Qantas loses its shock value abroad, but not entirely through its own fault
Compared to even a year ago, Qantas seems to be losing its capacity to make headlines at home or abroad.
That’s a reasonable conclusion from racing through the Euro and UK media to see what impact its first loss since listing was making outside of Australian news reports.
This is one of the stories that does refer to Qantas, but only in passing.
However it would be unfair to blame the current management at Qantas for this lack of real interest. It apparently costs almost $200 million according to the latest financial accounts to have a CEO wake up one morning and suddenly decide to ground the airline and make news all around the world, so the publicity is probably never going to be worth the cost of doing this more than once a year, is it?
And those that attended a ballroom at the Four Seasons Hotel in Sydney for the actual Qantas Q and A session on the release of its full year financial results described it as like turning up to the funeral of an unloved uncle and finding the chapel mostly empty, which was also unfair. The legacy media, like the legacy airline in question, is facing something between outright extinction or a severe contraction in the very near future, and has its own management worries to deal with never mind the fate of Qantas long haul operations or whether the editor-in-chief gets booted from the Qantas Chairman’s Lounge.
If you at this time living in the UK or Euro Zone or perhaps soon to be ex-Euro Zone states in some cases, it might be surprising that any coverage of airline affairs made more than the News in Brief. Too much else has gone wrong, is going wrong, or is about to go incredibly catastrophically very, very wrong.
And those that can fly anywhere in or from, the Euro Zone and the UK are paying ruinous additional taxes and levies unheard of, fortunately, in Australia, while Australia as such is now as impossibly gold plated by its exchange rate as the UK was for us when it cost about three dollars to buy a pound.
There is however one thing to note in the Reuters story. And that is that the two now very large low cost carriers, Ryanair and easyJet, are making prodigiously good money compared to the supposedly full service large legacy carriers.
This ought to remind us not to glibly accept the notion that somehow business or premium fare travel is less affected than discretionary or leisure travel in hard times.
The inconvenient truth is that when business goes bad, so does business travel, and sometimes it also down trades to easyJet, which unlike Ryanair, embraces flying to major airports that are actually in or near the city they serve, not two hours away or in another country. EasyJet is not from all contemporary accounts, the same joyous experience as flying Qantas or Virgin Australia domestic. But is more like what a low cost carrier could be if it was run according to the more courteous and caring standards of the full service carriers, with fewer gotchas like Ryanair which is also in the headlines for recently charging a family £ 200 to print out their boarding passes at an airport.
The real problem common to the reporting of Qantas affairs at home and abroad, and those of overseas legacy carriers, is that the media seldom has the time or resources to go deeper into the PR summaries and the well rehearsed executive presentations and query management competency or strategy.
There are many obvious external factors to blame in airline performances in any country relating to the global and national economic outlooks or situations, but without a forensic inquiry into actual currency and fuel hedging practices we will never know, using Qantas as an example, how an airline that should have benefited from a strong Australian dollar, can get away with claiming that it is being ruined by falling fuel prices quoted in weak American dollars, or comparatively weaker Singapore dollars.
Such hard questions are not being asked by those media organisations that were once equipped to ask them. Why? Because they can no longer afford the costs of getting answers to such questions even if they are keen to pursue them.
This is a frustration for on-line alternatives too, including Plane Talking. Sole operators, without support, may have from their experiences and contacts, have a clear idea where the problems lie, but we don’t have the research assistants, nor the budgets for search fees, to pursue all of the possibilities, and if we were able to invest the time required to dig up the answers, the pace of events will have moved on to newer more pressing stories.
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Ben, half the industry is asking the same question regarding fuel costs v a strong AUD. The fact the mainstream media can’t be bothered or is incapable of seeing the contradictions in that statement is a very sad reflection on real journalism and or lack of resources. How much else flies through to the wicket-keeper untouched I don’t know but I suspect plenty.
Re low cost carriers, true as far as it goes, but their business model is based on each aeroplane doing several journey cycles every day. That breaks down when you carry people twenty-four plus hours end to end and you have a legal as well as moral duty of care to look after them and which is the necessarily expensive domain of the long distance legacy airline.
Addendum to Previous. It does seem that long distance customers have been seduced into paying fares which are well below the responsible cost of production and really only affordable by subsidised carriers with the added benefit of geographic good fortune. To that end there is nothing wrong with the Government, of particularly a small country, believing it is nationally worthwhile to be at least in some sort of financial partnership with its airline, both for the positive presence it projects around the World and the income and goodwill it brings to the country. In that light it seems a shame now that the second tranche of the Qantas sale ever went ahead, but that was the Zeitgeist of the 1990′s, the horse has bolted and the gate now firmly shut
EasyJet also generates loyalty with a policy that legacy carriers used to have but gave up on. For example, if you turn up very early for a flight and they can fit you on an earlier flight, they will do so at no charge. Very customer friendly.
I also struggle with the fuel price argument. Qantas primarily serves Australian based clients and earns most of its money in Australian Dollars and yet the price of oil has gone DOWN in AUD terms as the exchange rate has risen.
http://www.exchangerates.org.uk/livecharts/OIL-AUD-180-day-price-history-graph-medium.png
MP , have you or can you produce charts going back much further? To when, I believe Ms Jackson said the low dollar was hurting them in 2001? Can some journo ask these people what is their price where they would be happy with. There has got to be a goldilocks value somewhere surely where everything is juuust right? (note: sarcasm)
You could change one letter and eliminate one word in this headline:
Qantas loses its stock value abroad, but entirely through its own fault
I think it’s continually overlooked that no other airline in the world has so poorly managed their fleet & the subsequent exposure to fuel price. Even Brunei operates 777s. It’s the rankest of hypocrisy for joyce & co to lament International’s performance, when they are their predecessors made it inevitable.
Not to overlook of course that a deliberate marginalisation of International is entirely in line with their overriding industrial policy.
Jetstar Int all painted red & white one day ?
One thing that commentators seem to overlook with Qantas international costs compared to its international competitors.
International competitors have a much lower cost base and largely based on USD costs and local currency costs but they access a high cost market (Australia) which because of its high value currency (AUD) has higher airfares in real terms and hence the margins for these international carriers are superior from the start.
Qantas on the other hand has ia high cost base in competitive terms because most of its costs are in AUD. So in many ways the high AUD works against Qantas. So it is not a simple matter of saying that because the AUD is high against the USD and Qantas buys its fuel in USD that it has an advantage. In real terms it is buying its fuel at the same price as its competitors and fuel last FY was consistently at around $110 a barrel.
Qantas has also seen its yields from low currency markets (US, UK and Europe) compared to AUD dramatically drop (as wella s volumes fall) and yet Qantas still has majority of its costs in AUD which makes it high cost compared to its competitors. So in offshore markets (that used to account for 50% of Qantas’s international revenues) the AUD has really worked against Qantas, not for it.
But this is only a small part of the problems with Qantas international; albeit this is certainly a real one that hurts it.
Commentators on this blog have made mention of hedging.
Noone makes any money out of hedging unless you have taken long positions in a rising market. It is not supposed to be a money maker. It is an insurance policy to iron out the pricing peaks and troughs of volatile markets and thus provide some degree of financial stability and certainty. In the current market no sensible airline will take very long positions or hedge much more than 50% of its total fuel cost in any sort of long position. Why? Because it is expensive to hedge and who knows where the fuel price is likely to go in a long position. You could quite easily be stuck on the wrong side, so you do not put all your eggs in one basket. For example the fuel price stayed up at around $110 from late July last year until second week of June this year when it suddenly dropped.
With fuel hedging, what airlines want is stability and for their hedging positions to end up neutral (i.e. overall no losses, no profits and a stable fuel price). From my reading of Qantas results and other info I have, this is what Qantas has achieved in past 12 months.
Interesting figure came to hand. Costs about $500,000 in fuel to fly an A380 Sydney to London. Do not know what is costs for a B777 by comparison. Perhaps a few boffins on this blog can do a calculation from relative fuel burns of each and using the $500,000 as a base. Then work it out in cost per seat kilometer.
There is so much nonsense on the web about the alleged relative performance of airliners that I usually ignore it. A bit like the foreign airline that strapped its 747 engine together with seat belts hoax, or the secret images of the 1000 seat Boeing BWB airliner. If Singapore Airlines and Emirates are replacing 777 flights with A380s as fast as they can, and using the 777s they bump down the line to replace A330s like EK is it makes me more inclined to the view that leaving behind up to 193 people at several thousand dollars each in revenue (SQ A380 versus SQ 773ER) per flight as routes grow is insanely daft, and puts its earning capacity on relevant routes many tens of millions of dollars per jet more than anything else per year. Which is why the A380 is here, flying from my experience in commercial service, slightly faster and climbing much more rapidly to higher altitudes than its glorious predecessor, with more space, less noise, a lower cabin altitude, and with full loads for 14 hours 20 minutes to Dubai from Sydney for example. Or going straight to 38,000 feet out of Sydney to Singapore with a full load. And all this before the 575 tonnes version comes off the line next year, with about another 40 minutes worth of range. The A380s and 777s are brilliant airliners for their intended purposes. Those who choke up whenever they are mentioned need to just–get–over–it.
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