Qantas Group Strategy Update and Financial Result

[Erik H. Bakke]

Didn't look like there was already a thread, but apologies if I missed one, or if multiple threads are being started at the same time.

Massive job cuts, but it looks like the most needed job cut will not be done.

[Kurt A]

Key points:
• $2 billion cost reduction, including 5,000 jobs
• More than 50 aircraft to be deferred or sold
• $1 billion capital expenditure reduction
• Core investment in customer service to continue

[Kurt A]

SYDNEY, 27 February 2014: Qantas today announced detail of its $2 billion cost reduction program and capital expenditure review.

Qantas will take action to permanently reduce costs in all parts of the Qantas Group through to FY17, including fleet and network changes, productivity improvements, consolidation of business activities, new technology and procurement savings. More than 50 aircraft will be deferred or sold and the Group’s workforce will be reduced by 5,000 full-time equivalent positions by FY17.

The Qantas Group’s planned capital expenditure net of operating lease liability1 will be reduced to $800 million in both FY15 and FY16, a total reduction of $1 billion.

Qantas has reached agreement on the return of its Brisbane Airport terminal lease, together with related assets, to the airport owner at a cash value of $112 million. The broader structural review of the Qantas Group portfolio continues and no final decisions have been made on other assets.
Chief Executive Officer Alan Joyce said Qantas would do everything in its control to overcome some of the toughest market conditions it had ever faced.

Market Conditions
“It’s clear that the market Qantas operates in has changed, with structural economic shifts exacerbated by an uneven playing field in Australian aviation policy,” Mr Joyce said.

“This situation is reflected in the financial result Qantas announces today, an Underlying PBT1 loss of $252 million for the half-year. This is an unacceptable and unsustainable result. Comprehensive action is needed in response.

“Qantas’ competitors have increased capacity to Australia by 46 per cent since 2009, more than double the world average, at a time of record fuel costs and economic volatility.

“We have met these challenges head on. Over the past four years, we have been carrying out the biggest transformation since Qantas was privatised – cutting comparable unit costs1 by 19 per cent over four years, introducing new aircraft and technology on a large scale, modernising work practices and revitalising service. But this is not enough for the circumstances we now face.

1 For definitions please see ‘Qantas Group Financial Result’ media release Attachment 1 – Review of Operations.

“The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines – yet retain access to Australian bilateral flying rights.

“Late last year, these three foreign-airline shareholders invested more than $300 million in Virgin Australia at a time when, as Virgin Australia reported to the ASX on 6 February, it was losing money. That capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses.

“The Virgin Australia Group has increased capacity into the domestic market at more than twice the rate of the Qantas Group since July 2011. As a result of these combined capacity increases, the total domestic profit pool has been shrunk from more than $700 million in FY12 to less than $100 million in 1H14.

“We have been clear with the Australian Government about the uneven playing field and the measures we believe could address it. But our focus today is on the immediate steps that Qantas must take.”

Immediate Priorities
“We must take actions that are unprecedented in scope and depth to strengthen the core of the Qantas Group business.
“To reach $2 billion in cost cuts over three years, we have to work our assets harder, become more productive, retire older aircraft, and make sure that our fleet and network are the right size. We must defer growth and cut back where we can, so that we can invest where we need to.
“We have already made tough decisions and nobody should doubt that there are more ahead.

“While the implementation and pace of delivery must change, the guiding principles of our strategy will not. Safety remains our first priority and we are committed to being the airlines of choice for customers in all our markets.

“Our long-term goal remains the transformation of the Qantas Group for profitable, sustainable growth.

“Over the next three years, we aim to secure our strong Group domestic position and maximise Qantas International’s competitiveness.

“Qantas Loyalty will continue to access new markets and revenue streams, building on its success to date.

“When it comes to Jetstar in Asia, we need to take the right decisions in accord with current market circumstances and our balance sheet. In Singapore, growth has been suspended by the Jetstar Asia Board until such time as conditions improve.

“The over-arching focus in Asia continues to be profitably bedding down existing businesses and partnerships. Jetstar has been a pioneer Australian brand across Asia and we continue to see major opportunities for it in the world’s fastest-growing aviation region.”

Commitment to Customers
“Despite the tough decisions we have to make, we will keep delivering outstanding service for our customers,” Mr Joyce said.
“Important customer investments will continue, such as the upgrade of our Airbus A330 fleet and the opening of new lounges in Hong Kong and Los Angeles, and the service that Qantas passengers
receive will not be compromised. Thanks to the skill and commitment of our people, we have earned record customer advocacy, and we plan to keep it there.”

Accelerated Qantas Transformation Program
Fleet and Network
After a detailed review of network and schedules, the Qantas Group will re-assign aircraft to better match demand, defer aircraft orders, dispose of aircraft, increase fleet utilisation and exit under-performing routes.
• Qantas Domestic will increase utilisation of narrow-body aircraft, allowing Airbus A330 aircraft in the domestic market to concentrate solely on East-West services and peak services on the Sydney-Melbourne-Brisbane triangle.
• A330-200s will be freed up to enter the Qantas International fleet as replacement aircraft, helping to accelerate the retirement of older Boeing 747 aircraft.
• All six of Qantas International’s non-reconfigured B747s will be retired ahead of schedule, by the second half of FY16. Nine reconfigured B747s with A380-standard interiors will remain.
• Qantas’ final two B737-400s have been retired this month and all B767s will be retired by the third quarter of FY15, resulting in cost and passenger benefits from fleet simplification.
• Qantas International’s eight remaining A380 orders will be deferred, with an ongoing review of delivery dates to meet potential future requirements. Schedule changes will allow maximum use of Qantas’ current 12 A380s.
• The final three of 14 Jetstar B787-8s on firm order will be deferred.
• Jetstar’s A320 order book has been restructured.
In total, more than 50 aircraft will be deferred or sold.
By FY16, the Group’s passenger fleet will have been simplified from 11 aircraft types to seven aircraft types, with an average age of eight years.
Over the next 12 months, Qantas will exit underperforming routes and make aircraft changes on certain routes to better match capacity to demand.
• Qantas International will withdraw from the Perth-Singapore route (first quarter FY15).
• Qantas’ Brisbane-Singapore and Sydney-Singapore services will be operated by A330s, replacing B747s (first quarter FY15)
• Qantas services between Melbourne and London will be re-timed in November 2014 to reduce A380 ground time in Heathrow (second quarter FY15). There are no changes to overall capacity on London flights.
• The Melbourne-London service change frees up an A380 for additional flying, and Qantas will evaluate opportunities to use the aircraft on other routes.

Workforce Changes
Over the next three years, Qantas will reduce employee numbers across the Group by the equivalent of 5,000 full-time positions, through measures including:
• Reduction of management and non-operational roles by 1,500.
• Operational positions affected by fleet and network changes.
• Restructure of line maintenance operations.
• The closure of Avalon maintenance base, as previously announced.
• Restructure of catering facilities including the closure of Adelaide catering, as previously announced.
The wage freeze for executives implemented in December 2013 will continue and will be extended to all Qantas Group employees.
The wage freeze will be:
• Ongoing for executives.
• Immediate for open EBAs.
• Proposed for other EBA-covered staff.

This is in addition to the reduction of fees paid to the Qantas board and a reduction in the take home pay of the Qantas CEO by 36 per cent this financial year.

No pay rises or bonuses will be contemplated until Qantas is profitable again on a full-year Underlying PBT basis.

Mr Joyce said these were hard but necessary decisions to protect as many Qantas jobs as possible and build a strong business for the future.
“I regret the need for these wide-ranging job losses, but we will do everything we can to make the process easier for employees who leave the business,” Mr Joyce said.

“At the end of this transformation, Qantas will remain an employer of more than 27,000 people, the vast majority based in Australia – and we will be a better and more competitive company.”

Capital Expenditure and Financial Position
The Group’s planned capital expenditure net of operating lease liability in FY14 will be $1 billion.

Planned capital investment, including movements in operating lease liabilities, will be $800 million per year in FY15 and FY16 – a total reduction of $1 billion over the two years. Qantas will maintain flexibility to make further changes if needed.

Transformation through FY17 will be funded through the reprioritisation of capital, future free cash flow as benefits from the cost reduction program begin to flow, and asset sales. Qantas continues to target positive free cash flow1 from FY15, with capital expenditure aligned to financial performance.
Qantas has total liquidity of $3 billion, comprising $2.4 billion in cash and $630 million in standby debt facilities, as at 31 December 2013.

Update on Structural Review
Qantas has reached agreement on the return of its Brisbane Airport terminal lease, together with related assets, to Brisbane Airport Corporation, with a cash value of $112 million to be recognised in the second half of FY14.

Qantas continues to work through the broader structural review of the Qantas Group portfolio launched in December 2013.

The review has identified a number of high-quality assets of significant value.

No final decisions have been made about other assets within the Group’s portfolio.

Qantas will update the market as and when required.
-QFA


Qantas 2013/14 Half-Year Results - Supplementary Slides
http://www.asx.com.au/asxpdf/20140227/pdf/42n15fc4jxpksp.pdf

Qantas 2013/14 Half-Year Results - Investor Presentation
http://www.asx.com.au/asxpdf/20140227/pdf/42n15cpv5qs46r.pdf

Qantas Group Strategy Update
http://www.asx.com.au/asxpdf/20140227/pdf/42n1589jxk6g8j.pdf

Qantas 2013/14 Half-Year Results - Media Release
http://www.asx.com.au/asxpdf/20140227/pdf/42n14wbnf0wwm1.pdf

Qantas 2013/14 Appendix 4D and Interim Financial Report
http://www.asx.com.au/asxpdf/20140227/pdf/42n14tpc10m1wx.pdf

[Michael Morrison]

So they are having a go that "The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines"

My understanding is that a 100% foreign owned airline has been allowed to fly domestic only for more than the last 10 years... hence how DJ started in the first place.


I think the biggest issue here is not around ownership, but more around Joyce's poor management - and the fact he can continue to drive the business into the ground without any re-course.

[Justin L]

It appears the only route cut is PER-SIN, but the QF Group still maintain a presence on that route with JQ services.

[Kurt A]

Log-in to download the attached 9-page Alan Joyce Speech transcript addressing Qantas' half year results from today's Press Conference in Sydney.

http://www.qantasnewsroom.com.au/speeches/alan-joyce-speech-qantas-half-year-result

[Kent Broadhead]

My understanding is that a 100% foreign owned airline has been allowed to fly domestic only for more than the last 10 years... hence how DJ started in the first place.

Wasn't Ansett foreign owned (AirNZ)?

[Jacob L]

You have to ask the question,

Should they have ordered the most reliable aircraft ever made, THE 777 instead of the 787

Hope the company lives to fight another day, don't want to lose all my QFF's :confused::confused:

[JamesL]

I just love how AJ won't answer any question re: QFi...

[Nigel C]

Apparently QF shares lost 3% in value over the course of Joyce's speech :eek:

[Montague S]

Sell everything, chop workforce, pay down debt...then eventually get back into debt. First question was why Joyce was holding the interview at Westin Hotel and not HQ.

[Sarah C]

First question was why Joyce was holding the interview at Westin Hotel and not HQ.

Actually it was the second question. They first one was about Joyce's job and why it was safe.

Both valid questions which were answered pretty poorly. The journos just got very soft in that press conference.

[George G]

So has he announced his resignation yet?

[Rowan McKeever]

Both valid questions which were answered pretty poorly. The journos just got very soft in that press conference.

Is there a link to the Q&A anywhere? Transcript, video, audio?

Cheers
Rowan

[Stephen Brown]

Joyce has been in charge of one of the greatest scale backs of Qantas in it's 94 year history. He must be doing one hell of a tap dance in front of that board.

[Ash W]

Should they have ordered the most reliable aircraft ever made, THE 777 instead of the 787

With hindsite maybe. But back when the 787 order was made I don't ever recall anyone saying a negative word about about it.

[Ash W]

Joyce has been in charge of one of the greatest scale backs of Qantas in it's 94 year history. He must be doing one hell of a tap dance in front of that board.

At a time where competition from foreign airlines (including their partner Emirates) is ever increasing, at a time where Australian workers (including myself) are getting paid more than ever, at a time where they had free run of the domestic premium for the best part of 12 years, but now face an aggressive competitor, at a time where they need a cash injection but won't get it from Australia and cannot get enough of it offshore.

So maybe under the circumstances he is doing what the board wants him to do.

Now before anyone goes me over my comment about Virgin, let me make it clear I think what they are doing is good for the country as a whole so not complaining about them just stating the fact. But when it comes to Qantas they grew fast to fill the void left by Ansett, quite clearly if Virgin is now eating into that market as they are entitled to do and should do, Qantas has little choice but to shrink, which of course means service cuts and job cuts.

[Rowan McKeever]

Proposed amedment of the QSA has passed the Lower House... unsurprisingly. Now for the Senate...

http://www.abc.net.au/news/2014-03-06/bill-to-lift-qantas-ownership-restrictions-passes-lower-house/5302102

[Steve Crook]

Can anyone clarify the timetable for downgrading of Qantas SIN-BNE services from 744s to A330s? The Qantas website says first quarter of FY15....Australian Business Traveller says by September this year. By FY15 do they mean FY14/15? I'm booked to fly SIN-BNE Premium Economy on points on Oct 2. I was initially booked SIN-SYD but they downgraded that flight from a 744 to an A330 just after making the booking (with an initial upgrade to Business quickly followed by an apology and downgrade to economy). I don't want the same thing to happen on the current booking. The flight still shows as a 744 on the Qantas website

[lloyd fox]

Yes Steve it will be a A330 unfortunately.

FY15 is July 2014 to June 2015.

[Stuart Trevena]

Hi All,

I had to bring up this thread again, as I think is worth it.

This Article appeared in the Melbourne Heald Sun Recently.

Titled "Qantas needs to cut 2000 more jobs to turn its fortunes around, analyst claims"

Here is the link

http://www.heraldsun.com.au/travel/travel-news/qantas-needs-to-cut-2000-more-jobs-to-turn-its-fortunes-around-analyst-claims/story-fnjjv9zn-1227037649654

What are peoples thoughts? Is the reporter Right??

No doubt my comments will be shouted down or tagged silly, but he is my 2 cents worth.

One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replcement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive.

Instead they placed all eggs in one basket, and waitied for the B787 Dreamliner, which they have now put on hold for the QF Fleet. The B777 was a proven aircraft with many airlines, including Emirates, British Airways, Singapore Airlines and Air New Zealand, just to name a few.

By going to the B777, which has only 2 engines, this would cut down Maint. costs and the fuel burn is much more economical on the new generation engines. This aircraft could go anywhere do anything from Cross Country East-West Coast flights to Lax or even Dallas / Fort Worth.

The shorter-200 series would be ideal for routes that don't need high capacity but maby more frequent services, say Perth - Auckland, Perth - Hong Kong or even Perth to Honolulu, or again East-West Coast Flights.

Not too many airlines still use the B747-400, as they have switched to the B777 for their Medium / Longhaul services and are doing well them.

Given that Qantas didn't have the the Right aircraft to operate to the various routes, they were force to cut these routes as they were becoming unprofitable, as they were using B747-400's.

New Routes QF should look at with the Right Aircraft include:

Perth - Honolulu

East Coast - to Florida via Honolulu or San Francisco to link up with the Cruises.(Australian Passengers are spending big money on the cruise Industry, and they need to get there)

Return to the Kanagroo Route via Singapore (Link via Capital Cities)

Take over Emirates Flight EK404/405 Melbourne to Dubai via Singapore

Return of Rome Services via Singapore.(Link via Capital Cities)

Return of Perth to Singapore and Extend to Hong Kong or Japan

Operate QF63/64 Sydney to Johannesburg via Melbourne

Move more International flights out of Sydney, to Brisbane or Melbourne. (De-Centralize. Sydney Is not the Centre of the Universe, and Passengers Don't wish to fly to Sydney to then connect to International Service)

By pushing the Travelling public onto Foreign Carriers, you, Qantas are losing money hand of Fist.

Finally, I must agree with some other comments about the board and inparticular Alan Joyce.

Under him, the Qantas Product, Services and Share Price have all nosed dived. If this was any other business, he would have been sacked years ago, for gross incompentance. Under Joyce, QF has bleed money Left, Right and down the Middle.

The only way forward is too sack the Board and Elect a New Board that will review the routes, and Aircraft type required, and deal with the Various Unions and EBA's once and for all.

Only then will Qantas return to Profit, which into will increase the share price for shareholders and gain back the travelling Australians Trust.


Stuart

[Ash W]

With hindsight you're right. But go back to when fleet decisions were made and I think Qantas management at the time were right (and no Joyce to blame either).

At the time the 777 didn't have the legs for the pacific and didn't have the capacity for Europe and was too big for domestic and Asia.

Now of course the traffic to Europe had been decimated by the Middle East carriers, they have the right aircraft in the A330 for domestic and Asia, they also have the right a/c in the A380 for some US flights leaving just a small number of a/c requiring a 777-300er.

One interesting thing can you explain why BA has so many 777's AND still has many 747's.

Oh BTW the 787 was never intended as a 747 replacement the 787 were always intended as a 767 replacement. The 747 replacement was the A380 though that decision was made when Qantas traffic levels to Europe were still decent and not declared by the ME carriers.

[Daniel M]

Hi All,

I had to bring up this thread again, as I think is worth it......


Oh lord, I think I've seen it all now.

Can I ask with what research and references you base all those (mostly ridiculous) claims on ?

[Stuart Trevena]

Hi All,

Daniel M - I did say these were my thoughts, and as such I didn't imply or state research had been done on my suggestions. They are exactly that - Suggestions!!!

Can't someone float ideas on this forum without having to spend countless hours doing research and References just to suit a petty person like you!!!

If your soo great, Where is your Fantastic idea and Suggestions, with fully costed businiess plan???? I want to see it in a few hours!!

Stuart

[Ash W]

Move more International flights out of Sydney, to Brisbane or Melbourne. (De-Centralize. Sydney Is not the Centre of the Universe, and Passengers Don't wish to fly to Sydney to then connect to International Service)

By pushing the Travelling public onto Foreign Carriers, you, Qantas are losing money hand of Fist.

Finally, I must agree with some other comments about the board and inparticular Alan Joyce.

Under him, the Qantas Product, Services and Share Price have all nosed dived. If this was any other business, he would have been sacked years ago, for gross incompentance. Under Joyce, QF has bleed money Left, Right and down the Middle.

I've cut a lot out but left a few paragraphs that are pertinatnt to what I am about to say. Which is which came first the chicken of the egg?

What I mean is the Qantas network today a result of poor management decisions over a long period of time (before your flogging boy Joyce) or is it a result of cashed up airlines in geographically perfect locations taking advantage of a/c with perfect capability for their operations?

Clearly I am in the latter camp and I think I am right? Proof look at where Qantas dos well, which is the US. Here all traffic between the two countries is point to point or hub to hub which means Qantas is competing on a relatively equal footing.

To Asia Qantas does ok on point to point traffic but certainly doesn't have the hub pull carriers like CX, TG, MH or SQ have. That traffic is sufficent for a smaller a/c from one or two hubs within Australia not every city people wish flights could come from.

Long haul to Europe and Africa Qantas has no hope what so ever.

So simply Qantas concentrates on Sydney because it is a large city and a perfect hub location for the bulk of the Australian population. They have pulled out of other markets because the demand is not there to justify the flights.

You blame the whipping boy Joyce for Qantas' woes though maybe the issue isn't him and his decisions maybe it is simply that he has been at the helm as others factors take over.

So not all that easy in the real world.

[Michael C.]

Hi All,

Daniel M - I did say these were my thoughts, and as such I didn't imply or state research had been done on my suggestions. They are exactly that - Suggestions!!!

Can't someone float ideas on this forum without having to spend countless hours doing research and References just to suit a petty person like you!!!

If your soo great, Where is your Fantastic idea and Suggestions, with fully costed businiess plan???? I want to see it in a few hours!!

Stuart

Stuart, If the forum had a "Like" button I would use it on your post! Everyone's entitled to their opinions and in my opinion that's what forums should be about.

[Ash W]

Stuart, If the forum had a "Like" button I would use it on your post! Everyone's entitled to their opinions and in my opinion that's what forums should be about.

And likewise Daniel expressed his opinion of Stuarts post and frankly asking someone to "justify" their comments even if they are just arbitrary thoughts or dreams is hardly a bad thing and can only encourage more healthy discussion.

[Nigel C]

And likewise Daniel expressed his opinion of Stuarts post and frankly asking someone to "justify" their comments even if they are just arbitrary thoughts or dreams is hardly a bad thing and can only encourage more healthy discussion.

Like

[Ricky T]

In hindsight, QF might not be in the current situation with respect to its fleet if the 787 program was on time.

The fuel guzzling 767s would have been long gone and the A332s would have returned to the QF fleet earlier which would have allowed to put on more Asia services.

Some routes that would have been perfect for the A332s: PER-SIN, ADL-SIN, MEL-NRT, MEL-PVG.

[James S.]

Hi All,

No doubt my comments will be shouted down or tagged silly, but he is my 2 cents worth.

One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replcement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive.


To be honest, I don't even think that the 77W or the 77L was where the mistake in fleet planning was made. QF really should have bought the 772ER back in the late 90s instead of waiting till the mid 2000's to get the 'NG' 777 for the longer, thinner routes. In saying that, the A330 was actually a pretty decent choice on the other hand, and works really well as one of the most flexible aircraft in the fleet.


Instead they placed all eggs in one basket, and waitied for the B787 Dreamliner, which they have now put on hold for the QF Fleet. The B777 was a proven aircraft with many airlines, including Emirates, British Airways, Singapore Airlines and Air New Zealand, just to name a few.

You're forgetting the A330. Especially the newer HGW variants, they're really not that much worse than a 787. Factor in lower leasing costs (purchase?) and you've got yourself one hell of a capable aircraft.


By going to the B777, which has only 2 engines, this would cut down Maint. costs and the fuel burn is much more economical on the new generation engines. This aircraft could go anywhere do anything from Cross Country East-West Coast flights to Lax or even Dallas / Fort Worth.

As others have said above, hindsight 20/20. I think that the best aircraft for QF is the A350-1000, replacing the rest of the 747's. Don't forget the ER's are relatively new still. If we're going to talk fleet, I think that something like this would be good for a future line up;
737MAX
789
351
388

They could reduce the A320NEO order and transfer their purchase options into A350's.


The shorter-200 series would be ideal for routes that don't need high capacity but maby more frequent services, say Perth - Auckland, Perth - Hong Kong or even Perth to Honolulu, or again East-West Coast Flights.

A330.


Not too many airlines still use the B747-400, as they have switched to the B777 for their Medium / Longhaul services and are doing well them.

Given that Qantas didn't have the the Right aircraft to operate to the various routes, they were force to cut these routes as they were becoming unprofitable, as they were using B747-400's.

Tell that to BA, DL, KL, LH, etc. Seriously, the 747 is not the sole reason that QF are going bust. People almost make it out to be a Convair 880 versus a Glider in terms of fuel efficiency... ridiculous. I understand that it's not the most efficient aircraft that is around, but what are they going to do about it now? That ship has well and truly sailed, time to focus on getting the right aircraft for the future.


New Routes QF should look at with the Right Aircraft include:

Perth - Honolulu

I bet the yields would be terrible.


East Coast - to Florida via Honolulu or San Francisco to link up with the Cruises.(Australian Passengers are spending big money on the cruise Industry, and they need to get there)

Because a one stop via Dallas is a really bad idea? American have a huge amount of connecting flights to get there. SFO would be good but there's not many suitable codeshare partners to get any feed there verse LA and DFW. QF's Americas strategy is probably the soundest part of the international business.


Return to the Kanagroo Route via Singapore (Link via Capital Cities)

Which ties up an aircraft and crew for 3 entire days when they could be flying somewhere more profitable. I don't think focusing on Asia is such a bad idea really, there's a huge amount of competition at this point in time and the overcapacity is seriously destroying the market with the advent of the LCCs and making EVERY airline hurt, including historically well managed airlines like SQ.


Take over Emirates Flight EK404/405 Melbourne to Dubai via Singapore

How on earth is this helpful? QF already fly to SIN from MEL, what's the point of the tag on to DXB?


Return of Rome Services via Singapore.(Link via Capital Cities)

Yields once again are very average to the Mediterranean regions, with mostly immigrant VFR families returning to visit relatives - this is also extremely seasonal. There's a reason why all of the European airlines bar BA have stopped service to Australia. The only reason airlines like CX, EK, etc can make it work is because of the massive amount of feed that they get in their respective hub locations.


Return of Perth to Singapore and Extend to Hong Kong or Japan

I agree with this, and in fact I believe QF are returning to the route. A HKG flight wouldn't be too bad either.


Operate QF63/64 Sydney to Johannesburg via Melbourne

No offense, but that's a terrible idea. If anything, Perth would be the best destination to get a JNB flight going. You know that they used to operate QF63/64 via PER, right? Flying from Sydney direct appeals to the business passengers and the South African codeshare is satisfactory. However, I'm not sure what the status of this is, I believe they're changing to VA? This is a route that would depend on numbers really. I doubt a Melbourne flight would justify it.


Move more International flights out of Sydney, to Brisbane or Melbourne. (De-Centralize. Sydney Is not the Centre of the Universe, and Passengers Don't wish to fly to Sydney to then connect to International Service)

I agree with this to a certain extent. I think BNE-DFW would be a good start on the long haul side of things, with more expansion into Asian destinations like HKG and SIN. They're bolstering flights to LAX from MEL as well with the return of the 747's.


By pushing the Travelling public onto Foreign Carriers, you, Qantas are losing money hand of Fist.

Blame the government for one of the most liberal Open Sky policies in the world, whilst tying QF with one hand behind it's back with the Qantas Sales Act restriction. I think that removing this is the first step to recovery for the airline, allowing it to access foreign investment and capital.


Finally, I must agree with some other comments about the board and inparticular Alan Joyce.

Under him, the Qantas Product, Services and Share Price have all nosed dived. If this was any other business, he would have been sacked years ago, for gross incompentance. Under Joyce, QF has bleed money Left, Right and down the Middle.

The only way forward is too sack the Board and Elect a New Board that will review the routes, and Aircraft type required, and deal with the Various Unions and EBA's once and for all.

Alan Joyce is not the entire company, however, I think the whole focus on Jetstar and it's Asian subsidiaries really wasn't the smartest of ideas. QF mainline was clearly facing newer challenges and more of the money should have been invested there. The JQ Hong Kong debacle is ridiculously embarassing and highlights one of the poor management decisions that have been made. However, at the same time, we need to look at the previous management that have left the airline in a poor condition to begin with in terms of flexibility.

>endthread.

[Nigel C]

Qantas just posted a $2.84b loss for the last financial year.

Ouch!

[Mark Grima]

Just woke up to this. That's got to hurt.

Interesting that the prior analysis at $1b loss was so far wrong.

ABC24 reporting Joyce has announced the International business will be sold off.

The value of the International fleet has be written down significantly mainly due to changes in exchange rates when the fleet was purchased (57 cents at the time the 747 fleet was purchased). Causing a significant part of the total loss.

Joyce also has said no pay raise for him or bonus for execs. How nice of him haha.

Apparently QF will return to profit next year...

Cheers

M

[Mackenzie Davis]

From Qantas News Room

Restructured Order Book

The Group announced in February that more than 50 aircraft on order would be deferred or sold to reflect more efficient fleet utilisation and slower capacity growth.

In light of the more subdued domestic capacity outlook and shift to more efficient utilisation of narrow-body aircraft:

Two Qantas B737-800s, including one sourced from the domestic fleet and one from the trans-Tasman fleet, will be sold during FY15.

A decision has been taken not to renew the leases on two Qantas Domestic A330-200s, meaning these aircraft will leave the fleet in the first half of FY16.

Five A320ceos on order for Jetstar Airways have been sold, reflecting the more subdued outlook for domestic capacity in FY15.

Two QantasLink Q300s will be sold during FY15.

[Rowan McKeever]

Hi Mark - as I read it, it's not that they'll be selling QFi but rather restructuring it within the company (amendments to the Qantas Sale Act allow them to reproduce Virgin's structure and, therefore, bring a greater degree of foreign ownership in over their domestic business).

I agree with you that it's interesting to see such a difference from analysts projections.

[Stephen Brown]

So when does the board stop blaming the market conditions and start looking at the bloke running the company??

Was supposed to 1bn, now 2.8bn.....Joyce should just resign...failure to achieve any results

[Robert.M]

The whole board should resign along with Joyce, they are just as bad by keeping him running the company, that he is clearly running into the ground. If the bad management continues, Qantas will just end up like Ansett.

[Mark Grima]

Yeah I think you are right Rowan, I think I used the wrong word there.

So if I understand this correctly the vast majority of the $2.8 figure is the write down in value of the QFi fleet (which as Joyce said this morning they don't intend to sell).

He says it has no cash impacts, however I wonder what borrowing or interest impacts it may have.

Cheers

M

[Sarah C]

Robert is right - the board is the bigger problem, the CEO is just the public face of the company. Punt Joyce, they will just get someone else to continue what they are doing. The board have a lot to answer for.

[Nigel C]

They are saying they'll hit a profit in the first half next year. If they get that wrong, then it'll be obvious they've got Wayne Swan working their budgetary numbers from the Fed Parliament back benches ;)

[Nick Te Mata]

The expected $1bn loss being spoken about in the past few months referred to the before-tax underlying loss, for which the actual result was $646M. Actually a slight improvement on guidance. The expected loss hasn't nearly tripled as it may appear, as the devaluation of the fleet doesn't reflect the costs/revenue situation of the business.

A diabolical result nonetheless.

[Rowan McKeever]

Hi All,

I had to bring up this thread again, as I think is worth it.

This Article appeared in the Melbourne Heald Sun Recently.

Titled "Qantas needs to cut 2000 more jobs to turn its fortunes around, analyst claims"

Here is the link

http://www.heraldsun.com.au/travel/travel-news/qantas-needs-to-cut-2000-more-jobs-to-turn-its-fortunes-around-analyst-claims/story-fnjjv9zn-1227037649654

What are peoples thoughts? Is the reporter Right??

No doubt my comments will be shouted down or tagged silly, but he is my 2 cents worth........

Hey Stuart

I just want to discuss a couple of your points, but understand I'm not bashing or tagging as silly... just my 2c.

I disagree with you about the 777 to an extent. Where I agree with you is that it's an amazing aircraft with a huge amount to offer an airline like QF. Where I disagree is that, in the current regulatory environment, QF isn't in a position to use what the 777 has to offer. EDTO restrictions for Australian operators are very tight and preclude the use of twins to South America, South Africa and much of the USA (DFW, for example, would not be possible for a QF 777). These restrictions have always been in place and are unchanged from the time QF was involved in the development of the 777, and CASA has made it clear the restrictions are unlikely to change in the foreseeable future. People will arc up over that, as they do, but CASA's position is based on the ability to reach a crash site on those routes which they estimate would take the better part of a week. I'm as big an advocate for the 777 as anyone and, in a different environment I would agree with you 110%, but not in this environment.

I also agree with the comment that their eggs are not all in one basket, as they have the A330s (two subtypes), B744s and A380s. They also have some options with 73H.

Some of your route suggestions are interesting too! PER-HNL would bleed, they'd be better off doing ADL-HNL as at least that would be a new connecting option for WA customers. But in any case they're best placed to leave HNL as is - anything else isn't worth the investment in equipment, crew, etc. Similarly with routing to FL via HI or SFO - that's what DFW is for.

The return of PER-SIN is rumoured and the tip is 73H operating multiple rotations. Which is kind of clever if that's the path the choose. PER-SIN-NRT is a long detour, but PER-HKG-NRT could work. Maybe 3-4 per week with A330s?

Again, I'm all for doing something more with Europe (not sure about Rome specifically, but Europe in general). They have some very capable A332s (also, hello 777! :p)which they could put to use on routes to connect with their oneworld partners through Germany, Spain and Finland. And they could route through Sri Lanka to meet up with their other partner their. The trouble is, and someone please correct me if I'm wrong, the EK agreement requires that all QF European services must route through DXB? In which case, how do they compete (maybe PER-DXB-HEL which EK doesn't have)?

QF do receive money from their customers who book onto the EK codeshares - probably not as much as they would if it was their own flying, but then they don't have all the costs of doing the flying (nor the overheads).

Just finally, on the product. I agree with you that the product and service isn't what it once was. But it's also, in my opinion, one of QF's main selling points over VA which has the most inconsistent product I could imagine. At least with QF (in domestic terms) I know that their name on the side of the aircraft means I get the same service whether I'm flying CBR-SYD or SYD-DRW. With VA, not so much!

Anyway, like I said just my 2c as part of the discussion. Thanks for opening it up Stuart!

Cheers
Rowan

[Justin L]

Interesting post Rowan.

Just curious, but how were VA able to overcome CASA's restrictions for twin engine jets on their flights to LAX and their old flights to JNB? Were they not considered an Australian operator?

[Rowan McKeever]

Hey Justin

LAX is within the restrictions and they added track miles to the JNB flights in order to meet the restrictions as well (one of the reasons the flights weren't economical).

Cheers
Rowan

[Justin L]

Interesting. Thanks Rowan.

[Stuart Trevena]

Hi All,

Rowan - Thank for your comments, as that was the reason for opening this back up.
Not to be blasted by somone, for saying my ideas were silly.

Sometimes the best ideas (this has been know to be true) come from those who are far removed from the boardroom, that a seed of a thought could actually turn into something later on.

I will have more to say later

Stuart

[James S.]

Sorry, but being asked to back up your statements with some verifiable fact rather than simply being hearsay is not getting 'blasted'. It's a significant part of discussing a topic, you need to understand that. No need to be defensive.

[Martin Buzzell]

I read somewhere that Heathrow's "Slots" are full, so wouldn't it be better to use a bigger aircraft such as the A380 instead of the Triple 7 to get more pax in with your slot?

Maybe that's why QF went with the 380, like other carriers did too.

[Daniel M]

Hi All,

Daniel M - I did say these were my thoughts, and as such I didn't imply or state research had been done on my suggestions. They are exactly that - Suggestions!!!

Can't someone float ideas on this forum without having to spend countless hours doing research and References just to suit a petty person like you!!!

If your soo great, Where is your Fantastic idea and Suggestions, with fully costed businiess plan???? I want to see it in a few hours!!

Stuart

omg, like I didn't ever say I was like, sooo great. All I asked was for some supporting reference to your suggestions (which are mostly ridiculous, as I mentioned ... but that's just my thoughts ... this is a free forum, I'm allowed to have my own thoughts remember)

[Ash W]

So they are having a go that "The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines"

My understanding is that a 100% foreign owned airline has been allowed to fly domestic only for more than the last 10 years... hence how DJ started in the first place.


I think the biggest issue here is not around ownership, but more around Joyce's poor management - and the fact he can continue to drive the business into the ground without any re-course.

Whilst what you say re ownership is correct it doesn't apply to Qantas who are restricted by the Qantas sale act, even after the recent/planned changed to the act. So he does rightly or wrongly have a valid point.

[Montague S]

Hi All,


What are peoples thoughts? Is the reporter Right??

No doubt my comments will be shouted down or tagged silly, but he is my 2 cents worth.

One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replcement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive.


Perth - Auckland, Perth - Hong Kong or even Perth to Honolulu, or again East-West Coast Flights.

New Routes QF should look at with the Right Aircraft include:

Perth - Honolulu


Return to the Kanagroo Route via Singapore (Link via Capital Cities)

Take over Emirates Flight EK404/405 Melbourne to Dubai via Singapore

Return of Rome Services via Singapore.(Link via Capital Cities)

Return of Perth to Singapore and Extend to Hong Kong or Japan

Operate QF63/64 Sydney to Johannesburg via Melbourne


Under him, the Qantas Product, Services and Share Price have all nosed dived. If this was any other business, he would have been sacked years ago, for gross incompentance. Under Joyce, QF has bleed money Left, Right and down the Middle.

The only way forward is too sack the Board and Elect a New Board that will review the routes, and Aircraft type required, and deal with the Various Unions and EBA's once and for all.

Only then will Qantas return to Profit, which into will increase the share price for shareholders and gain back the travelling Australians Trust.


Stuart

1) it's the Herald Sun, do you really believe what they write?

2) ever heard of the A380? that has 4 engines and is pretty economical to run. Technology evolves, regardless of there being 2 or 4 engines.

3) PER-AKL-PER is seasonal...

4) PER-HNL...right, who do you envisage flying this route?

5) why would QF63/64 go via MEL when the two biggest South African populations are in Perth & Sydney???

6) take over EK via SIN, that was the very first flight EK operated to Australia, do you really think they'd give it up?

7) Rome, what for? it's expensive enough as it is, and hardly worth the trouble. AMS would be far more attractive.

8) we all know the board has to go...but who replaces them?

[Stuart Trevena]

Hi All,

Montague, you always seem to read part of my posts.

In Reference to your Item 2 - I was talking about B747-400 Fleet "One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replacement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive."

In no-way did I mention the A380, which is economical.

And it is obvious that someone has cut and paste my original post to suit themselves, as items are missing and clearly not in order, that I originally posted them.

If anyone wants to use my posts, for quoting me, don't change anything, otherwise you are changing what I said for your own gain.

As for item 6) Since EK basicly Forced QF to change Hubs so that passengers to Europe would transfer to EK Aircraft, there should have been a give and take on the table. EK should have given up the 404/405 Service, and allowed QF to operate that route. A330 Service would work and more than likely be at least 75-80% full at a guess.

Item 7 - Ok Rome not a good idea, but its got people thinking - Maybe AMS is better... Don't know. Was floating ideas to promote discussion.

I still like this one - Return of Perth to Singapore and Extend to Hong Kong or Japan. Someone did suggest PER-HKG-Japan.

Stuart

[Joe Frampton]

Every time I read or hear about Qantas I get angry about the incompetent fool Joyce and how he is possibly still at the helm. The losses get bigger, things get worse, but oh no 'we can't change the leader while the job is half done' Exactly what job is that - the demise of Qantas? I have no idea what forces are at play here in seeing a long standing international airline/brand pushed in to a nosedive from which they will never recover. Sack this guy and get some new blood. And while we're at it, maybe it's time to have a rethink on domestic fares. If both Qantas and Virgin are losing buckets of money, then it's time to raise fares to a level where things might be sustainable. It doesn't mean it's collusion, it just means that airlines can put bums on seats at a price at which they WON'T go bust. We are all paying ourselves way, way too much in Australia right now. Time for the price of airline seats to go up accordingly. Or maybe that will just happen anyway when one of these airlines does actually go bust. We can't just go on with our head in the sand. End of my rant.

[Ash W]

If anyone wants to use my posts, for quoting me, don't change anything, otherwise you are changing what I said for your own gain.

I feel you are referring to me, in which case it was obvious because A) the quote wasn't 1000 lines long unlike the original post and b) I said in my opening line I left out a lot.

Then just like now I cut out parts I was not replying to and only left what I was replying too to make it clear what my post was addressing l, it was not as you suggest to suit my argument. Now if you don't like that then either make smaller posts where people can reply where it is clear as to what they are replying to or go build a big bridge and get over it.

[Ash W]

Hi All,

Montague, you always seem to read part of my posts.

In Reference to your Item 2 - I was talking about B747-400 Fleet "One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replacement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive."

In no-way did I mention the A380, which is economical.t

Anyone else confused by the above? 777 good because two engines, 747 bad because 4 engines require more maintenance but A380 is economical? But has 4 engines!

But in seriousness at the time the A380 order made sense. Where Qantas flew the 747 to loads were good and growing.

Then along comes the double whammy of late A380 deliveries and the rise of the middle East airlines and boom a cut to the traffic to the West and aircraft too big.

As mentioned isn't hindsight sitting here 10+ years later wonderful?

[Montague S]

Hi All,

Montague, you always seem to read part of my posts.

In Reference to your Item 2 - I was talking about B747-400 Fleet "One big mistake that the Board of Qantas made years ago, was to not order the B777-300ER or -200LR series aircraft, as a replacement for the ageing B747-400 Fleet. While I do like the Queen of th Skies, she has 4 Engines, which guzzle fuel and the extra Maint. cost or 4 engines is expensive."

In no-way did I mention the A380, which is economical.

And it is obvious that someone has cut and paste my original post to suit themselves, as items are missing and clearly not in order, that I originally posted them.

If anyone wants to use my posts, for quoting me, don't change anything, otherwise you are changing what I said for your own gain.

As for item 6) Since EK basicly Forced QF to change Hubs so that passengers to Europe would transfer to EK Aircraft, there should have been a give and take on the table. EK should have given up the 404/405 Service, and allowed QF to operate that route. A330 Service would work and more than likely be at least 75-80% full at a guess.

Item 7 - Ok Rome not a good idea, but its got people thinking - Maybe AMS is better... Don't know. Was floating ideas to promote discussion.

I still like this one - Return of Perth to Singapore and Extend to Hong Kong or Japan. Someone did suggest PER-HKG-Japan.

Stuart

Stuart, seriously...I only responded to what I felt was worthy of a response, hence the way I formatted my post. I read all of your post.

I don't need to sit here and write a response to everything you've written...

I know you didn't mention the A380...that's why I did.

now take a look at what I've responded to, and see how ridiculous it looks.

[Stephen Brown]

Every time I read or hear about Qantas I get angry about the incompetent fool Joyce and how he is possibly still at the helm. The losses get bigger, things get worse, but oh no 'we can't change the leader while the job is half done' Exactly what job is that - the demise of Qantas? I have no idea what forces are at play here in seeing a long standing international airline/brand pushed in to a nosedive from which they will never recover. Sack this guy and get some new blood. And while we're at it, maybe it's time to have a rethink on domestic fares. If both Qantas and Virgin are losing buckets of money, then it's time to raise fares to a level where things might be sustainable. It doesn't mean it's collusion, it just means that airlines can put bums on seats at a price at which they WON'T go bust. We are all paying ourselves way, way too much in Australia right now. Time for the price of airline seats to go up accordingly. Or maybe that will just happen anyway when one of these airlines does actually go bust. We can't just go on with our head in the sand. End of my rant.

Exactly why I think that Joyce is doing exactly what his job decryption is....Destroy Qantas....Transfer it all to Jetstar......Devalue the brand.....

[Ray P.]

I think it's interesting that Virgin Australia releases pretty poor results for FY2014 and no one seems to bat an eyelid. From what I understand (and as has already been raised in this forum), the Qantas results were actually pretty good compared with the expected figures, noting that the vast majority of the losses were 'paper' losses from aircraft write-downs.

[Brad Myer]

The issue for VA is for the year ending both yields and loads were up but they still couldn't make a profit.

QF domestic on the other hand suffered a massive drop in yields as well as loads and still managed a $30mil profit.

Interesting year ahead.

[Dave J]

Don't be fooled Brad. All of a sudden Jetstar lost over $100mil! Some clever accounting has taken place at QF for a number of years since the likes of Jetstar came about. This year QF needed to paint a very bleak picture for the whole group to justify the mass (5000+) staff from losing their jobs.

[Ricky T]

I don't see how 'cleaver accounting' has favoured JQ vis a vis QF. There are accounting standards that needs to be followed so its not management can just 'shift' JQ's costs to QF.

As for the need to 'paint a very bleak picture', their international fleet has been overvalued for accounting purposes for a long time so its reasonable to write them down to their fair value.

The 5000+ job loss that you mentioned has been going on for little while and to date, 2500 positions have been made redundant, so there are over half way there.

[Brad Myer]

Don't be fooled Brad. All of a sudden Jetstar lost over $100mil! Some clever accounting has taken place at QF for a number of years since the likes of Jetstar came about. This year QF needed to paint a very bleak picture for the whole group to justify the mass (5000+) staff from losing their jobs.

Load factor % etc are published monthly for all airlines domestic and international by the BITRE… No creative accounting.