Is Qantas Feeling the Pinch?

[Isochronous]

It may also be a pre-June 30 flurry with managers wanting to meet their KPIs to qualify for bonuses and pad out this year's figures.

 

[juddles]

It may also be a pre-June 30 flurry with managers wanting to meet their KPIs to qualify for bonuses and pad out this year's figures.

That may be true, but wouldn't any bookings (cashflow) still be real for the company? A detrimental effect of lower bookings entering the new fiscal year is a problem to be tackled afterwards. Like any business.

Not that I understand business. My claim to fame in sales is the one and only time I have ever actually sold something - some fish from a river in Cairns to a camper who paid me $5

 

[RooFlyer]

the "ship" is being run very tight from the top, and the bottom line is (as it should be for a private company) the main focus.

We've had this discussion before, and as an investor, I'm not disagreeing with you but a total focus on the bottom line = squeezing and alienating the customer, usually = fewer customers ... = performance downturn, bad for long term investors. But in the short term, its really good for management remuneration incentives.

 

[harvyk]

Does the truth hurt? The Libs lied to us and people fell for it. make popcorn, sit back and watch the drama unfold in the next 12 months.

My feeling on the current government is I don't like them, I don't trust them, and I didn't vote for them, and that is about as political as I'm going to get.

As for "the truth hurts", what truth? That I've decided to specialize in an area with high demand? That every major IT company is hiring people with those skills?

But this is getting very OT as to us guessing why QF might be doing more promos than usual.

 

[33kft]

Beyond the general DSC offer, I NOTICED a couple more targeted directly to family members or myself.

This isn't unusual in that there were targeted SC bonuses last year as well:

Qantas' Targeted Bonus Status Credit Offers

Qantas' double status credit offers are extremely popular among AFF members.

www.australianfrequentflyer.com.au

Also, I have to point out that these offers this year were more restrictive in that they were (for the first time, if I am not mistaken) limited to either domestic or intl flights which means that only part of many itineraries were covered and most importantly, that a lot of routings that were indirect and resulted in a larger number of SCs were not covered.

I just can't see any of this reflecting desperation. I would happily snap up cheap flights and so I don't have skin in the game in terms of running some sort of denial defence but Betteridge's law applies here - no, I don't see the signs personally.

 

[juddles]

We've had this discussion before, and as an investor, I'm not disagreeing with you but a total focus on the bottom line = squeezing and alienating the customer, usually = fewer customers ... But in the short term, its really good for management remuneration incentives.

First up, I am not defending what many perceive as "obscene" upper-management salaries and bonuses - let's not go there. But I would hope that a company as big as QF has investors/board/etc that look beyond the very short term. If they do in fact allow a system that promotes short term gain at the expense of longevity, the company deserves to die. And it appears to me that not only is QF not dying at the moment, but has more vigour than it has had in many years. Perhaps my erroneous assumption here is that the leaders know their stuff. And answer to equally knowledgeable people?

 

[Melburnian1]

..First up, I am not defending what many perceive as "obscene" upper-management salaries and bonuses - let's not go there. But I would hope that a company as big as QF has investors/board/etc that look beyond the very short term. If they do in fact allow a system that promotes short term gain at the expense of longevity, the company deserves to die. And it appears to me that not only is QF not dying at the moment, but has more vigour than it has had in many years. Perhaps my erroneous assumption here is that the leaders know their stuff. And answer to equally knowledgeable people?

But neither it nor VA appear to be investing in replacements for ageing B738s used on many domestic and a few shorter international routes like DPS. QF has more, of course, and on average its are older than VA's. This is a deferral of necessary capex. AFFers have previously discussed this (IIRC, I may have commenced that thread.)

Back to the OP's topic, while it does not break down the number of seats filled by airline on each route, the BITRE monthly domestic passenger numbers show patronage that (while variable between routes) is overall flat, slightly declining or rising at less than population growth (latter is 1.8 per cent per annum).

There is a lag in this information becoming available, but as others have pointed out, since the Morrison Liberal/Nationals Government was (re)elected, there's been an upswing in subsectors such as housing construction and in finance, loans for housing. The CBA commented the week after the election was its busiest for loan inquiries in a long time.

We'll need to wait three or four months before a post-election picture is clear but I wouldn't expect any dramatic rises in domestic air travel. One negative is that the rate of increase in international tourists visiting Oz has slowed right down. If I recall, in February it dropped by two per cent compared with the previous February. Mainland Chinese may have some or much discretionary income but you can't tell me that the USA's imposition of tariffs (not something I support) has not hurt the mainland Chinese.

Australia has put a lot of eggs re tourism with the mainland Chinese while comparatively neglecting other nations as sources. Qantas CEO Mr Joyce suggested that every (mainland Chinese?) tourist who comes here makes a typical two to three domestic air trips so any decline in arrivals will hit both domestic airline groups.

 

[juddles]

I really get a sense that QF has very certain goals/aspirations in relation to its main businesses. Regarding domestic, it just has to keep up with Virgin, in price/product/service. Not hard in the domestic limited-competition arena. The Loyalty program is very succesful so not to change it much. Regarding international, it may not be the biggest part in economic terms, but it is crucial as a brand. And I think that AJ has a very clear notion what to do there. QF cannot compete with many world airlines due to higher cost bases, relatively tiny market, and geographical isolation. So what I perceive as the long term focus ("premium" ultra-long-haul point to point - think Project Sunrise) makes perfect sense to me.

China may be a huge market numbers-wise, but competition will always be stiff, and get stiffer. I have seen Y return flights from China to Australia around $300!!

 

[downgraded]

But I would hope that a company as big as QF has investors/board/etc that look beyond the very short term.

I worked for a multi national that couldn't see beyond the quarter and now has a share performance that reflects their willful blindness. They only see the world from their perspective and whilst clearly their own fault they choose to surround themselves with yes-people they make faulty decisions to the detriment of the greater good of the company.

 

[juddles]

I worked for a multi national that couldn't see beyond the quarter and now has a share performance that reflects their willful blindness. They only see the world from their perspective and whilst clearly their own fault they choose to surround themselves with yes-people they make faulty decisions to the detriment of the greater good of the company.

I agree "yes people" are a danger to any business, and this is an underlying fear I have about QF at the moment. Don't get me started..... I "left" QF for a reason

 

[odysseus]

I really get a sense that QF has very certain goals/aspirations in relation to its main businesses. Regarding domestic, it just has to keep up with Virgin, in price/product/service. Not hard in the domestic limited-competition arena. The Loyalty program is very succesful so not to change it much. Regarding international, it may not be the biggest part in economic terms, but it is crucial as a brand. And I think that AJ has a very clear notion what to do there. QF cannot compete with many world airlines due to higher cost bases, relatively tiny market, and geographical isolation. So what I perceive as the long term focus ("premium" ultra-long-haul point to point - think Project Sunrise) makes perfect sense to me.

Shrink to success isn't a great business approach. Most that have gone that path - typically because they're forced to - have not done well out of it.

Sweating your current assets is one thing that serves cost control well, which has been much of their current strategy, rather than making a stake in which way to go for the future. Personally, I have my doubts about the viability of Project Sunshine as a smaller business with less seating across the board.

 

[RichardMEL]

But neither it nor VA appear to be investing in replacements for ageing B738s used on many domestic and a few shorter international routes like DPS.

VA does have a standing 737MAX order, though it is not due for some years yet.

 

[RichardMEL]

Re the pinch QF finished one oz sale, and rolled into another one pretty much right away, including cheaper J fares than the previous one. Tell me that's not feeling the pinch?

 

[Quickstatus]

The QF 737-800 is not old ageing or antique aircraft (though the technology is).

Of the 75 in service, 36 are more than 10 years old, and 39 are 10 years or less. The oldest is 17 years and the youngest is 5 years. VH-VZF is at the 10 year mark.

This is a very young fleet compared with what we see overseas especially in the US.

While there does not seem to be an officially announced capex pipeline for the replacement of the 737-800 fleet, the current fleet seems to be operating well with comparable on time dispatch to its competition so it would be hard to argue for a replacement. Unfortunately the domestic market is an oligopoly and deferred capex (if any) is a sound business decision even though we travellers might not like it. I also don't see how a replacement fleet would increase customer satisfaction bearing in mind that domestic travel is mostly commuter travel rather than experiential.

Nimble small single aisle aircraft with fast turnaround at ports is the way to go rather than larger twin aisle aircraft. The A330 is not really suited to a "CityFlyer environment even though it adds a bit of pizzazz to the fleet (post cabin update). However the A320/321 and B737Max can. I can see why AJ is making noises about the Max. He does not want to deal with a subsequent monopoly.

 

[CaptJCool]

As for nimble...

I saw a JQ flight turn around in Hobart in less than 20 minutes.

Why?

Because they forklift 3 luggage containers off and then 3 more on in fast time.
The A330 ought achieve similar reduced time turn around

Boeing’s are not designed for bulk luggage container loadings.
You may have noticed it’s one-by-one loading on the 737.

 

[Quickstatus]

Unfortunately the A330 turnaround was found by QF to be longer than the B767 that it replaced.

 

[juddles]

Shrink to success isn't a great business approach. Most that have gone that path - typically because they're forced to - have not done well out of it.

Sweating your current assets is one thing that serves cost control well, which has been much of their current strategy, rather than making a stake in which way to go for the future. Personally, I have my doubts about the viability of Project Sunshine as a smaller business with less seating across the board.

I think the labelling "shrink to success" is a bit unfair in this case. I think "finding their niche" would be a better one for the uphill battle QF faces. Some sort of specialization would appear to me to be a very sound approach. Also, as much as we have all sufferred from codeshare issues, etc, one way an airline can actually grow now is through alliances, and IMHO Qantas have been managing this aspect quite well.

 

[serfty]

Unfortunately the A330 turnaround was found by QF to be longer than the B767 that it replaced.

There was a story doing the rounds that the A330 slow turnaround was due to refuelling issues caused by poor fuel flow/pumps. I did read it was debunked however.

 

[juddles]

This is both on topic and off topic - the issues with 737 manual loading.

Qantas seems fairly conservative when selecting new fleet, which is not a bad idea. At the moment it must be a very hard choice regarding narrow bodies. Either swap to Airbus or await something decent from Boeing.

This just adds to the whole 737 MAX debacle - Boeing really need to come up with a brand new design for the smaller stuff. But even if they do that will be probably ten years off for QF. Will be interesting what they do in about 5 years....

 

[Quickstatus]

The other factor which may or may not be in QF’s favour is the forward oil contracts. It appears that inventories are rising and OPEC is attempting to cut production. Most of QF fuel price is hedged so this could be a negative for the airline as it also indicates a drop off in economic activity