Welcome to the Australian Aviation Thread October.

Link to September edition viewtopic.php?f=3&t=1476237

QF1/30SEP delayed approx 24hrs. The return QF2/01Oct delayed approximately 11hrs. This is a result of an engine change on the aircraft.

QF1/01OCT also delayed approx 24hrs. The return QF2/02Oct also will be delayed approximaely 11hrs. This is a result of the previous days delay and combined with crew rest requirements.

QF64/30SEP delayed tba due bird strike on the inbound QF63. QF engineers requesting techical information from Boeing

Rex has completed its purchase of National Jet Express (NJE).

https://www.flightglobal.com/fleets/nat ... 87.article

From the end of the September thread re: JQ getting their whole 787 fleet back in the air. Wasn't it looking dicey for one their aircraft that was hit by lightning? As in there was speculation of a write off due to carbon fibre being problematic to repair after significant lightning damage. Or was that just A.Net conjecture?

Obviously both Boeing and JQ wouldn't have wanted the bad PR - and expense and disruption - of a write-off, but the fact that it's returning to service relatively quickly suggests that the situation wasn't quite so bad after all.

cx777fan wrote:

From the end of the September thread re: JQ getting their whole 787 fleet back in the air. Wasn't it looking dicey for one their aircraft that was hit by lightning? As in there was speculation of a write off due to carbon fibre being problematic to repair after significant lightning damage. Or was that just A.Net conjecture?

Obviously both Boeing and JQ wouldn't have wanted the bad PR - and expense and disruption - of a write-off, but the fact that it's returning to service relatively quickly suggests that the situation wasn't quite so bad after all.

You must b referring to -VKL which is currently enroute DPS-BNE JQ58.
On a side note appears -ZNC has been repaired and on its way extremely late QF64… Hopefully the QF75 isn’t a curfew buster.


Sent from my iPhone using Tapatalk

VH-VKL returned to service on 30/9 when it was ferried SYD-MEL as JQ7991. I've read that Boeing flew a team over to repair the aircraft.

Does anyone know why the delivery flight of Bonza's second 737 (VH-UIK) was BFI YYC? Something to do with the lessor?

Haven't seen noted anywhere else, could be wrong. (Pls delete if so).
QF71/72 PER-SIN is now five weekly x26 (last I knew was three weekly)
Going to 6 weekly late October x6
Then back to pre-Covid Daily from early November. Great news for Perthites.

tristans wrote:

Does anyone know why the delivery flight of Bonza's second 737 (VH-UIK) was BFI YYC? Something to do with the lessor?

Probably because it’s due for delivery and Boeing does not want it sitting around any longer. They don’t seem confident launching this calendar year so perhaps they will keep any further aircraft in Canada for Flair, or use them for flair and re deliver them early next year.

Possibly a better idea having them parked at the Calgary maintenance base vs sitting at the sea near MCY for 6 months with no maintenance base.

https://twitter.com/AlexPraglowski/stat ... 3265266688

tristans wrote:

Does anyone know why the delivery flight of Bonza's second 737 (VH-UIK) was BFI YYC? Something to do with the lessor?

Previously aircraft have been flown to Canada and delivered there for tax purposes. I'm not sure of the details, or the why's etc, but it has been done previously.

AirbusA322 wrote:

tristans wrote:

Does anyone know why the delivery flight of Bonza's second 737 (VH-UIK) was BFI YYC? Something to do with the lessor?

Probably because it’s due for delivery and Boeing does not want it sitting around any longer. They don’t seem confident launching this calendar year so perhaps they will keep any further aircraft in Canada for Flair, or use them for flair and re deliver them early next year.

Possibly a better idea having them parked at the Calgary maintenance base vs sitting at the sea near MCY for 6 months with no maintenance base.

https://twitter.com/AlexPraglowski/stat ... 3265266688

The only problem with your theory is that the aircraft then returned to the States.

ffan787 wrote:

Haven't seen noted anywhere else, could be wrong. (Pls delete if so).
QF71/72 PER-SIN is now five weekly x26 (last I knew was three weekly)
Going to 6 weekly late October x6
Then back to pre-Covid Daily from early November. Great news for Perthites.

November certainly seeing its fair share of resumption back to normal at PER with:

QF beginning JNB and CGK
QZ ramping up PER-DPS
JQ ramping up PER-DPS
D7 resuming PER-KUL
MK resuming PER-MRU
EK resuming A380 ops

to name a few that come to mind.

JQ failures continue despite spruiking a full 787 fleet return only a day or two ago.

Multiple DPS flights plus a SIN flight cancelled today.

Long weekend and school holidays, typical JQ form.

hic787 wrote:

Rex has completed its purchase of National Jet Express (NJE).

https://www.flightglobal.com/fleets/nat ... 87.article

So curious how ZL structure this, I assume they can wrap PelAir into their venture.

Press release from ZL is nothing short of tragic again, only REX could some how nice a great news story with an opportunity to slag of Qantas. Their PR and brand team is nothing short of a disaster with an inferiority complex!

"There is no better operator of air services in Australia than the Rex Group, be it for reliability or financial performance. Over the last 14 vearsf for when the entire global economy has been shaken to the core by the Global Financial Crisis and COVID-19, Rex has still managed to achieve a positive gross retum of 2.9%, compared to Singapore Airlines' 1.3%. while Qantas showed a disgraceful negative 1.9%. In fact, over the last 18 years, Rex made more absolute accumulated profits than Qantas!"


https://www.rex.com.au/MediaAndPressCli ... spx?y=2022

REX marketing, comms and PR are truly cringeworthy. If they spent a fraction of their time actually building brand recognition and goodwill in the regional communities they serve(d) they may not be cutting routes or dummy spitting if/when QLink start sniffing around a route or they start bleeding pax to other nearby ports. Not once did I see or hear an ad for them here in northern NSW to promote the advantages of flying ZL out of LSY or GFN while they were in slow and painful decline. Instead they just picked fights with local councils and charged mind bogglingly uncompetitive fares meaning their old SAABs were often empty.

LTEN11 wrote:

AirbusA322 wrote:

tristans wrote:

Does anyone know why the delivery flight of Bonza's second 737 (VH-UIK) was BFI YYC? Something to do with the lessor?

Probably because it’s due for delivery and Boeing does not want it sitting around any longer. They don’t seem confident launching this calendar year so perhaps they will keep any further aircraft in Canada for Flair, or use them for flair and re deliver them early next year.

Possibly a better idea having them parked at the Calgary maintenance base vs sitting at the sea near MCY for 6 months with no maintenance base.

https://twitter.com/AlexPraglowski/stat ... 3265266688

The only problem with your theory is that the aircraft then returned to the States.

I can’t see the flight plan showing it returned to the USA?

vhebb wrote:

JQ failures continue despite spruiking a full 787 fleet return only a day or two ago.

Multiple DPS flights plus a SIN flight cancelled today.

Long weekend and school holidays, typical JQ form.

JQ35 MEL-DPS failed to leave yesterday (overnight delay) JQ36 is around 15hrs delayed as a result.

JQ57 BNE-DPS and JQ44 MEL-DPS both cancelled today.

vhebb wrote:

vhebb wrote:

JQ failures continue despite spruiking a full 787 fleet return only a day or two ago.

Multiple DPS flights plus a SIN flight cancelled today.

Long weekend and school holidays, typical JQ form.

JQ35 MEL-DPS failed to leave yesterday (overnight delay) JQ36 is around 15hrs delayed as a result.

JQ57 BNE-DPS and JQ44 MEL-DPS both cancelled today.

Sounds like a good news day coming at all the news outlets!

To be honest they deserve all the negative press they get. If they can't operate the flights (which has been evident for months now) they shouldn't be selling the flights.

JQ2 HNL-MEL is now also cancelled leaving pax stranded in HNL.

vhebb wrote:

To be honest they deserve all the negative press they get. If they can't operate the flights (which has been evident for months now) they shouldn't be selling the flights.

JQ2 HNL-MEL is now also cancelled leaving pax stranded in HNL.

The terrible service by the airlines since June, particularly by Jetstar, will sorely tempt the government to impose similar penalties as used in the EU. This would be a significant cost to the airlines which they would have to self-insure. This would have to be passed on via higher fares but, at least, it would mean the airlines have to take greater responsibility for their delays and have greater incentive to resolve faster.

Most airfares are already much higher than pre covid and the service and reliability far worse.

Bring on the delay/cancellation compensation!

cx777fan wrote:

From the end of the September thread re: JQ getting their whole 787 fleet back in the air. Wasn't it looking dicey for one their aircraft that was hit by lightning? As in there was speculation of a write off due to carbon fibre being problematic to repair after significant lightning damage. Or was that just A.Net conjecture?

Obviously both Boeing and JQ wouldn't have wanted the bad PR - and expense and disruption - of a write-off, but the fact that it's returning to service relatively quickly suggests that the situation wasn't quite so bad after all.

It took five months to to repair VH-VKL and return it to service. Hardly relatively quick return to service and probably shows how significant and difficult it was to repair.

vhebb wrote:

Most airfares are already much higher than pre covid and the service and reliability far worse.

Bring on the delay/cancellation compensation!

You may have noted that jetfuel prices are about 50% higher than pre covid and capital costs rising quickly too.

[photoid][/photoid]

evanb wrote:

vhebb wrote:

Most airfares are already much higher than pre covid and the service and reliability far worse.

Bring on the delay/cancellation compensation!

You may have noted that jetfuel prices are about 50% higher than pre covid and capital costs rising quickly too.

But still managed to find several hundred million for share buy backs, plus increased management remuneration. All announced as recently as August.

We've had much higher fuel prices in past years.

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

ben175 wrote:

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

Utilisation. The same reason no european carrier (other than BA) operates to Australia.
While no doubts QF makes money on the non stops out of PER. For the european carriers, they could operate 2 transatlantic return sectors in the time it takes for one return trip to australia and make more money for the airline. Cost per mile, Europe-Australia is cheaper (lower yielding) than transatlantic. Certainly at the moment airfares are high but Europe especially is heading for a very hard economic winter.

vhebb wrote:

But still managed to find several hundred million for share buy backs, plus increased management remuneration. All announced as recently as August.

We've had much higher fuel prices in past years.

What's your point? Are you expecting the company to absorb higher costs and subsidise air travel for consumers? Would you expect Coles or Woolies to not pass on inflationary costs?

The use of buybacks is an alternative to dividends given the relative tax implications. Shareholders much prefer buybacks since it allows the shareholder to decide whether they want to sell and potentially incur capital gains tax or to effectively reinvest the dividend (i.e. keep their shares during the buyback) and have to pay tax on it. You can't opt out of a dividend, but you can effectively opt out of the buyback. It also only makes sense if the board think the company is undervalued (that might be the bigger hint). This is not at all unique to Qantas and if Qantas were to only pay dividends rather than buybacks it would severely undermine shareholder demand relative to alternative investment options and undermine Qantas's ability to raise capital in a highly capital intensive industry. That said, I would question whether giving a dividend/buyback at this time is the best strategy given rising interest rates and the current high rates of capital expenditure at Qantas. As a shareholder, I'd prefer a more cautious approach to capital management.

In AUD terms, oil prices are the highest they've been in history (or at least they were when they peaked in June and July - they've come down a bit since). To put it in perspective, fuel cost per unit in FY 2022 were 43.7% higher than than FY 2019. If they flew the same as FY 2019 which they will be close to in FY 2023, it would amount to an absolute increase in the fuel expense from $3.9 billion to $5.5 billion. That difference of $1.6 billion exceeds net free cash flows before exceptional items, so not passing it on would be pretty catastrophic.

smi0006 wrote:

hic787 wrote:

Rex has completed its purchase of National Jet Express (NJE).

https://www.flightglobal.com/fleets/nat ... 87.article

So curious how ZL structure this, I assume they can wrap PelAir into their venture.

Press release from ZL is nothing short of tragic again, only REX could some how nice a great news story with an opportunity to slag of Qantas. Their PR and brand team is nothing short of a disaster with an inferiority complex!

"There is no better operator of air services in Australia than the Rex Group, be it for reliability or financial performance. Over the last 14 vearsf for when the entire global economy has been shaken to the core by the Global Financial Crisis and COVID-19, Rex has still managed to achieve a positive gross retum of 2.9%, compared to Singapore Airlines' 1.3%. while Qantas showed a disgraceful negative 1.9%. In fact, over the last 18 years, Rex made more absolute accumulated profits than Qantas!"


https://www.rex.com.au/MediaAndPressCli ... spx?y=2022

What is absolute accumulated profits when it is at home?

ben175 wrote:

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

It's an interesting question. I wouldn't say PER-FCO is a triumph just yet, but certainly PER-LHR has been far more successful than even QF had expected!

However, I think it's a very different prospect for a carrier operating to/from a fortress hub (I know PER isn't really this, but if we see the whole of Australia as such for QF, it makes more sense). The reason I say this is that the data that I've seen only puts PER originating pax at 50% (25% MEL, 7% SYD, 6% BNE, 4% ADL, 8% elsewhere - maybe out of date though). A European carrier wouldn't get the same connectivity at PER. Even if LH got VA feed, they'd be at the mercy of what capacity VA would give them and then at what cost. The latter would be important given how yield would be so critical on an ULH. Let's add the product to that. QF can offer connecting options (at least to MEL, sometimes SYD and BNE) with flatbed in business, again probably giving them an ability to exploit yields a little more. Then, the overall market size from PER might no be large enough and QF got the first mover advantage.

Furthermore, BA would have to question how it may cannibalise their LHR-SIN-SYD flight given just how they have struggled to make SYD (and MEL before that) work over the years. I think they have found a good formula with the B787-9 and probably don't want to undermine that.

evanb wrote:

vhebb wrote:

But still managed to find several hundred million for share buy backs, plus increased management remuneration. All announced as recently as August.

We've had much higher fuel prices in past years.

What's your point? Are you expecting the company to absorb higher costs and subsidise air travel for consumers? Would you expect Coles or Woolies to not pass on inflationary costs?

The use of buybacks is an alternative to dividends given the relative tax implications. Shareholders much prefer buybacks since it allows the shareholder to decide whether they want to sell and potentially incur capital gains tax or to effectively reinvest the dividend (i.e. keep their shares during the buyback) and have to pay tax on it. You can't opt out of a dividend, but you can effectively opt out of the buyback. It also only makes sense if the board think the company is undervalued (that might be the bigger hint). This is not at all unique to Qantas and if Qantas were to only pay dividends rather than buybacks it would severely undermine shareholder demand relative to alternative investment options and undermine Qantas's ability to raise capital in a highly capital intensive industry. That said, I would question whether giving a dividend/buyback at this time is the best strategy given rising interest rates and the current high rates of capital expenditure at Qantas. As a shareholder, I'd prefer a more cautious approach to capital management.

In AUD terms, oil prices are the highest they've been in history (or at least they were when they peaked in June and July - they've come down a bit since). To put it in perspective, fuel cost per unit in FY 2022 were 43.7% higher than than FY 2019. If they flew the same as FY 2019 which they will be close to in FY 2023, it would amount to an absolute increase in the fuel expense from $3.9 billion to $5.5 billion. That difference of $1.6 billion exceeds net free cash flows before exceptional items, so not passing it on would be pretty catastrophic.

How about making the priority getting pax to and from the destinations which they booked, rather than leaving thousands stranded consistently week after week.

The laws need to be tightened and penalties applied to the repeat offenders, example Jetstar.

It's the only way the airlines will start taking delays/cancellations seriously.

vhebb wrote:

How about making the priority getting pax to and from the destinations which they booked, rather than leaving thousands stranded consistently week after week.

The laws need to be tightened and penalties applied to the repeat offenders, example Jetstar.

It's the only way the airlines will start taking delays/cancellations seriously.

How about actually responding to the discussion at hand rather than a strawman?

However, I'll take the bait ... are you willing to pay even higher ticket prices?

evanb wrote:

How about actually responding to the discussion at hand rather than a strawman?

However, I'll take the bait ... are you willing to pay even higher ticket prices?

Under the current regulations airlines routinely treat their own non-executive employees and all their customers who aren't the highest value frequent fliers like absolute garbage. I'd gladly pay more for a ticket if it stopped that happening and guaranteed me compensation if they messed up the flight.

vhebb wrote:

evanb wrote:

vhebb wrote:

But still managed to find several hundred million for share buy backs, plus increased management remuneration. All announced as recently as August.

We've had much higher fuel prices in past years.

What's your point? Are you expecting the company to absorb higher costs and subsidise air travel for consumers? Would you expect Coles or Woolies to not pass on inflationary costs?

The use of buybacks is an alternative to dividends given the relative tax implications. Shareholders much prefer buybacks since it allows the shareholder to decide whether they want to sell and potentially incur capital gains tax or to effectively reinvest the dividend (i.e. keep their shares during the buyback) and have to pay tax on it. You can't opt out of a dividend, but you can effectively opt out of the buyback. It also only makes sense if the board think the company is undervalued (that might be the bigger hint). This is not at all unique to Qantas and if Qantas were to only pay dividends rather than buybacks it would severely undermine shareholder demand relative to alternative investment options and undermine Qantas's ability to raise capital in a highly capital intensive industry. That said, I would question whether giving a dividend/buyback at this time is the best strategy given rising interest rates and the current high rates of capital expenditure at Qantas. As a shareholder, I'd prefer a more cautious approach to capital management.

In AUD terms, oil prices are the highest they've been in history (or at least they were when they peaked in June and July - they've come down a bit since). To put it in perspective, fuel cost per unit in FY 2022 were 43.7% higher than than FY 2019. If they flew the same as FY 2019 which they will be close to in FY 2023, it would amount to an absolute increase in the fuel expense from $3.9 billion to $5.5 billion. That difference of $1.6 billion exceeds net free cash flows before exceptional items, so not passing it on would be pretty catastrophic.

How about making the priority getting pax to and from the destinations which they booked, rather than leaving thousands stranded consistently week after week.

The laws need to be tightened and penalties applied to the repeat offenders, example Jetstar.

It's the only way the airlines will start taking delays/cancellations seriously.

"making the priority getting pax to and from the destinations" . You think that is not the airlines main priority? I can tell you it most certainly is! but it has to be done safely and with the tools they have (which at the moment they are drastically short of (for what ever reason - mainly a thing called COVID which has absolutely put a lightning rod through the operating heart of all airlines - worldwide) You think they (the airlines and BTW it is not just Qantas & Jetstar) want to be in this position? I can again guarantee they don't! But they can't just 'duck out the back' and make an airplane, or rope new recruits off the street, new recruits for airlines need specialized training which takes time! Without proper training, people can get hurt, including you.

You seem to have a short memory and a one eyed view on what it takes to operate an airline.

Take this December coming, JQ increases flying to Japan and adds a new destination all using the existing 787 fleet which can't seem to cope with the current (reduced) schedule.

Is that not a recipe for more dramas?

It took them weeks to finally stop selling new tickets to Bali to enable stranded pax to get those seats to get home.

All this is done at the expense of passengers who have booked tickets in good faith.

I can't think of many other industries where you tell your customer sorry not today come back next week. This seems to be happening pretty much daily with Jetstar over multiple flights.

vhebb wrote:

Take this December coming, JQ increases flying to Japan and adds a new destination all using the existing 787 fleet which can't seem to cope with the current (reduced) schedule.

Is that not a recipe for more dramas?

It took them weeks to finally stop selling new tickets to Bali to enable stranded pax to get those seats to get home.

All this is done at the expense of passengers who have booked tickets in good faith.

I can't think of many other industries where you tell your customer sorry not today come back next week. This seems to be happening pretty much daily with Jetstar over multiple flights.

I do agree on some elements, and have empathy and compassion - but then I also feel you get what you pay for, and this isn’t a surprise to anyone the way Jetstar manages disrupts. LCCs are low cost not because of no meal or IFE - they are low cost because of the lack of back of house support services - they don’t pay for staff to rebook, they have limited airport staff, and no agreements with other airlines plus everything that goes with disrupt recovery- that’s where the savings are!

You pay a premium to avoid this mess with a full service carrier (or should, thus the justified fury at QFs recent service standards). This has hardly been Jetstar’s first disrupt disaster, and won’t be the last - yet their traffic domestically is above pre-pandemic levels. People can’t be truly swearing off them for life…. I get peoples frustration, and I don’t think it’s acceptable but also think it’s a bit of free markets - fly air Asia next time. I don’t fly Jetstar internationally for this reason, and domestically won’t book a late night fly due to flow on crew delays - otherwise I take my chances when purchasing a $120 domestic ticket! Do we need government regulation? Or can people not use free will when selecting a brand like the do everywhere else?

However—- not refunding customers promptly in these scenarios is unacceptable.

ben175 wrote:

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

In a way you have answered your own question. PER-LHR is predominantly ex AU point of sale and QF is the home carrier. For this very reason I very much doubt any European carrier would contemplate sending a piece of very heavy flying metal real estate on such a long flight with little prospect of financial return. As for BA, remember LHR is runway restricted and they have pulled profitable African flights and given those slots to more profitable trans-atlantic services.

evanb wrote:

vhebb wrote:

But still managed to find several hundred million for share buy backs, plus increased management remuneration. All announced as recently as August.

We've had much higher fuel prices in past years.

What's your point? Are you expecting the company to absorb higher costs and subsidise air travel for consumers? Would you expect Coles or Woolies to not pass on inflationary costs?

The use of buybacks is an alternative to dividends given the relative tax implications. Shareholders much prefer buybacks since it allows the shareholder to decide whether they want to sell and potentially incur capital gains tax or to effectively reinvest the dividend (i.e. keep their shares during the buyback) and have to pay tax on it. You can't opt out of a dividend, but you can effectively opt out of the buyback. It also only makes sense if the board think the company is undervalued (that might be the bigger hint). This is not at all unique to Qantas and if Qantas were to only pay dividends rather than buybacks it would severely undermine shareholder demand relative to alternative investment options and undermine Qantas's ability to raise capital in a highly capital intensive industry. That said, I would question whether giving a dividend/buyback at this time is the best strategy given rising interest rates and the current high rates of capital expenditure at Qantas. As a shareholder, I'd prefer a more cautious approach to capital management.

In AUD terms, oil prices are the highest they've been in history (or at least they were when they peaked in June and July - they've come down a bit since). To put it in perspective, fuel cost per unit in FY 2022 were 43.7% higher than than FY 2019. If they flew the same as FY 2019 which they will be close to in FY 2023, it would amount to an absolute increase in the fuel expense from $3.9 billion to $5.5 billion. That difference of $1.6 billion exceeds net free cash flows before exceptional items, so not passing it on would be pretty catastrophic.

I'd argue yours is the strawman. Share buybacks v dividends, it doesn't really matter. It's excess profits garnered from massive cost cutting and elevated airfares. That all comes from the operations side of the business, the bit that actually is there to deliver the service. And clearly the heightened fuel prices haven't dented earnings that much. But I like how you try to zero in on technical accounting practices to divert from any debate around airline culpability in any of this year's mess.

All major Australian irlines have effectively been selling flights and services they know, or have a high likelihood of knowing, won't be delivered as sold. If that doesn't scream out for an EU-style compensation arrangement then I don't know what does. Staff absenteeism has been predictable for some time now, moreso following outsourcing and staffing cuts that are now delivering excess profits. Virgin for isntance announced changes to its sick leave system that of cours eincentivised crew to take the sick leave while they could - real brainboxes those executives. And forward sales provide a pretty damn accurate picture of demand.

So really very few factors, bar weather and a cataclysmic event, leave network and schedule planners in the dark. Australia sorely needs a passenger compensation system that isn't just "refer to the airline's policy". And yes, as it the cost would be spread over millions of ticket sales, I would be willing to pay the few dollars more to ensure there is recompense for airline mock-ups and incentives for airlines to sell flights and services that will actually happen.

Oh and fun fact, food retailers do absorb a lot of inflationary costs - you just don't see that. They also operate on much thinner margins than airlines, which is saying something.

Perhaps the first step is already under way:

https://www.aph.gov.au/e-petitions/petition/EN4362

aerokiwi wrote:

I'd argue yours is the strawman. Share buybacks v dividends, it doesn't really matter. It's excess profits garnered from massive cost cutting and elevated airfares. That all comes from the operations side of the business, the bit that actually is there to deliver the service. And clearly the heightened fuel prices haven't dented earnings that much. But I like how you try to zero in on technical accounting practices to divert from any debate around airline culpability in any of this year's mess.

All major Australian irlines have effectively been selling flights and services they know, or have a high likelihood of knowing, won't be delivered as sold. If that doesn't scream out for an EU-style compensation arrangement then I don't know what does. Staff absenteeism has been predictable for some time now, moreso following outsourcing and staffing cuts that are now delivering excess profits. Virgin for isntance announced changes to its sick leave system that of cours eincentivised crew to take the sick leave while they could - real brainboxes those executives. And forward sales provide a pretty damn accurate picture of demand.

So really very few factors, bar weather and a cataclysmic event, leave network and schedule planners in the dark. Australia sorely needs a passenger compensation system that isn't just "refer to the airline's policy". And yes, as it the cost would be spread over millions of ticket sales, I would be willing to pay the few dollars more to ensure there is recompense for airline mock-ups and incentives for airlines to sell flights and services that will actually happen.

Oh and fun fact, food retailers do absorb a lot of inflationary costs - you just don't see that. They also operate on much thinner margins than airlines, which is saying something.

How is it a strawman? He made a statement regarding Qantas and share buybacks. I directly responded to that by highlighting an argument of why it has rational cause, even if I didn't agree with the conclusion. I noted that I didn't think they should have, but highlighted why it's rational. If you think that is a strawman, then all language has lost meaning. A strawman is a form of argument giving the impression of refuting an argument where the real subject of the argument was not addressed. I addressed his argument. Just because one doesn't like or agree with it or the conclusion, doesn't make it a strawman. I counter that the response was a strawman since it didn't address any point that I made, but simply shifted the goalposts. It was no longer about the buyback, but now about the delays. They are two separate things.

Higher fuel prices have not dented earnings? I showed that it's had a net $1.6 billion cost increase, yet they have not been able to increase revenue nearly that much. They are running massive losses at the moment because they have not been able to pass this on fully. In the last year, their fuel unit cost increased by by 0.38 cents per available seat km, yet revenue per available seat km declined by 0.24 cents. So they actually absorbed some of the fuel cost increases!

And supermarkets? Responding to Coles last full year results in August, the asset manager VanEck had this to say: "Coles would generally be able to pass on price increases to maintain, and even increase, its profit margins. With continuing food inflation, supermarket margins are expected to remain at their current levels, or possibly widen further in the short term. Coles is a fortunate position of benefiting from inflation, at least in the short-term. Reflecting this, supermarket margins improved substantially to 26.3 per cent from 25.9 per cent a year earlier." Basically, Coles are over shifting inflation to consumers. Their margins increased! Also, their margins are higher than airlines by a long way. Coles's margins are in the 20s. Qantas at best hit 10.2%. Airlines are in a much more challenging position. Unlike Coles, they cannot use their market buying power to squeeze producers on margins (supermarkets are widely condemned for this). Fuel is entirely exogenous to an airline. Qantas couldn't shift it all to consumers, yet Coles over shifted!!! Maybe one should consider actual data rather than what you feel it is.

vhebb wrote:

Perhaps the first step is already under way:

https://www.aph.gov.au/e-petitions/petition/EN4362

For what it's worth, in July 2022, 33% of Ryanair flights were delayed, 31% of eastJet, 27% of Lufthansa, 33% of BA flights were delated. And this is using a very generous 30 minutes. BITRE uses a far more stringent 15 minutes, and gets similar results. So I'm not sure that there is a huge causal impact other than making flights more expensive.

My argument was getting passengers to/from a destination should be the airlines priority ahead of share buybacks or increased management remuneration or bonuses.

That does not appear to be the case for either QF or JQ for the past few months.

vhebb wrote:

My argument was getting passengers to/from a destination should be the airlines priority ahead of share buybacks or increased management remuneration or bonuses.

That does not appear to be the case for either QF or JQ for the past few months.

They are not mutually exclusive. The idea that they're choosing one of the other is absurd. They're a big, complex business. They can do many different things simultaneously - on fact they have to. One could argue that over the medium term, not focussing on different areas would only make things worse. Don't pay senior management well and it's a global marketplace, they'll walk and Qantas will be left without the appropriate skills in senior management. You may be shocked, but Australians from this sector are well regarded and sought after in many other countries. Alternatively, don't satisfy investors and who is going to finance aircraft? This is particularly important at present with capita costs rising.

QF and JQ have been in all sorts of chaos over the last year. I have some news: most large global airlines have been! It's not like they want it this way!

evanb wrote:

aerokiwi wrote:

I'd argue yours is the strawman. Share buybacks v dividends, it doesn't really matter. It's excess profits garnered from massive cost cutting and elevated airfares. That all comes from the operations side of the business, the bit that actually is there to deliver the service. And clearly the heightened fuel prices haven't dented earnings that much. But I like how you try to zero in on technical accounting practices to divert from any debate around airline culpability in any of this year's mess.

All major Australian irlines have effectively been selling flights and services they know, or have a high likelihood of knowing, won't be delivered as sold. If that doesn't scream out for an EU-style compensation arrangement then I don't know what does. Staff absenteeism has been predictable for some time now, moreso following outsourcing and staffing cuts that are now delivering excess profits. Virgin for isntance announced changes to its sick leave system that of cours eincentivised crew to take the sick leave while they could - real brainboxes those executives. And forward sales provide a pretty damn accurate picture of demand.

So really very few factors, bar weather and a cataclysmic event, leave network and schedule planners in the dark. Australia sorely needs a passenger compensation system that isn't just "refer to the airline's policy". And yes, as it the cost would be spread over millions of ticket sales, I would be willing to pay the few dollars more to ensure there is recompense for airline mock-ups and incentives for airlines to sell flights and services that will actually happen.

Oh and fun fact, food retailers do absorb a lot of inflationary costs - you just don't see that. They also operate on much thinner margins than airlines, which is saying something.

How is it a strawman? He made a statement regarding Qantas and share buybacks. I directly responded to that by highlighting an argument of why it has rational cause, even if I didn't agree with the conclusion. I noted that I didn't think they should have, but highlighted why it's rational. If you think that is a strawman, then all language has lost meaning. A strawman is a form of argument giving the impression of refuting an argument where the real subject of the argument was not addressed. I addressed his argument. Just because one doesn't like or agree with it or the conclusion, doesn't make it a strawman. I counter that the response was a strawman since it didn't address any point that I made, but simply shifted the goalposts. It was no longer about the buyback, but now about the delays. They are two separate things.

Higher fuel prices have not dented earnings? I showed that it's had a net $1.6 billion cost increase, yet they have not been able to increase revenue nearly that much. They are running massive losses at the moment because they have not been able to pass this on fully. In the last year, their fuel unit cost increased by by 0.38 cents per available seat km, yet revenue per available seat km declined by 0.24 cents. So they actually absorbed some of the fuel cost increases!

And supermarkets? Responding to Coles last full year results in August, the asset manager VanEck had this to say: "Coles would generally be able to pass on price increases to maintain, and even increase, its profit margins. With continuing food inflation, supermarket margins are expected to remain at their current levels, or possibly widen further in the short term. Coles is a fortunate position of benefiting from inflation, at least in the short-term. Reflecting this, supermarket margins improved substantially to 26.3 per cent from 25.9 per cent a year earlier." Basically, Coles are over shifting inflation to consumers. Their margins increased! Also, their margins are higher than airlines by a long way. Coles's margins are in the 20s. Qantas at best hit 10.2%. Airlines are in a much more challenging position. Unlike Coles, they cannot use their market buying power to squeeze producers on margins (supermarkets are widely condemned for this). Fuel is entirely exogenous to an airline. Qantas couldn't shift it all to consumers, yet Coles over shifted!!! Maybe one should consider actual data rather than what you feel it is.

Oh I know what a strawman is. I think your reasoning is disingenuous and your hyperbole on the meaning of language is, well, just that. I also know the supermarket game and you misread the data rather conveniently, via an analyst no less.

The original poster clearly raised share buybacks in the context of an airline's priorities and their apparent inability to deliver on their basic service. But focusing on the technicalities of buybacks versus dividends is a convenient way to obfuscate that regardless of the technique of profit distribution, the airlines are failing to deliver their core service, using funds that should otherwise be used to pay for ensuring those services - and accepting consumer payment as revenue in the process - to reward shareholders instead. So yeah, you didn't address the OP's argument but tried to claim you had. Hence, strawman.

This is where government intervention is wholly justified. An EU-style approach is warranted and should be pursued. Though the allure of the Chairman's Lounge will probably prevent too much scrutiny from politicians. Is this something you object to? Or are you solely interested in profit distribution as a point of contention? Because if the latter, I think a fairly limited audience on here for that debate, if there's any.

Which brings me to the airlines v supers thing (at the end so everyone else can ignore). I wouldn't cry poverty on Qantas's part. Coles has 30% marketshare (Woolies about 40%) whereas Qantas Group have about 60%, comparing domestic to domestic. And if taking gross margins as your baseline is convincing, please. Yes supermarkets pass on some of the cost (I never said they didn't) but they also absorb a lot and gains are realised by everyone along the supply chain. Woolies earnt net about $1.5bn on about $60bn in revenue in FY22, a good time for supers (Coles was $1bn on $39bn revenues). Compare that to a good time for airlines (e.g. FY19) and Qantas earnt about $900m net on revenue of about $17bn. Coles in 2019 earnt about a billion net on revenues of $37 bn. Data eh? Which makes sense as Qantas has pursued a strategy of premium passengers for some time now whereas for supers it's a volume game. Obviously CPVID has messed comparisons up across industries, so happy to fall back on FY19.

vhebb wrote:

My argument was getting passengers to/from a destination should be the airlines priority ahead of share buybacks or increased management remuneration or bonuses.

That does not appear to be the case for either QF or JQ for the past few months.

Given the turnover of talent at Qantas, they probably have to incentivise their senior exec somehow as Joyce stubbornly squats in the role he should have vacated a while back.

I think what the "whatabout-ists" miss is that while there has been disruption globally, management decisions in Australia (by those esteemed highly sought after types) have exacerbated the problems and there have been consequences for airlines, such as EU compensation blunting the impact on passengers. I'm not sure if it applies still to UK travellers given Brexit but I received pretty prompt compensation for a mammoth delay in France earlier this year that mitigated the financial impact, at least. Would have done wonders to alleviate the disruption when Virgin left me stranded in Perth for 11 hours earlier in the year. And would it have changed QF Group's approach to recovery for stranded JQ 787 passengers? Very possibly (note, fully acknowledge the JQ 787 problems were a particularly bad run of bad luck).

But barely a whisper from policy makers, suggesting the airlines' lobbying efforts are working.

Nauru airlines won a Australian Government tender to service Marshall Islands and other Pacific Islands with Brisbane using their 737s.

https://www.rnz.co.nz/international/pac ... ic-service

NZ516 wrote:

Nauru airlines won a Australian Government tender to service Marshall Islands and other Pacific Islands with Brisbane using their 737s.

https://www.rnz.co.nz/international/pac ... ic-service

Now that would be a cool way to get to the US.

BNE-INU-TRW-MAJ with ON, then MAJ-HNL on UA's Island Hopper service.

ben175 wrote:

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

I just can't see airlines such as LH being interested. They already offer single-stop services to the major Australian markets (SYD and MEL) with codeshares on SQ and TG through SIN and BKK. Adding a non-stop service to PER makes no sense unless there were sufficient O&D demand from PER to fill a 789 or A359 3 or 4 times per week which appears unlikely.

As has been pointed out, Kangaroo routes remain comparatively low yielding by world standards so European airlines will continue to concentrate on the higher yielding routes across the Atlantic to North and South America.

aerokiwi wrote:

The original poster clearly raised share buybacks in the context of an airline's priorities and their apparent inability to deliver on their basic service. But focusing on the technicalities of buybacks versus dividends is a convenient way to obfuscate that regardless of the technique of profit distribution, the airlines are failing to deliver their core service, using funds that should otherwise be used to pay for ensuring those services - and accepting consumer payment as revenue in the process - to reward shareholders instead. So yeah, you didn't address the OP's argument but tried to claim you had. Hence, strawman.

And totally missed the part where I said I didn't think it was a good move by Qantas at a time of rising interest rates and the need to preserve capital? I highlighted that I don't think buybacks in any way impacts the service delivery. Whether Qantas did this or not is making absolutely no impact on present challenges. The genesis of the buybacks wasn't about rewarding shareholders. Shareholders had been pushing Qantas to be more focused on the core business and divest from non-core assets, particularly property, and rather invest in the core business which has become a lot more capital intensive over the last decade. Qantas did this, selling the Mascot property which fetched them a tidy sum. Most was of this has been reinvested, by paying down some debt and in new aircraft orders, but Qantas decided to return some of that to shareholders. By my rough calculations, they're returned about $70 of the $800 million they got from the Mascot property. The rest has paid down some debt or been reinvested. Buybacks were a more efficient means to do that rather than dividends since it gives shareholders the choice. It was never a profit distribution since Qantas hasn't made any profits since 2019. It appeared from the OP that the concern was jumping on the reflexive objection to buybacks as a generalisation, something that I object to since it's simply a response to shitty tax policy where dividends are taxed at source rather based on the choices of beneficial owners. I'm not sure that using the proceeds of that to pay current expenses would have been a good or sustainable business practice.

aerokiwi wrote:

This is where government intervention is wholly justified. An EU-style approach is warranted and should be pursued. Though the allure of the Chairman's Lounge will probably prevent too much scrutiny from politicians. Is this something you object to? Or are you solely interested in profit distribution as a point of contention? Because if the latter, I think a fairly limited audience on here for that debate, if there's any.

I think that stronger government standard setting would be incredibly important and something that some airlines actually advocate for. I'm just not sure that the EU-style approach has had any positive effect since the airlines have passed those costs onto consumers. Sure, I can get compensation, but now we're just socialising that cost. There hasn't been a notable change from airlines although I'd be happy for anyone to show data that supports that. The recent European 2022 summer just reinforced that.

What it's also done is created a whole new bureaucracy to implement and enforce it, and a wildly inconsistent approach in each country that has made it cumbersome for consumers to use it. For example, if you're making the claim in Germany (you must make in the specific country) and the airline declines the claim (which they can), you have to go through a myriad of local agencies at the state level, each with their own process, etc. The only people that seem to really get a benefit are the new online companies that have sprung up to help people get what is due since it's so complicated.

aerokiwi wrote:

Which brings me to the airlines v supers thing (at the end so everyone else can ignore). I wouldn't cry poverty on Qantas's part. Coles has 30% marketshare (Woolies about 40%) whereas Qantas Group have about 60%, comparing domestic to domestic. And if taking gross margins as your baseline is convincing, please. Yes supermarkets pass on some of the cost (I never said they didn't) but they also absorb a lot and gains are realised by everyone along the supply chain. Woolies earnt net about $1.5bn on about $60bn in revenue in FY22, a good time for supers (Coles was $1bn on $39bn revenues). Compare that to a good time for airlines (e.g. FY19) and Qantas earnt about $900m net on revenue of about $17bn. Coles in 2019 earnt about a billion net on revenues of $37 bn. Data eh? Which makes sense as Qantas has pursued a strategy of premium passengers for some time now whereas for supers it's a volume game. Obviously CPVID has messed comparisons up across industries, so happy to fall back on FY19.

If the concern is with Qantas's dominant position in the market, that is really a function of competition policy, not a critique on Qantas. I'd argue that airlines are more of a natural oligopoly than supermarkets due to the massive capital investments required. Coles earns that income on $12 billion of fixed assets (property, plant, equipment and right-of-use assets). Qantas needed (ironically) the same amount - $12 billion of fixed assets, to earn only 43% of the net revenue. That capital intensity requires an exceptionally high return on assets and capital markets simply won't fund airlines in a market as competitive as supermarkets. That industry concentration is higher, because it's what is needed and makes it sustainable. While the barriers to entry are high, you'd expect for airlines to be making supernormal profits, something they are unable to do on a consistent basis.

I'm not sure what your point about price pass through is. My comment was that Qantas are having to absorb a significant portion of fuel cost increases because their supply chain is different. They're far more of a price taker, particularly on fuel, which makes up anywhere between 20% and 30% of costs. The simply have no control over this. They do hedge, but that is about reducing risk rather than reducing costs. The challenge is that their only way to mitigate this in the long term is by greater capital investment, which is also undergoing a challenging transition with the increasing cost of capital.

In terms of the revenue recognition, and something which you're ignoring in the way you present data and something the analysts are very interested in, is how different businesses report revenue. So Coles report sales of $39.4 billion, with the cost of goods $29.2 billion, so net sales or gross profit of $10.1 billion. This is where there is a grey area, since other business like airlines that don't resell don't have a cost of goods. It's a point of contention for financial analysis. For supermarkets it gets even murkier because of who holds risk on inventories. Supermarkets are able to use their market power over the supply chain to reduce their risk on the stock holding. It's always surprising to see how little inventories are valued on supermarket balance sheets compared to other businesses. They do sell a lot of perishables, so shorter supply chains means lower inventories, but inventories should also account for risk taken on future stock which they're on the line for (if not under inventories, there should be some other recognition on the balance sheet). Coles only have inventories accounting for 6% of sales. I highly doubt Coles are only holding financial risk on 3 weeks of stock. Given this massive ability to hold off cost of sales risk, analysts try to weight the cost of sales based on actual cost of sales risk. When doing this, one estimates the much, much higher margins in order to make comparisons across company, sector and time. This is important, since (shock, horror) many investors much prefer to invest in companies with pricing power (see Buffet). This analysis is critical to making those choices.

How does one calculate this for airlines? It's really tough. Fuel is probably the very easy one, and maybe overflight and catering, since they are true variable costs. Hence, analysts do their own analysis (hence the job title) to be able to get a grip of income statements and balance sheets to create like for likes. So yes, we don't like looking at net margins on supermarkets ... very big differences between gross and net, yet when you look at airlines, they don't even report gross.

tullamarine wrote:

ben175 wrote:

On a different note - the huge triumph of PER-LHR and PER-FCO for QF has me thinking… why have no European airlines tried to mirror the success of these routes? With premium leisure travel driving ginormous demand post-covid, you would think BA atleast could give LHR-PER a stab with their own metal - their 787-9s are perfectly configured for the route, and they’d have the advantage of a First offering over QF. Perhaps even LH on FRA-PER, and slap a VA codeshare on it to generate some East coast connections.

The argument that PER does not generate enough of its own demand does not live up anymore. PER-LHR goes out chockers almost every day, as does FCO - with the majority of passengers originating in WA.

I just can't see airlines such as LH being interested. They already offer single-stop services to the major Australian markets (SYD and MEL) with codeshares on SQ and TG through SIN and BKK. Adding a non-stop service to PER makes no sense unless there were sufficient O&D demand from PER to fill a 789 or A359 3 or 4 times per week which appears unlikely.

As has been pointed out, Kangaroo routes remain comparatively low yielding by world standards so European airlines will continue to concentrate on the higher yielding routes across the Atlantic to North and South America.

I would add that a missing piece in the current generation of network carrier long haul strategy are joint ventures. Lufthansa (including SWISS and Austrian) and Singapore Airlines (including Scoot) have a joint venture where they share revenues and costs, and allows them to coordinating capacity, pricing and schedules. This covers routes to/from Australia, as well as, on this end, Singapore, Indonesia, Malaysia, and three additional countries which remain confidential. Within the context of the JV, they likely have made the decision that Singapore can feed to/from Australia more efficiently and with lower costs and/or higher revenue/yields than Lufthansa can, rather allowing Lufthansa to focus capacity elsewhere in SE Asia.

If I recall correctly the Lufthansa group, including (SWISS and Austrian) only have an interline agreement with VA, thus any FF benefits for LH's (M&M) FF customers flying VA (and vice-versa for VA Velocity FFs on LH group) would be zero as LH and VA are not codeshare and/or FF partners.