Building a stronger Qantas

[gumpy]

A lot of comments about qantas being allowed to improve their balance sheet. A couple of numbers in the investor presentation struck me. First 7% revenue increase for QF with a 240% increase in profit. Something like a 19% revenue increase for JQ with a 29% profit increase. If I was only on about balance sheet I'd focus on the area that provides the greatest impact on profit.

I would also look to rapidly turn around a $200 million loss. Just on that another number was the 10% reduction in fuel cost from using the A380. So why are QF sticking with 747s and not trying to get that 10% saving. 10% of a $3 billion fuel bill must surely help the balance sheet.

Well to QF's defence they were planning to get the 747s swapped for the 787s...

I still think they should have gone for the 777s as well... they're suppose to be quite efficient and have low running costs...

 

[Oneworldplus2]

Gumpy, please clear your inbox....

 

[harvyk]

Regardless of the bullying and cajoling tactics, used by some pilot sycophants in this thread, there are obviously a number of Qantas customers who feel that Qantas management is on the right track… and fully support their tough stance with long haul pilots.

Personally I would rather see the whole International Division shut down (or off-shored) and local pilots’ jobs terminated, before management should give in.

Be careful what you wish for, you might just get it... :shock:

I completely believe that Qantas management would be able to employ suitably competent pilots at much lower pay rates than they do now.

That's true, they might be able to employ suitably competent pilots at a much lower pay rate. But one of the things that makes aviation in Australia so safe is the fact that near enough is not good enough.

The other thing to remember is the cost of the pilot is such a small cost in the scheme of things, lets assume that it costs say $30 per NM in fuel alone (yes I realise this is a variable number as it depends on actual pax and freight load as well as the actual cost per litre which is paid), on a long haul flight a plane could easily burn through $150,000 worth of fuel, you've also got the costs of the FA's, and the engineers, as well as maintenance and parts costs... So now the $2000 which the pilots may get paid for the flight is actually a really small amount, and thus the reason why fuel efficient planes are considered so much more important.

 

[TonyHancock]

I'll preface this by saying I know nothing about running airlines.......

...but it seems to me that the QF management separates the various segments of it's business. Alan Joyce has announced that QF needs to repair QFi. As a complete layman I can't see how you can make the separation of the business as easily as QF appears to.

Events of the last couple of days have highlighted the just how intertwined the FF program is with the domestic and international services. My concern of QF is what is going to happen to domestic. It does not seem to me that the current QF domestic market share is sustainable with a half decent competitor, and if VA does a good job, QF will lose some market share. My question is what percentage loss of business would erode the current $160k profit generated by the domestic arm? Will Alan Joyce's successor (he can't last another year can he?) be standing up making the same announcement about QF domestic needing repair?

I'm in the process of booking a DJ/VA flight. Previously, three times this year, I have flow Jetstar MEL-NTL, not this time though. I flew Jetstar for the QF points. I like what I see in the VA/DJ FF program and am taking up the WP comp. (If they'll accept me!) and I want to maintain WP status. That means QF will lose domestic business from me, and a long haul international J flight too. (although that probably would have gone to BA). My first VA/DJ flight will be in a months time.

I'm choosing this path not because QF has not delivered to it's FF's (It hasn't of late in my opinion.), I'm doing it because I see a better FF program, looking after FF's at VA/DJ.

From my perspective I see QF's businesses as a house of cards that will tumble if they do not pay attention to the individual business' reliance on each other. The QFF program is the glue that binds them together, but they all need each other.

 

[rechoboam]

Doctor: ALL my patients will die.

Pilots: Are glorified bus drivers. Now compare that to truck drivers who get paid a flat rate per km.
In both cases electronics and strategy is mapped , and adding value is difficult.
Supertanker captains , I think have been 'internationalized' and don't get paid a lot relative to the cost of the bus they are driving.
USA air pilots have also been beaten around the head, money wise.
So it is a natural that pilots with cozy conditions get attacked (mind you, the board and the exec - are not on the pay cut list), nor is doing something about meal and travel allowances.

Cut pay and offer a % in shares or route profitability, but cutting alone is a dumb option. Maybe pilots can earn their cake, by giving them a say in operations. But bear in mind, the Ansett saga is still a sour point.

I'm not sure what you are getting at there- sarcasm?...flying an A380 is clearly an entirely different proposition to driving a bus. My airplane flying is limited to simulators, albeit highly realistic ones and my overwhelming impression was that the complexity, stress, challenge and enjoyment of piloting a four engine jet is very similar to the complexity of managing a critically ill patient in ICU. At least technically, I dont know what the administrative and interpersonal challenges are like for a pilot. But ultimately wages are function of various factors such as barriers to entry, supply, demand, and a premium for danger or dirtiness. There isnt a benevolent master out there apportioning extra credit just because a job is worthy or difficult. Some doctors here get paid a heap, while there are some medical specialties in some developed nations where making any significant profit in a private practice is impossible. If lots of people want to fly jets, wages will fall to a level held up only by the long training time and barriers such as health and ability to read maps, do maths etc.

 

[rechoboam]

Isn't having an experienced, competent, valued and respected pilot on-board the same as any form of preventative medical care?

Look at the income of a cardiac surgeon.
Then look at the income of a clinical epidemiologist trying to reduce the number of heart attacks.
Then tell me that we as a society always put our money where are mouths are and pay big bucks to prevent problems rather than fixing the consequences.

 

[goldy]

what is relevant is how much profit is made compared to the asset base, in which case a $250m profit is quite poor for Qantas all things considered, moreso when you take into account this profit included $95m (not sure if tax is applied to this or not) from Rolls Royce for the A380 incident.

You're right. $250 Million profit is not that great given the asset base, but in comparison to several other competitors (excluding EK and CX), it is quite respectable. As for the $95 million from RR, I dont see its relevance given that its payment was to "compensate" QF for direct losses and expenses it incurred due to the engine incident. It was not a cash bonus that inflated the bottom line, but rather a cash settlement to return QF to the "$250 million annual profit" position it would have been in had the incident not occurred.

Then tell me that we as a society always put our money where are mouths are and pay big bucks to prevent problems rather than fixing the consequences.

Id suspect that has something to do with the fact that the consequences require immediate attention whereas prevention does not. Im not saying I agree with it, but thats the shortsighted society in which we live.

 

[nlagalle]

I'll preface this by saying I know nothing about running airlines.......

...but it seems to me that the QF management separates the various segments of it's business. Alan Joyce has announced that QF needs to repair QFi. As a complete layman I can't see how you can make the separation of the business as easily as QF appears to.

it's quite common now for everything to be broken up into Business Units, or Silos/towers etc. Almost micro management for accountants.

 

[rechoboam]

Its not totally unreasonable either. I have a very different business to QF, with altruism being of much more importance, but I do look at every contract and I need to be making money on enough parts of the business to allow for unprofitable but important work elsewhere.. if an airline can't make money running an international full-service business, it shouldn't be obliged to do so when its shareholders can use their money to do something else. Unless there is some legislative provision that means they have to, I dont know much about the Qantas Sale Act.

 

[TonyHancock]

it's quite common now for everything to be broken up into Business Units, or Silos/towers etc. Almost micro management for accountants.

In some business setups this can be a good thing and allow decision making at lower levels...by employees that actually understand the processes they are making decisions on. It becomes less appropriate when there is a dependency on another business and decisions are made that impact the other business.

 

[goldy]

Its not totally unreasonable either. I have a very different business to QF, with altruism being of much more importance, but I do look at every contract and I need to be making money on enough parts of the business to allow for unprofitable but important work elsewhere.. if an airline can't make money running an international full-service business, it shouldn't be obliged to do so when its shareholders can use their money to do something else. Unless there is some legislative provision that means they have to, I dont know much about the Qantas Sale Act.

Thats all fair and well... and im certainly not saying this applies to every situation or every company, but "sometimes" you have to lose money to make money. You dont have to look further than your local grocery store front page catalogue "loss leader" to see what I mean. BA have been known to lose money on their intra-europe routes, but those routes support their vast international network.

 

[harvyk]

it's quite common now for everything to be broken up into Business Units, or Silos/towers etc. Almost micro management for accountants.

True, on paper accountants like to break things up, but they still need to remember that the sign on the front door still says "My Company", and the customer doesn't know or care where the business unit lines are drawn, as far as they are concerned they are paying "My Company" to deliver a service, nothing more...

 

[medhead]

Well to QF's defence they were planning to get the 747s swapped for the 787s...

I still think they should have gone for the 777s as well... they're suppose to be quite efficient and have low running costs...

Yes they did plan for this. By ordering 787s. But they have now totally thrown that plan out the window. I just have an issue with the idea that you're address a problem but doing nothing and giving away an obvious part of the solution to Jetstar. Are they hoping it will just go away?

 

[nlagalle]

An interesting opinion piece by Jeff Kennett in the Herald Sun today..

Qantas must reinvent itself now | Herald Sun

 

[QF WP]

Nicely written. What's more important - the company or the staff? Neither are more important, but must work symbiotically to move the company into a changing environment, under which both must change - or falter.

 

[drron]

Look at the income of a cardiac surgeon.
Then look at the income of a clinical epidemiologist trying to reduce the number of heart attacks.
Then tell me that we as a society always put our money where are mouths are and pay big bucks to prevent problems rather than fixing the consequences.

But all the Cardiac surgeons I know will give their patients the correct preventative advice.
None of the Clinical Epidemiologists I know can do Cardiac surgery.
And when i was working full time in private practice as a General Physician the Clinical epidemiologists I knew earnt more after tax and expenses with less hours and better conditions.

 

[markis10]

Be careful what you wish for, you might just get it... :shock:

That's true, they might be able to employ suitably competent pilots at a much lower pay rate. But one of the things that makes aviation in Australia so safe is the fact that near enough is not good enough.

I wonder about the pay levels involved in this little story, while it is a press article, to me is symptomatic of the sort of problems you get with not hiring the best you can:

A Chinese pilot's refusal to give up his landing slot to a passenger plane that issued a distress call to say it was running out of fuel almost caused a disaster, state media reported yesterday.

China's privately-owned Juneyao Airlines confirmed that one of its pilots refused to give way when a Qatar Airways plane contacted air traffic controllers at Hongqiao airport, asking permission to land immediately.
The pilot of the Qatar plane said it had just five minutes' worth of fuel left after it was diverted from Shanghai, the Global Times newspaper reported, adding that a disastrous accident was only narrowly averted. The Qatar plane was travelling from Doha to Shanghai when it was ordered to divert due to a thunderstorm on August 13.
Air traffic controllers in Hongqiao, about 45 kilometres from Shanghai, ordered the Juneyao pilot to circle the airport and allow the Qatar plane to land first, but the pilot refused.

Read more: Stubborn pilot to blame for near disaster at airport: report
​

 

[QF WP]

Thankfully we aren't in China:idea:. Hope the Chinese pilots gains some understanding of how close he came to causing another Tenerife-like crash. It wasn't a Pan Pan Pan, it was a Mayday, you turkey .

 

[Major]

Thankfully we aren't in China:idea:. Hope the Chinese pilots gains some understanding of how close he came to causing another Tenerife-like crash. It wasn't a Pan Pan Pan, it was a Mayday, you turkey .

The same incident as reported in the AV herald

Incident: Qatar B773 and Juneyao A320 near Shanghai on Aug 13th 2011, fuel emergency or not

 

[Oneworldplus2]

An interesting opinion piece by Jeff Kennett in the Herald Sun today..

Qantas must reinvent itself now | Herald Sun

From the article...

But look at the situation now: British Airways, Olympic, Lufthansa and Alitalia no longer fly to Australia.