QFF Bumped off Business.

[medhead]

Qantas Group reported the $200m international loss to the ASX in the FY11 preliminary final report, on page 1. They disclose an EBIT number for the Qantas Airways segment, as it is clearly an integrated business with a lot of shared revenues and expenses. But it is totally legitimate for them to also say "but this part of the Qantas Airways segment is losing $x". Especially when that part of the Qantas Airways segment is consuming 35%+ of the whole group's capital and basically hasn't made money (returned it cost of capital) since the 1990s.

I'm not making comment about whether it's legitimate. I simply said the number is meaningless. Taking your point about it being an integrated business, how do they untangle the shared revenues and expenses? If that is so easy to do, why is it not a separate entity. Mostly likely because it is an integrated part of bigger business. So I think it is perfectly legitimate to question management's motive in pulling out this other number.

Your point about them not disclosing the number for Jetstar is irrelevant as Jetstar International (unlike Qantas international) is not in a long-term structural decline and loss of market share due to having a 20%+ higher cost base than its competitors. Thankfully for QAN shareholders.

Sorry, how do you know this if they don't report separate numbers? How do we know that JQd isn't carrying JQi in exactly the same way as for QF? The relevance is to highlight the different treatment for QF as a basis for questioning the motivation of management. It was also only an example, I'm sure there are plenty of other examples of the same sort of thing in the other business entities, that raise the question as to why QFi is subject to special treatment.

What motivation would management would have to make up the $200m loss anyway? Even if Qantas international made a $200m PROFIT, that is still a completely unacceptable return on $5 billion of invested capital (4% return). Especially in a high-risk business where you are investing an extra $1.5 billion+ in new fleet every single year. So the argument for restructuring international is actually completely independent of the $200m loss, unless you argue that Qantas international secretly made a profit of say $800 million (16% return on capital) and they somehow stashed away an extra billion dollars somewhere else in their books.

Anyone who has worked in corporate HQ at a public company knows that you do NOT take these things lightly. Statements of financial results to the ASX have to be signed off by management, directors, internal auditors, and maybe also external auditors. Just ask Andrew Forrest what happens when you get these things wrong.

I have no idea what their motivation might be, and I'm not going to bother with theories on this point. However, it is pretty clear that QFi is being treated differently. I will pick up on the investment in new fleet as another example: is $1.5mil being invested in QFi or is it QF and JQ in total? You imply that it is QFi, last I heard QFi are getting nada.

I'm also certainly not saying that management are making things up on the fly. I'm saying they are releasing selective numbers that match their narrative. We can also see this their selective commenting about passenger numbers leaving Australia, which implies that JQi is a competitor.

 

[MEL_Traveller]

I make a comment about it not being legitimate. I simple said the number is meaningless. Taking your point about it being an integrated business, how do they untangle the shared revenues and expenses? If that is so easy to do, why is it not a separate entity. Mostly likely because it is an integrated part of bigger business. So I think it is perfectly legitimate to question management's motive in pulling out this other number.

Good question. I would like to know, for example, if JQ pays QF for every passenger entering the lounge on a QP card? That alone could have significant revenue implications for QF at $30 a go. (And you would have to argue that lounge access when flying JQ is a big incentive.)

 

[ozbeachbabe]

We were told that they required the seat for some other passangers. We then found out from another (there were 3 of us) that had also been downgraded, that they had to send 3 tech's to Perth, and it was in their award that they had to fly business.

This other person was the chief of staff for some NSW Minister. The Minister was kicking up a storm about having planned to work together on the flight etc etc etc. My guess was that as we were on FFer points, and the other would have been on a very attractive government fare, that we were the lowest in revenue terms.

The Chief of Staff obviously wasn't linked to the Minister who you would assume be a CL member. I guess that would've knocked the minister for six as I imagine the "planned to worked together" means the Chief of Staff spoon feeds the Minister what has to be said & done. :shock:

I was talking to a check-in agent not so long ago, and she mentioned that, if someone needs to be moved, both status and the cost of the ticket would be taken into account. I assume "the cost of the ticket" being the booking class. It is also mostly automated by the computer, and cannot be over-ridden (not easily, at least). While I don't know if this applies for op-downs, I would assume that it is likely to be the case.

Whilst Altea automatically recommends who to op-up in the case of downgrades I think there would be more human intervention early on in the piece in order to move people to other flights they wouldn't leave it until flight close at minus 15 & wait for Altea's recommendation as you'd probably get a delay as you'd have to then offload the bags for that person.

Not sure how Op Downs work after close of checkin, but if both cost of ticket and status are involved, status must be trumping.

I'm sure each Amadeus system user does it slightly differently so how BA handles a situation would vary slightly to how AY, CX & QF may do it. It's always better to pre-allocate seats if at all possible however as i the case of the OP he had done precisely that plus done OLCI & that didn't stop him being downgraded.

I definitely think that people with onward connecting flights would be less likely to be targets because it would create more hassles rebooking the onward flights however if they were on a "U" class redemption & were NB then they may be unlucky. Some airlines may upgrade them to a higher class of travel on the new flights as well as given them DBC (denied boarding compensation) plus hotel accommodation & all meals & that may be acceptable for some people but not for others.

 

[ozbeachbabe]

I'm also certainly not saying that management are making things up on the fly. I'm saying they are releasing selective numbers that match their narrative. We can also see this their selective commenting about passenger numbers leaving Australia, which implies that JQi is a competitor.

Talking of passenger numbers leaving Australia, every JQi international flight that stops in DRW enroute to Asia & vv (with the exception of JQ57/58) requires passengers to clear outboud and inbound customs and immigration in DRW. Therefore if you're booked on JQ61 MEL/SIN which transits in DRW, that is where you depart Australia. Ditto for returning on JQ62 SIN/MEL via DRW - you will again clear customs and immigration here.

The point is that the NT Govt could use arrival & departure statistic & say "we've seen so much growth on tourism to the NT - just look at the increase in the arrivals and departures compared to last year" etc etc - you get the picture. Passengers can 'depart' & 'arrive' DRW without so much spending one cent if they were passengers in transit from MEL to SIN.

Of course the Govt would have the have statistics, graphs & figures to 'prove' their theory. The reality is that they're just being economical with the truth.


Joyce rejects Qantas international losses

Joyce rejects Qantas international losses “conspiracy”

Item by australianaviation.com.au at 2:43 pm, Wednesday August 24 2011

In parliament last night independent Senator Nick Xenophon said the airline’s assertion its international operations were losing money needed “forensic examination”.


“The reality is that Qantas has long been used to subsidise Jetstar in order to make Jetstar look profitable and Qantas look like a burden, and when there’s a profit to be made Jetstar makes it,” Senator Xenophon claimed.

Said the Senator, “It would be foolish to take management’s word Qantas International is losing money.” Instead he suggested that Qantas, to avoid the restrictions of the Qantas Sale Act, could have “a strategy of private equity selloff by stealth”, with Qantas “moving assets out of Qantas and into an airline you own, but isn’t controlled by the Act.”

 

[amaroo]

Not sure how Op Downs work after close of checkin, but if both cost of ticket and status are involved, status must be trumping.

Was on a QF SYD-HKG about 2 years ago. Had Y booking, and entered the upgrade lottery, for 2 x PS. Upgrade came through, so U class. Check in OK (seats assigned). Delay in departure, and then aircraft sub. (Needed the plane to do the JNB run, as that a/c went tech). New plane was different configuration, with many less J seats - so op Downs were occuring. We reatined J seats (although no longer together - had to swap seats after takeoff, but not too difficult, as were travelling with another friend who had paid for J - so wanted 3 seats, includding a middle). I know from disgruntled other passengers, that J fare paying passengers were being either Op'ed down, or offloaded to a later flight. Flight was about 4 hours late leaving as it was.

As a flyer with status, I think this system is brilliant - on an airline where I have zero status this system sucks.

 

[JohnK]

And yet I know people that have been bumped down on SQ (but I think their policy is to find a 'volunteer' first.)

Wouldn't it make sense for every airline to ask for volunteers first?

 

[jveevers]

A small point of order but it's only 3h 40m between the two PER-SIN departures, not 6 hours per the OP.
This would have a bearing on the decision to go in Y or wait for J.
Having said that though, I would probably have taken the money and run.

I was checking in 2 hours 20 minutes before my flight. Yes the next one was around 4 hours later than the first one. 6 hours would have been my total time to wait instead of 2 hours 20mins.

On our return flight, which was Economy, I said to the check-in girl "we got bumped out of Business coming here, any chance of an upgrade this time?"

Reply "there are seats available in Business, if you go over to ticketing and buy Business Class, I can put you on there"

 

[ermen]

Qantas Airways (domestic + international) made $228m EBIT in FY11. If you take the $200m loss in international and add that back in, you get $428m EBIT for Qantas domestic. Next most profitable was QFF at $342m. Next was Jetstar at $169m. So QFF made more than twice what Jetstar made.

These figures taken from the market preso for FY11 results.

I don't really understand the inference contained in "if you believe management". The idea that the management of an ASX50 company would risk jail time and serious civil penalties by misleading investors in order to pursue some vague political agenda is just insane. And the idea that their external auditors would go along with this is even more insane.

Actually the FY11 number for QFF was affected by one-off accounting factors. If you see the underlying number, it should come out to c.$220m EBIT thereabouts from memory. And re JQ: If you add back the c.$95m that they were meant to make in JQ (if not for the floods), you will see that JQ would have made maybe c.$265m EBIT

So based on those calculations - QAN Dom is top, then JQ, then probably QFF. All of this is in the management presentation for FY11 results.

But that's not the point - segmental splits are based on some form of management allocations which are prone to assumptions. For example:
i) c.$150m in "unallocated" costs - what is this? who should actually wear this?
ii) On a say MEL - SYD - LAX flight: how do you allocated revenue / earnings? is this a 100% international flight or part domestic from an accounting point of view?
iii) in any case, my understanding is that mgmt have not traditionally split dom and international earnings since ~2005... so we will have to take their word that International made c.$216 EBIT loss - not even sure if they can even be held to this as you will notice is not part of the AIFRS numbers filed with ASIC but more of a mangement accounting number...

In any case, what was the question lol...

 

[Happy Trails]

I was checking in 2 hours 20 minutes before my flight. Yes the next one was around 4 hours later than the first one. 6 hours would have been my total time to wait instead of 2 hours 20mins.

Fair enough, sorry for the misunderstanding.

 

[keithrh]

Last year, my wife and I got downgraded from a paid business class flight (Sydney to Los Angeles) on United, while they were upgrading economy passengers to business. Yes!! We made a fuss, and eventually got 'upgraded' to business (as they put it), but could not be seated together - separated by one of the upgarded economy passengers. Not impressed.

So my wife and I decided to use some of our hard-earned points to book a Business Class to Singapore from Perth.
Booked well out, maybe 5 months.
really looking forward to it as our 1st time Business.
Selected seats when booking, did on-line check-in the day before.

So we rocked up at Perth airport, 2.5 hours out, plenty of time to enjoy the Q Lounge.
Checking in, "there is a problem, let me get my Superviser".
Superviser rocks up after 10 minutes.
"Sorry we have overbooked, you have been randomly selected to be moved to Economy, or you can wait for the next flight in 6 hours"
Wife extremely unhappy, me pissed off.
Security is hovering.

"Here are your Economy Boarding passes, you can use our lounge and we will come let you know if anyone cancels Business so you can have your seats back."

Had a dozen freeby drinks, boarded , glared at the d*** who was in "MY" seat, given Champagne "normally for Business only but you can have one", took off, turned on my Entertainment, it didnt work, complained, now really pissed off, given $200- complimentary duty-free and another Champagne. Not feeling good by now (maybe the 14 drinks but I wasnt abnoxious), vomited into bag, fell asleep, woke up in singapore. Probably best flight I have had. Reminder, drink lots before flights and it goes very quickly.

Anyone else been bumped?

 

[TiredOldFlyer]

The USA and the European Union have very clear laws on being bumped. A few years ago on United we received a refund of the fare and an upgrade to wait 8 hours for the
next flight. Unfortunately Australia does not have any rules - allows airlines to do very much as they like. Time for an "Airline Pax Bill of Rights " ?

 

[Prof Henry]

My recent experience of being bumped from Business to Economy was in the middle of a RTW (OneWorld) trip. It was a relatively short leg so I wasn't too fussed (I also have relatively short legs) about my style being cramped. But it was the increasingly bizarre explanations and couldn't-care-less attitude of the BA ground staff that did cause me some consternation.

Yes, it was a fully-paid confirmed itinerary (no points or discounts); I am QF Platinum/OneWorld Emerald; I arrived early. Well, yes they could see that I had a QF FF number but my status wasn't showing up (??). There must be a glitch between QF and BA systems. I'd be put back in my correct seat in the Lounge... (??). In the Lounge I was told that they were in fact overbooked but all airlines did that. Later they told me that someone would meet me at the Departure Gate and discuss compensation. The person who checked me in at the Gate wasn't interested in discussing anything and clearly didn't know there was a problem.

Sophie, the inflight attendant was sympathetic, but as I could see, there were no spare seats. She kindly filed a report on her iPad and promised someone would contact me within 2 days; she also mentioned compensation. 16 days later, I got a short message from BA Customer Relations
"Sophie mentioned you requested a refund for the difference in fare. Please contact your travel agent and they will be able to assist you in this matter."

Now, I still haven't "requested" compensation, but 2 BA staff assured me I would receive some. I remained calm throughout -- as I said it wasn't a long flight and Business Class clearly WAS full, but I'm still pissed off by the rubbish explanations ("can't see your status") and the attitude that being bumped was normal and not worth discussing.

Any suggestions:?:

 

[MEL_Traveller]

Any suggestions:?:

was it to/from the EU? you'll get the standard prescribed EU compensation. Although you may beed to file a claim for it.

 

[Red Roo]

It sounds you were on a BA flight? So the matter will have to be taken up with BA.
If you would like to PM me your details (QFF# dates, flight # etc.) I can check for you.

My recent experience of being bumped from Business to Economy was in the middle of a RTW (OneWorld) trip. It was a relatively short leg so I wasn't too fussed (I also have relatively short legs) about my style being cramped. But it was the increasingly bizarre explanations and couldn't-care-less attitude of the BA ground staff that did cause me some consternation.

Yes, it was a fully-paid confirmed itinerary (no points or discounts); I am QF Platinum/OneWorld Emerald; I arrived early. Well, yes they could see that I had a QF FF number but my status wasn't showing up (??). There must be a glitch between QF and BA systems. I'd be put back in my correct seat in the Lounge... (??). In the Lounge I was told that they were in fact overbooked but all airlines did that. Later they told me that someone would meet me at the Departure Gate and discuss compensation. The person who checked me in at the Gate wasn't interested in discussing anything and clearly didn't know there was a problem.

Sophie, the inflight attendant was sympathetic, but as I could see, there were no spare seats. She kindly filed a report on her iPad and promised someone would contact me within 2 days; she also mentioned compensation. 16 days later, I got a short message from BA Customer Relations
"Sophie mentioned you requested a refund for the difference in fare. Please contact your travel agent and they will be able to assist you in this matter."

Now, I still haven't "requested" compensation, but 2 BA staff assured me I would receive some. I remained calm throughout -- as I said it wasn't a long flight and Business Class clearly WAS full, but I'm still pissed off by the rubbish explanations ("can't see your status") and the attitude that being bumped was normal and not worth discussing.

Any suggestions:?:

 

[VHOEJ]

I didn’t think QF overbooked flights, how did it happen?

Every airline in the world does it and they have to or they don't make money. It is rare for every single person to turn up, make connections, not change thier plans late.

 

[Prof Henry]

was it to/from the EU? you'll get the standard prescribed EU compensation. Although you may beed to file a claim for it.

Thanks MEL_Traveller.
Yes, it was LHR-Berlin (Tegel). BA referred me to my travel agent -- am I right in thinking BA should handle this?

 

[serfty]

BA should be handling this; with EU regulation 261/2004 it should be a proportion of the price of the ticket. The proportion varies depending on the length of the segment. As an EU carrier BA are fully liable.

More information here:

• Upgrades and downgrades (WikiPedia) &
• REGULATION (EC) No 261/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

To Quote from the regs ...

Article 10
Upgrading and downgrading​

1. If an operating air carrier places a passenger in a class higher than that for which the ticket was purchased, it may not request any supplementary payment.
2. If an operating air carrier places a passenger in a class lower than that for which the ticket was purchased, it shall within seven days, by the means provided for in Article 7(3),
reimburse
(a) 30 % of the price of the ticket for all flights of 1 500 kilometres
or less, or
(b) 50 % of the price of the ticket for all intra-Community flights of more than 1 500 kilometres, except flights between the European territory of the Member States and
the French overseas departments, and for all other flights between 1 500 and 3 500 kilometres, or
(c) 75 % of the price of the ticket for all flights not falling under (a) or (b), including flights between the European territory of the Member States and the French overseas departments.

Article 7
Right to compensation
​

...
3. The compensation ... shall be paid in cash, by electronic bank transfer, bank orders or bank cheques or, with the signed agreement of the passenger, in travel vouchers and/or other services.

They are even in breach by not providing you with this information.

In relation to the "price of the ticket", there are indications that can run the full gamut from the entire ticket price, the IATA fare for that segment in the original booking class or some other calculation, such as a pro-rated costing. No doubt BA will endeavour to find the lowest cost to them.

I believe the IATA fare is the fairest, but others may differ.