discuss specific results except to say the company, overall, had been rated as "stable" and there was a range of results.
Join Date: Apr 2005
Location: sydney, australia
Posts: 407
Likes: 0
Received 0 Likes
on
0 Posts
Thanks for that. The name Oldsmeadow has always been closely followed by some expletives that would earn a months holidys from this site in the area that I work.
Oldsmeadow's job is to "disengage staff " from their conditions.
Oldsmeadow's job is to "disengage staff " from their conditions.
Registered User **
Join Date: May 2005
Location: The Ultimate Crew Rest....
Age: 69
Posts: 2,346
Likes: 0
Received 0 Likes
on
0 Posts
For a company that exists in a business that relies on customer service ,QF seems intent on shooting itself in the foot on a continual basis. It is hard for people to show enthusiasm and focus on the customer when they are constantly besieged by the company with threats of job cuts ,relocation and erosion of pay and conditions.
The latest (dis) engagement survey shows this and will be of no surprise to anyone employed by the company with the exception of the top echelon who travel between Mosman and Mascot in a Porsche with GPS navigation .
There are a number of questions that each and every department in QF could ask regarding various policies and decisions if given the chance but in all probability never will.
This thread titled QANTAS MANAGEMENT:ADDING VALUE could not be more accurate but it is only the value to the bonus’s of the few that is being increased not the share price or inherent value of the company.
The latest (dis) engagement survey shows this and will be of no surprise to anyone employed by the company with the exception of the top echelon who travel between Mosman and Mascot in a Porsche with GPS navigation .
There are a number of questions that each and every department in QF could ask regarding various policies and decisions if given the chance but in all probability never will.
This thread titled QANTAS MANAGEMENT:ADDING VALUE could not be more accurate but it is only the value to the bonus’s of the few that is being increased not the share price or inherent value of the company.
Last edited by lowerlobe; 17th May 2006 at 01:55.
Join Date: Apr 2005
Location: sydney, australia
Posts: 407
Likes: 0
Received 0 Likes
on
0 Posts
Another example of the lack of value in insulting your staff is that when someone mentions that they are flying overseas the response used to be "hope you're flying qantas as we really look after the aircraft "
Now it's "get the cheapest ticket because I can no longer vouch for the quality of work performed"
It's not the best advertising in the world..is it?
Now it's "get the cheapest ticket because I can no longer vouch for the quality of work performed"
It's not the best advertising in the world..is it?