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Are idle Jetstar A320s bleeding Qantas cash?

Flying into stormy skies: Photo courtesy Jetstar

Updated with Jetstar statement*

For some time now aircraft spotter sites and Pprune, which sometimes hosts some very interesting discussions, have been publishing photos and registration lists of unemployed Jetstar franchise A320s parked at Toulouse, Narita and even Bordeaux.

Some carry Japan registrations, some for an approval pending Hong Kong operation in which the Ho dynasty will take instructions from Qantas ( no really) and some have temporary French registrations, normal for aircraft that have come off the Airbus lines, but not been finally delivered to the customer.

The Jetstars photographed include some with their engines covered. They are expensive to park, to store, and to finance when they are not earning their keep, as lease fees or other charges continue whether the jet is earning revenue or not.

Some of these jets would have been idle for months. It is claimed that some of the daily airport charges are as high as $US20,000, but we can’t vouch for that, even though a fraction of that daily amount per jet would be painful for Qantas in its current state.

Which is why Qantas has been asked for a definitive list of delivered but idle Jetstar A320s. Plus an accounting of the full costs being incurred by these jets for finance or lease charges, or other fixed costs. By some counts there are as many as around 11 Jetstar A320s doing nothing but burning cash at the moment.

What isn’t needed is another load of rubbish from Qantas management about how this is all the work of evil foreign government carriers (other than Emirates of course). What is needed is an accounting for the consequences of a serious failure to efficiently and profitably manage the Jetstar business.

No doubt the Qantas board, let by the geniuses that have overseen the massive destruction of shareholder value that has occurred in the company for the past five or more years, are pestering group CEO Alan Joyce for answers.

Those answers are seriously overdue.

*Jetstar statement

·         The Jetstar Group’s fleet order strategy allows for a flexible approach with the allocation of flying resources.

·         Following the delay in the launch of Jetstar Hong Kong, the Jetstar Hong Kong Board is evaluating options to manage their fleet in the short term, with a number of aircraft currently in Toulouse.

·         Jetstar Japan is Japan’s fastest growing LCC and any spare aircraft will be used to support the establishment of the airline’s planned second base in Osaka this year.

·         The Jetstar Group will continue to expand its operations in 2014 including the launch of Jetstar Hong Kong, subject to regulatory approval, the establishment of an Osaka base to support the continued growth of Jetstar Japan and growth in Australia for Jetstar Airways.

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  • 1
    discus
    Posted January 7, 2014 at 10:54 am | Permalink

    If indeed these aircraft are parked, idle and costing big money on leases, parking fees etc ( 60 million more for Jetstar japan? ) it needs to be in the mainstream media. Qantas’ future is at stake and even scared cows need to be in the firing line

  • 2
    Bad santa
    Posted January 7, 2014 at 11:28 am | Permalink

    Please please please please please let this be the last straw!

  • 3
    discus
    Posted January 7, 2014 at 11:34 am | Permalink

    EDIT on my prior post. Please read: “sacred cows” not “scared cows”. No matter how many times I proof read…

  • 4
    Allan Moyes
    Posted January 7, 2014 at 12:52 pm | Permalink

    Cows in the firing line would be “scared”, discus, and so should Alan Joyce! However, even if he goes, he’ll probably get a golden parachute of $Ms for “improving” the company.

    When is the next shareholders meeting?

  • 5
    Ken Borough
    Posted January 7, 2014 at 1:06 pm | Permalink

    Jetstar have taken delivery of two B787s. Currently, one flies daily between Melbourne and Bali while the other sat in Melbourne from the date of its delivery around 13 December until it flew to a Cairns on 31 December where it’s understood to be parked. Daily revenue utilization is a tad over five and a half hours for this fleet of two. From this limited evidence, all is clearly unwell.

  • 6
    chris turnbull
    Posted January 7, 2014 at 1:43 pm | Permalink

    On 31 December 2013 Qantas took contractual delivery of B788 number 3 (VH-VKD). Where it is and what it might be up to I don’t know.

  • 7
    Creeper
    Posted January 7, 2014 at 1:45 pm | Permalink

    I heard Tiger’s lease costs for the 5 weeks it was grounded was $11 million for the 10 aircraft.

    I notice they are now deferring frames also, one has just gone to Vueling to become EC-LZE.

  • 8
    Travel Hound
    Posted January 7, 2014 at 3:39 pm | Permalink

    If I am not totally up to speed with the aircraft sitting idle, but I understand they are associated with Jetstar Japan and Jetstar Hong Kong.

    We are all know the deal with Jetstar Hong Kong and so in real terms there should be no surprises here. The reality is investors (QANTAS and others) go through a whole range of “what ifs” when investing in such ventures and as such, even though the current situation is not desirable it would have been allowed for in the business plan.

    A320′s sitting idle for Jetstar Japan is a new one for me. It might have something to do with slots or approval to fly international. I am not sure, but at the end of the day it will all come out in the wash.

    Generally speaking it is not uncommon for airlines to have surplus aircraft in their fleet. Just think of the aircraft VA bring in and out of their fleet and how long it takes to complete end of lease maintenance.

    We have to remember these planes are long term investments (8 years minimum) so in real terms the pain is going to be short lived. Also remember the economics of airlines rely on scale of economies, so over the longer there could be advantages in having these aircraft sitting idle for a short period of time.

    Let’s not simply get into a QANTAS bash because QANTAS is doing what airlines do. There are realities associated with running airlines and we just need to come to terms with it.

  • 9
    Dan Dair
    Posted January 7, 2014 at 4:22 pm | Permalink

    Travel Hound,
    Let’s be realistic.
    Qantas is skint.
    It can’t afford to take-up the B787 options for it’s in-house fleet, when updating & upgrading it’s aircraft would make them more economical to fly & more inviting for it’s passengers.
    Having ONE aircraft sitting idle might be considered to be acceptable if it was going to be ‘spare’ as a JQ fleet replacement, to slot-in anywhere in their network.
    If there are as many as twelve aircraft sat idle (Quoted figure of 11 x A320′s + 1 x B787 @ Cairns(Ken Borough)) it becomes less surprising that QF is struggling so much.
    If someone ‘gave’ Michael O’Leary 12 modern passenger planes, he’d have them running 24/7, 350 days a year & earning their keep in a minute. (even if all they were doing was making a dollar a day over their costs)

    Your statement,
    “it will all come out in the wash” is another version of ‘she’ll be right’ which is more based on hope than reality.
    Should Qantas go-under, it will be the same people who think that “it will all come out in the wash”, that will be turning around and despairing that ‘no-one saw that one coming’.
    Ben has been ‘Qantas-bashing’ for ages.
    It is clear that the reason is NOT because he doesn’t like Qantas. (I believe it’s as close to his heart as any contributor to these pages)
    It is because he genuinely fears for it’s survival & has done so for a considerable time now. (longer than I’ve been a regular on this site)
    Hopefully Ben’s fears are unfounded, but all the time spin, half-truths & obfuscation come out of QF HQ, we’ll never know.
    (Ansett all over again.?)
    (I watched the Swissair documentary on YouTube. The more I read about QF/JQ, the more it resembles the way Swissair/Sabena went bust. When the airports start demanding cash to fuel the planes, you’ll know the games up)

    Positive thinking is a good thing. It can help you achieve better results and more of them.
    However, all the positive thinking in the world, will not change a pigs-ear into a silk purse.

  • 10
    patrick kilby
    Posted January 7, 2014 at 4:47 pm | Permalink

    In noticed quite a few at Narita couple of months ago, but it could have been at the time of day when they are all about to head off. There are a lot of flights ex Narita now. Not sure why they can’t use the HK ones in Australia while others are serviced or some such. The 787 is new so is being sorted out prior to real work from Feb with the new Timetable with three of them.

  • 11
    moa999
    Posted January 7, 2014 at 6:52 pm | Permalink

    The real worry in the region is not Qantas (Jetstar)’s orders.

    Maybe Air Asia with over 380 – all A320/320neos

    or Indonesia’s Lion Air with over 600 !! – pretty much all A320 and B737s

    If they can’t use that capacity within Asia, methinks a lot of it might flight flying South, from airlines with a very low cost base.

  • 12
    Travel Hound
    Posted January 7, 2014 at 7:04 pm | Permalink

    Hello Dan Dair,

    I don’t share the same enthusiasm as some for bashing QANTAS. Both Jetstar Japan and Jetstar Hong Kong are start-ups. As is the nature with such ventures there are hiccups along the way. In both instances expansion there is / will be aggressive expansion, so in real terms this could be a better option than not having enough capacity.

    As I stated in my post QANTAS would have gone through a whole a whole range of “what if’s”, so this is probably covered. What wouldn’t be covered is slow expansion where the airlines take years longer in achieving scales of economy. I don’t think the $$$ realities of this are not appreciated.

    As for the 787 it is a new aircraft type and has to do a whole lot of proving with pilots, FA’s, maintenance, etc before it can start operations proper. I don’t see any mismanagement here.

    QANTAS’s problems are more structural based than they are operational, so if we are really concerned about QANTAS, we should be looking elsewhere for where the problems lie.

  • 13
    Travel Hound
    Posted January 7, 2014 at 7:13 pm | Permalink

    Hello Moa999,

    You bring up a very good point.

    The Jetstar strategy has focussed expansion in the North Asia mature markets where they are being used to compliment existing full service carriers.

    If we look at the major Asian LCC’s and take their home markets out of the equation, they aren’t performing to well. CAPA has an article about the Philippines market and uses the word “irrational”. This a market where Tiger and Air Asia have a presence.

    If you look at the business model of Jetstar and where they have invested in expanding their operations, I don’t think any of us (even the QANTAS bashers) could call it irrational.

    With all of the new planes coming into the LCC market over the next five years, Jetstar’s strategy is probably going to be seen positively by most in the industry. On this point I don’t think a snapshot in time focusing on one relatively small issue will ever give a proper representation of realities.

  • 14
    Ben Sandilands
    Posted January 7, 2014 at 7:34 pm | Permalink

    Travel Hound,

    Criticising Qantas on its record and on the factuals is not bashing. On some of the reasoned estimates of the costs for 11 delivered but idled A320s I have received today they are costing Qantas shareholders, the one’s screwed by this management and its feeble directors, to the tune of $2 million a month in lease or finance charges.

    Are you seriously suggesting this is all normal and planned for?

    Curious to know how long you think this ‘normality’ is tolerable.

  • 15
    Flying High
    Posted January 7, 2014 at 8:19 pm | Permalink

    Wow – so now it has grown to 12 idle aircraft. How much more spin can you put on this? Any takers for 18 or how about 24?

    Lets start with the facts. There appears to be 5 Jetstar HK aircraft in storage. No surprises there because the venture has been delayed.

    Those 5 aircraft are the responsibility of Jetstar HK. Qantas owns 33% of Jetstar HK so at worst it is up for 33% of any costs – not 100% as is suggested in this article. Its a very convenient omission and you can start dividing your costings by 3!

    Where are these so called idle aircraft in Japan? None of the 18 aircraft are in storage with all 18 existing aircraft flying scheduled routes. Improving the daily flying hours is one of the key challenges for Jetstar Japan as it expands but that is very different to alleging they are putting aircraft in storage.

  • 16
    Ben Sandilands
    Posted January 7, 2014 at 8:59 pm | Permalink

    Flying High,

    The question put to Qantas and Jetstar concerned jets delivered but idle. Jets for which the fixed costs continue but the revenue doesn’t. The invitation to clear up the numbers and of jets and the specific costs wasn’t taken up.

    It was specifically said during the interview that there was a rotation of units in Japan, as distinct from all of the aircraft delivered being in active service. The idle slack is to be taken up by the opening of the Osaka base.

    The basic premise remained unchallenged, that a proportion of the fleet is idle. But attracting fixed costs based on each jet, whether or not the jet concerned is inactive.

    The LCC model is based on high utilisation and high load factors. The fleet isn’t being managed to consistently achieve those objectives, which is why there are so many photos in circulation of Jetstar Japan A320s parked away from the action.

    I was keen for Qantas/Jetstar to clear up the question as to just how many delivered jets were idle. It wasn’t keen for that information to be published.

    The spin continues, but so do the questions, and they need to be answered.

  • 17
    Bad santa
    Posted January 7, 2014 at 9:34 pm | Permalink

    Where is the Qantas bashing? All I see is frustration at the destruction of a once iconic airline by an entirely inept management.
    Travel hound,
    Jetstar Hong Kong is not a start up. It’s still just an idea (bad in my opinion), poorly implemented and costing millions and millions and millions. The hilarious “5 year plan” press release assured us it would be up and running in early 2013. Never mind the aircraft. The cost of infrastructure and staff sitting idle as well boggles the mind.
    This is reminiscent of Red Q. Announcing a new idea without due diligence to ensure a concrete path to reality. This management is so bad it doesn’t learn from its mistakes.
    If you think this is just a “hiccup” then you must have gone to the Alan Joyce school of airline management.

  • 18
    Dan Dair
    Posted January 7, 2014 at 9:40 pm | Permalink

    To put a context on my earlier point about aircraft utilisation & how Michael O’Leary would do it differently;
    A few years ago an LCC operated a positioning flight from my local airport to another internal airport, before this flight went on to a holiday destination.
    The LCC, (not Ryanair in this case) registered the flight as a route & sold tickets on it.!!!
    Because the flight was fully-equipped with ALL on-board crew, there were no restrictions to this.
    The tickets were £5 + taxes.
    I don’t know if they ever sold more than a few per flight as it wasn’t the kind of route the masses would want, (or someone would already be flying it) but the fact that it was generating a couple of extra shillings here and there is the point I’m making.
    All modern airlines need maximum utilisation to justify ‘owning’ an aircraft.
    If you can’t do that, you need to sell it on or lease it out.
    (Or return it to the manufacturer against a future sale (order swap) & remove the parking/storage costs from your books immediately)

    Travel Hound;
    Point 1,
    The what if’s…
    I would agree with you in almost every case, but the evidence regarding Qantas seems to disprove the idea that it’s been properly thought through.

    Point 2,
    On current form I would think it very likely that JetStar will not be owned by Qantas in 5 years time.
    Also,a strategy of aircraft utilisation & rollover-renewal would potentially mean that some of these aircraft may have been replaced before JetStar achieves the level of success you suggest.
    (But at least the re-sale value on a 0-hours/0-cycles airframe will be relatively high.???)

    (Whilst proofing this it occurred to me that over an ownership period of 3 years, the 0-hours & cycles aircraft would probably have cost more to park than it’s residual value)

  • 19
    Dan Dair
    Posted January 7, 2014 at 9:48 pm | Permalink

    It subsequently occurred to me that it might be relatively cheap to park an aircraft adjacent to the Mojave desert ‘graveyard’.
    If your plane’s not going to be required at ‘a minutes notice’ for a while, it might be a lot cheaper to fuel it to fly it there and back, but actually park it for next-to-nothing in ideal preservation conditions.?
    Just a thought.

    (Does anyone have the graveyards phone number & an e-mail address for Allan Joyce.?)

  • 20
    Travel Hound
    Posted January 7, 2014 at 10:57 pm | Permalink

    “It was specifically said during the interview that there was a rotation of units in Japan, as distinct from all of the aircraft delivered being in active service. The idle slack is to be taken up by the opening of the Osaka base”.

    Ben, As far as I know Jetstar release operating statistics on their aircraft. If I remember correctly, in one of their statements to the market they stated they were on average turning their aircraft in Japan 5 times per day (and thus underutilising them). Again, if I remember correctly they even stated average hours per day. At the time they were very clear that utilisation rates would not increase until such time they started international flying, which would allow them to better schedule aircraft.

    These statements to the market have been out there for quite a while. Analysts go all over these numbers and make their assessments on them.

    We see some photos on the net months latter and start screaming.

    I am not sure what we are to expect. These are start up airlines. They have to go through a fair amount of work to get them to a stage where they are viable. To expect there to be no bumps along the way is just not realistic.

    I would concur that the current situation is not ideal, but in stating this don’t see how it can be concluded the Jetstar business and QANTAS management by default are a shame because of it.

    In all seriousness people have to get real! We are not talking about balancing our weekly grocery spend, but running very complex and sophisticated businesses. You can’t confuse the two.

  • 21
    Travel Hound
    Posted January 8, 2014 at 12:07 am | Permalink

    “Are you seriously suggesting this is all normal and planned for”?

    What I am saying is planning includes a whole range of scenarios, which are taken into consideration when developing a business plan. I would suggest low utilisation of aircraft in the initial stages of start-up would be one of those scenarios. To suggest it is “normal” would probably be a stretch too far, but to suggest it wasn’t planned for would again be a stretch to far.

    Starting a new airline in a new country is a very complex undertaking. A robust business plan would allow for a range of scenarios.

    Again we are taking a snapshot in time and coming to conclusions about entire businesses. This is just not realistic.

  • 22
    Dan Dair
    Posted January 8, 2014 at 12:29 am | Permalink

    Travel Hound,
    With respect, I disagree on your last point.

    In principle, other than the size of the numbers, there’s little difference between household & commercial budgeting.
    Any organisation, no matter how massive or miniscule has to ensure that there is enough coming in on a daily/weekly/annual basis to cover the outgoings over the same period.

    Any organisation can borrow money for investment in something or other. The trick, as always, is to manage your finances correctly.
    An individual or household which is overstretched financially will have the same consequences as a business, if there’s a hiccup in the income stream.
    If you rely on overtime to meet your bills & the overtime isn’t available, you’ll struggle.
    Equally, if a business is not utilising it’s capital or staff assets to the full, it will not be bringing in the expected revenues.

    The consequence for either organisation is financial failure due to cash-flow problems.
    The subtle difference is domestically, if your car gets repossessed, you can always catch the bus, though you might not get finance for anything for a while.
    If Qantas starts getting stuff ‘re-possessed’, it will undermine any business confidence in it from the markets & suppliers & it will be in dire-straights faster than an Emirates A380 trying to beat the KSA curfew.

    At a micro or macro level, the way any financial organisation works is basically the same.
    The difference is in business, you employ dedicated finance-department people who’s minds are not boggled or overwhelmed by the huge figures.
    These are the people who are constantly asking “where are we up to in the plan?” and are constantly revising the plan to reflect where we’re actually up to.
    Qantas either hasn’t got those kind of people or the board & CEO aren’t listening to them.

  • 23
    Ben Sandilands
    Posted January 8, 2014 at 6:26 am | Permalink

    The wombat in the room so to speak in the Qantas situation is that there is no confidence in the current management ever returning to profitability.

    In my opinion, the stock market for QAN is most driven by the level of expectation of quick gains from the dismantling of the enterprise through spin offs, or some form of a buyout or rationalisation play.

    Too many eyes are focussed on the exits (at a profit over the buy-in point) compared to those that might be looking at the longer term future

  • 24
    Travel Hound
    Posted January 8, 2014 at 7:23 am | Permalink

    Hello Dan Dair,

    The whole crutch of the article is based around a premise that QANTAS management is totally incompetent because Jetstar currently have A320′s being under utilised in some markets.

    The premise is wrong!

    With regards to Jetstar Japan, I don’t see how anyone could see this as a failing venture. It has strong partners, a potential market that is three times larger than Australia and is growing faster than any of its LCC peers.

    For arguments sake let’s take a guess and put a value of $10 million over six months for the underutilisation of aircraft in Japan, but after the six months (when they get access to Osaka) the aircraft allow Jetstar to grow and subsequently become profitable. Let’s also argue the inflection point for profitability is 24 aircraft (a reasonable guess). Now if Jetstar waited for Osaka slots to become available before ordering aircraft there could be a 1 year delay in Jetstar becoming profitable.

    Now if at 24 aircraft Jetstar Japan can produce a profit of $20 million, than having aircraft idle for six months at a cost of $10 million over a two year period actually resulted in additional profits of $10 million.

    The arguments about idle aircraft are very simple. They do not take into account the entire business plan. They do not take into account other costs and how they are accrued over a period of time. More importantly, they don’t take into account the revenue opportunity aspect of the Jetstar Japan business and how this factor will ultimately determine the real value of the business going forward.

    These businesses, if successful will have exponential growth in revenues. If the Jetstar Japan venture is successful (on current evidence I don’t see why it shouldn’t be) in 2-3 years time this event won’t even get a mention.

    We have to be realistic.

  • 25
    Red Devil
    Posted January 8, 2014 at 7:34 am | Permalink

    Travel Hound: You state this is normal business, bollocks! This cycle of making press statements about RedQ and Jetstar HK “Before getting approval” has proved over and over again that Alan Joyce and his team are completely incompetent). I could use more colourful words but might get banned). If his plan was to sell off the Jetstar franchises at a huge profit the time has passed.
    Anyone who has worked in Asia knows the problems companies face in doing business and it cannot be done overnight and they are quite clever at taking westerners money, gaining the expertise and doing their own thing. Alan Joyce was a lamb to the slaughter and one of many over centuries that line the road with carcasses of companies that think they can go to the heart of China and make a quick buck.
    Qantas is now under a huge amount of pressure because of actions by management, not the cost of staff. The cost of staff can be dealt with by engaging in the staff and not telling them that Jetstar is madly profitable and expecting them to believe it. Australians are like the Irish, cynical but not dumb(except for some) and know they have been lied to and the company expect to forgive and forget. The staff will not believe anything this management and board says ever again because they have no credibility especially when they ground the airline at the costs of millions in what can only be described as a massive own-goal.
    If he was so successful with his plan investors would be lining up at the door. The deal with Emirates is attune to a “Cashless Takeover” with no money changing hands or a equity stake in Qantas that Emirates is entitled to do, subject to FIRB approval of course. Emirates is actively courting our high-yield passengers every time they go through the Dubai lounge.
    The demise of Qantas started a long time ago with James Strong went down the path of selling off assets to generate profit and this continued through Geoff Dixon who knew nothing about airlines but made a lot of money for himself and now Alan Joyce. Qantas has been beset by as Ben described it, short-term management, intent on making as much as they can while they can and the consequences will be disastrous. Good luck to the new CEO if there is one, massive effort required and every week Alan Joyce is at the helm the problem will get bigger.

  • 26
    Travel Hound
    Posted January 8, 2014 at 8:02 am | Permalink

    Hello Red Devil,

    There is no Bullocks in my post. What I have written are the realities of doing business. If we don’t like it than we should just let others take over our businesses and handle our affairs for us.

    I work out of Asia and the remarks that they just want to take our money is wrong. The realities are Asia is where our future are, so like it or not, we have to do business there (and I enjoy working out of Asia).

    If we do have a real interest in the well being of QANTAS than we should be looking else where. As stated in one of my previous posts QANTAS’s problems are structural, not operational.

    So, look at the legislative environment it works under, current work practices (and this doesn’t mean going lowest possible wage, al la Virgin Australia), maintenance regimes and corporate instead of this doom and gloom forecasting based upon photographs on the internet.

    At the end of the day, as Australians we are actually good at doing good business and being fair at the same time.

    Unfortunately, we are also good at having a good old whinge, if things don’t go the way we think they should.

    It’s an international word we live in and we can’t look back. We have to move forward!

  • 27
    Red Devil
    Posted January 8, 2014 at 9:01 am | Permalink

    Then get an Australian to run Qantas, not a so-called low-cost guru way out of his depth. The Airline is the worst run business in Australia. I worked in Singapore and I know how they do business and they think in decades not months like the clowns running Qantas. Qantas has not chosen the best bed-fellows in Singapore, Vietnam and now Hong Kong with Dennis Choo and now Stanley Ho’s daughter? what the? I agree the Australian regulatory regime is hopeless and opening up the skies without even considering how that would affect Australian business is very short sighted, what would have been better would have been a slow relaxing of bilaterals combined with negotiations aimed at exchanging these rights instead of believing everyone is as niave as us. The problem Qantas has is the dumping of foreign capacity which is ironic because that is what Qantas is doing domestically. At least Hong Kong protect their own people and insist that investment is carried out internally instead of this mad drive to off-shore everything. We are dumbing down Australia and if Joe Hockey reckons he has a deficit problem now just watch this space. Your view is noted Travel Hound but I disagree with your interpretation.

  • 28
    Dan Dair
    Posted January 8, 2014 at 9:42 am | Permalink

    Travel hound,
    “Now if at 24 aircraft Jetstar Japan can produce a profit of $20 million, than having aircraft idle for six months at a cost of $10 million over a two year period actually resulted in additional profits of $10 million”

    Or,
    you could take delivery of the aircraft you need, when you need them:
    Therefor realising over a two year period actual profits of $20 million.

    This much more radical plan calls for a level of understanding of planning seemingly well outside the capability of the senior Qantas management.

    I must be a genius to have thought have that all by myself, when all these highly paid people who know all about airlines can’t think of such a radical proposal.???

    Oh no, just another malicious Qantas basher with my own self-interest at heart. (that last bit was a joke)

  • 29
    Travel Hound
    Posted January 8, 2014 at 11:04 am | Permalink

    Or,
    you could take delivery of the aircraft you need, when you need them:
    Therefor realising over a two year period actual profits of $20 million.

    Hello Dan Dair,

    We can argue as much as we like, but in reality all we will do is keep going around in circles.

    Aircraft are long lead time items. When you place orders and negotiate production slots you do so on the best information you have at the time.

    With Jetstar Japan it looks likes there deliveries against capacity requirements are out by about six-nine months.

    With Jetstar Hong Kong, we all know the issues there.

    Considering these planes were ordered in 2011 there is a two year lag where things can change.

    As I noted in my previous posts, Jetstar would have factored a range of aircraft utilization scenarios in their business plans. They do this, not because they are incompetent, but because as good business managers they understand the ever changing dynamic of operating a business.

    Further, QANTAS have previously made statements and released data to the market about the situations in both Japan and Hong Kong. The markets will monitor this, like they monitor other parts of the QANTAS business, and make statements to the markets as required. On this point we rarely hear analysts commenting about Jetstar and its franchises. One of the reasons for this (and I could be wrong) is these aren’t the areas where QANTAS need to focus.

  • 30
    Flying High
    Posted January 8, 2014 at 12:52 pm | Permalink

    Travel Hound said “On this point we rarely hear analysts commenting about Jetstar and its franchises. One of the reasons for this (and I could be wrong) is these aren’t the areas where QANTAS need to focus.”

    Spot on. The analyst’s see Jetstar as a valuable asset which also offers significant upside for the business. Its former, current, potential Qantas staffers that dislike Jetstar for self interest reasons.

    Red Devil said “This cycle of making press statements about RedQ and Jetstar HK “Before getting approval” has proved over and over again that Alan Joyce and his team are completely incompetent).”

    Qantas is a publicly listed company and has continuous information disclosure obligations. It would be breaking the law if it did not disclose that it was engaging in a significant new business venture. Further the process of obtaining approvals in Hong Kong involves public consultation. Also Hong Kong involves other parties who would have their own disclosure obligations. Qantas can only go so far with a new business venture before it has to make public announcements.

  • 31
    Ken Borough
    Posted January 8, 2014 at 4:00 pm | Permalink

    JETSTAR is a LCC planning to set up new operations in different jurisdictions where it’s been known that the regulatory path for new entrants has been difficult. They ought have taken a very cautious approach and done things step-by-step. An initial base in Japan with the right number of hulls to service that base should have been planned rather than hulls for other bases before such bases had been approved, fully set up and resourced. No airline can afford to have under-utilized equipment, especially a LCC. To suggest that Qantas would have predicted the shambolic planning and waste that we have seen develop in HK and Japan is being too charitable and perhaps naive. Give us a break!

  • 32
    redtrigger
    Posted January 8, 2014 at 4:16 pm | Permalink

    I think the problem may be more to do with ordering 110 A320′s but not actually having businesses defined at the time of the order. The order was done before Jetstar Japan was up and running and at that stage there was no mention of Jetstar HKG. Was the cart being placed before the horse and were a whole lot of operational assumptions being made without giving enough thought to the problems and issues with actually establishing the business to absorb the aircraft?

  • 33
    Bad santa
    Posted January 8, 2014 at 4:40 pm | Permalink

    I could write war and peace about the litany of errors that have occurred over the last decade but some people just won’t listen.
    So I’ll just say this. Billion dollar profit heading to a 600 mil loss.
    What would it take to change your minds?
    Imagine if the more than 1 billion dollars spent on Jetstar Asia had been invested in rejuvenating Qantas.
    And of course it’s self interest. Those people want to feed and educate their kids. At 600mil plus a year I don’t blame them.

  • 34
    Dan Dair
    Posted January 8, 2014 at 5:11 pm | Permalink

    In a start-up situation,
    It doesn’t make economic sense to purchase anything.
    You’re spending the capital you may well need to invest in cash-flow instead.

    It would be far better to lease your initial aircraft until the business becomes established & you can then move on to an ‘ideal’ of aircraft ownership in a more stable business environment.
    A lease aircraft can be picked up relatively quickly, even if it’s not absolutely the ideal one you want.

    If Qantas had done what they did & got themselves into a ‘delivery 6 to 9 months in advance of requirement’ situation, good planning & business strategy would suggest that they lease out the aircraft whilst it’s not required or slot-swap for a later delivery time.

    I don’t know anything about transacting aviation business in Asia.
    I am sure however, that I wouldn’t have made some of the mistakes that QF management have in their foray into this field. (Though I concede that I might well have made different ones)

  • 35
    Travel Hound
    Posted January 8, 2014 at 5:49 pm | Permalink

    “…They ought have taken a very cautious approach…”

    Hello Ken,

    We can argue that yes they should have “taken a very cautious approach”, but the realities are the Jetstar team setting up the Japan franchise would have gone through a full range of scenarios and developed a business plan around them. In hindsight (and I’m not convinced) we can argue a more conservative plan could have been a better way forward, but in reality the Japan franchise will probably be running three extra planes for a period of six months. In my books around $3.6 million dollars. Considering these investments run into the hundreds of millions and are long term, this isn’t a lot of money.

    Jetstar has existed for 10 years now. It is an airline that has value and makes returns for its shareholders. It is also an airline that brought flying to many Australians who had never flown before. At some point we have to come to terms with the fact Jetstar is going to remain a part of the Australian landscape for many years to come.

    On this point, I don’t see why some of us see Jetstar as such a constant threat. What is stopping us from seeing it as a successful Australian business venture that has branched out into other parts of Asia attracting many first tier investors along the way.

  • 36
    Travel Hound
    Posted January 8, 2014 at 6:13 pm | Permalink

    “I think the problem may be more to do with ordering 110 A320′s but not actually having businesses defined at the time of the order”.

    Hello Redrigger,

    The 2011 order was for 110 aircraft with 32 of them being the current version and the remainder being the NEO. In real terms this was a very conservative order.

    To date the Australian, Singapore and Japanese franchises have already taken a good proportion of these planes. There are mechanisms (return to lessor of existing aircraft) that allow for Jetstar to right size their fleet against underlying demand, so the order in itself shouldn’t be seen as a poor decision. Interestingly, instead of right sizing (which many are arguing) Jetstar has decided to keep a surplus of aircraft. This suggests there would be an economic benefit (over the longer term) in doing so.

    Just have a look at other LCC’s in the region, their very aggressive expansion and purchase of new planes. It isn’t hard to see Jetstar is being very conservative.

  • 37
    Ben Sandilands
    Posted January 8, 2014 at 7:01 pm | Permalink

    Those who have been here for the longer haul will know that I have always been supportive of the Jetstar concept, including the setting up of a trans border LCC franchise.

    But for this reporter a number of things went wrong, and I have made that clear over a number of years, and I think I was right in my approach. In no particular order:

    Qantas has never revealed the raw metrics. We don’t know in statutory reporting terms, how the Jetstar operation has performed.

    We do know that some of its costs were assigned to Qantas full service in a manner which while the Qantas was entitled to do this, tended to support unsubstantiated claims as to how well some sections of the business performed while others were claimed not to.

    In 2007 Jetstar illegally changed the approved flight manual for the A320, an action which nearly lead to a crash shortly afterwards at Tullmarine Airport during an attempted go around which put the bottom of the jet less than 20 feet off the ground in no visibility with the flaps and throttle detents incorrectly set. The company failed to report the true circumstances of the incident to the ATSB but another reporter and I published details which caused the safety investigator to launch an inquiry, during which it found that the airline had failed on a number of occasions to report the triggering of the ground proximity warning system as required by law and its AOC.

    This lead to a Senate inquiry in which, unusual though it may seem, the director of safety at CASA John McCormick agreed with my identification of the cause of what was a very serious incident.

    It is a reflection on the ATSB and CASA however that no action was taken against Jetstar. This incident was more serious than the one over Leopold near Avalon that lead directly to the grounding of Tiger Airways as a threat to public safety.

    Another issue was that Qantas, having said it would not allow Jetstar to compete directly with its parent, then allowed it to do same, even on the Sydney-Melbourne route. Ironically, Qantas is sometimes cheaper than Jetstar, and Virgin Australia, on that route.

    In can be argued that Qantas has mismanaged the Jetstar brand to the detriment of the Qantas brand on a number of levels, including an ideological fixation on isolating and reducing its exposure to so called legacy safety and labour costs.

    Of course Qantas was perfectly entitled to manage its suite of brands as it saw fit, but it hasn’t done so successfully, and for the last year,it has advised of deteriorating yields in every segment of its well run business, which includes those immune to competition from wicked foreign owner carriers, although not Emirates.

    Jetstar set out to abuse its obligations as a patriotic Spirit of Australia airline to pay taxes for work done by its employees in Australia by setting up a sham cadet pilot scheme in Jetstar in which the pilots were paid under NZ conditions to an NZ bank account.

    This was exposed under parliamentary privilege at a Senate inquiry, and both Joyce and then Jetstar CEO Buchanan were recalled to correct evidence they gave to the committee which proved to be completely factually incorrect and I suggest deliberatley so. If you doubt this, because the general media ran away and hid under a desk, it is all recorded in Hansard.

    I could go on, but it is fair to say that aspects of the Jetstar operation, including the Senate exposure of attempts to make Thai flight attendants fly Australian domestic NON tag, as well as TAG segments for Jetstar under thai contracts, significantly soured this reporters perceptions of Jetstar.

    It undermines in my view, the credibility and integrity of the management of the Qantas group, and I simply do not buy all the claptrap about being an Australian icon.

    The actions of management on these and other occasions have been reprehensible, and I have reported on this, and done so under parliamentary privilege.

    If this hasn’t been disappointing enough, we have now arrived at a situation where the airline has lost its investment grade debt rating, has deprived its owners of dividends for five years, has trashed its share price, given away for nothing major parts of its network to parts of Australia it didn’t consider worthy of its flag carrier services, and now gone bleating to Government for some form of help.

    Increasingly my concerns are reflected by the mainstream media, and whatever political capital it may have retained in Canberra has been put at risk by these continued antics.

  • 38
    Travel Hound
    Posted January 8, 2014 at 9:54 pm | Permalink

    Hello Ben,

    I refer to your post, but without knowing the intricate detail of some of your complaints, I can only respond in broad terms.

    With regards to the level of reporting for different business units, there has been an ongoing argument about the information Jetstar provides to the market (in general). It is not unusual, that QANTAS reports on it’s operations as a whole and not in part, with there being good reasons for this. The main one being the performance and operating metrics of business units, for competitive reasons are considered “Commercial in Confidence”.

    As publicly listed companies normally do not report to the extent as what is being suggested for Jetstar, the requests for more information, although seeming reasonable are really not the norm. Release of this information could undermine the competitive and strategic positioning of the Jetstar operation and as such it could be argued it would be derelict of the QANTAS board to do so.

    On the same point, QANTAS would make high level presentations on their operating affairs to analysts and core investors. As such, even though this information is not available in the public realm, it is being constantly reviewed by the major funds, analysts and investors in the industry.

    You refer to the Jetstar 2007 incident and again I am not familiar with the details. This incident goes back more than six years and considering the ATSB and CASA have decided to no longer pursue the matter, it suggests that what ever operational procedures that were alleged to be deficient no longer or do not represent a safety concern for Jetstar.

    I would suggest comparing the Jetstar incident with the Tiger Airways grounding is not warranted. There were multiple aspects to the grounding of Tiger Airways, which I would suggest were not evident with Jetstar. This is an extract from the CASA website about the conditions placed on Tiger Airways and its grounding:

    “These conditions required actions to improve the proficiency of Tiger Airways Australia’s pilots, improvements to pilot training and checking processes, changes to fatigue management, improvements to maintenance control and ongoing airworthiness systems and ensuring appropriately qualified people fill management and operational positions…”

    Again, and as stated above I would suggest the majority of these conditions, if not all were not present in the Jetstar incident you refer to.

    For the issue of Jetstar competing directly with QANTAS, I concede that statements made at the start of the Jetstar operation are not representative of the operations in latter years or today. In reality, in allowing Jetstar to compete with QANTAS, management was doing so because of the competitive pressures associated with the than Virgin Blue Airlines. In real terms we shouldn’t have been so naive and should have known better to have simply taken these statements as a QANTAS management decree for generations to come.

    Broadly, you mention the Jetstar pilot cadet scheme and Thai FA’s flying Jetstar local routes at reduced pay levels.

    We don’t have to look far to see Jetstar’s main competition employing FA’s on conditions that cost a significant amount less than what Jetstar pays. These LCC airlines directly compete with Jetstar on many of its international routes and as such have an immediate cost advantage. In using Thai FA’s on local flights, my understanding was these FA’s were only used where the flight through connected to the international destination.

    There are constant competitive pressures in this industry. For example Cathay Pacific employs Filipino FA’s instead of local’s from its home Hong Kong base, because it is cheaper for them to do so.

    Although, I agree with the notion that as a sophisticated nation, we should value fair pay there are competitive pressures from other airlines and nations who do not hold this same value.

    We only have to look at shipping and what happened to Australia National Lines (ANL) to realise at some point of time there will be a reality check that we will have to come to terms with. This is just as much a government and union issue as it is a QANTAS issue and personally I would like to see more leadership on this subject.

    To broaden this argument, by default, airlines such as Virgin Australia who outsource the majority of their aircraft maintenance to MRO’s in Asia are paying the low wages associated with the complaint of Thai FA’s. We need to come to a broader understanding of this issue, so we can make proper judgements in the future.

    I have no issues with the Jetstar pilot scheme. At the end of the day these pilots will be in the top 5% of wage earners, so there are other people I will cry for before them. In real terms they shouldn’t need any of us to cry for them anyway. You would hope they are capable of making a proper value judgement on what is best for their own affairs.

    Again, we come back to the main complaint or allegation that the management of QANTAS has been derelict in its duties. I think it is fair that we properly state this is only one argument of many (I understand your blog writes as an opinion piece).

    Some of us have been arguing there are many aspects to the QANTAS affairs with much of it to do with the QSA, ANA and current legislative environment and to an equal extent the legacy related issues associated with the transfer of QANTAS from government to public ownership.

    For the sake of QANTAS and its employees it is important that we have a proper debate on its current situation and how it arose. This is a broad subject and should be far reaching. I am not a fan of a debate that simply becomes a slanging match about current QANTAS management.

    As the current management (I am not sure of who would want to take over from the current management) are going to be pivotal for the success of QANTAS, I am an advocate for a debate that is engaging and informed rather than one that simply places blame.

    This requires a commitment from government, the unions, QANTAS staff and the media who report on such matters, just as much from the QANTAS board.

    I am a strong believer that with the right mindset we as Australians can confidently compete on the world stage, whilst also being fair to the people we employ.

  • 39
    Ben Sandilands
    Posted January 8, 2014 at 10:11 pm | Permalink

    If Qantas and Jetstar management had been more forthright in their initial testimony to the Senate I think there would be more political capital left in the kitty.

    Such as admitting that it tried on a tax dodge, and got caught. It is lack of candour and accountability that troubles me, and I’m not alone, particularly in relation to such episodes as the totally unplanned grounding of customers and the sudden cessation of the alleged ‘death threats’ which diverted police resources in NSW into a special task force.

    I just can’t accept the conduct of Qantas over the past five years, and with utterly no chance that this management is going to have any answers (other than selling stuff that isn’t prohibited by the act) I think it appropriate to carefully asses every single word it says, and do reverse audits on promises never kept.

    The role of the media ought to be to ask questions and do research, not regurgitate press releases, and in some cases, claim them as original work.

  • 40
    Flying High
    Posted January 9, 2014 at 12:43 am | Permalink

    Travel Hound you have provided an excellent response which eloquently addresses the commercial realities that many cannot grasp.

    One of the major challenges of this debate on Qantas is that the iconic airline touches so many people and there are many who are experts in their respective fields in the airline industry but they do not necessarily have a very strong grasp of economic and commercial matters.

    Airline engineers, pilots, journalists (I am not taking a swipe at you Ben) can be experts in their respective fields however that does not make them expert economists or financiers.

    If you visit the PRUNE forums and view the latest arguments being mounted by the ALAEA and their members to take on Qantas you can immediately see how lacking they are in commercial sense. They may be bright individuals but in terms of commercial intelligence they are a basket case.

    Qantas is a publicly listed company that employs many good people. It operates commercially and its motives are commercial.

  • 41
    Red Devil
    Posted January 9, 2014 at 9:34 am | Permalink

    Travel Hound, You are obviously attempting to justify what has occurred and I applaud you for it but the truth should be exposed for the sake of the shareholders(they own the company after all not the board and/or management).

    I agree with Ben the concept is good but the truth lies in the detail. DO your self a favour Mr Travel Hound and look into the books of the various franchises and you will see SIGNIFICANT loses to the holding companies OWNED by Qantas. Where did “Orangestar”(former owner of Jetstar Asia) go and why did it cease to exist, I will tell you why, it was bankrupt with several million dollars and years of loses and could not meet it’s obligations. It was bought out by “Newstar”(again owned by Qantas) as a “going concern” with “good will” to the tune of several million and then went on to suffer loses in the region of several hundreds of millions of dollars all known about by the board I would assume. You speak of continuous disclosure and “Commercial In-Confidence” but surely the shareholders should know this information because I can assure you it is not easy to find and it is drowned out by the various Franchises turning a “profit”, while in essence this is correct the truth lies hidden in the detail in off-shore accounts published to very few people and not freely available.

    ASIC recently changed the continuous disclosure rules to address failings by many major companies such as NuFarm, Leightons, James Hardie, David Jones and Fortescue but it appears more work needs to be done. I accept that ASIC is underfunded and has limited resources and like the SEC in the United States lacks the intelligence to keep up with major multi-national companies like Qantas.

    As far as the safety is concerned it does highlight a huge emphasis on cost cutting and we are lucky not to have seen a tragedy in Australian skies but risk takers(gamblers) are known to push the envelope. The recent Senate Inquiry into the Pel-Air accident highlights the problems we have with CASA and ATSB which to date has not been dealt with but fingers crossed the new Minister will address. Australians are like most world travellers these days and are willing to take on a “unknown acceptance of risk” assuming that all airlines operate to the same standard and that is certainly not the case.

    I agree with your last statement that ALL parties need to look at this problem and the staff(unions cause they are the same) does not trust the current board/management and it will take a new management team along with the Australian Government to really take drastic action on productivity but also provide an environment where the Australian based airlines(all) are allowed to compete. To do that would mean the Government drastically changing the business climate by addressing capital investment(accelerated depreciation) and tax relief. To compete against the Middle-Eastern and Chinese carriers then zero tax(ain’t going to happen as it appears we are broke) and lower costs at Australian Airports(Macquarie won’t like it but tough). The sooner the better.

  • 42
    Dan Dair
    Posted January 9, 2014 at 10:43 am | Permalink

    Qantas has ‘invested’ (or squandered) a phenomenal amount of money in the various JetStar franchises.
    For all that the Qantas annual report, such as it is, reports profitability & potential, I can’t see from where these multi-millions of dollars are going to come back to the parent company.

    The purpose of being in business is to make profits.
    You invest in a start-up business to make profits in the long-term, knowing that you are just paying out in the short term.
    Ten years on from it’s inception, JetStar is still in ‘start-up’ mode. Gobbling up working capital.
    It may be ‘profitable’ in certain areas, but this is a ‘wiping-it’s-face’ profitable.
    There are no obvious signs of any return of capital back to the investor, nor of any substantial profits or dividends.

    How long does Qantas expect to be subsidising JetStar for.?
    When will shareholders stop investing.? (if they haven’t already)

    Has anyone, anywhere got a firm and fixed idea (as in, a date or even a year) when they will say that JetStar will either;
    Repay significant amounts of investment capital back to the parent company.? (By significant I mean 25% or greater)
    or,
    Make a substantial dividend payment back to the parent company.? (eg. more than $1 per share)(Always assuming that there actually are a significant number of shares which accurately reflect the level of investment)

    I suspect the short answer will be, No.
    The longer answer will have stuff about vagaries of the market & not yet achieving potentials in it.

  • 43
    moa999
    Posted January 9, 2014 at 10:59 am | Permalink

    Dan Dair,

    Heaven forbid we apply the same analysis to Qantas Mainline. Billions of dollars in invested capital in large planes (A380s, 747s, A330s, 737s) let alone what is invested on new shiny Lounges, Terminals, Maintenance sheds, Catering, and yet it appears that International hasn’t made a profit in years and domestic is losing money at present.
    There is far more shareholder $$$s invested in mainline than in the capital light Jetstar.

    Note also from the Qantas financial results (if of course you put any credence to them) that Jetstar (admittedly mostly the Australian domestic operations as they are the largest) have delivered Qantas EBIT of almost A$250m over FY12/FY13 – off a far lower investment basis than the Qantas operations.

    Reality is the Jetstar domestic operations are paying for the international expansions, whether in time this will be a good thing – only time will tell, but they aren’t an internal parasite. If Qantas didn’t have Jetstar I have no doubt we would have LionAirAustralia or AirAsiaAustralia or a much lager TigerAustralia causing the same changes within the aviation market.

    The real problem is with Qantas mainline itself – both International and Domestic.

  • 44
    Bad santa
    Posted January 9, 2014 at 12:11 pm | Permalink

    “The real problem is with Qantas mainline itself-both International and Domestic”
    I implore you to look at the record for Domestic and International since the Jetstar experiment began.
    Domestic has until very recently been the cash cow for the Qantas group. Typically making around 400 million per year. It has basically propped up the Group. It’s the stubborn 65% line in the sand that is now hammering both domestic and Jetstar Australia.
    As you know, most of this money was not reinvested in mainline. It was pumped into expanding the Jetstar franchise.
    International was always a tough business. No denying that. But when most of the revenue is spent on expanding the new franchise and your competitors continue to improve their product it gets more and more difficult to compete.
    Let’s say it takes 10 hours to fly to Hong Kong. That’s 100 tonnes of fuel with a 747. That’s 70 Tonnes with a 777 which carries a comparative load. Lets say there are 10 return flights a week. That’s 600 tonnes of fuel differential. In a week. 600,000 kg. I know you’ll say “yes yes but the lease costs on new aircraft etc etc” but the truth is they’d be payed off by now if the right fleet decisions had been made at the right times.
    The fact is Mainline International still has a very tired fleet comprising 747s and 767s which it’s competitors disposed of years ago. Just look out the window when you taxi around Melbourne and Sydney airports.
    By the way, I believe the A380 was another poor fleet decision which I’m happy to debate.
    Given the revenue transferred to Jetstar and the cannibalisation of the mother with infrastructure use and flights regularly competing to the same destination at almost the same time no wonder QF employees don’t feel warm and fuzzy about Jetstar.
    I assure you they would if it was having a positive net effect.
    The bottom line is that the Group Profit has plummeted under this management. Segments of the Jetstar business may be profitable (???) but the NET EFFECT is that the group as a whole has been smashed. It’s right there for all to see despite the cloaking of some figures.
    And let me make one more point about the people on this forum. Perhaps some people don’t know commercial, but they might know Aviation. And it’s funny how just before an Airline goes under all the commercial people say everything is ok and the aviation people especially those at the coal face say we’re screwed. I’ve seen it all before.
    And the commercial people when private equity takes over and it gets broken into bits and Joyce gets his golden handshake will still find a way to say he did a marvellous job.

  • 45
    Travel Hound
    Posted January 9, 2014 at 2:33 pm | Permalink

    Hello Red Devil,

    In business it is very rare to find Cinderella type characters. Often business is compromised by the interests of others and as such management are often placed in very difficult situations. I think this represents facts.

    For instance (and I don’t want to dwell on this point too long) if we have a look at the VIAH entity and how it was able to contravene the spirit of the ANA, it just didn’t happen with some wizz-bang lawyer coming up with a corporate structure that allowed compliance. I would suggest, Virgin Australia in structuring the entity would have sort the support of government and the opposition of the time. For this arrangement to win support, in essence back room deals would have been done (not suggesting criminality, but legislative ineptitude).

    I am not totally aware of the financial performance of the Jetstar Asia entity and its various holding companies to properly respond to your comments. Obviously, you have more information on this, than I do. All I can say is there has been a lot of water under the bridge since (2009) Newstar took over from Orangestar as the operating entity. I believe, since this time the performance of Jetstar Asia has somewhat stabilised.

    Again, there are no real surprises here. I have referenced the above information from memory with the majority of my information coming from QANTAS statements to the market and various commentaries from the media and analysts. From the information that has been available to the market, you don’t have to be an Einstein to realise the previous performance of Jetstar Asia had been less than impressive.

    You raise the issue of off-shore accounts and entities hiding profits/losses, etc. You are actually raising an issue that is very significant for Australia. With many businesses now engaging in “Price Transfer” (transfer of profits to low taxing regimes), economists are looking at ways to secure taxes going forward. Some are seeing an increase in the GST as one way to secure tax revenues.

    For interest sake, the governments own Future Fund has entities in low taxing regimes (Cayman Islands) as a means for improving ROI’s on its investments. Like it or not this is a part of doing business.

    You raise the continuous disclosure rules and give examples of other companies. I could probably add a few more examples to that list and give first hand accounts of how they have not complied with these rules.

    You raise your concerns about maintenance. I have no real information and as such all I can suggest is the governments current enquiries would seem to confirm there are some legitimate concerns.

    So, we come to the point of QANTAS and the main issues that are affecting the business. In real terms, even though the issues you mention are not desirable, they are not central to the current issues affecting the performance of QANTAS. Realistically, many of the issues you mention are not associated with the current management team or if there is an association, the issues are known and well documented in the public realm.

    So, the questions become what are the real issues for QANTAS? Probably, the first and most important issue is to do with the role of government and current legislation that disadvantages QANTAS in a competitive market place. In yesterday’s The Australian there was an opinion piece from a government minister expressing his views on current aviation legislation and its affects on QANTAS.

    The second, and this is probably going to be the hardest issue to tackle, is the legacy work practices and conditions that go back to when QANTAS was owned by government and transferred to the private sector. To put it simply there is a massive cost involved in restructuring this part of the QANTAS business.

    Resolution on both of these issues are significant for the future well being of QANTAS and subsequently Australian jobs.

    Where some see a management team loosing money on Jetstar or market share with the reduction of routes, others see a management team actively engaging with government and its employees to re-structure the company.

    Where some focus their energies on discrediting the current management team, others focus their energies in determining where the real issues lie.

    Where some see the solution to the problems being simply the sacking of the current management team, others see the complexities associated with dealing with various stakeholders (government, unions (employees), investors), current legislation, a very competitive market place and the difficulties associated with navigating a re-structure of the business.

    From where I sit the current management team are properly focusing their energies on the areas of the business that need the most attention.

    Considering the magnitude and difficulty of the task, I am not going to sit here and enter into a game of blame (There aren’t too many innocent parties here – Government / unions / investors / QF management), because that focus’s on the past and not the future.

    Obviously, many QANTAS employees face the prospect of loosing their job, having work practices changed or having their entitlements re-structured. This will create a certain amount of anxiety and is expected. Ultimately, focusing on this anxiety and not the end solution will only prolong a saga that in real terms has been going on for too long now.

    At the end of the day, regardless of our differences of opinion we both come to the table with similar objectives. The well being of QANTAS (and Australian businesses in general) and as a consequence retained jobs in the industry.

    The longer this saga goes on and the more desperate the parties become the prospect of retaining investment and jobs in Australia simply becomes harder.

    So at the end of the day we all have a choice.

    Do we continue with a simple blame game or do we focus our energies on understanding the real issues that will allow for continued investment in Australian businesses and jobs, now and in the future?

    I don’t know about you, but for me the answer is simple!

  • 46
    patrick kilby
    Posted January 9, 2014 at 3:10 pm | Permalink

    Red Devil I have not idea where your “get an Australian to run Qantas”, comes from, as we already have one running the company (and obviuosly you don’t like this bloke); unless of course you are joining the Hansonites, that argue unless you were the gaolers (not the convicts) in the early 1800s, your passport means nothing.

  • 47
    reeves35
    Posted January 9, 2014 at 3:51 pm | Permalink

    No one disputes the question as to whether Qantas is facing a complex environment. Of course it is. The question is whether the management and board have performed well in handling these issues and from my perspective, as a shareholder, I would have to say it has not.

    The role of the board is to maintain and generate the wealth of the shareholders. This cannot be disputed. No matter what timeframe you pick, 18 years, 10 years, 5 years, 2 years, 1 year, six months, the Board has fundamentally failed and shareholder wealth has been lost. As a guide the ASX has long term average growth of around 7% so any company that consistently fails this is losing value for its shareholders. Qantas shareholders are going backwards.

    Meanwhile we have nothing but platitudes from the chairman and CEO about how it is all going swimming…just don’t ask them when the shareholders will something for their dollar. We don’t even have a coherent strategy to pin our hopes on. No one has taken responsibility. This failure of culture is infecting the organisation.

  • 48
    Zarathrusta
    Posted January 9, 2014 at 3:55 pm | Permalink

    Given their access to bonuses etc., there really needs to be a law where the public and shareholders can get at directors for criminal negligence.

    If these A320s are sitting idle, why haven’t they leased them out for the time being?

  • 49
    Bad santa
    Posted January 9, 2014 at 4:59 pm | Permalink

    Oh man. Travel hound. One more try before I give up.
    You really believe the QSA and government legislation is the reason QF is where it’s at? It’s hardly the most important problem facing Qantas. Nice if its amended but hardly a panacea.
    The legacy work practices are a problem but let me point out that some of the worst work place alterations were made long after QF was no longer government owned. To say that the management is actively engaging with its work force is at best mischievous and at worst totally ignorant.
    Employees tried repeatedly to engage with management to come up with efficiencies but management had already decided to shut down the Airline and engage FWA which achieved virtually nothing.
    Sorry, that’s incorrect. It achieved a 200mil loss and the permanent defection of thousands of customers and further damage to the brand.
    Of course there are some who think a change of management is the best solution. This mob won’t change direction as its an admission that the path to a 600mil loss was the wrong one.
    They’ll now start selling stuff. Probably the frequent flyer program as its about the only thing that still makes money.
    These blokes need to do a George Costanza and do the exact opposite of what their instincts are. Then I’d be happy to retain the board.
    From where you sit this management is doing a good job?!
    You must be on mars or the board. You certainly couldn’t possibly be a shareholder.
    Fair dinkum. You’d probably say Jack the Ripper was just misunderstood.

  • 50
    Red Devil
    Posted January 9, 2014 at 5:26 pm | Permalink

    OK you got me, Alan Joyce is an Australian. I asked an Aer Lingus Captain recently whether he wanted him back and he went into expletives saying what you could do with him and it wasn’t nice so he left Ireland and now calls Australia home. I think Qantas Employees will have similar feelings for him. He is not a popular chap, anywhere! To solve this problem you have to first recognise there is one and he refuses to do so. Until he admits that he has stuffed it up big time then we have no hope of change and addressing the core problem and that can be dealt with but until he admits the staff are the part of the solution then it will continue to be a mess.
    Bad Santa has summed it up, the staff have tried to engage and come up with savings that would go a long way to fixing this mess but because of Mr Leigh Clifford who seems intent on destroying unions instead of acknowledging that the unions are the staff then we are never going to get a solution. Mr Clifford nearly destroyed Rio Tinto in his ideological endeavours and Sam Walsh made a point that you can work with Unions if you are honest and forthright and had done so to good affect. Nothing wrong with FWA but I can assure there is a lot wrong with management!

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