Qantas buy back announcement includes poor outlook
Qantas has broken some bad, if not infuriating news with its announcement of a buyback of around 4% of its shares.
This is the ASX release about the buy back:
This is the ASX guidance information for the first half of FY13, or the six months to 31 December this year:
In the corresponding half to 31 December 2011 Qantas reported an underlying profit before tax of $202 million, and a statutory profit before tax of $58 million.
A careful reading of the full disclosures to the ASX this morning show that the misery is significantly self inflicted through a determination to add capacity to the domestic market of up to 9%, which means a fare war with Virgin Australia rather than any effort to do something about the state of the Qantas product or its loss of competitive advantage to a much better managed entity with an engaged rather than alienated work force.
No matter how it is read, it does not claim in any way that Qantas will successfully deal with the Virgin threat other than by adding seats which will force it down into lower yielding territory, and raise operating expenses by flying more empty seats than before.
What it does read like is a page taken from the business school playbooks that wrought substantial damage to legacy US and European carriers in similar price and capacity wars.
What is missing from the Qantas guidance is any sign that it is as smart as Singapore Airlines, or Cathay Pacific, in lifting its game to a level where a premium for excellence is the appropriate way to compete, and as a daily read of the fare offerings of its low cost brand Jetstar compared to those of soon to be Virgin controlled Tiger Australia is concerned, there is clearly something fundamentally flawed with the current application of the Qantas dual brand strategy.
There are no doubt many arguments to be had as to who is the most to blame for this. But cutting through all of the fawning apologies that get generated in the general media and from ‘analysts’ the bottom line is that Qantas is appallingly badly managed.
Shareholders who have been burned by the worst chairman and most incompetent CEO ever foisted on Qantas shareholders have nothing to celebrate either from being locked in to a trashed share price, or an incredibly disappointing outlook.