Qantas quiet as deadlines for 787s, and job losses approach
A personal perspective
Qantas has been very quiet since late February when it outlined the massive job cuts that have yet to happen other than in a token way, and the Abbott cabinet slammed the money box shut on its fingers when it asked for a $3 billion unsecured loan.
There are however, timely reminders that investors, employees and any customers who give a damn anymore are drumming their fingers, waiting for the next stroke of management brilliance.
Such as this very interesting story in the Sydney Morning Herald.
It focuses on adding capacity to Jetstar domestic flights on routes in SE Australia where it can’t fail to take business away from the full service Qantas network, against the backdrop of morale boosting threats being made by management to mainline staff and by inference the prospect of their being reassigned to Jetstar.
Let’s widen the focus on Jetstar. Qantas has around 11 delivered but idle brand new A320s that have been parked for months at enormous costs awaiting expansion approvals for Jetstar Japan and approval to operate at all for Jetstar Hong Kong.
That’s around $US 4 million a month not counting finance charges and fixed costs including labour. That’s also the size of the Tigerair Australia fleet, which isn’t profitable either on the most recent Virgin guidance, but certainly isn’t idle.
To park a fleet of brand new jets costing a fortune for months that is the size of your competitor’s domestic low cost brand requires genius. And to pretend like Qantas has that these jets are variously ‘operational spares’ or just being lined up for the inevitable richly lucrative Hong Kong operation requires audacity. And a board and major investors that are brain dead.
Of course relief is at hand. In February Qantas said it was holding off on Jetstar Asia expansion. Great, after almost 10 years of snake oiling the promise of the Jetstar franchise in Asia, and diverting massive sums of money into its development, it’s so good it’s on hold.
The bad news is that Virgin Australia shows no signs of investing in a fleet expansion that would pick up the disenchanted from Qantas, or who will be very disenchanted if they discover that flying Qantas really means being shunted into Jetstar, and then remind Qantas of something it may have forgotten, which is that they have a choice.
This may also however be evidence that Virgin is rational. Having more customers than you can seat is much better than having more seats than customers. If Virgin thinks Tigerair is the answer …. No … let’s not even go there.
Late last week there was another Fairfax story which revisited the worst nightmare for many Qantas watchers, in that it quoted its chief executive international, Simon Hickey, as saying he believed the international business could return to profitability with its current fleet, particularly as its ageing 747s are retired.
That could be interpreted as meaning that Qantas will not take up its options for Boeing 787-9s , the second and much improved version of the Dreamliner as they start falling due, quite soon, for delivery slots which start to become available under those options in 2016.
It could also be interpreted as meaning that plans to keep the least aged 747s in service until the end of this decade or early into the next were being brought forward.
The refurbishment of Qantas owned A330s and the entry into service of brand new 787-9s are two capital expenditure items that Qantas watchers may have reason to fret about.
Yet the only material insight into the success of the current Qantas management’s strategies for international services so far has come not from Qantas, but Emirates, which is on the record as praising the flow of Qantas premium customers onto its A380s, under the ‘business’ partnership in which Qantas gave the Dubai based carrier its carriage of the kangaroo route markets to London from Perth, Adelaide and Brisbane for nothing.
And quit Frankfurt, another plus for Emirates and competitors such as Singapore Airlines and Cathay Pacific.
It’s an alarming outlook as Qantas implodes its way to success. The Jetstar franchise is on hold in Asia, new equipment purchases for Qantas are under a cloud, and while it stands still or goes backwards, its competitors are all growing, because demand for travel between Australia and the world isn’t standing around waiting for the Australian carrier to do something. Other than complain about everyone else and agitate for corporate welfare from government.