Qantas Equity $1.9B Raising and Announcements June 2020

[p--and--t]

With QF's cuts, part of the game plan may be to (re) sign flight crew up at lower rates, perhaps in some new 'vehicle', similar to what was done with flight attendants over the years. This would reduce costs.

The employer will have the advantage of a prospective large pool of labour from which to choose.

Time will tell if this suggestion that I heard from someone with an historically reasonable knowledge of airlines materialises.

Find that hard to process given QFs announced cuts (<20%) are far smaller than for most of the others (of the order of 30-50%) that have been in the news of late.

 

[jakeseven7]

Find that hard to process given QFs announced cuts (<20%) are far smaller than for most of the others (of the order of 30-50%) that have been in the news of late.

Other airlines you mean?

QF is a very tightly cost controlled company - was not as bloated and fat as a lot of the other airlines in the media I’ve seen with job cut announcements to date. It was already run relatively leanly.

Plus a lot of the other announcements are companies with heavy leans to international travel. QF has a huge domestic business to run that hopefully will keep cranking up.

 

[eastwest101]

I was just looking at Google Flights for August dates for return SYD-MEL-SYD and I saw that at the moment, QF and VA have flights scheduled one per hour between SYD-MEL and the return fares are in the ball park of $235-$250 return. Fares are uniform in price without the typical expensive Mon Fri price pattern which would seem to indicate low fare buckets available and widespread. SYD-PER is a different matter for August, only one sole scheduled VA flight and 4 QF flights scheduled but prices in the ball park of $470-$530 return with the typical 10-15% difference in fares between QF and VA. I expect what we are seeing here is the effect of Federal Government assistance/subsidies to both VA and QF to maintain a minimum schedule through to at least September 2020. When I looked further forward into the future to remove that effect, say Nov 2020 on SYD-MEL return I was seeing much more frequency again and a bigger variation in fares but some price increases as well all the way from $230-$380 and in the case of SYD-PER return I was seeing similar prices for QF and VA and similar story for SYD-PER return $496-$627 ballpark fares.

Thats not to say that all or any of these flights will actually operate or be rescheduled , given the fluid situation with state border restrictions/closures/self isolation requirements, but it did highlight to me that it looks like QFd and VAd are at least "testing the market" a bit in August and beyond and seeing what demand is out there, and now that Bain appears to have completed the VA transaction, people are probably feeling more confident about booking on VA and not losing their money, so we seem to have the beginnings of a functioning domestic airline market, albeit still Federally subsidized until September but after that the yield managers of both airlines haven't responded to a lack of demand or any surge in demand thats too radical post Fed Govt assistance.

Normally we would rely on the yield managers to tell us the state of the airline market and forward booking but maybe the uncertain Covid-19 situation has rendered the usual airline yield managers equations and formulas irrelevant at the moment?

 

[Melburnian1]

...Normally we would rely on the yield managers to tell us the state of the airline market and forward booking but I maybe the uncertain Covid-19 situation has rendered the usual airline yield managers equations and formulas irrelevant at the moment?

The depth of this recession is unprecedented in our lifetimes. Even if JobKeeper continues in some form for some sectors post-27 September 2020 (a costly proposition given Federal Government's already huge leap in its debt- , there will be so-called 'zombie companies' folding and a high level of unemployment plus significant underemployment. So it must be close to impossible for airlines to use revenue analysts' calculations that are usually based on historic trends.

 

[jase05]

QF has a huge domestic business to run that hopefully will keep cranking up.

And has the freight market pretty much sown up. Freight is still booming domestically

 

[RAM]

Not that reluctant as 200,000 fares just sold by Jetstar indicated....

Not sure about those numbers as the level of complaints made about no seats avaiable at advertised prices, servers failing, or prices doubling when going to the final payment screen - should make the next few weeks quite interesting.

As to "Melbournian"'s post above - does that rate as discrimination?

The depth of this recession is unprecedented in our lifetimes

There are actually people still alive who were born before even the early 1980s.... even if we don't go around with the personalised number plates advertising the fact.

Whilst the likely future will see a severe global recession - in some countries it won't be as severe as what they experienced in the Asian Crisis, or the 2007-2009 debacle or even the recession we had to have. In some industries within Australia in the 1990's fun - their industries contracted over 40% from peak to trough. Even in the absence of a recession - the oil industry (both globally & within Australia) got massacred in the period from 1984 to 1988. One well known fund manager thought it was a great idea to buy Bridge Oil (pretty much at the peak). They ended up writing off 96% of the cost.

The travel industry has a wealth of available information (for those in the know) showing very good guides to the impact from economy-wide downturns through to the impact of only industry specific downturns hitting the travel industry (such as mining or investment banking for example). The data exists across all regions and countries - people just need to know where to find it.

For example, the daily spend of the US Govt on ANY product type or daily increase in any type of Govt revenue is available online with a 24hr delay. However, just because its there does not mean many people know about it. Possibly less than a dozen or so worldwide - although I've yet to find another. It is amazing what you can find by accident when searching for something totally different.

That Q reportedly took up 100% over-subscription in its reported equity raising (to a total of $4bn) is very telling, as this excerpt from the Age (before that was revealed) details:

It is also no coincidence that Qantas has chosen to bolster its balance sheet with a $1.9 billion equity raising having said previously that this was not needed.
Qantas could have hobbled through COVID without an equity raise but with the share price doubling over the past three months, the opportunity was too good to pass up.
To have raised almost $2 billion when the share price was not much more than $2 would have been extremely dilutionary for shareholders.

Qantas boss Alan Joyce can thank retail shareholders for much of the share price lift. A report from Nabtrade last week detailing small shareholder buying patterns revealed in the months of March, April and May, Qantas was among the top seven most popular stocks to buy.

So, the very issue the Age complimented Joyce about not diluting shareholders actually has come to pass by seemingly taking more than 100% over-subscriptions. I really hope this is not going to be a repeat of the stampede by small investors last November to provide the unsecured debt to VA to buyback the share it sold previously in Velocity. Shares rank AFTER unsecured debt btw.

The latest news that Q is now expecting to park all 12 A380s for three years in the Mojave Desert - explains why they've taken as much as they can. Q's cash burn increases dramatically the day JobKeeper stops. There's no way that the Fed Govt can keep it going for another 3 years. It is hard to believe that Q won't get rid of all the A380 specific pilots, flight engineers, cabin crew, ground crew & maintenance personnel nor sit on the spare parts pile they've contracted with Airbus for.

Whilst this effective ending of all Q's 4 engined planes will significantly cut operating types (& costs), Q cannot afford to say it is retiring the A380s or it'll pretty much wipe out the total capital raising when combined with the significantly smaller hit from bringing forward the 6 B747s retirement by 6 months. The costs of the roughly 20 yr old B747 retirement would be around 1/6th that for the A380s given the interesting way Q values them that has zero to do with their secondary market value nor actual cost.

When you are between a rock & a hard place - that's when the tough decisions are made. Anyone see the film '127 hours'?

 

[Melburnian1]

Not sure about those numbers as the level of complaints made about no seats avaiable at advertised prices, servers failing, or prices doubling when going to the final payment screen - should make the next few weeks quite interesting.

RAM, could you expand on this a little please?

 

[jakeseven7]

Not sure about those numbers as the level of complaints made about no seats avaiable at advertised prices, servers failing, or prices doubling when going to the final payment screen - should make the next few weeks quite interesting.

You don’t need to be sure, you can just google and they released how many fares were booked during the sale. I’m sure not all of them were the $19 fares. I got some $29 and $49 steals - but sorry you weren’t able to take advantage!

 

[jase05]

You don’t need to be sure, you can just google and they released how many fares were booked during the sale. I’m sure not all of them were the $19 fares. I got some $29 and $49 steals - but sorry you weren’t able to take advantage!

Couldn’t pay me enough to fly on Junkstar

 

[jakeseven7]

Couldn’t pay me enough to fly on Junkstar

Normally me too but VA too risky and QF were double the price so hey you know

 

[justinbrett]

Normally me too but VA too risky and QF were double the price so hey you know

The only difference between VA and JQ in the air is you can pay extra to earn QF SCs with JQ

 

[drron]

RAM today is nothing like the early 80's,1987 or the recession we had to have.It is much worse. Even worse than the stagflation of the 70s.
Today is really Unprecedented in my lifetime and I was born in 1946 and first began investing in the sharemarket in the late 60s.

 

[Melburnian1]

RAM today is nothing like the early 80's,1987 or the recession we had to have.It is much worse. Even worse than the stagflation of the 70s.
Today is really Unprecedented in my lifetime and I was born in 1976 and first began investing in the sharemarket in the late 60s.

Quite the achievement for you to be 'born in 1976' and 'invest in sharemarket from the late 1960s.'

May I have some of the potions that power you? God failed to give me whatever you're on.

 

[drron]

Quite the achievement for you to be 'born in 1976' and 'invest in sharemarket from the late 1960s.'

May I have some of the potions that power you? God failed to give me whatever you're on.

Just a senior moment.

 

[L1925]

I'd genuinely be interested to know of a business that's so essential? I understand from other threads that there are some occupations like engineers that need to do things like checking oil and gas pipelines and service stations etc.

There are a load of essential service businesses out there. Engineers for oil and gas are far down the line of real essential workers in running this country.

How do you think this country is run ? A substantial amount of Federal, Defence and State government agencies use contractors to undertake critical work for them. We are still required to do the 14 day isolation period where its not avoidable.

 

[MEL_Traveller]

There are a load of essential service businesses out there. Engineers for oil and gas are far down the line of real essential workers in running this country.

How do you think this country is run ? A substantial amount of Federal, Defence and State government agencies use contractors to undertake critical work for them. We are still required to do the 14 day isolation period where its not avoidable.

I don't know, which is why I was asking. I'm genuinely interested to know of a business that needs to send 20 people interstate.

 

[L1925]

I don't know, which is why I was asking. I'm genuinely interested to know of a business that needs to send 20 people interstate.

Well, without going in to details, there are a load of us sitting in quarantine around Australia for that exact reason(like me on day 4 of 14). far in excess of 20 people.

Critical maintenance and servicing of infrastructure/services is required throughout the country as a basic function. You cannot get someone off the street to undertake the works we do without 6+ months of security clearances. I can't comment further on this one.

 

[jenib]

Well, without going in to details, there are a load of us sitting in quarantine around Australia for that exact reason(like me on day 4 of 14). far in excess of 20 people.

Critical maintenance and servicing of infrastructure/services is required throughout the country as a basic function. You cannot get someone off the street to undertake the works we do without 6+ months of security clearances. I can't comment further on this one.

My nephew is a specialist crane electrician who usually flies all over the country and the Asia Pacific at short notice to fix cranes so that construction can continue. There are not very many electricians in the country who know how to fix cranes. I am just mentioning this as one example of the people who are maintaining and fixing infrastructure to keep the economy running.

 

[Melburnian1]

My nephew is a specialist crane electrician who usually flies all over the country and the Asia Pacific at short notice to fix cranes so that construction can continue. There are not very many electricians in the country who know how to fix cranes. I am just mentioning this as one example of the people who are maintaining and fixing infrastructure to keep the economy running.

These people are a very small percentage of those who normally travel interstate.

 

[Vic]

That's incorrect. NSW Premier is actively discouraging travel between NSW and Victoria so a lot of businesses would no longer regard trips as 'essentuial.'

She's suggesting NSW businesses not accept custom from Victorians, so that would scare many businesses in my state (Victoria) from having their staff travel lest an hotel suddenly declines a booking, or something else adverse occurs.

I don't dispute business travel will remain important, because we all need face-to-face contact, but some who are less optimistic suggest that WebEx/Zoom and other forms of telecommunications will render many business trips interstate, or overseas, a thing of the past.

I think you're agreeing with me, everything you've raised are due to factors other than the border being closed. The fact that Gladys is discouraging travel supports my view that such travel is an option for business despite border closures.

Having had numerous zooms for the last 3 months (at least 2 per week), they suck the sweat off a dead man's .... To quote Good Morning Vietnam.
There is already a backlash against zoom, I'd expect the use to decline to a more reasonable level, once travel is possible again