Qantas Cuts Capacity in Response to Oil Prices

[Deni G]

Sorry only version of press release I could find.

Source asx.com.au

http://www.asx.com.au/asxpdf/20080528/pdf/319c31g5wnckkp.pdf

[Sarah C]

This big news out of that is:
- Accelerating retirement of the 743 to December - not surprising
- Retiring one 737 (734 I believe)
- Grounding two 767 and one JQ 320 (wonder which two they will ground)
- Cancelling delivering of an A321.

Some big decisions made given the price of fuel

[Michael Morrison]

JQ axe ADL-MCY, BNE-HBA and SYD-PPP as well as reduce AVV/ADL/CNS flying

QF axe MEL-AYQ and SYD-OOL and reduce SYD-AYQ

[Rhys Xanthis]

wow, i must say i wasnt expecting anything as serious as grounding to 767's and canning an a321 order, ground a320...surprising.

not so surprising is the exit from sydney-ool, but it makes it that much harder for pax travelling via syd to ool from per...re check ins make me angry:mad:

edit: i bet virgin is grinning from ear to ear...e-jets are ready to shine in a BIG way.

edit2: could we perhaps see some different routing arrangements for aircraft (744) going to europe? perhaps terminating at SIN, getting some a333's pronto?
perhaps qf axe lax-jfk route?
rethink its syd-scl route?

[Chris Tully]

Media Release:
QANTAS CUTS CAPACITY IN RESPONSE TO FUEL PRICES


SYDNEY, 28 May 2008: The Qantas Group today responded to continuing high fuel prices by announcing a range of cost saving measures including the cancellation of five per cent of Available Seat Kilometres (ASKs) – the equivalent of grounding six aircraft.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said Qantas’ fuel bill would increase by more than $2 billion in 2008/09, representing around
35 per cent of the company’s total expenditure.

“The fact is that fuel prices are something we have no control over, so we have to look harder at areas where we do have control,” Mr Dixon said.

“Despite our fuel hedging strategy, fuel surcharges, two separate
across-the-board fare increases and a recruitment freeze, we are not bridging the widening gap between the actual increase in the cost of fuel and the amount we offset.”

Mr Dixon said the Qantas Group would manage the reduction in ASKs by:

retiring one B737 aircraft;
grounding two B767 aircraft and one Jetstar A320 aircraft;
cancelling the delivery of one Jetstar A321 aircraft;
accelerating the retirement of its four B747-300 aircraft, currently
operating trans-continental services to Perth, by December; and
adjusting the flying patterns of other aircraft, including reducing the
utilisation of the B747-400 fleet.

“This will enable us to make significant changes to domestic and
international flying for both Qantas and Jetstar. In some cases, this will involve pulling off routes entirely. In other cases, we will scale back frequencies and capacity.”

In the domestic market, Mr Dixon said:

Qantas would exit its Gold Coast-Sydney and Ayers Rock-Melbourne routes
and reduce Ayers Rock-Sydney services from August;
Jetstar would exit its Sydney-Whitsunday Coast, Adelaide-Sunshine Coast,
and Brisbane-Hobart routes from July; and
Jetstar would reduce services on some Adelaide, Avalon and Cairns routes
by August.

“Wherever possible, we have tried to minimise the overall impact of the changes. For example, Jetstar will continue to offer more than 140 return services to the Gold Coast each week, including up to 10 services a day on the Sydney-Gold Coast route.

“The Qantas Group, through Jetstar, remains the largest carrier in and out of the Gold Coast.”

Mr Dixon said Qantas was finalising details of its international network restructure, including capacity adjustments and market exits, and would announce these within the next week.

“Qantas remains a fundamentally strong company, with a good balance sheet and a commitment to investment that includes a $35 billion order for aircraft,” Mr Dixon said.

“We must make these hard decisions now, however, if we are to ensure the ongoing strength of Qantas, preserve the jobs of the vast majority of our current workforce, and position ourselves for growth when the trading environment improves.”

He said that the magnitude of the changes would require a reduction in staff numbers.

“This week we will launch an accelerated leave program to mitigate the requirement for redundancies, but it is inevitable that a reduction in staff numbers will be necessary in selected parts of our business,” Mr Dixon said.

“As always, we will communicate with our people. In the first instance, redundancies will be carried out on a voluntary basis.”

Mr Dixon said that in addition:

the pay for all of the company’s senior executive group would be frozen;
and
the normal July pay review for the remaining 1,000 executives would be
deferred.

He said passengers affected by the schedule changes would be contacted to discuss alternative arrangements.

[Michael Morrison]

Any bets JQ will drop some Japan routes with the announcements next week?

perhaps free up a 332 to replace QF on MNL/HNL totally or some NRT services from say PER?

Axing of SYD-CHC (mostly LCC's at CHC these days?)

[Andrew P]

edit: i bet virgin is grinning from ear to ear...e-jets are ready to shine in a BIG way.



guess they are in a much pain as QF is in with the fuel prices, so will be interesting if they follow along a similar vain.

Banjo

[Rhys Xanthis]

Any bets JQ will drop some Japan routes with the announcements next week?

perhaps free up a 332 to replace QF on MNL/HNL totally or some NRT services from say PER?

Axing of SYD-CHC (mostly LCC's at CHC these days?)

well nrt services are operated by 767 from perth now, so its well possible.

i wonder how service loads to singapore are going? 3 daily with singapore, soon to be 2 with tg, 2 x daily qf with a 3rd via denpasar/jakarta some days. although i guess its used for passage to europe mostly.

perhaps we see a 744 going 1 x daily on this route in the future? although the a333's are on pretty weird rotations i think (from singapore and hkong)

[Greg F]

DJ would be feeling the exact pain as the QF group.

The E-Jets are no more economical than a 737 or A320, if infact I would have thought worse.

also on the Tiger front I read somewhere with a big boss saying ' Tiger Australia is traveling reasonably well ' which isn't that convincing...

Seems that the Oil price issue is hurting Aussie Airlines badly. :(:(

[Brenden S]

Oil is hurting everyone around the world, that is what you pay with china and India consuming more.

[Montague S]

can anyone say the word merger?

[Kain C]

Jetstar would exit its Sydney-Whitsunday Coast, Adelaide-Sunshine Coast, and Brisbane-Hobart routes from July

How ridiculous!!! JQ only said the other week they were looking at adding new HBA-OOL services as demand from HBA-South East Queensland was booming! The demand obviously is booming as DJ had previously added additional 737 services on top of their existing daily HBA-BNE flight! Hopefully DJ will go up to double daily now.

[Greg F]

Open your eyes... look around the world... its happening everywhere and at a rather rapid pace too... reduce flights and A/C and fly at full capacity on what you have.

I cant see why DJ wont do a 'double daily' as you say...
Their share prices a rocketing up!!! they are going great!!! (slight sarcasm :p)
Its funny that REX is making more $ per quarter than DJ does in a year..

DJ will follow suit, they will just do it in the way they always do,
Let QF or JQ do it first, cop the media bashing, then they sneakily do it and nobody notices...

[Michael Morrison]

Their share prices a rocketing up!!! they are going great!!! (slight sarcasm :p)
Its funny that REX is making more $ per quarter than DJ does in a year..

...

According to Rex that is.

virgin's last profit guidance was to have profit of around $140M for the full year....

Rex's latest announcement was for a profit of $8.2m for the 3rd quarter with full year profit expected to be around $23M....

Now how on earth is $23M from Rex in year more than Virgin and $140M?????

[Marty H]

can anyone say the word merger?

If that was the case what likely merge could take place?

[Rhys Xanthis]

If that was the case what likely merge could take place?

perhaps with singapore? its been bandied about for some time (but i personally highly doubt it).

i doubt any merger will be done at all.

[Michael Cleary]

All prices are going up, not just within AUS.

I am going to Zurich in October and made the Booking (Points Redemption) back in February. At that time the Taxes were AUD 482.88 - and a look now shows the Taxes to be AUD 547.18 for a Booking made today - and will probably be higher by the time that I depart.

These Oil Prices are causing belt tightening everywhere.

For info, a SYD-ZRH-SYD return, departing SYD 04/10/08 returning 04/11/08 on SQ is AUD 1590.00 + 547.18 Taxes = AUD 2137.18 - the Taxes accounting for 25% of the Total. Not surprisingly I guess, but to depart on SQ222 (A380) on that date adds AUD 200 to the fare.

[Jason Carruthers]

It's very odd JQ are dropping BNE-HBA meanwhile keeping it's 4x weekly BNE-LST rotation. I would have expected LST or both to go.

IIRC Isn't BNE-LST Subsidised?



Jason

[Ian Garton]

It's very odd JQ are dropping BNE-HBA meanwhile keeping it's 4x weekly BNE-LST rotation. I would have expected LST or both to go.

I find this one surprising too. Having flown JQ on this route a few times the flights have always been pretty full. ACARS load reports for the route seem consistantly good too.

It would have surprised me less if JQ dropped the BNE-DRW nightly instead.

[Tom Lohdan]

I am going to Zurich in October and made the Booking (Points Redemption) back in February. At that time the Taxes were AUD 482.88 - and a look now shows the Taxes to be AUD 547.18 for a Booking made today - and will probably be higher by the time that I depart.

Depends on the Airline to how they charge you with taxes.

Last month I did a weekend MEL-LAX-PHL-SFO-MEL cost me $62US in taxes on a reward ticket.

Which is weird, because when I took a friend to LAX on reward in December it cost $72US in taxes.

I am 1K with United so many fee's are removed.

Details: MEL on Saturday, 11 hours in LA, overnight flight to Philly, 11 hours, evening flight from PHL with a connection in SFO to MEL via SYD, and rocked up to work by 11am. Not Hotels or showers, amazing what you do in a bathroom of an aircraft :eek: No checkin luggage either.

[Lukas M]

Also on the Tiger front I read somewhere with a big boss saying ' Tiger Australia is traveling reasonably well ' which isn't that convincing...

or when he goes
"We are not planning to raise fare prices across the board"" so Basically saying "Were commiting suicide"

[Stuart Trevena]

Hi All,

So why aren't JQ axing the Perth-Melb (Tulla) flight?

It leaves nearly the same time as the QF Flight?

If they must keep that flight, at least ops it Avalon instead of having a duplicate flight.

Stuart

[Grant Smith]

or when he goes
"We are not planning to raise fare prices across the board"" so Basically saying "Were commiting suicide"

Yes Lukas, because you are an aviation finance guru :rolleyes:

FYI: It's we're as in we are, not were - your above comment implies that Tiger was / had been (somehow) committing suicide...

[Andrew P]

perhaps free up a 332 to replace QF on MNL/HNL totally or some NRT services from say PER?

Axing of SYD-CHC (mostly LCC's at CHC these days?)then in today's SMH

Qantas chief reaches for the knife

(http://business.smh.com.au/qantas-chief-reaches-for-the-knife-20080528-2j2t.html)amid speculation it could look to cut services on routes such as Manila, Honolulu and even some trans-Tasman services.

wonder if this Board is the source of the writer speculation???

Banjo

[Sarah C]

I think the writer is spot on. I wonder how the loads are for Manila, they certainly are not full. Honolulu just increased service by one per week so that may go back (due to grounding two 767). I also think Japan is on the cutting block too- I say it would be first to go

[Lukas M]

I think we might see those 9 Daily AVV-SYD services cut to at least 7

[Steve Jones]

Lots of empty seats on SYD-CBR too to keep up the frequency (esp as QF have added more 737s to compete with the Ejets), but I guess QF won't cut services (or downgrade to Dash 8s on some services) unless Virgin reduce...

[Lukas M]

Didn't that A321 that was cancelled have a bad airframe???, or a not healthy airframe. Apparently its not in the best of conditions

[Michael Morrison]

Didn't that A321 that was cancelled have a bad airframe???, or a not healthy airframe?

Thats what they are saying on PPRUNE (are you flyer-18 737 over there?)

How many more 738's are due this year? I guess if they are coming on more 734's are to be retired?

QF have also wanted to get out of OOL for a while - so high oil prices are a good way to finally be done with that market.

[Andrew M]

Expect cuts to Japan, Honolulu in my opinion

[Greg F]

(A321's - JQ)

I heard that there were contractual issues between JQ/QF and Spirit Airlines, with the first two taking too long to be delivered and a lot of money needing to be spent on them to get them up to scratch, and therefore JQ opting out of the contract for the last Aircraft......

[Brian Wilkes]

Should retire the 734's and 743's A.S.A.P and convert 4 older 744's into BCF'S should save them some lease money on Atlas planes as well.

Stop growing Jetstar at such a high rate! Which is killing Qantas!

[Nigel C]

I think we might see those 9 Daily AVV-SYD services cut to at least 7


How do you surmise that? Inside info, or just a guess?

[BradR]

Stop growing Jetstar at such a high rate! Which is killing Qantas!

How do you figure that? Without the lower cost structure built into JQ, QF would be really struggling and would have had to move out of nearly all leisure routes. JQ has enabled them to remain on these routes as well as putting competitive pressure on DJ.

Even if you look at the routes QF mainline domestic announced they were withdrawing from yesterday you would have to say they really should have been JQ routes all along. SYD-OOL and MEL-AYQ are leisure routes and really do not support a full-service carrier anymore.

Brad

[Michael Mak]

How do you surmise that? Inside info, or just a guess?
Slightly OT, JQ626 AVV-SYD was cut for about 2 months last year. I was booked on this flight but JQ rebooked the the earlier flight JQ624.

[Greg F]

Seems that Virgin Blue are about to follow suit and reduce services according to the Sydney Morning Herald.
Bit of a radical change as everybody's massive plans for rapid expansion seem to have been put on hold for the moment.

And you know who you are, im not bashing DJ, this would be a good move for them too.


Virgin set to axe routes

Virgin Blue is expected to follow Qantas's lead and announce cuts to its less profitable routes as soon as next week.

The airline has a "strategic review meeting'' scheduled for next week, where the key item of discussion will be the airline's soaring fuel bill.

After Qantas and its low-cost offshoot Jetstar yesterday announced plans to cut 5% of their domestic and international capacity from July, it is expected Virgin Blue will follow suit and cut flights on routes where it is struggling to turn a profit.

Virgin Blue spokeswoman Heather Jeffery declined to comment on Virgin Blue's plans but hinted the airline could take drastic steps to cut its fuel bill.

"We've said before no airline model can remain profitable with jet fuel at $US170 a barrel. Airlines can't continue to absorb fuel costs at these levels,'' said Ms Jeffery.

Qantas-Jetstar's reduction in services on low-yielding leisure routes - such as Ayers Rock, the Gold Coast and Hobart - will allow Virgin Blue to reduce capacity and still maintain its 30-odd per cent share of the domestic market. It is the first time since the collapse of Ansett in 2001, that the Australian domestic aviation market has contracted.

Shares in Virgin Blue touched a new all-time low of 70 cents this morning, and have now fallen 72% over the past year. Qantas shares were down 1.7% at $3.39.

The fall in Virgin Blue's share price has been more dramatic than Qantas's, given the low-cost carrier has less of its fuel hedged than its full-service rival.

Another disadvantage Virgin Blue has, is its higher exposure to price sensitive passengers. Qantas's dominance of the corporate and government travel market means a higher percentage of its passengers can absorb higher ticket prices and fuel surcharge rises.

This is one reason why Virgin Blue has been keen to attract more corporate passengers in recent years, through the introduction of a frequent flyer program, lounges and more recently premium economy seats on its 737 aircraft.

Sydney Morning Herald

[Chris Tully]

Didn't that A321 that was cancelled have a bad airframe???, or a not healthy airframe. Apparently its not in the best of conditions


Totally false. Nothing to do with the aircraft.

HNL is a good performer for QF. If anything, BOM would be the worst performer. Certainly low yielding.

[Adrian C]

What QF is doing and what DJ is about to do comes straight from 'Airline Profits for Dummies'.

Where's all the money made in Australia? Simple - Melbourne-Sydney-Brisbane.

What have we seen a proliferation of in recent years? Hub bypassing, those hubs being the ones listed above. Now that's all very well when the oil price is favourable, but when it starts to bite you're left hauling a lot of empty seats at the back of a 767 around the Golden Triangle, and at the end of the day you give them away to fill the plane.

Need to save some dough? Simple. Cut your hub bypassing, your flights to Avalon, your services from Timbuktu direct to Brisbane or Mackay. People want to fly from Hobart to Brisbane? Put 'em on a flight to Melbourne, then connect to Brisbane? Keeps the load factors high on Tassie-Melbourne flights and you can raise the fares without risking not having enough punters to fill them. Those same punters are then paying a realistic fare on the Melbourne-Brisbane leg, and the backpackers who only pay $69 to get to Brisbane can go back to catching the freaking bus.

The QF decision to get out of the Gold Coast smells more like "whatcha gonna do about it?" than anything to do with cost cutting. Force the suits onto Jetstar and still get your slice of the market because there's no other full-fare carrier to take their business. It's the sort of calls you can make when you're the only full-service airline in the market. If the business lobby on the Gold Coast want more legroom that badly, they can catch a flight out of Brisbane.

I heard a prediction today that oil might ultimately crack $200 a barrel. If that happens, we might be studying The Flintstones' approach to public transport. :D

[Grant Smith]

From this morning's Australian...

QANTAS will accelerate its Sustainable Future restructuring program and could give a greater proportion of its flying to Jetstar as part of ongoing changes as it grapples with spiralling oil prices.

The carrier made front page news yesterday when it announced it would ground planes, withdraw from poorly performing routes, axe jobs and freeze executive salaries in response to the record cost of jet fuel.

Although the airline's extensive hedging means the high fuel prices are not expected to affect this financial year's record profit of about $1.4 billion, more expensive hedging in 2008-09 means fuel will cost it an extra $2 billion in 2008-2009.

The Qantas move to reduce capacity by 5 per cent was welcomed by financial analysts but has met with suspicion by unions.

It will be achieved by grounding seven Qantas mainline aircraft and one Jetstar A320 as well as cancelling a Jetstar A321 order.

Qantas and Jetstar are also canning five underperforming routes and reducing services on others. The routes, which were marginally profitable at lower fuel prices, have become unviable at current costs.

Next week, the group will also announce reductions to its international services, with analysts predicting mainline Japanese routes are among the most vulnerable.

But Qantas chief executive Geoff Dixon made it clear this week that continuing high fuel prices meant the airline still had major changes to make.

"We've got a Sustainable Future program, as you know," he said. "We'll ramp that up more, we'll just have to push the envelope in every area.

"I mean, we're not the only airline doing this, of course.

"We've probably moved more quickly than others and that's been part of the reason of our success.

"Our big aim on this - because we've got a strong balance sheet and we're a strong airline, although we do need to meet our commitments - is that we want to be very strong and be able to grow again when the business changes.

"Now if the oil prices are here forever, that means we have to continue to change our model.

"We'll probably see more of Jetstar, but not necessarily at the expense of Qantas."

While unions decried the Qantas announcement as an industrial ploy, analysts welcomed it as a positive for the airline.

"Management is aggressively positioning the business to overcome unprecedented fuel costs before profit is impacted," JPMorgan analysts Matthew Crowe and Russell Crichton-Browne said in a note.

"This has not always been the case for Qantas.

"We expect the capacity cuts to be positives for load factors and yields, especially in the domestic market."

The analysts said the Qantas fiscal 2009 fuel guidance reflected current spot prices and implied a crude price of $US130 a barrel, with a refining margin of $US30 at a US95c exchange rate.

"We do not expect the current spot jet fuel price to be maintained in financial year 2009," the analysts said.

Despite the approval by analysts, unions yesterday attacked the Qantas cuts as an industrial strategy. Qantas is attempting to keep all its unions to a 3 per cent pay increase and is in dispute with its engineers, who want a 5 per cent rise. Its 3 per cent pay offer to Transport Workers Union members looks set to receive a similar rebuff.

WU national secretary Tony Sheldon yesterday described the capacity cutback announcement as industrial ambush.

"It reeks of industrial espionage," he said. "Qantas needs to be honest about what it is up to."

But Mr Dixon rejected the union claims. "It's total bull****," he said. "We didn't plan the escalation of oil at this time."

I particularly enjoyed the Mr Dixon's response... It's about time he started calling a spade a spade :D

[Adam P.]

Morning Granny, doncha love shiftwork!

Adrian:
I heard a prediction today that oil might ultimately crack $200 a barrel
A mate of mine was asked in an interview for the QF graduate program about two years ago "what would you do if oil cracked $100 a barrel". His response was something similar to what you see airlines doing now - schedule cutbacks to increase load factors on the remaining flights so fares could be increased to compensate.

Oil will crack $200 a barrel sooner rather than later. Ultimately it will become unavailable.... not for a little while yet though.

[Grant Smith]

Morning Granny, doncha love shiftwork!

Certainly beats fighting off traffic... And it's fuel efficient too (keeping it on topic ;))

[Nigel C]

I heard a prediction today that oil might ultimately crack $200 a barrel. If that happens, we might be studying The Flintstones' approach to public transport. :D

Not everyone is convinced it will hit, or stay at $200 a barrel.

From www.news.com.au on the 25th May

Oil price 'a bubble waiting to burst'

May 25, 2008 04:21am

DESPITE all the gloom, oil prices are predicted to fall 30 per cent within 12 months, giving motorists much-needed relief.

Many economists argue that the present oil market is a bubble waiting to burst, much like the tech-stock boom in 2000.

They say the price is being boosted by speculators, and point to a Persian Gulf chock-full of supertankers, chartered by oil-rich governments to hold fuel they cannot sell.

Oil retreated slightly from its record high of $US135 a barrel last week and economists tip it will fall to around $US100 in six to 12 months.

However, it may top $US150 before that happens.

With the Australian dollar expected to reach parity with the US dollar by September, the currency will continue to provide a buffer against petrol getting much higher.

"If we see pull-back in the oil price in the longer term, it's likely to be better news for motorists," CommSec equities economist Savanth Sebastian said.

"There is speculation in financial markets, which is what's driving the price further upwards. The expectation is that it's unsustainable at these prices and should work its way back down."

"We believe the long-term forecast for oil is below $US100 a barrel. We could see prices get down to $US80/$US90 a barrel."

ANZ head of international economics Amy Auster said ANZ had forecast oil to fall to $US106 by the end of 2008.

"It would be a pretty significant decline. From $US130 a barrel to $US100 a barrel is a 30 per cent decline," she said.

[Grant Smith]

I wonder what Tom Petrovski at CommSec thinks about this... Tom?

:D

[Rhys Xanthis]

I wonder what Tom Petrovski at CommSec thinks about this... Tom?

:D

its actually Piotrowski:p

http://youtube.com/watch?v=BcyY8xd6eho

hehe

[BradR]

Even $100 would remain a problem for a lot of airlines who have based their current business models on oil being no more than $85.

Brad

[Michael Morrison]

Even $100 would remain a problem for a lot of airlines who have based their current business models on oil being no more than $85.

Brad

Mainly US airlines who still think it will be $60 per barrel!

Southwests fuel hedging is an example. They have hedged at $60 per barrel until july next year - after that they have no hedging.... presumably as they didnt think it would stay this high.

[Chris Tully]

Current price of jet fuel in Singapore sits at USD$166.00

[Lukas M]

Virgin isn't in the best of positions at the moment:

VIRGIN Blue is set to become a bigger thorn in the side of its 62.7% owner Toll Holdings, with one broker warning the airline is not only losing money, but could need an injection of funds if fuel prices remain at current levels.
UBS's research arm has slashed its forecast for Virgin of $60 million net profit next financial year to a $40 million loss, warning the carrier's capital position could become "strained" if jet fuel prices remain at about $US160 a barrel.
"We believe Virgin Blue is currently losing money, and we forecast a full-year loss in (2008-09) on our $US150 per barrel jet fuel assumption," UBS analyst Simon Mitchell says in a note to clients.
"At the current spot (price), a loss-making scenario looks even more certain."
The benchmark Singapore jet fuel price hit an all-time high of $US173.55 last Tuesday before ending the week slightly below $US160 a barrel. The doubling in jet fuel prices over the past 12 months has been compounded by refining margins rising even more than oil prices.
UBS says one problem for Virgin Blue is the huge amount of capacity set to come into the market, with the huge number of aircraft orders by Jetstar, Virgin Blue, Qantas and Tiger set to increase the number of seats in 2008-09 by 9%.
"The key problem for the airline is the lack of pricing power in the domestic market, given rampant capacity growth," the broker said. The increased capacity is expected to reduce the ability of airlines — especially those heavily exposed to the leisure segment such as Virgin Blue and Jetstar — to cut their fares.
Virgin Blue is this week expected to follow the lead taken by Qantas and Jetstar, cutting capacity on loss-making routes.
Unlike Qantas, however, which has been able to retire older aircraft that have already been fully depreciated, Virgin Blue's relatively new fleet gives it less flexibility.
Despite Jetstar announcing plans to "ground" one of its jets and cancel one order, the low-cost Qantas airline is still set to triple its fleet with a short-haul jet order of about 60 aircraft.
UBS says the strain on Virgin Blue's balance sheet would be exacerbated by the $2.3 billion of debt it needs to fund the 33 jets it has on order. This includes the $800 million needed to pay for six Boeing 777s for its V Australia long-haul airline.
If jet fuel remains at about $US160 a barrel, UBS warns that Virgin Blue could need fresh capital in 2009-10. This would no doubt be a major headache for Toll boss Paul Little, who only recently shelved attempts to sell the stake in Virgin Blue that Toll inherited from its takeover of Patrick Corp in 2006.
Virgin Blue shares hit an all-time low of 68¢ last Thursday, well down from their high of $2.75 in February last year. The UBS note follows a JPMorgan report that said Virgin Blue was the listed transport stock most vulnerable to oil prices.


http://business.theage.com.au/virgin-turbulence-on-fuel-20080601-2khu.html

[Chris Tully]

Qantas annouces reductions and exits on the ASX. (http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&releasedDuringCode=W&issuerCode=QAN)

QANTAS ANNOUNCES INTERNATIONAL SCHEDULE CHANGES

SYDNEY, 5 June 2008: The Qantas Group today announced changes to its international services as it continues to manage the impact of high oil prices.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said the changes, which follow last week’s announcement regarding domestic services, included market exits, capacity cuts and the replacement of Qantas services with Jetstar services on a number of routes.

Mr Dixon said the cost of fuel had changed the way the Qantas Group had to do business over the next two years.

“We have to look closely at each individual market, including the number of frequencies we operate and which of our flying businesses is better suited to serve those destinations.”

Mr Dixon said Japan and South East Asia would be the most affected markets by the schedule changes.

“The Japan-Far North Queensland market has also been particularly difficult for Qantas for a number of years. At current fuel prices, the Group would lose more than $100 million operating to Japan under our existing schedule.”

Mr Dixon said Qantas would engage the tourism industry at seeking better ways of offering viable options for inbound tourism into the future.

Mr Dixon said the changes to the Japan schedule included:

The withdrawal of Qantas’ thrice-weekly Melbourne-Tokyo (Narita) A330 return services from September 2008;

A reduction in Qantas’ Sydney-Tokyo (Narita) A330 return services from nine to seven return services per week from September 2008;

Jetstar’s withdrawal from the Cairns-Osaka-Nagoya route from December 2008;

The replacement of Qantas’ 14 weekly B767 Cairns-Tokyo (Narita) services with a daily Jetstar non-stop A330 two-class service from December 2008; and

The introduction of new Gold Coast-Tokyo (Narita) services five times per week, operated by Jetstar with two-class A330s from December 2008, in addition to Jetstar’s daily Sydney-Gold Coast-Osaka services.

Mr Dixon said that under the new schedules, the Qantas Group would continue to offer significant capacity – more than 11,500 seats per week – between Japan and Queensland.

To support the schedule changes, Jetstar would need to free up A330 aircraft and, as a result, would:

Withdraw from its Sydney-Kuala Lumpur operation to make available an A330 aircraft; and

Replace its existing three weekly A330 services that operated between Sydney and Ho Chi Minh City with five A320 return services on the new route of Sydney-Darwin-Ho Chi Minh City from September 2008.

He said Jetstar would also replace Qantas on:

The Perth-Denpasar route, with up to four Jetstar A320 services taking over from Qantas’ B737-800 services from December 2008; and

Perth-Jakarta, with three Jetstar A320 return services per week replacing the existing three Qantas B737-800 services from December 2008.

Mr Dixon said Qantas would close its pilot base in Cairns, with around 40 Cairns-based pilots returning to Sydney or other bases.

“Qantas will maintain its existing cabin crew base in Cairns to service domestic operations, and Jetstar will establish a new base for pilots and cabin crew in Perth from October,” he said.

Mr Dixon said that as a result of the international schedule changes, there would be a small number of job losses in Cairns and Japan. These were in addition to those flagged in last week's announcement, which were expected to be in the low hundreds, and would also be managed initially on a voluntary basis.

He said in addition to the Asian flight changes, Qantas would reduce its B747-400 Sydney-Los Angeles services from 17 to 15 per week, following the commencement of A380 flights on the route at the end of the year.

“Using the larger A380s on a spread of our USA services will enable us to grow Melbourne-Los Angeles capacity and maintain our total current capacity levels from Australia to the USA.”

Mr Dixon said Qantas had done everything possible to mitigate the effects of the schedule changes we have been forced to make.

“We will continue to work with individual markets and look for opportunities as conditions improve to address capacity issues and reinstate services where and when we can.”

[Ben O]

So if MEL-NRT is cut plus the 2 daytime SYD-NRT A330 flights wonder what QF will do with the free A330 capacity?

[Michael Morrison]

wonder what QF will do with the free A330 capacity?

Perhaps put it on PER-NRT and SYD-MNL so that the only long haul 767 flying left under the Qantas brand is HNL ?

[Ben O]

SYD-CGK
SYD/BNE-MNL
PER-NRT
SYD-HNL

These will be the only Intl B763 routes. (Apart from NZ)

[Rhys Xanthis]

perhaps replace 767, dare i say could they possibly use one to do PER-MEL/SYD runs?

[Michael Morrison]

SYD-CGK
SYD/BNE-MNL
PER-NRT
SYD-HNL

These will be the only Intl B763 routes. (Apart from NZ)

CGK could be done with domestic aircraft (like NOU and CHC etc)

I was thinking it would be one less 767 config flying around if they got rid of them.

[Lukas M]

Also, the reason they said they were dropping SYD-KUL was because they needed the aircraft elsewhere. Does this mean that pax figures to KUL on JQ are struggling, or just they need the aircraft. Has anyone experienced SYD-KUL before?

SYD-DRW-SGN on an A320:eek:. How Awful

[Kelvin R]

Isnt the seat pitch on the JQ A320 and the A332 the same? The only difference is that seating is 3x3 instead of the more desirable 2x4x2?

Don't JQ already fly MEL-DRW-SIN and CNS-DRW-SIN with the A320 so what is the difference in flight time of the new service?

I guess JQ wasnt seeing much demand for starclass on the route?

If the US and EU airlines can send 757's across the Atlantic I am sure that the A320 can fly across part of the pacific.

[Michael Morrison]

Also, the reason they said they were dropping SYD-KUL was because they needed the aircraft elsewhere. Does this mean that pax figures to KUL on JQ are struggling, or just they need the aircraft.



It may not even be doing as badly as Japan - but I guess QF want to keep a hold on more of their NRT slots for now.

Also it doesnt appear that these additonal A330's are coming to fruition so something had to be cut.

[Chris Tully]

Seat pitch and type are different on the A320 and A330.

A320 seat design provides for an inch of extra width. Seat pitch is 30 inches.

The A330's are using the exisiting Qantas Y seats with the fabric replaced with leather. Seat pitch is 32 inches.

[Marty H]

Seat pitch and type are different on the A320 and A330.

A320 seat design provides for an inch of extra width. Seat pitch is 30 inches.

The A330's are using the exisiting Qantas Y seats with the fabric replaced with leather. Seat pitch is 32 inches.

Ask any girl and they would tell you they would prefer an extra two inches;)

[Mick M]

Was in an unnamed large engineering facility only last week and asked the question re the 743's service life and got a non committal answer that mentioned D checks coming up and thus decision time was approaching. The same conversation also mentioned the profitability of large aircraft on the SYD-PER run and the most likely runner would be 332's. So that's my informed comment contribution. So Andrew M's comment would seem to be on the cash.

Marty: :p:p:p Now you're getting into it!

[Andrew M]

So Andrew M's comment would seem to be on the cash.


Not sure what comment I made and where now :confused:

But I do know that the 743's have to be replaced with something bigger than a 738.

The 763 doesn't cut it either

:)

[Rhys Xanthis]

Just had a look at what the d check involves (thought it would be a complete and total check up).

You cant imagine QF doing D checks on all aircraft and returning them back to service? they are out by the end of the year anyway. flog them for parts......if they can get the airplanes.

they could free up some planes by using some 763's on int'l routs to get capacity up, using the a332/a333 on the route instead, temporarily...

[Sarah C]

In regards to PER, th A332 will be used on it but also 767's, but with increased services so there is more seats on the route.

[Mick M]

Rhys,
they'll sell them with minimal hours left to the D check, enough to fly them to an offshore maintainance facility to get the D completed. Then they'll go back into service probably hauling Uncle Sam's men and all their kit to and from the middle east.

I can do you a good deal for 9 million and I'll throw in four spare engines.......what a guy! And if memory serves me correctly I believe OJE is rapidly approaching the hours on the 300 frames. So it's not just the 743's getting towards replacement.

[Michael Morrison]

From ASX


the accelerated retirement of QantasLink's six remaining Dash 8 100 36-seat aircraft by August2008;the closure of QantasLink's Mildura maintenance base on 15 August 2008;
exiting the loss-making Melbourne-Wollongong route from 18 July 2008; and
the permanent withdrawal from previously suspended QantasLink services between Newcastle andboth Melbourne and Sydney.

[Chris Tully]

QantasLink Response to High Fuel Costs Latest News
Sydney, 17 June 2008
The Qantas Group today announced additional capacity and network changes, focusing on QantasLink's regional operations in New South Wales and Victoria.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said the changes followed similar measures already announced for Qantas and Jetstar's domestic and international operations over the past fortnight due to unprecedented increases in oil prices.

He said the changes were:
- the accelerated retirement of QantasLink's six remaining Dash 8 100 36-seat aircraft by August 2008;
- the closure of QantasLink's Mildura maintenance base on 15 August 2008;
- exiting the loss-making Melbourne-Wollongong route from 18 July 2008; and
- the permanent withdrawal from previously suspended QantasLink services between Newcastle and both Melbourne and Sydney.

Mr Dixon said the retirement of the older Dash 8 100 series aircraft would result in the closure of the maintenance base in Mildura.

"We will work closely with the affected staff in Mildura to minimise redundancies by offering alternative job opportunities at other QantasLink locations," he said.

Mr Dixon said the Melbourne-Wollongong services had been underperforming for some time, and record fuel prices now made it difficult for QantasLink to continue to operate the older Dash 8 aircraft on the route.

In the case of Newcastle, the Qantas Group will remain the largest operator through Jetstar's 56 services a week to and from Melbourne, Brisbane and the Gold Coast.

QantasLink's affiliate partner, Aeropelican, also currently offers up to eight services a day between Sydney and Newcastle.

Mr Dixon said QantasLink would maintain its existing flight operations, cabin and ground crew bases in Melbourne and Mildura to service its remaining network in Victoria, which included services between Melbourne and Mildura, Devonport, Launceston and Canberra.

Qantas.com (http://www.Qantas.com)

[Montague S]

can anyone say the word merger?

and the talk of mergers continues with Qantas mentioning that they are looking for a new partner or possible merger, SQ was mentioned.

[Nigel C]

Quoting yourself? You really are keen to get your point across!:D

[Brenden S]

Hey just think of the money they are saving today and tomorrow by not paying the engineers, fuel, etc.

[Gareth U]

The A330's are using the exisiting Qantas Y seats with the fabric replaced with leather. Seat pitch is 32 inches.

Seat pitch on the 330s is 31"

[Chris Tully]

Correct, 31 inches.

267 Slimline seats, 31” seat pitch, 2x4x2 layout