This is a continuation thread of part 3 which can be found by following this link:Qantas Grounds Entire Airline Part 3

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Thank you,


SA7700

For the conspiracy theorists in this debate who seem to be strong in the belief that Alan Joyce is out to destroy Qantas, could you offer up any of your reasons that could be deemed plausible as to why he would? I mean it is all very well to plod on and on with the same old "he is the devil", but really what possible reason could be shown for him to do this?

Quoting packersfan (Reply 1): For the conspiracy theorists in this debate who seem to be strong in the belief that Alan Joyce is out to destroy Qantas, could you offer up any of your reasons that could be deemed plausible as to why he would? I mean it is all very well to plod on and on with the same old "he is the devil", but really what possible reason could be shown for him to do this?

In the never ending battle between cock up and conspiracy it is usually cock up that wins out. He had a bad strategy to begin with (2 brands) and having pitched the 2 brands idea to get the CEO job he is tied to it come what may. Its not working and while he is trying to muscle in on the rest of the world is eating QF's lunch on the kangaroo routes with VA chowing down on domestic. And being a CEO he really dosen't have to care if it works as his parachute is golden and the board by appointing him has buy in on the 2 brands strategy.

This often happens in business actually I have had to construct some really stupid designs because they were pitched and won, sometimes the other guy gets in with the sensible idea first so the salesmen decide to "go another way".

Quoting BoeingVista (Reply 2): He had a bad strategy to begin with (2 brands)

I haven't read half of Part II or any of Part III (it just became too much...) but how on earth can that possibly be a bad strategy? Especially on domestic? Would you have preferred to see QF turn into UA/AA/DL etc, claiming to be a legacy full service style airline, but with LCC service? That's what would have happened, to allow them to compete with DJ.

Quoting BoeingVista (Reply 2): Its not working and while he is trying to muscle in on the rest of the world is eating QF's lunch on the kangaroo routes with VA chowing down on domestic.

I honestly don't think (though I have no sources to back this up) that QF domestic is suffering massive losses to VA at the moment. Nor do I think that the impact will be major in the long term. In my view market share will remain pretty evenly split, but VA will end up making more money than they did as DJ because they'll be charging higher fares. JB isn't all about taking business away from QF (that has something to do with it though) but more increasing the profitability of the customers he already has... QF Domestic is simply too dominant (assisted by JQ) for VA to make a big dent, and they're smart enough to see that. Nor have we heard any complaints from QF management that the domestic sector is suffering in the face of competition and they would be the first to whine...

Quoting BoeingVista (Reply 2): In the never ending battle between cock up and conspiracy it is usually cock up that wins out.

And truth would appear to be the first casualty.

Quoting BoeingVista (Reply 2): He had a bad strategy to begin with (2 brands) and having pitched the 2 brands idea to get the CEO job he is tied to it come what may.

Jetstar was flying (2004) well before Mr. Joyce became CEO of Qantas (2008).

Quoting BoeingVista (Reply 2): Its not working and while he is trying to muscle in on the rest of the world is eating QF's lunch on the kangaroo routes with VA chowing down on domestic.

Yet Qantas held onto its market share:

http://www.adelaidenow.com.au/news/n...ircle/story-e6frea8c-1226192015258

"Qantas holds on to air share as rivals circle"

As to the idea that Virgin Australia is "chowing down" on domestic, you must have more recent information than I - August 2011.

http://www.virginaustralia.com/About...NewsandPressReleases/P_017158.html

"VBA Financial Result for Full Year Ended 30 June 201

Net Result before Tax (excluding hedging ineffectiveness) was a loss of $66.6 million, within the guidance of a loss of between $30m and $80m

International network profitable, EBIT of $22.4 million"

So if Virgin's international was profitable, the loss can only have come from domestic.

mariner

Quoting mariner (Reply 4): So if Virgin's international was profitable, the loss can only have come from domestic.

To be fair, they have sunk a lot of money this year into their rebranding, refitting planes etc. That's probably where the loss is coming from, rather than specifically being due to poor domestic operations.

Quoting qf002 (Reply 5): To be fair, they have sunk a lot of money this year into their rebranding, refitting planes etc. That's probably where the loss is coming from, rather than specifically being due to poor domestic operations.

That may be true, but a number of the rebranding costs could have been listed as "special items" and they gave other reasons for the loss:

http://www.smh.com.au/business/earni...s-eyes-rebound-20110825-1jazb.html

"Virgin Australia has slumped to a $68 million annual loss due to the effects of natural disasters, higher fuel prices and a meltdown of its reservation system late last year.

Australia’s second-largest airline has refrained from giving specific earnings guidance for the new financial year - matching bigger rival Qantas yesterday - because of the uncertain economic conditions.

Virgin will only say that it expects an ‘‘improvement in underlying financial performance’’."

The greatest threat is probably the higher fuel price - it is kneecapping airlines all around the world, such as the 76% drop in profits Emirates reported and the 50% profit drop at Singapore.

I hope Virgin Australia does very well, I like flying with them, but some of the claims being made here are presently unrealistic.

mariner

Quoting mariner (Reply 4): And truth would appear to be the first casualty.

Half the time I have no idea what your replies actually mean.. Please explain.

Quoting mariner (Reply 4): Yet Qantas held onto its market share:

Quick, email Mr Joyce because he also thinks that Qantas is losing market share, which they have been over the last x amount of years; pretty sure that you agreed with this in the last thread, a report on their year on year market share decline as also posted in the last thread.

Quoting BoeingVista (Reply 7): Half the time I have no idea what your replies actually mean.. Please explain.

I don't know how else to explain it other than as I did within the body of the post.

Quoting BoeingVista (Reply 7): Quick, email Mr Joyce because he also thinks that Qantas is losing market share, which they have been over the last x amount of years; pretty sure that you agreed with this in the last thread, a report on their year on year market share decline as also posted in the last thread.

If you say that I agreed that market share was declining then obviously I have to believe you - but I don't recall even commenting about share in previous threads.

mariner

[Edited 2011-11-14 20:02:09]

Quoting BoeingVista (Reply 2): In the never ending battle between cock up and conspiracy it is usually cock up that wins out. He had a bad strategy to begin with (2 brands) and having pitched the 2 brands idea to get the CEO job he is tied to it come what may. Its not working and while he is trying to muscle in on the rest of the world is eating QF's lunch on the kangaroo routes with VA chowing down on domestic.

By some strange coincidence (cock-up perhaps) I fell across the edition of Aus Av the month after the Potemkin roll out and who should be spinning the merits of the 787 strategy but none other than JB. Quite amusing reading these many years later.

You could wonder that however badly QF has done, it is not as badly as its contracted plane suppliers. By my calculations the 788 will be 5 years late and no real idea of how close it will be to the contract specs. Who was responsible for buying the A333s, presumably JB????

The final outcome of the two brands will be interesting. There were pessimists at the time who said it could not be done, but to give AJ his due, he did better than the pessimists thought he would. It is still possible that having the two brands in the one house is not a recipe for the survival of both.

The leap to the A32x to stay clear of QF conditions seems in retrospect to have been a decision that will in the end benefit QF even more than JQ???

Quoting mariner (Reply 6): I hope Virgin Australia does very well, I like flying with them, but some of the claims being made here are presently unrealistic.

100% agree.

Quoting BoeingVista (Reply 7): Quoting mariner (Reply 4): Yet Qantas held onto its market share: Quick, email Mr Joyce because he also thinks that Qantas is losing market share

There's a difference between Domestic and International... We're talking about Domestic here and AJ is talking about International...

Quoting packersfan (Reply 1):

How about by destroying Qantas and funnelling the money into Jetstar he can then Sell Jetstar off for big $$ and pocket something like $20m himself as a result?

Quoting Zkpilot (Reply 11): Quoting packersfan (Reply 1): How about by destroying Qantas and funnelling the money into Jetstar he can then Sell Jetstar off for big $$ and pocket something like $20m himself as a result?

Of which you have what evidence to support this statement?

Quoting TruemanQLD (Reply 12): How about by destroying Qantas and funnelling the money into Jetstar he can then Sell Jetstar off for big $$ and pocket something like $20m himself as a result?

Quoting TruemanQLD (Reply 12): Of which you have what evidence to support this statement?

The Dixon et al private equity sale pretty much points in that direction.

As do the SYD-HNL services. Qantas fly nasty clapped-out 763s with a hard product everyone else retired a decade ago. While Jetstar fly new and modern A330s - which Qantas actually paid for.

Quoting koruman (Reply 13): As do the SYD-HNL services. Qantas fly nasty clapped-out 763s with a hard product everyone else retired a decade ago. While Jetstar fly new and modern A330s - which Qantas actually paid for.

Could easily point to the MEL-SIN route as an opposing example. JQ fly their 10 year old A330s with a product equivalent to QF's old domestic product while QF offers brand new A380 services. The HNL example is also flawed since every other airline flying directly between HNL and Australia is a LCC...

Quoting qf002 (Reply 14): The HNL example is also flawed since every other airline flying directly between HNL and Australia is a LCC...

Are you going to tell Hawaiian Airlines, or am I?

It is a pretty unique achievement for a full-service Australian airline to be outclassed in product quality by an American carrier. Yet Qantas pulls it off!

Quoting koruman (Reply 13): The Dixon et al private equity sale pretty much points in that direction

So you have no evidence just hyperbole and supposition.

Quoting koruman (Reply 13): As do the SYD-HNL services. Qantas fly nasty clapped-out 763s with a hard product everyone else retired a decade ago. While Jetstar fly new and modern A330s - which Qantas actually paid for.

Yet people still fly the Qantas mainline service. Curious isn't it? I'd also point out that Jetstar pays for the A330's they lease and not Qantas International. Overall the QF group pays for both and would probable have a good idea about the returns available on the Hawaii route. You could even extrapolate and use it, if you like, as an example of what it takes for QF to make money on HNL, a fully depreciated 767, vs JQ on a new A332 given their respective cost bases and return on capital.

Quoting koruman (Reply 15): It is a pretty unique achievement for a full-service Australian airline to be outclassed in product quality by an American carrier. Yet Qantas pulls it off!

On one route pretty much devoted to tourists. I've flown on a Hawaiian 767 a couple of times now and found their product to be comparable to JQ's and QF's. I don't yet know what their A332's are like but since QF doesn't feel the need to respond by putting an International A332 on the route I summise that QF needs the extra bums on seats in economy to make money on the route rather than Skybeds.

Quoting Zkpilot (Reply 11): Quoting packersfan (Reply 1): How about by destroying Qantas and funnelling the money into Jetstar he can then Sell Jetstar off for big $$ and pocket something like $20m himself as a result?

Wow! That is a bold statement. Is this forum not subject to libel laws? I think you are allowing your distaste for Mr Joyce to rule your thoughts, you do not have one iota of proof to back up that accusation.

Quoting Baroque (Reply 9): The final outcome of the two brands will be interesting. There were pessimists at the time who said it could not be done, but to give AJ his due, he did better than the pessimists thought he would.

The LCC airline-within-an-airline approach has been adopted by a number of legacy carriers as they try to work out how to do battle with the surging LCC's.

British Airways with GoFly, Air Canada with Jazz and Tango, United with Ted, Delta with Song, Air New Zealand with Freedom. Mostly, it hasn't worked.

Qantas tried it with Australian Airways and - I assume - the lessons learned from that were applied to Jetstar. To the surprise of many, including myself, it worked.

It may have worked so much better in Australia because there was (at the time) no genuine LCC competition - Virgin Blue was always a bit of a hybrid in my mind, with lounges an' all.

It has always puzzed me that the battles being fought here now - legacy v. LLC - are battles that were fought and won years ago in the US.

I imagine most airlines will now be looking at Qantas/Jetstar to see what was done differently and Singapore thinks it is a good idea - thus Scoot.

Quoting BoeingVista (Reply 18): You know this (or should) so I'm perplexed by your willful ignorance of the established facts.

The two brand strategy had already been decided when Mr. Joyce and Mr. Borghetti were up for CEO and had been in effect for some time.

If Jetstar was not working, why would they have given Mr. Joyce the job?

mariner

[Edited 2011-11-15 17:38:16]

Quoting mariner (Reply 23): If Jetstar was not working, why would they have given Mr. Joyce the job?

Quoting Zkpilot (Reply 11): How about by destroying Qantas and funnelling the money into Jetstar he can then Sell Jetstar off for big $$ and pocket something like $20m himself as a result?

I think that Mr Joyce was a far more convenient CEO for Clifford and the board than Borghetti was.

Remember, the previous CEO and his senior executives stood to trouser $91 million from the failed private equity buyout which, of course, we now know would have bankrupted the airline. The key investors and current board are the intended beneficiaries of that narrowly-averted corporate disaster, and there is no reason to believe that their motives or intentions have changed.

We only need to look at Virgin Australia to know precisely what Borghetti offered. Heavy investment in product on the mainline airline's product and constructive labour relations, with a view to maximising consumer satisfaction.

We can then look at what Joyce has delivered to see what the board actually wanted. An airline persisting with obsolete 747 and 767 aircraft and their interiors in a world in which the competition uses 777s of varying sizes for the 220-350 seat long-haul market, which Qantas has vacated apart from a few range-restricted A330s. An airline which adopts an adversarial approach to its employees, to the point of locking them out of work because some of their colleagues were engaged in legal and protected limited industrial action. An airline which vacated entire markets like Tasmania and the nation's sixth largest city and let Virgin control the high end of the market there, while abandoning its Qantas Club subscribers.

Quoting koruman (Reply 24): I think that Mr Joyce was a far more convenient CEO for Clifford and the board than Borghetti was.

Since the two-airline policy was already established Qantas Group strategy, if Mr Borghetti stood against it, as so many claim, he was never going to get the job.

And I'm puzzled that it is being presented as a two horse race when there were three in the running.

mariner

[Edited 2011-11-15 18:51:58]

Quoting mariner (Reply 25): Since the two-airline policy was already established Qantas Group strategy, if Mr Borghetti stood against it, as so many claim, he was never going to get the job.

I cannot claim to know whether Borghetti intended to let Jetstar be absorbed like Ted and Song and Freedom or whether he would have kept it as a stand-alone enterprise.

But we currently have a situation in which Qantas has an average fleet age of 11.3 years and Jetstar has an average fleet age of 4.4 years.

I cannot imagine that Borghetti would have tolerated that. And I am sure that he would have pointed out that that discrepancy goes a long way to explaining the supposed relative efficiency of the two carriers.

Quoting koruman (Reply 26): But we currently have a situation in which Qantas has an average fleet age of 11.3 years and Jetstar has an average fleet age of 4.4 years.

None of which would apply at Qantas if the 787 had been delivered on time - or even reasonably on time.

Quoting koruman (Reply 26): I cannot imagine that Borghetti would have tolerated that. And I am sure that he would have pointed out that that discrepancy goes a long way to explaining the supposed relative efficiency of the two carriers.

I would point out that he has opted for used A330's.

I'm aware of this love affair that everyone seems to be having with Mr. Borghetti, and he may be terrific, but it is interesting - to me - to go back just a few months in time.

Ban Sandilands, for example, can hardly be called partisan to Joyce, but he is what he had to say about Mr. Borghetti at Virgin Australia earlier this year:

http://www.crikey.com.au/2011/03/23/...ottom-line-in-for-a-rough-landing/

"This morning’s Virgin Blue profit downgrade to a loss of -$30 million to -$80 million before tax for the full year to June 30 raises question over the strategy of CEO and former Qantas executive general manager John Borghetti"

He goes on to question the strategy and talk about the reasons for the loss, but ends with this:

"If this happens this year, all of the Australian carriers are going to be badly burnt, and Virgin Blue’s investment in Qantas-beating business-class cabins will become a game loser rather than a game changer."

mariner

[Edited 2011-11-15 19:13:21]

Quoting koruman (Reply 26): But we currently have a situation in which Qantas has an average fleet age of 11.3 years and Jetstar has an average fleet age of 4.4 years.

Quoting mariner (Reply 27): None of which would apply at Qantas if the 787 had been delivered on time - or even reasonably on time.

Is anyone surprised?

But why doesn't the Qantas Group make better use of its existing assets?

It strikes me that just as Scoot is getting Singapore Airlines' hand-me-down 772s, Jetstar should be operating with a mixture of Qantas clapped-out 763 fleet and its 737-400s. And the Airbus fleet should be being operated exclusively by Qantas.

And therefore the Qantas fleet should consist of A320 and A330 aircraft domestically and A330 and A380 aircraft long-haul, with a few 747s remaining until the 787 joins the fleet.

And let's see which unit would be running at a loss then............

And let's see too whether anyone would want to buy that Jetstar from the Qantas group.
............................................................................................................................................................
At the end of the day, I just don't buy the "Qantas is unprofitable because the staff are overpaid and the Boeing 787 is late" line.

It's malicious nonsense.

Qantas owns (or leases) a perfectly efficient and modern fleet. But it is still choosing to fly 16 737-400s and 24 767-300s while it lets Jetstar operate 45 A320s, 6 A321s and 11 A330s.

Those Jetstar Airbuses would allow the retirement of every inefficient Qantas jet - but Qantas is stuck flying the gas-guzzlers instead.

Similarly, the board want to be able to expand the Jetstar model to Qantas in Asia, with cheap Thai and Filipino and Filipina staff crewing the fleet.

This is disingenuously sold as "a need to match the salaries of the Asian airlines". Yeah, right. I've been at the Sydney Hilton when Emirates crew interviews were massively over-subscribed, and I would imagine that the salaries of their expat staff (and Singapore Airlines staff) are far in excess of Jetstar's Thai and Phillipine contracts.

The management needs to decide. If Jetstar staff's salaries are based on market prices in Third World Asian nations, then so must the management's salaries - Bruce Buchanan could reasonably be paid perhaps A$60,000 per year.

And if Qantas code is going on flights operated by crews from such nations, then Alan Joyce's total remuneration package should also be pegged at Thai and Philippine market levels, perhaps a total of A$80,000 per year.

They can't have it both ways. Asian remuneration levels or global. They can take their pick. But not one rule for management and another for staff.

I'm not sure that anyone still falls for the tired old "you need to pay globally competitive salaries to get top global talent" line, which is usually trotted out by the beneficiaries. It's my own personal but sincerely held belief that I could make a quick trip down to the local caravan park and pick up a handful of intoxicated people who would do a better job than Mr Joyce and his team.

That may seem extreme, but it's not. It's a fact. Rather like when Basil Fawlty wanted to show that he could "cope" when he was starting a fire, insulting his guests etc, Mr Joyce's talent in recent times has been on display in locking out his entire workforce and disrupting his customers, marooning some in a flood zone, etc, etc.

So Filipino remuneration levels for him and his team would really be excessive.

[Edited 2011-11-15 20:18:49]

[Edited 2011-11-15 20:19:51]

Quoting koruman (Reply 28): But why doesn't the Qantas Group make better use of its existing assets?

Ah - that's a whole other question, and there you and I might be in more agreement.

I am deeply puzzled that the A300HGW (which is not "range restricted" as you claimed) is not being used for the purpose for which it was intended:

http://www.flightglobal.com/news/art...-higher-gross-weight-a330s-332966/

"Jetstar Airways has opted for the new higher gross weight option for its new batch of Airbus A330-200s, giving the Australian low-cost carrier the potential to launch services to Europe before it begins taking Boeing 787s in 2013.

Jetstar had been due to start taking 787s from Qantas's original for 65-aircraft 787 order with -8s in 2010, but now is due to start taking 787s from Qantas's revised 50-aircraft order with -9s in 2013. Jetstar had been waiting for the 787 to open routes to southern Europe, but Buchanan says that with the launch of the higher gross weight option for the A330 "we can now do southern Europe very comfortably out of Bangkok, Singapore or Ho Chi Minh"."

I don't keep track of these things, so perhaps they don't have enough in the fleet yet?

But I'm still scratching my head about the whole 787 issue anyway, not just at Qantas. I hope it proves to be everything you blokes want it to be, but I am getting bored to the dunny with Air NZ CEO Fyfe complaining that the delay is killing them - and doing nothing about it.

mariner

Quoting koruman (Reply 15): It is a pretty unique achievement for a full-service Australian airline to be outclassed in product quality by an American carrier. Yet Qantas pulls it off!

That's only a very recent change... And sooner or later QF have to do something with the route, and when they do it's going to end with a significantly better product from QF which will leapfrog HA by miles.

Quoting mariner (Reply 25): Since the two-airline policy was already established Qantas Group strategy, if Mr Borghetti stood against it, as so many claim, he was never going to get the job.

I don't think JB would ever have gotten rid of JQ, but it would have been fulfilling its original purpose on leisure rather than perhaps becoming a bigger part of the group.

Quoting koruman (Reply 28): But why doesn't the Qantas Group make better use of its existing assets?

Agree. Investing some money in the 767 fleet 3-4 years ago would have done wonders. Signature Interiors, IFE and proper new seats would have extended their meaningful life until the end of this decade as international or domestic planes.

Quoting qf002 (Reply 32): I don't think JB would ever have gotten rid of JQ, but it would have been fulfilling its original purpose on leisure rather than perhaps becoming a bigger part of the group.

I would hope Mr, Borghetti would have been more flexible than that.

The LCC's have changed the face of civil aviation and even more markedly since 2008, when oil hit its (then) peak of WTI at $147 bbl.

I don't believe LCC's are the only future, but they surely a greater part of the future than was thought ten years ago. Passengers have voted with their wallets, and a major part of Emirates success is that it has lower fares.

Again, the battles that are happening in Australia now - or at Qantas - are the battles that were fought in the US a dozen years ago, and given razor-sharp focus by the downturn in air travel after 9/11, and the subsequent bankruptcies of US legacy carriers.

The one legacy carrier that didn't file Chapter 11 to restructure costs - American Airlines - is in deep doo-doo, with its share price collapsing. It hasn't made a profit, annual or quarterly, in yonks, nor is it expected to do so for the foreseeable future and - today - its market cap is lower than that of Virgin Australia.

People say that it is because American doesn't offer high enough service standards, but the profits at Emirates and Singapore - who do - are collapsing and we know what Singapore's answer is.

Peter Gregg, the third candidate for Qantas CEO, was deeply disturbed by fuel costs - rightly. Despite the world economies being in tatters, oil surges relentlessly higher again - today, West Texas Intermediate is over the critical $100 bbl. Add in the crack spread (refining costs) and we are looking at an effective $130 bbl.

Yet the mass of competition means that it is virtually impossible to raise fares enough to cover these costs and I simply do not believe that Australia is immune to these world events.

Some might see LCC's as the Borg of the airline world, but we either embrace the future or fight it and as the Borg say - resistance is futile.

As an uninvolved observer, I am fascinated to see how this plays out, but I don't have a horse in this race. I'm barracking for Air Australia.

mariner

[Edited 2011-11-16 11:31:09]

Hi Everyone,

Due to the fact a number of posts are now having to be removed for off topic and flame filled comments, the time has come to lock this thread.

Thanks

NZ1
Forum Moderator