Building a stronger Qantas

[Pushka]

Just a minor point.. but MA is Malev and not Malaysian which is MH.

M.A. work for you then?

 

[medhead]

Ok so reading some more and I've fired up more than the iPhone. I've already mentioned the Qantasia flying to Oz thing. Here is the link http://http://www.theaustralian.com.au/business/opinion/with-qantas-facing-hard-questions-asia-is-the-answer/story-e6frg9if-1226116322031

I've now found this gem:

This is just the beginning of the change process. In the short term our objective is to return Qantas International to profitability. In five years we intend that the Qantas airline business, domestic and international combined, will be exceeding its cost of capital on a sustainable basis.

Now I'm slightly confused, I thought this was about QFi profits and capital return. But now we see the qantas airline business, domestic and international, being lumped together over the cost of capital. Why exactly is all the talk about QFi cost of capital only? What is the cost of capital for the Qantas airline business as a whole, now? So here is Joyce sending out mixed messages with an implicit contradiction. Question: What is the problem, QFi or QFwhole?

Then there is a piece from Matthew Stevens in the Oz Brash, bold and certain to anger... a new course is set | The Australian

First off there is the question of offshoring and Joyce's convenient answer to reply:

"Jetstar Japan is not offshoring, it is building a new business in Japan," he says.

No mention of Qantasia there, just Jetstar Japan. But then, reading further, I have to wonder if Jetstar Japan really is only a local airline, when I get to the following.

Jetstar Japan, for example, will be allocated 24 Qantas aircraft, thus removing them from the Australian operator's balance sheet.

What! I thought jetstar Japan was a purely domestic operation. Joyce said they are getting new A320s. We're told the problem with capital is QFi. So what is happening? what are these 24 aircraft that are going to be transferred? They can't be from QFd, why would Jetstar Japan want a fleet of 737s and A320s? How would moving aircraft from QFd books help QFi capital return? But if they are from QFi, why does a purely domestic Japanese airline need international aircraft? (if not to fly international routes :shock I guess another possibility is that QFd or i actually have A320s on their books. But hang on they don't operate those aircraft. QF wouldnt be subsidizing Jetstar by having jetstar aircraft on their capital account, would they?

Perhaps Red Roo might like to seek some clarification about all the contradictory information being published in the Australian. Certainly there are a few questions here that Alan Joyce might like to clarify, so we can understand what this is all about.

 

[dajop]

Talk to us again when Qantas enhance away your J lounge access as part of your LTG

Will deal with that when that happens (which I expect it will) , its a nice to have, but I hardly fly QF/oneworld any more as other carriers meet my needs better.

 

[The Rok]

Perhaps some of the current QFd aircraft are going to Japan and some of the A320's to QFd where they are more suited. Perhaps a primarily 737-800 BSI & A320 NEO domestic network. Just a handful of wide body for coast to coast to compete with VA.

 

[Danger]

Talk to us again when Qantas enhance away your J lounge access as part of your LTG

(You mean international J lounges, yeah, not domestic?)

 

[gumpy]

What! I thought jetstar Japan was a purely domestic operation. Joyce said they are getting new A320s. We're told the problem with capital is QFi. So what is happening? what are these 24 aircraft that are going to be transferred? They can't be from QFd, why would Jetstar Japan want a fleet of 737s and A320s? How would moving aircraft from QFd books help QFi capital return? But if they are from QFi, why does a purely domestic Japanese airline need international aircraft? (if not to fly international routes :shock I guess another possibility is that QFd or i actually have A320s on their books. But hang on they don't operate those aircraft. QF wouldnt be subsidizing Jetstar by having jetstar aircraft on their capital account, would they?

The article is just not written well.

Basically:
1. J* Japan will get Aus Domestic fleet for short haul around there. As these planes are already depreciated the return on capital for this new LCC venture should be ok as the capital base is lower.
2. New neos and other short haul airlines will come into QFd which is fantastically good on the return on captial and take the cost of new airlines and depreciation hits.
3. They rationalise their QFi routes so that they're just flying the profitable routes and improve return on captial.
4. All of the above will result in QF as a whole having a good return on capital.

Above is how I'd interpret the information and would make the most sense for me from a financial/tax/strategy perspective.

 

[goldy]

Can you quantify the loss you have suffered from this alleged breach?

Im not going down this path again....except to say that if you bought your fare from QF for X/Y/Z reasons and Z is not delivered, does it matter what loss you have "suffered", or is it more a case of you not getting what you paid for which IMO, means there "could be" a breach of contract.

I concede this is different to an IROP, where you might be delayed or rerouted as these are covered by various T&C's but I don't see how those same T&C's cover the non provision of clearly defined benefits (like lounge wifi, priority boarding and luggage)

Im just asking.. so please can we keep it civil and not turn the question into something that it is not.

I think the case would be dead before it started for being a trivial matter.

What is trivial to you, may not be to others. I remember in my uni days, a case about a painter quoting and charging for 3 coats of paint but only actually painting 2. The complainant was not successful in their claim for total reimbursement,due to substantial performance, but was successful for the cost of contracting another painter to paint the final coat. Did the complainant "really" suffer a loss because they only got 2 coats? Despite its "intangibility", the courts seemed to think they did and I think I agree. They did NOT get whet they paid for, irrespective of how trivial it may have been. That is not to say id care enough to purse the non provision of priority boarding...

back to an aviation theme... your contract with an airline is that you will checkin on time. The consequences of not meeting that condition is that you get offloaded as an aircraft will not be kept waiting for you to sort your self out. In this example, you "breached" the T&C's and there was a consequence. Why then, should you sit around waiting for an airline to sort themselves out, which in effect is the airline breaching the T&C's but there does not seem to be a consequence. It seems to me that you're just expected to tolerate it, whilst they don't tolerate your tardiness. Unfair status quo in my book.

I am used to just walking on board - the concept of queuing behind 200 people is unpalatable.

Even more unpalatable when you know that you really shouldn't have to, had the airline actually provided what it was supposed to and what you are entitled to. But good on you for not getting too worked up about it.

(You mean international J lounges, yeah, not domestic?)

Either or. It was tongue in cheek. I have no knowledge of any impending changes, but no doubt they are coming.

 

[el_rooto]

I am still scratching my head as to how you can have a premium carrier without wide bodied aircraft? A 4hr flight in a 320 is not my idea of fun.

This strategy would make more sense if they had Qantas Asia flights from asia to europe, as well as intra-asia flights.

 

[lsmi4126]

Basically:
1. J* Japan will get Aus Domestic fleet for short haul around there. As these planes are already depreciated the return on capital for this new LCC venture should be ok as the capital base is lower.
2. New neos and other short haul airlines will come into QFd which is fantastically good on the return on captial and take the cost of new airlines and depreciation hits.
3. They rationalise their QFi routes so that they're just flying the profitable routes and improve return on captial.
4. All of the above will result in QF as a whole having a good return on capital.

Above is how I'd interpret the information and would make the most sense for me from a financial/tax/strategy perspective.

I completely agree with this, and again it just adds fuel to the cross-subsidisation debate between QF mainline and JQ (and eventually the other LCC's). Although I don't have all the intricate details, I still can't for the life of me understand why mgt expect rational investors to heed the bottom line segment data (QFi, QFd, JQ) when the HUGE capital required across the business makes it's like comparing apples with waterbuffalo from an accounting standpoint.

Take a look at the segment EBITDAR numbers for 2010 - the D & A for QF c.f. Jetstar illustrates my point (76% vs 4% of EBITDAR respectively).



While I think a new strategy is a fantastic idea, and am happy to see something rather than nothing - I don't buy the pretences under which it was delivered.

 

[argamond]

surely its singapore? but who is the partner?

I doubt it is Singapore, as it doesn't really open up a lot of new destinations (think China). My bet for the premium airline hub would be either Hong Kong (if they approve plans to build a third runway) or possibly Macau (as a cheaper base). Both SARS would also be easier to place a hub, with great potential into China (without the legal hurdles involved with a true Chinese base). Macau may be a cheaper option, but my bet would be Honk Kong to leverage the lounges already available/will be built, and leverage the planned development of the third runway. My reasoning is that either of the two destinations will open up China/Taiwan/South Korea as possible destination points, and would not be competing with air asia/tiger around Singapore.

As for flights to london, I believe that reductions in services (and code sharing) is a great idea (from a business/economics point of view). I'd imagine the costs in terms of wages and allowances to use staff all the way to london must be massive. Terminating in BKK/HKG should reduce this cost. Additionally, if the premium airline is based in HKG, they can take over from qantas and fly services to London and LA (and also connect to jetstar japan)

 

[serfty]

I am still scratching my head as to how you can have a premium carrier without wide bodied aircraft? A 4hr flight in a 320 is not my idea of fun.

This strategy would make more sense if they had Qantas Asia flights from asia to europe, as well as intra-asia flights.

More and more USA airlines are doing this - it seems that unless a VLA, widebodies are not as popular as they once were.

 

[harvyk]

I am still scratching my head as to how you can have a premium carrier without wide bodied aircraft? A 4hr flight in a 320 is not my idea of fun.

This strategy would make more sense if they had Qantas Asia flights from asia to europe, as well as intra-asia flights.

A widebody does not equal premium carrier. Just look at JQ flying A330's, and yet they are def not premium. I agree, A320 does not scream premium airline to me, but I guess that's because I remember days of old where if you where flying somewhere (other than dom), you'd be on a jumbo, you'd also be treated very well even in Y.

 

[lsmi4126]

More and more USA airlines are doing this - it seems that unless a VLA, widebodies are going the way of the dodo.

You've flown on a premium airline in the US serfty??? (please don't say AA - the back of their buses are not premium)

 

[medhead]

The article is just not written well.

Basically:
1. J* Japan will get Aus Domestic fleet for short haul around there. As these planes are already depreciated the return on capital for this new LCC venture should be ok as the capital base is lower.
2. New neos and other short haul airlines will come into QFd which is fantastically good on the return on captial and take the cost of new airlines and depreciation hits.
3. They rationalise their QFi routes so that they're just flying the profitable routes and improve return on captial.
4. All of the above will result in QF as a whole having a good return on capital.

Above is how I'd interpret the information and would make the most sense for me from a financial/tax/strategy perspective.

That's probably a fair interpretation. But what about the aircraft differences. Jetstar japan is supposed to be getting A320s, QFd doesn't have these. Also a few knowledgable people on AFF (more knowledgable than me) have implied it is crazy to operate 737s and A320s. Why would QFd be getting new 737s and A320s?

I suspect the 24 aircraft thing is wrong. But this apparently from Joyce and it fits the capital return narrative.

 

[markis10]

More and more USA airlines are doing this - it seems that unless a VLA, widebodies are not as popular as they once were.

While short haul aircraft are all the rage, wide bodies are still in demand and represented 27% of Boeings orders YTD with 100 777s. Over at Airbus the ratio is pretty much the same:

http://www.airbus.com/uploads/pics/O_D_chart_table_JULY.jpg

it might be only me but I see a lot of upside in the A320 orders list for deferments/cancellations!

 

[Oneworldplus2]

I am still scratching my head as to how you can have a premium carrier without wide bodied aircraft? A 4hr flight in a 320 is not my idea of fun.

This strategy would make more sense if they had Qantas Asia flights from asia to europe, as well as intra-asia flights.

A few years ago l got to sample QFxx_ (QF579 at the moment/SYD-PER/Boeing 737-800-Winglets).

Never again.

 

[oz_mark]

In which the choice of a320s seems even more puzzling. A330s are the better aircraft or flying between AUS and Asia, and probably would not be too difficult to fill up intra-Asia, given the size of the market there.

If they want to fly A320's as a premium airline to Australia, that would cut down the options for where they could be located. Or at least, IMO, hubbing through Darwin is not a premium experience, so they would have to be located within flying distance of various cities in Australia.

 

[serfty]

You've flown on a premium airline in the US sefty??? (please don't say AA - the back of their buses are not premium)

Furthest I have ever flown in Economy on AA was DFW-ONT, 2 hour flight, ~9pm, S80 - 10B Aisle seat with no seat companion. I slept.

The only other AA economy flights I have had number at 6 - all less than an hour (LAX/SFO, LAX/LAS).

I have had over 50 AA flights in First Class or Business - one was a 73H LAX-BOS ...

I have also had about 20 flights in First/Business class on UA/US A319/320/321, longest was last year SAN-CLT.

 

[markis10]

Wonder if the new premium airline will once again raise the "Australian Airlines" flag, and I don't think it will be just a320s, after all JQ are moving some A330s to SIN.

 

[ajw373]

The article is just not written well.

Basically:
1. J* Japan will get Aus Domestic fleet for short haul around there. As these planes are already depreciated the return on capital for this new LCC venture should be ok as the capital base is lower.
2. New neos and other short haul airlines will come into QFd which is fantastically good on the return on captial and take the cost of new airlines and depreciation hits.
3. They rationalise their QFi routes so that they're just flying the profitable routes and improve return on captial.
4. All of the above will result in QF as a whole having a good return on capital.

Above is how I'd interpret the information and would make the most sense for me from a financial/tax/strategy perspective.

That is not what the Qantas press releases say.

Firstly in the release about the A320 order

“The first of the A320s will be allocated to the new Jetstar Japan venture between the Qantas Group, Japan Airlines and Mitsubishi. We are using the Qantas Group’s scale in the aircraft purchasing market to establish this exciting new airline. Financial management of the fleet will rest with Jetstar Japan and will be funded independently of the Group’s balance sheet.

“The remainder of the A320 order will go to other new ventures, including Qantas’ premium airline serving the Australia-Asia market, and to renewing Jetstar’s global fleet – giving us the flexibility to meet growth requirements where needed.

About Qantas - Media Room - Media Releases

and in the release about Jetstar Japan

The airline will launch with an initial fleet of three new Airbus A320 aircraft, configured for 180 customers in a single class, growing to 24 aircraft within its first few years. Total capitalization commitment for the new airline is up to ¥12 billion

About Qantas - Media Room - Media Releases