What do Australians think of Qantas?

[evanb]

What really did grind my gears last year was just the comments from Alan Joyce and co. regarding customers (see the whole "match fit" thing), and their seeming inability to accept that Qantas has flaws. Maybe I don't follow the news in other places as much, but I just don't feel like the leadership at most other western carriers are anywhere near as arrogant (or at least seemingly arrogant) about their own performance.

I strongly agree that QF (read: management) didn't "read the room" in 2022, but I think one should distinguish that from what QF did or didn't do. While winning public opinion on it will be tough, QF made decisions that were focused on long term operational stability which came at great short term pain. Many US and European carriers did the opposite and are much worse for it now. Just seeing some of them (e.g. UA and WN having near implosions at times, or LH barely being able to deliver a schedule) now compared to an improving QF's operational reliability is enough for me.

However, I suspect that some of QF's responses are due to management feeling under attack (often in the media) and the constant need to defend themselves. Much of the media attack is pure vitriol targeted at Joyce, personally, in a hyper partisan media.

 

[RooFlyer]

I think that these sorts of protections can and do make passengers feel like they have more protections, but they also create unintended consequences that they may not see or may not see until they impact them.

A belated welcome to AFF . I wouldn’t call the things you list there as unintended consequences. They are just the rules of the program. Higher prices maybe but to me it’s just the cost of a sort of insurance. Third-party insurance in driving a motor car is a compulsory and an added cost and I would see this as somewhat similar.

There are many things that they could improve on, but I could say the same about most of my alternatives. Having spend the last 20 years traveling a huge among internationally for work, and at times being quite concentrated on DL, UA, BA, and LH group, I find QF quite nice.

I thought the same, and then I tried QR and QSuites

QF did or didn't do. While winning public opinion on it will be tough, QF made decisions that were focused on long term operational stability which came at great short term pain.

disagree. I think the sh** show that was Qantas in 2022 was the result of long term underinvestment, laying off and outsourcing large numbers of staff togethereith lack of preparedness of their management for coming out of Covid AND then lack of willingness to spend money to get them out of the holes that were then created because the CEO was determined to post a record profit before he left. ( Forgive the horrible sentence structure.)

However, I suspect that some of QF's responses are due to management feeling under attack (often in the media) and the constant need to defend themselves. Much of the media attack is pure vitriol targeted at Joyce, personally, in a hyper partisan media.

I suggest that if the CEO just keep his head down and concentrated his time on running the airline to the best it could be run, rather than going out on lots of extraneous issues ( such as airport security wait times) and doing social pages photo shoots and interviews the media would have a much smaller target.

 

[stm1sydney]

Enough Australians think it is wonderful. Enough for the CEO's bonuses to continue to boom.

 

[justinbrett]

For those who want their main domestic airline to be a global alliance member (which is many of us), we haven't had an alternative since 2001.

 

[kangarooflyer88]

I think I generally agree with this. Qantas is mid, but it is what it is.

And for what it's worth, they do some things better than their competitors who are generally regarded as superior. This is not to say Qantas is a better airline than the others mentioned, but there are things to keep in mind.

For instance, Qantas has a very consistent Business Class product across their entire long-haul international fleet (with the exception of that one un-refurbished A380 currently making the rounds...). If I'm flying to Japan from Melbourne, I'm confident I'll get a direct-aisle-access lie-flat seat, whereas both ANA and JAL have actually subbed in 2-2-2 787-8s on that route from time-to-time.

Have you flown international carriers recently? I will concede that many airlines lack a consistency when it comes to seating and hard product, but many do or are certainly on their way to getting there. Two that come to my mind are Qatar and United. In the case of Qatar just about every wide body in their fleet are Q-suites and the ones that have the older herring-bone configuration are limited to a handful of birds put primarily on secondary markets like CAI. In the case of United, it was not long ago where it was a real cough shoot in Polaris whether you would get a plane configured in a 2-4-2 configuration, or the more modern 1-2-1 configuration. However, around 2019 it all changed to the 1-2-1 all aisle configuration. And I would go so far as to say that United provides better onboard amenities than Qantas when it comes to long haul. Aside from the pyjamas and slippers you might get on QF, you also get a nice gel pillow, Saks Fifth avenue bedding, etc. And we don't even need to look far to find long haul business class products that put Qantas to shame - just look at Air New Zealand. They have a lovely topper they put on the bed that converts your lie flat into the closest thing I've found to a bed in the sky.

What really did grind my gears last year was just the comments from Alan Joyce and co. regarding customers (see the whole "match fit" thing), and their seeming inability to accept that Qantas has flaws. Maybe I don't follow the news in other places as much, but I just don't feel like the leadership at most other western carriers are anywhere near as arrogant (or at least seemingly arrogant) about their own performance.

Clearly you've never met Oscar Muñoz (former CEO of United Airlines) who initially called Dao disruptive, belligerent and was "re-accomodated". What is different though is the arrogance there was only directed at one passenger, whereas with Uncle Alan the disdain is directed at the travelling public. And after he made those gaffes, what did QF do? They extended everyone's status for a year and extended status support. QF knew they ticked off loyal passengers with these remarks and had to backtrack.

Many an Australian would love to see some sort of EU261 protection in the market, however how much are they willing and able to pay for it? At first thought, one might expect it to be a significant deterrent for airlines or an incentive for them to do a better job, but one should consider the unintended consequences.

EU261 costs nothing. Don't believe me? Look at RyanAir or EasyJet. They are providing flights cheaper than what you will find on JetStar, yet they still have to provide EU261 compensation. I've said it before and I'll say it again, EU261 costs airlines nothing, so long as they run good operations. EU261 is a tax on inefficient airlines, but inefficient airlines struggle to make a profit anyway!

Firstly, in concentrated markets where the supplier has pricing power, if all suppliers are subject to the same cost structure they will simply pass it on to customers. So the first unintended consequence is higher ticket prices. Ultimately, we would be socialising the costs of these delays.

Well that's part of the issue here, now isn't it? Why is it that it costs the same for me to fly to Auckland (where there are a whole host of taxes and fees associated) as a domestic flight to say Darwin (which has very few such fees)? International competition a-la LATAM, Air Asia X, and others. I will also point out that it is unclear who pays for taxes and fees on flights. Is it the passenger? Is it the airline? A good example that comes to mind is the UK's Air Passenger Duty. Often times to stay competitive, the airlines will "eat" the cost of that by simply reducing the base fare and/or carrier surcharge. Certainly in the case of upgrades to business class, you can be certain the airline is eating the additional APD owed there.

Secondly, EU261 specifically has conditions, for example that no compensation is due if the airline cancels the flight 14 days or more before. So you may book a flight 11 months in advance for your dream holiday and get a great deal only for the airline to cancel the flight 14 days out and give you a refund. Your alternative booking is now expensive and you are due no compensation. Effectively, it incentivises an airline to proactively cancel rather than run some flights. It simply becomes algorithmic with regards to the penalties, and risk averse airlines will simply cancel.

Perhaps I am the odd one out here, but I notice that when airlines do change or cancel flights on me, we are looking at less than 2 weeks out. Certainly with JetStar I am finding it is day of travel or maybe a couple of days before. Remember too that even if they cancel months out, EU261 still protects you in the sense that the airline must give you the option of refunding the ticket or selecting a date/time of departure that is suitable to you for free.

Thirdly, EU261 does not apply if the flight is cancelled due factors outside of their control, i.e. weather (or sometimes maintenance issues). Many of the most egregious delays are often subject to these conditions.

Weather might be an out for the airlines in terms of EU261 compensation, but they must still provide a duty of care (i.e. hotels, meals, etc.). Here in Australia you are on your own. Maintenance by definition is within the carrier's control and thus subject to EU261. In the early days of EU261 airlines tried claiming it was an extraordinary incident, but the courts kept striking them down saying, you are in charge of your maintenance, it is on you. Heck, even a pilot dies at the airport, it wasn't deemed extraordinary circumstance and hence EU261 compensation was due. So trust me when I say, there are very few outs for compensation when it comes to EU261.

I strongly agree that QF (read: management) didn't "read the room" in 2022, but I think one should distinguish that from what QF did or didn't do. While winning public opinion on it will be tough, QF made decisions that were focused on long term operational stability which came at great short term pain. Many US and European carriers did the opposite and are much worse for it now. Just seeing some of them (e.g. UA and WN having near implosions at times, or LH barely being able to deliver a schedule) now compared to an improving QF's operational reliability is enough for me.

I would argue that QF made a number of short sighted cut backs that yes led to long term financial stability, but may not have been in the best interests of the travelling public. Strategy isn't just about counting how many olives are on the plate (just as Boeing) but is also looking bigger picture at the markets you serve (or want to serve)

disagree. I think the sh** show that was Qantas in 2022 was the result of long term underinvestment, laying off and outsourcing large numbers of staff togethereith lack of preparedness of their management for coming out of Covid AND then lack of willingness to spend money to get them out of the holes that were then created because the CEO was determined to post a record profit before he left. ( Forgive the horrible sentence structure.)

Qantas did lay off a number of employees during the pandemic. Many other airlines did the exact same thing globally, and quickly regretted. What I think is unique about Qantas is this underinvestment and outsourcing occurred well before COVID. All COVID did was make a bad situation considerably worse. And for Qantas to recover from all of this means they will likely have to spend considerably more in the long run. Uncle Alan saved a nickel to spend a dollar.

-RooFlyer88

 

[evanb]

A belated welcome to AFF . I wouldn’t call the things you list there as unintended consequences. They are just the rules of the program. Higher prices maybe but to me it’s just the cost of a sort of insurance. Third-party insurance in driving a motor car is a compulsory and an added cost and I would see this as somewhat similar.

disagree. I think the sh** show that was Qantas in 2022 was the result of long term underinvestment, laying off and outsourcing large numbers of staff togethereith lack of preparedness of their management for coming out of Covid AND then lack of willingness to spend money to get them out of the holes that were then created because the CEO was determined to post a record profit before he left. ( Forgive the horrible sentence structure.)

I suggest that if the CEO just keep his head down and concentrated his time on running the airline to the best it could be run, rather than going out on lots of extraneous issues ( such as airport security wait times) and doing social pages photo shoots and interviews the media would have a much smaller target.

Thanks!

Third-party insurance on cars is because there is a negative externality with respect to losses upon "third-parties", i.e. payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. Compensation to a ticket holder is quite different and if people want insurance on the ticket then people can purchase their own. I suspect many people don't because they correctly assess the risk to be low. However, in socialising it, it limits true liability and essentially makes a fixed payout independent on loss. It's a very inefficient mechanism of insurance. I also somewhat feel that the burden of the cost will be on more price sensitive travellers and especially those who do not travel frequently.

On the second point, there is a narrative that if only they spent more money or were not as cost conscious things would have been better, but the counterfactual is always brushed off. On the international front, they're facing competition from Asian carriers with much lower labor costs, or transit carriers with much lower labor costs and subsidised cost of capital. On the domestic front, their competition was using a bankruptcy process to dramatically lower it's entire cost structure. What should QF have done differently and where they to compete? History shows the Australian market to be brutal on the carrier with the weakest cost structure. What should they have done differently? Saying they should have spent more money, or outsourced less is pretty vague, and it's not clear that it would have made a significant difference. For example, everyone kept shouting "why don't they get more B787s", yet they were struggling to get the ones already due to them.

 

[kangarooflyer88]

For those who want their main domestic airline to be a global alliance member (which is many of us), we haven't had an alternative since 2001.

Well there is Air New Zealand, but I don't know how much of the fairy tale called cabotage is believed here in Australia (certainly in Canada you could fly US carriers domestically via the US - it would raise some eyebrows particularly if you don't have Nexus and have to talk to a border officer).

 

[evanb]

Have you flown international carriers recently? I will concede that many airlines lack a consistency when it comes to seating and hard product, but many do or are certainly on their way to getting there. Two that come to my mind are Qatar and United. In the case of Qatar just about every wide body in their fleet are Q-suites and the ones that have the older herring-bone configuration are limited to a handful of birds put primarily on secondary markets like CAI. In the case of United, it was not long ago where it was a real cough shoot in Polaris whether you would get a plane configured in a 2-4-2 configuration, or the more modern 1-2-1 configuration. However, around 2019 it all changed to the 1-2-1 all aisle configuration. And I would go so far as to say that United provides better onboard amenities than Qantas when it comes to long haul. Aside from the pyjamas and slippers you might get on QF, you also get a nice gel pillow, Saks Fifth avenue bedding, etc. And we don't even need to look far to find long haul business class products that put Qantas to shame - just look at Air New Zealand. They have a lovely topper they put on the bed that converts your lie flat into the closest thing I've found to a bed in the sky.


Clearly you've never met Oscar Muñoz (former CEO of United Airlines) who initially called Dao disruptive, belligerent and was "re-accomodated". What is different though is the arrogance there was only directed at one passenger, whereas with Uncle Alan the disdain is directed at the travelling public. And after he made those gaffes, what did QF do? They extended everyone's status for a year and extended status support. QF knew they ticked off loyal passengers with these remarks and had to backtrack.

EU261 costs nothing. Don't believe me? Look at RyanAir or EasyJet. They are providing flights cheaper than what you will find on JetStar, yet they still have to provide EU261 compensation. I've said it before and I'll say it again, EU261 costs airlines nothing, so long as they run good operations. EU261 is a tax on inefficient airlines, but inefficient airlines struggle to make a profit anyway!

Well that's part of the issue here, now isn't it? Why is it that it costs the same for me to fly to Auckland (where there are a whole host of taxes and fees associated) as a domestic flight to say Darwin (which has very few such fees)? International competition a-la LATAM, Air Asia X, and others. I will also point out that it is unclear who pays for taxes and fees on flights. Is it the passenger? Is it the airline? A good example that comes to mind is the UK's Air Passenger Duty. Often times to stay competitive, the airlines will "eat" the cost of that by simply reducing the base fare and/or carrier surcharge. Certainly in the case of upgrades to business class, you can be certain the airline is eating the additional APD owed there.

Perhaps I am the odd one out here, but I notice that when airlines do change or cancel flights on me, we are looking at less than 2 weeks out. Certainly with JetStar I am finding it is day of travel or maybe a couple of days before. Remember too that even if they cancel months out, EU261 still protects you in the sense that the airline must give you the option of refunding the ticket or selecting a date/time of departure that is suitable to you for free.

Weather might be an out for the airlines in terms of EU261 compensation, but they must still provide a duty of care (i.e. hotels, meals, etc.). Here in Australia you are on your own. Maintenance by definition is within the carrier's control and thus subject to EU261. In the early days of EU261 airlines tried claiming it was an extraordinary incident, but the courts kept striking them down saying, you are in charge of your maintenance, it is on you. Heck, even a pilot dies at the airport, it wasn't deemed extraordinary circumstance and hence EU261 compensation was due. So trust me when I say, there are very few outs for compensation when it comes to EU261.


I would argue that QF made a number of short sighted cut backs that yes led to long term financial stability, but may not have been in the best interests of the travelling public. Strategy isn't just about counting how many olives are on the plate (just as Boeing) but is also looking bigger picture at the markets you serve (or want to serve)

Qantas did lay off a number of employees during the pandemic. Many other airlines did the exact same thing globally, and quickly regretted. What I think is unique about Qantas is this underinvestment and outsourcing occurred well before COVID. All COVID did was make a bad situation considerably worse. And for Qantas to recover from all of this means they will likely have to spend considerably more in the long run. Uncle Alan saved a nickel to spend a dollar.

-RooFlyer88

Indeed, I've flown about 40 long haul sectors already this year, and particularly familiar with QF, EK, QR, SQ and UA this year. I think you may be dramatically overstating the consistency of many airlines.

QR? OMG, yes, all the A350s have Q suites, but none of the B787s, A330s, or A380s do! Thats about 50 aircraft. Of the B777s, the B77Ls are about half-half, of the B777Ws, of the QR birds, they're about two-thirds with Q suites, while they have 6 ex-CX birds in original configuration in addition to the 3 VA aircraft. And even then, the non-Q suite aircraft (excluding the CX and VA) have two different business class seats. So that is 5 different business class seats across the long haul fleet ...

EK have three different business class seats. UA have finally finished their Polaris upgrade - it took 7 years, 7 years of hoping for all aisle access with a strong probability of a late switch that gave you a middle seat. Yes, UA have better amenities, yet the food is mostly horrendous (I'd rate business class food worse than economy on some carriers). Even SQ doesn't have a consistent product, although this is by design. Point being, it's easy to find the weakness in any airline's product if you're looking for it. For me, I like to know what I'm getting, even if isn't the best of the best.

Yes, I know Oscar Munoz. I worked for him. I don't think US CEO's need some into it or we can just double down with Scott Kirby.

I think you have misunderstanding of EU261. If a flight is cancelled, at any time, you have a choice between a refund, re-routing to your final destination at the earliest opportunity, or re-routing at a later date at your convenience. You choose one, but "earliest opportunity" is a misnomer, but ultimately means the next flight they operate subject to availability, they are under no obligation to generate that availability for you. The key is that compensation is only due if the cancellation takes place less than two weeks out. The idea behind this was that this would give passengers more alternative arrangements. In practice what it did was give airlines a de factor coordinated timeline for revenue management. I spend a mid chunk of the mid-2000s working with European airlines developing optimised strategies on how to manage flight planning and revenue management within the context.

And yes, LCCs do very well, even under EU261, but part of the major reason is that they are not quite as susceptible to delays and overbookings compared to legacy carriers in Europe is that their business model is fundamentally different. They don't do online connections of passengers, they tend to operate to (on average) less congested airports, they don't overbook (or as substantially) since they don't have a connecting model, they don't have crew stay over at destination in order to time flights for hub banks (and thus run into overnight duty limitations that knock onto the next day), etc etc. Point being, you chose the functionality of network carriers for a reason and that generates risks of delays. And yes, if you want to go all the way to the European Court of Justice to enforce your €250 then go for it, but in many cases, airline will reject based on maintenance and it's up to the competent national authority to enforce ... tried that in Germany as a foreigner?

You're still being exceptionally vague about QF and the counterfactual. I'm still not sure what would be different.

Post automatically merged: Aug 8, 2023

Well there is Air New Zealand, but I don't know how much of the fairy tale called cabotage is believed here in Australia (certainly in Canada you could fly US carriers domestically via the US - it would raise some eyebrows particularly if you don't have Nexus and have to talk to a border officer).

You know that NZ has the right to operate domestically in Australia. Not even cabotage - they can originate flights in Australia, yet they choose not to ...

The reason why they don't is that the infrastructure is capacity contained. It's not QF who have not built those runways ...

 

[RooFlyer]

Pls don't be offended by multiple quotes - you put up good arguments and I like a robust discussion.

It's a very inefficient mechanism of insurance. I also somewhat feel that the burden of the cost will be on more price sensitive travellers and especially those who do not travel frequently.

Fair enough, but its the 'more price sensitive' travellers who benefit most when insurance is needed. I wouldn't push my 'third party insurance' analogy too far, but like insurance, EU261 type protection is always an imposition - until you need it.

On the domestic front, their competition was using a bankruptcy process to dramatically lower it's entire cost structure. What should QF have done differently and where they to compete?

I don't think VA1 went 'bankrupt' as a strategy to lower costs. I'd be more sympathetic to the argument about the relative competitive position of QF and VA over the past few years if it wasn't for the enormous profit QF generated (not all cash surplus of course).

What I think Qantas should have done differently is not to have a perennial war on unions (as much as I dislike unions!) - their workforce - and not outsource services to the lowest bidder; kept expertise and contingency in-house so they can react better and faster to problems; invested in decent IT; invested in other than the dreadful off-shore call centres; invested earlier in renewing the fleet. Many of these of course would apply before covid/covid recovery, but the company's customers unfortunately reaped what the management sewed over a number of years, which culminated with the company was making a huge profit. Diversion of some of that large cash-flow into improving the IT/call centres/baggage issues during 2021/22 would have helped a great deal.

On the international front, they're facing competition from Asian carriers with much lower labor costs, or transit carriers with much lower labor costs and subsidised cost of capital.

Yes, but if you look at the international competitors who are fully/part state owned (eg QR, SQ), their fares don't flat-out undercut Qantas' - for example, there was some numbers put up in another thread recently that showed QR was certainly not the cheapest option to Europe in J, IIRC. That's not to say it always happens, but its not as if the state-owned/subsidised carriers undercut Qantas to an unfair extent. The likes of QR and SQ compete successfully on service.

What should they have done differently? Saying they should have spent more money, or outsourced less is pretty vague, and it's not clear that it would have made a significant difference. For example, everyone kept shouting "why don't they get more B787s", yet they were struggling to get the ones already due to them.

Done differently - as above. I think it would have made a difference to spend on the crunch points for customers. But they focussed instead on profit, profit, profit. Now, as a retiree who lives in part off dividends, I don't begrudge a company making a profit but the imbalance in Qantas was huge, and it showed.

As for getting new aircraft, it hasn't been a short-term issue. Alan Joyce simply kept deferring fleet renewal virtually the entire length of his tenure, I think no doubt to protect his balance sheet; again, we had discussion on another thread here that showed how the Qantas fleet has average-aged over Joyce's tenure. At the start, their press releases crowed about the young average age; more recent ones have said fleet age isn't a thing. Alan Joyce has finally put big orders in, now he is on the way out - someone else's problem when the profit falls.

 

[evanb]

Fair enough, but its the 'more price sensitive' travellers who benefit most when insurance is needed. I wouldn't push my 'third party insurance' analogy too far, but like insurance, EU261 type protection is always an imposition - until you need it.

I agree its an imposition until you need it, although all insurance is like that. Maybe a better way is to have a mandate that all traveler must have insurance, thus allowing us to see the cost more directly. I think that would be absurd, but it would remove the socialisation of the cost. That aside, I think it's naive to expect that airlines will change practices and behaviours to only mitigate costs by doing everything in their power to avoid delays. They are far more sophisticated and have the ability to measure these costs. They now have total look through of their cost function and can optimise around it.

I don't think VA1 went 'bankrupt' as a strategy to lower costs. I'd be more sympathetic to the argument about the relative competitive position of QF and VA over the past few years if it wasn't for the enormous profit QF generated (not all cash surplus of course).

What I think Qantas should have done differently is not to have a perennial war on unions (as much as I dislike unions!) - their workforce - and not outsource services to the lowest bidder; kept expertise and contingency in-house so they can react better and faster to problems; invested in decent IT; invested in other than the dreadful off-shore call centres; invested earlier in renewing the fleet. Many of these of course would apply before covid/covid recovery, but the company's customers unfortunately reaped what the management sewed over a number of years, which culminated with the company was making a huge profit. Diversion of some of that large cash-flow into improving the IT/call centres/baggage issues during 2021/22 would have helped a great deal.

Apologies if it implied that they went bankrupt to lower costs. The point that I was making was that bankruptcy gave VA a huge opportunity to reset their cost base, and much lower than QF's. They were able to discharge historic debts, cancel leases they didn't like, renegotiate others, and renegotiate labor from a much stronger strategic position. This in itself placed some competitive cost pressures on QF.

Yes, but if you look at the international competitors who are fully/part state owned (eg QR, SQ), their fares don't flat-out undercut Qantas' - for example, there was some numbers put up in another thread recently that showed QR was certainly not the cheapest option to Europe in J, IIRC. That's not to say it always happens, but its not as if the state-owned/subsidised carriers undercut Qantas to an unfair extent. The likes of QR and SQ compete successfully on service.

I agree that they have a terrible relationship with labor, and that even predates Joyce. Efforts to circumvent labor this go back a long time, for example, Jetconnect predated Joyce by 6 years. While it seems crude, there is simply no easy choice for QF. Labor in Australia is expensive compared to what competitors are paying.

I agree, competitors are not undercutting QF, but they are selling tickets at similar prices, generating similar revenues, while having a lower cost base. QF have limited means to compete since many costs are exogenous (e.g., fuel, aircraft, cost of capital, etc). Unfortunately, many of the things you highlight, from IT to reservations are really a function of labor costs. Competitors like EK and QR insource this by bringing cheap labor into the country, others like SQ also outsource some of these things (shocking, I know). SQ and QR do compete on service, but again, they can do this because labor conditions are different. And this doesn't even take into account EK or QR's excessively low cost of capital.

I'm not suggesting anything that QR or SQ is unfair. At the end of the day it benefits the Australian consumer, however it's naive to expect that QF will sell things for similar prices, pay higher costs, and that they will survive. Yes, they will do well in the short run given the market conditions, but we all know that this is a short term boom, but they won't survive in the long run.

As for getting new aircraft, it hasn't been a short-term issue. Alan Joyce simply kept deferring fleet renewal virtually the entire length of his tenure, I think no doubt to protect his balance sheet; again, we had discussion on another thread here that showed how the Qantas fleet has average-aged over Joyce's tenure. At the start, their press releases crowed about the young average age; more recent ones have said fleet age isn't a thing. Alan Joyce has finally put big orders in, now he is on the way out - someone else's problem when the profit falls.

I think this is wishful thinking and somewhat of a narrative that's been overplayed. Ordering works as a group level. Joyce came in as CEO in November 2008. He came in with a substantial order book of B787s and A380s, which came with extraordinary balance sheet risks. When he took office, the AUD had tanked by 50% in the previous 5 months and global capital markets were stalled - major banks went under. It was a pretty precarious situation and it took several years to recover.

Even worse, was that the order book was stacked with big deliveries beginning in 2008, first the A380s (12 between 2008 to 2011, several A330s and a bunch of A320/A321. The B787s were due to arrive in 2008, but had already been delayed, and timeline was uncertain.

He didn't keep deferring. The original order for the B787s in 2005 was for 45 B787s, with options for 20 and rights for 50. They ended up with 25 B787s, which wasn't a poor result keeping in mind how many early B787s were cancelled due to a combination delays and the GFC. Their first was due to arrive in 2008, and yet arrived 5 years late (this not due to deferment)!

So by the time 2012 rolls around, Qantas wasn't in great shape. Post GFC hadn't been great. They had accumulated a lot of debt taking on all those deliveries. Debt peaked at about $6.5 billion in 2012 (revenue was only $15.7 billion back then). The delivery boom had put them in a rather unsustainable position. They didn't really have the scope to continue taking more deliveries, never mind ordering more. In 2012, they still had huge uncertainties regarding the B787 timeline and they needed to make decision. Even then, they were expecting the first B787 in the first half of 2013 and even it came 6 months late. The decision to restructure the B787 order didn't really have an alternative given the debt situation, and delivery uncertainty. It's still ironic to me that when QF were really ready to come back for the B787 (in the last two years) that they had shot themselves in the foot, even being unable to deliver existing aircraft due to the certification issues.

When was he supposed to order? He ordered plenty, just not a lot of long haul aircraft, mostly because he came in with a huge hangover and didn't need to. The only ones I would place responsibility on him for were the B747-400ER replacements, which they were probably planning on using the final B787 options for if COVID hadn't thrown the spanner in the works for and Boeing had not gotten perfectly stuck on certification. By 2019, debt had been reduced significantly (and even more relative to revenue). That was the time to pull the trigger and he has.

I'm not sure I get the accusation that he chose not to order and rather juice the profits. It doesn't really make sense that it argues that he would fly older aircraft harder, which would be more expensive. Ordering aircraft doesn't impact the bottom line immediately. In fact, while it saps cash flow and/or increases debt (see 2012), it would increase short term profits by reducing operational costs. They even had to stop paying dividends and massively reduce capital returns for many years in order to pay down the debt. If the argument was that they shouldn't have been paying down that debt, they probably would have gone bust in 2020.

 

[kangarooflyer88]

I agree its an imposition until you need it, although all insurance is like that. Maybe a better way is to have a mandate that all traveler must have insurance, thus allowing us to see the cost more directly. I think that would be absurd, but it would remove the socialisation of the cost. That aside, I think it's naive to expect that airlines will change practices and behaviours to only mitigate costs by doing everything in their power to avoid delays. They are far more sophisticated and have the ability to measure these costs. They now have total look through of their cost function and can optimise around it.

Why should we have to pay insurance for the airlines messing up? The fact of the matter is international civil air transportation has always had passenger's back from the Warsaw Convention of 1929 to the modern day equivalent Montreal Convention, 1999. Throughout this history there are certain reasonable assumptions we as society have agreed upon when travelling by air:

• We safely arrive at our final destination
• Our bags arrive with us
• If we are inconvenienced by the airline through things like delays, they must make us whole on our out of pocket expenses

Indeed, I have always said that an Australian travelling internationally will always get treated better than one travelling domestically. And we can look at this across any dimension you like from fares to lounges and certainly to things like delays, baggage, and (heaven forbid) injury or death.

Apologies if it implied that they went bankrupt to lower costs. The point that I was making was that bankruptcy gave VA a huge opportunity to reset their cost base, and much lower than QF's. They were able to discharge historic debts, cancel leases they didn't like, renegotiate others, and renegotiate labor from a much stronger strategic position. This in itself placed some competitive cost pressures on QF.

Possibly, but it also eliminated a great deal of competition in the marketplace. Sure Virgin 2.0 has come back leaner or meaner, but I would challenge you to tell me with a straight face that Qantas is facing more competition either in the domestic or international market from Virgin now than it was pre-COVID. It simply cannot be done. Fact of the matter is Virgin flew internationally to a number of destinations like the US and UK. Certainly if we look purely across the ditch to NZ, Virgin's bankruptcy was a huge win for Qantas, now all they got to compete with is Air New Zealand which is a weak competitor at that (some may argue Virgin has Queenstown, but I mean c'mon, no one is travelling to Queenstown). And in terms of hard and soft product that has deteriorated greatly with Virgin 2.0. Bye-bye lie flat business seats on wide body jets, bye-bye lounges when travelling internationally. Now all we got is the middle-seat lottery. Whoop-di-do!

I agree that they have a terrible relationship with labor, and that even predates Joyce. Efforts to circumvent labor this go back a long time, for example, Jetconnect predated Joyce by 6 years. While it seems crude, there is simply no easy choice for QF. Labor in Australia is expensive compared to what competitors are paying.

A major issue with Qantas is they don't have any overseas bases as far as I'm aware. If you look at major airlines like United, for instance, they have bases throughout the world, many times in countries where labour is cheaper than the US. But I also must question how big of a role labour plays in the grand scheme of things? From what I can tell labour makes up about 30% of the airline's operating expense, which whilst that may sound like a large number there is not much an airline can do. After all, legislation says they need to have so many pilots and crew on a given aircraft. Sure you can squeeze that percentage down a bit, but again we're not looking at huge optimizations here. Other things like taxes and airport fees marketing also make a considerable amount of the operating cost and yet we don't see QF curtailing those.

I agree, competitors are not undercutting QF, but they are selling tickets at similar prices, generating similar revenues, while having a lower cost base. QF have limited means to compete since many costs are exogenous (e.g., fuel, aircraft, cost of capital, etc). Unfortunately, many of the things you highlight, from IT to reservations are really a function of labor costs. Competitors like EK and QR insource this by bringing cheap labor into the country, others like SQ also outsource some of these things (shocking, I know). SQ and QR do compete on service, but again, they can do this because labor conditions are different. And this doesn't even take into account EK or QR's excessively low cost of capital.

I think one major factor you need to consider is it's a numbers game, meaning they make money by filling up all their planes. And they do that by offering competitive fares and potentially other perks Qantas is unwilling or unable to offer. Using Singapore as an example, who in their right mind would bother flying Singapore Airlines to Tokyo when Qantas offers a non-stop route? Would you seriously want to waste a couple hours in Changi airport and all the hassle associated with that? The reason why people fly them is because they price the flights lower than the non-stop offered by Qantas. A similar argument could be made for Qatar. Who would fly Qatar to London when Qantas offers direct service to London? And Doha is even less appealing than Changi as a connection point. Again, Qatar has to price its fares competitively.

But because they've got so many flights coming and going out of Changi or Doha, these airlines have built a robust route network that can take travellers from anywhere to anywhere. Yes you may need to connect, but if the price and service are right, people will switch. Another big issue of course is the geography. The fact of the matter is no one outside of Oceania would bother connecting in Sydney or Melbourne. It will easily add half a day or more to your travels given we are literally in the middle of nowhere. The same cannot be said about a hub like Doha which lays in the centre of Europe and Asia.

 

[drron]

Sorry I would definitely consider flying SQ to Tokyo to Brisbane. I was looking early this year for a one way flight in J BNE - TYO to get on a cruise back to CNS. At the time SQ was charging $A3760 and QF $A7450. I ended up with a more complicated BA fare covering 2 trips.

And when we go to Kokkaido in July the next year it is SQ awards all the way. DRW - SIN -NRT/ HND -SIN -BNE.

And I was looking at Trust Pilot as considering if changing home insurer. Canstar rates the QF policy pretty well. I went to look at Trust Pilot and couldn't find a review on insurance but QF as an airline does abysmally.

 

[Peasant]

My two cents..

I have a soft spot for Qantas. I generally find front line staff who take pride in what they do and the loyalty program delivers solid value that for me is unmatched in the Australian market. The lounges are a highlight and forgive (some) of their operational ineptitude.

What am I unhappy with? What I consider to be a delinquent management team that has more than sweated its assets - it’s bled the place dry, all in the interests of (unsustainable) short term financial targets. There has been a severe lack of stewardship.

The fleet is clapped out, the international network is unacceptably unreliable and getting any form of useful customer service is nigh on impossible. That makes Qantas a high risk, unreliable proposition that I generally try to avoid for international flying. I cannot trust them and therefore don’t.

It wasn’t always like this and it doesn’t have to be like this. I do not admire Alan Joyce’s war on everything approach to business and hope QF gets the management it deserves before it’s really beyond redemption.

 

[clifford]

I went to look at Trust Pilot and couldn't find a review on insurance but QF as an airline does abysmally.

Possibly worse than Ryanair.

Any airline that can take months to refund points and cash aren't really competitive at all (and I know from personal experience)

 

[justinbrett]

And I was looking at Trust Pilot as considering if changing home insurer. Canstar rates the QF policy pretty well. I went to look at Trust Pilot and couldn't find a review on insurance but QF as an airline does abysmally.
View attachment 338692

Awkward to mention that QR, VA, BA, AA, DL, SQ, EK, EY, AY (amongst others) also all have 1.X ratings.

The site obviously has a massive negative bias, for airlines at least.

 

[RooFlyer]

@evanb - hope to have a chat to you in a First Class lounge sometime

 

[SYD]

Awkward to mention that QR, VA, BA, AA, DL, SQ, EK, EY, AY (amongst others) also all have 1.X ratings.

The site obviously has a massive negative bias, for airlines at least.

Can’t forget AC. Also 1.3….

 

[kangarooflyer88]

Can’t forget AC. Also 1.3….

View attachment 338703

I think the proof is in the pudding here, slightly more favourable reviews, likely thanks to APPR meaning Air Canada has to pay you for their failures (sometimes)

 

[RichardMEL]

Criticism is warranted, but holy hell do aussies go at it like a dog with a bone. I get it, Qantas are out of favour, your delayed flight still isn't newsworthy.

It's a combination of, in my view, people who have really been burnt (and there are a lot!) and who tell and re-tell the stories (and why not?) and word of mouth (enhanced hugely by social media) becomes the image of the airline. I include here all the endless stories about bag issues last year, and remember the whole sequence of aircraft turn arounds for about 6 weeks there where it seemed every week there was a new batch turned around, diverted or whatever until it was beathlessly reported any time a QF tail returned to the gate for some issue that wouldn't have been a blip a few years earlier. It's like the old wounded animal lying out in the sun - the vultures circle and form packs.... And this is the general image most have of the carrier now - even people who've never flown on them seem to.

The other aspect is the well known "Tall Poppy Syndrome" - QF's an easy target, specially when the CEO gets mega million bonuses etc... so it's almost a national sport to tear into such brands and people as a matter of course (yes, I think the compensation Joyce has gotten over the years is pretty obscene, but he's hardly unique in Austrlian big business). Add to this general dislike of the "tall poppy" of QF and it's top brass, when you have a company who has a big social footprint and has specific positions on social policy and other things as an entity (note, I'm commenting, I'm not saying if it's good or bad - everyone has their own views on this) - well even these very well known things can provoke negative sentiment in elements of the community. Personally, I find all of those things irrelevant to QF's job as a transportation company (don't take that to mean I am anti anything in particular). However some people feel very passionately - both pro and con - and will support or deride based upon these factors - that honestly have nothing to do with the airline's operational performance, safety, fares, ervice or anything else most of us who travel are probably more interested in (at least when we're flying ).

 

[N860CR]

They’re an awful airline. There’s really no other way to put it. You cannot rely on their international OTP (to within a few days), services varies from excellent to beyond awful (as opposed to most airlines who run from great to ok) and the chance of meeting an absolutely miserable staff member is very high.

They have a captive market, route duopoly and an extensive media budget. If it all goes to plan, you’ll be fine (not great, but fine). If something goes slightly wrong, you’ve got zero recourse. I’m still waiting on a refund from 2 years ago (that even ACA have agreed on but are ignoring).

That’s the “spirit of Australia” though. I can’t imagine the competitor is any better.