Qantas - what will Coronavirus mean in the medium term?

[oirets]

Maybe Australian universities should have a business model that caters for Australians, rather than offshore students. No different to all the lobster / abalone / tuna / specialised exporters of meat and select F&V.

I agree, but the issue is that the Australian government is treating education as a cash cow right now that they're exploiting as much as they can. Specifically underfunding universities so that they have to rely on income from international students.

 

[drron]

And we travelled around the world in the middle of the Swine flu outbreak.As well did a trip to the Middle East with MERS about.
Panic is the difference plus social media.

 

[moa999]

And too many eggs in one basket the mainland Chinese one. But unis not alone in this.

We haven't seen the result yet..
Our reliance on China for many products is about to hit as supply chains dry up.

Want a new phone, laptop etc, buy it soon.

 

[Fatcat]

Hi all,

There are quite a few threads about dear old Coronavirus/2019-nCoV/SARS-CoV-2/COVID-19 relating from everything to disrupted travel plans to panic buys of dunny paper to status freezes. What I wanted to hear from members is their opinions on what this pandemic and its effect on travel will have on Qantas? Zillions of airlines around the world have cancelled many flights and parked up aircraft and staff. And this worries me in an industry that has slim margins at the best of times. I, like many travel enthusiasts, hope that there may be windows of opportunity to get great sales fares. But this thread is not about bargain airfares - it is about the impact this whole thing will have on QF. I see the share price has dropped from over $7 to $5 since the news broke...

A few ideas:

(1) Will QF suffer a major loss this year?

(2) Maybe this is the death-knell to VA, at least internationally? So in the long term a boost for QF?

(3) "National" airlines being what they are, often supported by the nation's government, will other countries support their flag carrier more than the aussie government will the private QF? So making it an even more un-level playing field in the future in which to compete?

(4) Will Sunrise get delayed years as there are far more pressing short-term concerns, and a collapsed international market is exactly a wrong time to trial such a novel (sorry ) new thing?

(5) Although I feel the era of travel restrictions will vanish within months once it is a global pandemic, perhaps the severe economic effects of the whole thing will cause a massive drop in general travel that lasts for many months to years?

All in all, although I have no idea what the real effects will be, I am sure that QF, as most airlines, will emerge from this in a different state than what they were in just a few short months ago.

QF's last update forecasts a possible $100-150m hit to profits in the second half - although I would think most of that loss would be forecast to come from the Asian routes. Given the sharp drop in it's share price since then I would say most investors are betting that figure is somewhat conservative - despite the fact that it would appear not many of its shares are being shorted- yet. I haven't seen the stock market drop so quickly since the GFC, it is almost indiscriminate selling, and Oz is still relatively unscathed in the whole scheme of things. Monday is looking like another bloodbath on the markets, and whats happened so far pales in comparison to the rush for toilet paper. If people panic or things get worse, the economy will suffer and QF will be lucky to make a profit for the year. As the virus spreads around the world travel demand drops off everywhere, not just Asia, and I doubt much if any of that has been factored into the QAN stock price.

Sure oil prices are dropping fast (10% over the weekend) and with OPEC+ looking like it has collapsed for the time being fuel could become very cheap, but lets not forget QF proudly boasts that they hedge a lot of their fuel and retain the flexibility to benefit from lower fuel prices - but the thing with hedging is that it costs money, and if you are hedged then you want the fuel price to be sky high so your competitors who are not hedged have to suffer higher prices. If oil prices collapse then its actually beneficial to all airlines, especially those that did not hedge. Labour costs in OZ aren't cheap compared to QF's competitors either so it isn't a competitive advantage. QF charges a premium that many happily pay to due to their FF program, but when the economy heads south that may change as people become more price sensitive and demand may not recover; and if travel demand does recover as the virus subsides there could be substnatial price competition on international routes. The Aussie Peso isn't doing that well and local demand for international flights would suffer - I would bet that foreigners dont share the same devotion to the flying roo as the locals.

QF makes most of its money domestically and from its FF program, but both of those may not fare as well if we have a recession. It would not surprise me if QF reported a loss in the second half - a lot will depend on consumer confidence. Even after the virus is under control, if people lose their jobs as the economy heads south and markets don't bounce back, I doubt many would be in the mood to travel after taking a 30-50% haircut on their net worth. As for sale fares, I think we are already seeing some discounting and there may be more if forward bookings don't improve and cancellations pile up.

 

[burmans]

Maybe Australian universities should have a business model that caters for Australians, rather than offshore students. No different to all the lobster / abalone / tuna / specialised exporters of meat and select F&V.

Without wanting to get political, when government drastically reduced funding to universities for domestic students, I find it unsurprising that universities turned to overseas students. I'm no particular fan but this seems likes fairly rational behaviour to me.

 

[amaroo]

Without wanting to get political, when government drastically reduced funding to universities for domestic students, I find it unsurprising that universities turned to overseas students. I'm no particular fan but this seems likes fairly rational behaviour to me.

Maybe start with the salaries - since when do we think VC should be earning north of million $$$$

Regrettably, this is the 2017 figures .... add a few more to the million $$$ list.

One moment, please...

 

[Melburnian1]

.. I would bet that foreigners dont share the same devotion to the flying roo as the locals.

QF makes most of its money domestically and from its FF program, but both of those may not fare as well if we have a recession. It would not surprise me if QF reported a loss in the second half - a lot will depend on consumer confidence. Even after the virus is under control, if people lose their jobs as the economy heads south and markets don't bounce back, I doubt many would be in the mood to travel after taking a 30-50% haircut on their net worth. As for sale fares, I think we are already seeing some discounting and there may be more if forward bookings don't improve and cancellations pile up.

Of course many Australians are devoted to QF: look at AFF.

However overall, QFi and JQi (not including 3K) had a 24.9 per cent share of international bookings in December 2019, so three in four travellers don't use the QF Group for overseas travel in/out of Oz. From reading AFF you'd think it had a 65 per cent share.

Agree consumer confidence is poor but how many will really suffer '30 to 50 per cent decline in net worth', even if property prices eventually markedly drop? I'm no optimist but that's a very large drop.

I've said before QFi may well now be losing money. It's a bigger call that the QF group as a whole has entered lossmaking terriitory. Not saying you are incorrect, but its FF program for one is a big moneyspinner. However it's operating fewer domestic flights and some of my friends say they're noticing more empty seats: I haven't, but none of us fly several times a day so the sample size is small. It's been a while since BITRE put out stats that would give us answers.

Mr Joyce boasted some time back that the typical Chinese tourist took two to three domestic flights each. With well above a million of them each year, but not many at present, that soon adds up (negatively.) I was surprised when he said this, as I'd have thought some just fly into Sydney and remain there, but he'd know.

 

[Sprucegoose]

Yeah, sure, they can remain and infect. But would you prefer to travel to travel on a "clean" plane but with a pax who is active coronoavirus, or on a plane that was not cleaned and who held no active corona pax?

We don’t get that choice. I want clean pax on clean planes is my clear preference. We can at least control some inputs and supply a clean plane.

I watched a YouTube on how Qatar clean their planes, clearly the labour rates of a TCN maybe significantly lower than in oz. That however is not the point (Is it Alan?).

 

[juddles]

I think an underlying issue that is present here (as it always is with airlines) are that they are, in general, a very risky business.

Things from oil prices to coronaviruses have huge impacts, and are things completely out of the control of the airlines themselves.

I think Qantas has done amazingly well, in the overall context, of staying alive with the handicaps they have (small size, geographical nightmare, staff costs, etc) But I still get the sense that many (including frequent posters here) see them as a nasty company extracting gazzillions in profit. They are, as always, merely surviving.

 

[amaroo]

It already has begun affecting many employees and businesses. I'm an academic at a major university and we're already starting to feel the effects of not having the cash flow in from Chinese students who are currently stuck overseas. Classes have been cut, employees asked to take leave...etc.

I don't really know enough about what will happen, but it's probably best not to book anything too far in advance. Right now, I would say that the risks aren't really high enough to be altering travel plans unless they're to areas where there's been massive outbreaks.

Maybe Australian universities should have a business model that caters for Australians, rather than offshore students. No different to all the lobster / abalone / tuna / specialised exporters of meat and select F&V.

One more thing - maybe now you have a better appreciation on how miners and rural families feel when their livelihood is put at risk, particular when there is no global or national emergency!

 

[Princess Fiona]

Be afraid, be very afraid. Multiple schedule changes will come and they will not be popular amongst the crowd here including myself.

 

[amaroo]

Be afraid, be very afraid. Multiple schedule changes will come and they will not be popular amongst the crowd here including myself.

I gave up travelling a month ago - it just seemed very very obvious.

 

[Pushka]

Be afraid, be very afraid. Multiple schedule changes will come and they will not be popular amongst the crowd here including myself.

Now you can't just leave it at that PrincessF! I did hear that Dubai was in the mix instead of Singapore. But I totally wouldn't mind that change. Could you sprinkle some fairy dust and get Qantas to cancel DPS flights please? Effective next week?

 

[TheInsider]

Be afraid, be very afraid. Multiple schedule changes will come and they will not be popular amongst the crowd here including myself.

You know something we don't know?!

 

[juddles]

We don’t get that choice. I want clean pax on clean planes is my clear preference. We can at least control some inputs and supply a clean plane.

I watched a YouTube on how Qatar clean their planes, clearly the labour rates of a TCN maybe significantly lower than in oz. That however is not the point (Is it Alan?).

We all want clean planes, but, essentially, none of us want to pay for it. That is the same as all aspects of airline travel. We want better food, bigger seats, cleaner aircraft, etc. Everyone knows these things. But, there is not a single company on the planet that would risk trying to offer that, as they all know that despite our expressed desires, at the end of the day we will click on a cheaper price...

 

[juddles]

BTW, is it just me, or has QF gone bonkers recently offerring all sorts of things via emails? Everything from insurance to Dyson vacuum cleaners? Seems an all-out onslaught. With things like extra points-per-spend with their associated sellers, seems to me that QF and those third parties are hurting....

 

[TheInsider]

BTW, is it just me, or has QF gone bonkers recently offerring all sorts of things via emails? Everything from insurance to Dyson vacuum cleaners? Seems an all-out onslaught. With things like extra points-per-spend with their associated sellers, seems to me that QF and those third parties are hurting....

Trying to get that extra money in.

 

[amaroo]

Who was recently in Singapore and said A-OK for travel?

Passengers who arrived on QF02 leaving Singapore on February 27 and arriving in Sydney February 28, and were seated in rows 31 to 33 have been asked to self-isolate and call their local public health unit for further guidance on 1300 066 055.

 

[juddles]

Trying to get that extra money in.

Over my many years in this Life I have become weary of such ups and downs in almost all trades. Seeking a more gentle work routine, and financial security, I have retreated to the only truly secure money-spinners in human need: alcohol and hope.

 

[Pushka]

BTW, is it just me, or has QF gone bonkers recently offerring all sorts of things via emails? Everything from insurance to Dyson vacuum cleaners? Seems an all-out onslaught. With things like extra points-per-spend with their associated sellers, seems to me that QF and those third parties are hurting....

I'm being plagued with offers of cruises. Hell yeah! Promise me the world, takes me money, cancel the cruise or offers a cruise credit. They must be dreamin'.