QANTAS....not good news.

[ramblingboy42]

After reading this I think it's time to cash in my frequent flyer points....wine would be good.....before they dishonour them in the name of cost cuts.

We lost flights booked to Fiji with Ansett for the same reason.....still awaiting our dividends as creditors.

Qantas cops second ratings downgrade to junk - ABC News (Australian Broadcasting Corporation) (http://www.abc.net.au/news/2014-01-09/qantas-cops-second-ratings-downgrade-to-junk/5192252)

[trog]

the conspiracist in me says the current management engineered the "downfall" so as there would be a lot less outcry in flogging it off. What is next in line , Aus. Post ?

[UncleHo]

QANTAS should never have been privatised,:mad: and seeing that is our national carrier it should have stayed a wholey owned Govt. entity :)

And not run by that little Irish Git!

[superquag]

the conspiracist in me says the current management engineered the "downfall" so as there would be a lot less outcry in flogging it off. What is next in line , Aus. Post ?

Not a conspiracy theory... much more devious things are done in the world of business...and politics.

Yes, the German 'Bundespost' was sniffing around Australia Post many years ago. - coming from a manager at AP

[BMKal]

After reading this I think it's time to cash in my frequent flyer points....wine would be good.....before they dishonour them in the name of cost cuts.

We lost flights booked to Fiji with Ansett for the same reason.....still awaiting our dividends as creditors.

Qantas cops second ratings downgrade to junk - ABC News (Australian Broadcasting Corporation) (http://www.abc.net.au/news/2014-01-09/qantas-cops-second-ratings-downgrade-to-junk/5192252)

Thanks for the reminder. I've been sitting on quite a few frequent flyer points for a while too - was thinking a while back that it might be wise to cash them in. Might have a browse through the Qantas shop this weekend. :D

[bobslandies]

the conspiracist in me says the current management engineered the "downfall" so as there would be a lot less outcry in flogging it off. What is next in line , Aus. Post ?

Yes:

Australia Post sell-off idea sparks angry debate (http://www.smh.com.au/federal-politics/political-news/australia-post-selloff-idea-sparks-angry-debate-20140106-30dmt.html)

Australian Post Privatisation Debate Continues Despite Gov't Denial - International Business Times (http://au.ibtimes.com/articles/533382/20140108/australian-post-royal-mail-australia-tony-abbott.htm#.Us9ro564VH4)

Quote:

"Stephen King, a former ACCC commissioner, supported the sale of Australian Post with conviction. He remarked that the national broadband network will make the traditional letter redundant. Mr King believes the Australian Post should be sold to the private sector."

If this is the quality of their information one might well ask why would anyone take notice of the ACCC?

Australia Post initially survived the internet by delivering junk mail, franchising and gift type shop licenced outlets but with the astronomical growth of ebay and the internet "mail order" economy - both local and international, outgoing and incoming - it is now operating well even if our parcel charges are sometimes excessive.

Bob

[peter51]

BUMP. If you really want some insight on the quality of current financial
management at QANTAS - here is a reply by DR tony Weber who was chief economist to QANTAS 2004 - 2011 in response to a slandering by the current CO Evans.

Former Qantas Chief Economist Zt Weber replies to CFO Aevns article
BEN SANDILANDS | JAN 31, 2014 5:47PM

One of the fairness tests in media is the right of a prompt reply when someone is personally attacked for their opinions. Plane Talking is happy to assist Fairfax Media in meeting its obligations by publishing unedited the following article by former Qantas Chief Economist Tony Webber.

Last week Gareth Evans published an article in the Fairfax Media entitled “Armchair Critics Take Flight of Fancy on Future of the Air” which takes aim at me directly – Armchair critics take flight of fancy on future of the air (http://www.theage.com.au/business/ar...123-31bnd.html)

I have asked Fairfax Media if it would allow me respond to the article but they haven’t returned my correspondences. I have written numerous articles for Fairfax Media over the past two years since my exit from Qantas.

This article is designed to set the record straight in relation to some of the commentary in the Evans article. It will also demonstrate how his article is proof that his own understanding of aviation strategy and risk management is profoundly weak.

Let’s start with the Facts

Gareth Evans began as CFO on June 15, 2010. When he started the Qantas Group share price was $2.64. Today it is $1.09. The Group hasn’t paid a dividend since the first half of FY09. The Group’s annual Profit Before Tax outcomes between FY09 and FY13 have been A$123m, A$116m, A$552m, A$95m and $192m. In FY08 the Group made A$1.4b. By most conservative markers, under the Evans watch the Group’s earnings and shareholder return performance have been a dismal failure.

Evans would have you believe that none of this is within his control. He’ll blame the economy, jet fuel prices, competitors, market capacity and an uneven playing field. He’ll never blame himself.

Let’s talk about the performance of the economy under the Evan’s tenure. Australian GDP has grown at or above 2% since he has been CFO. In FY12 GDP actually grew by 3.6%. Long run average GDP growth is around 3%. GDP growth has therefore been highly favourable for the Group over the Evan’s tenure.

The price of Singapore Jet Kerosene between FY10 and FY14 (to date) has averaged between $83 and $126 per barrel. The price peaked at $182 just prior to the GFC. Relative to this peak, the movement in the jet fuel price during the Evan’s tenure has been highly favourable.

The Australian dollar averaged between 88 and 103 US cents between FY09 and FY14 (to date). The long run average is around 70 cents. The stronger Australian dollar has been an enormous source of cost benefit for the Qantas Group since Gareth Evans has been CFO.

Over the past 10 years, domestic and regional market capacity has grown on average by 7.2%. Between FY09 and FY13, capacity grew between 1.2% and 8.3% with an average of 4.4%. There is little evidence to suggest that Qantas can blame extraordinarily high market capacity growth for its woes. In fact, it didn’t complain between FY04 and FY08 when domestic and regional capacity growth averaged 9.9%.

References to Me

Evans says that I was a former finance employee. He doesn’t use the title I held before I left Qantas, which was the Chief Economist, to paint a picture that I was relatively junior and that my commentary and views were, and are, irrelevant.

Evans indicates that I was retrenched. This is a carefully chosen, emotive word suggestive of a position that Qantas was no longer in need of my services and that I was disgruntled. The facts, however, tell a different story. In early 2011 Evans came into my office and said that he didn’t know how to use me and that I was to now report to the Deputy CFO. If I was one dimensional and lacked a basic understanding of aviation, as he claims in his article, then why didn’t he make me redundant then and there?

Evans argued that he didn’t know how to use me despite the fact that I convinced Treasury to hedge fuel in Brent crude oil rather than West Texas Intermediate saving the company millions. He made this assessment despite the fact that I successfully convinced Treasury to adopt a more integrated approach to hedging fuel and operational foreign exchange exposures. And he formed this view despite the fact that I built the fuel hedge effectiveness testing framework that Qantas Treasury had been using for 4 years before I left, and quite possibly continue to use, resulting in a significant reduction in earnings volatility.

Knowing that a lower reporting line equates to doomsday in the corporate world, I made the decision to voluntarily make myself redundant. It was made clear to me by the deputy CFO that a position was available to me if I so wanted.

Thirdly, Evans argues in his article that I recommended a significant reduction in regional capacity. I never made such a recommendation. That is Evans naïve inference from a set of results that I presented to him in a CFO direct reports meeting. Let me explain.

Before Evans was CFO, I had constructed a mathematical representation of earnings on every single domestic and regional route flown by Qantas mainline, QantasLink and Jetstar. This model was able to quantify the impact of a number of different forces on profitability, including own and competitor capacity, the state of the economy and jet fuel prices. The model was designed to be an emotion-free decision making tool that would support, rather than replace, business decisions.

The outcome of that model at the time was that QantasLink had significantly more capacity in the market than was profit maximising. Evans inferred from this that I was recommending a significant reduction in capacity. I made no recommendations. I was only stating a set of findings. If I was to make a recommendation it would be to slow capacity growth until underlying demand caught up with supply. The most significant contribution of the model was that it was able to rank excess supply on every single route and that this could be used to target routes that were underperforming.

Coles and Woolworths

The Coles and Woolworths analogy is just nonsensical.

First of all, competition in the grocery market occurs between two very mature players. Competition between Virgin and Qantas is only around ten years old, while competition in the corporate segment of the airline market has only just begun. The competitive dynamics in the airline and grocery sectors are at completely different levels of maturity thus making capacity decisions in the markets non-comparable.

Secondly, capacity decisions in aviation are difficult to align with capacity decisions in supermarkets. Building extra capacity in the supermarket business is not just about opening new shops. Supermarkets can increase capacity, for example, by extending opening hours and by increasing check-out speed. Capacity is increased in aviation by increasing available seat kilometres, which can be achieved in a number of different ways. Comparing available seat kilometres to opening and closing shops is simply ludicrous.

Thirdly, aviation supplies a perishable good to the market. If seats remain unsold on a flight they can’t be placed in inventory and sold a later date, unlike most goods sold in a supermarket. It is for this reason that capacity decisions in aviation are significantly more important than in supermarkets.

Fourthly, the trajectory of demand, which is a strong driver of capacity decisions, is different in the two sectors because the driver variables and the way they influence demand are quite different. Aviation is a discretionary good while groceries are non-discretionary. Groceries are relatively resilient to the business cycle, while the demand for air travel is highly exposed to it. The fact that the demand drivers and their influence are quite different means that a comparison of capacity strategies is utterly useless.

65% Market Share

Evan’s commentary on the 65% market share is completely flawed. He is preoccupied with the belief that those who disagree with targeting market share think that Qantas must reduce capacity, which will in turn provide competitors a ‘leg up’. He fails to understand that Qantas can concede market share simply by growing capacity at a slower pace than competitors.

The biggest issue with targeting a market share is that you lose control of capacity decisions. The airline that targets a market share must grow its capacity at the same pace as its competitors. This loss of control means that the airline risks a situation in which its competitor irrationally grows capacity too quickly. This risk is currently being realised.

The problem with the 65% market share target at the moment is not the 65% per se. The problem is that market capacity is above that which maximises profit for the market. If both Qantas and Virgin were to reduce capacity by 20%, and so Qantas were to preserve its 65% market share, then they would both be making an extraordinary amount of money.

Asian Strategy

Evans makes the claim that it is ‘breathtaking small mindedness’ to believe that Asia is a distraction for the Group. Let’s just consider what the Qantas Group has done in Asia in the form of its Jetstar investments and align this with the growth in Asian demand for air travel.

First of all, it is very clear that the Asian middle class is growing and that they will swap no travel or road/rail travel for air travel. But where is the middle class growing fastest? Is it in Singapore, Japan and Hong Kong where the Qantas group is focussing its Jetstar investments? I suspect that the middle class in each of these Asian countries has grown to a reasonably mature level.

The fastest rate of growth in the middle class will be in the likes of China and India. While this will drive some growth in inbound travel to Singapore, Hong Kong and Japan it is far better to capture this growth by positioning yourself in China and India.

Now think about the competition that Jetstar will face in its chosen Asian hubs. In Hong Kong it faces the might of Cathay Pacific amongst other smaller carriers, and for services into mainland China they face the big four Chinese carriers. In Singapore, competition comes from Singapore Airlines, Silk Air and Tiger Airways, while in Japan it faces strong competition from All Nippon, Japan Airlines, Peach Airways and Vanilla Air to name but a few. It is going to be exceptionally difficult for the Jetstar product to profitably break into these markets given the strength of competition and the maturity of outbound demand. This combined with the fact that it is facing a strong competitive threat in its ‘bread and butter’ domestic market means that, yes, Asia is a distraction at the moment.

Words of Evans Wisdom

I attended Treasury Risk Management meetings at Qantas every Thursday morning, almost without fail, for around 4 to 5 years. I started doing this well before Evans was made CFO.

When Evans became CFO he began attending these meetings. During one of those meetings, he presented a ludicrous personal view (not the Qantas Group view) that the Qantas business couldn’t survive $100 oil prices. I found this comment extraordinarily uninformed given that a record profit of A$1.4b was made in FY08, over which period the oil price averaged US$97.

Qantas is a great airline. I love the product and the people. I continue to have many friends who work there. Hopefully this great airline will have continued success into the future.

[peter51]

Im having issues with the bluetooth keyboard for the ipad
It should read
Former Qantas Chief Economist Tony Weber replies to current CFO Evans article.

[Mick_Marsh]

the conspiracist in me says the current management engineered the "downfall" so as there would be a lot less outcry in flogging it off. What is next in line , Aus. Post ?
I don't think you need to ask that question.
Yes. You are absolutely right.

[VladTepes]

The current management (the irish git) is interested in using Qantas to prop up Jetstar as the winner at Qantas expense and is doing a great job of just that. Arsehats

[DT-P38]

So who is going to kick that little ponce leading the downfall in the nuts? Oh yeah, that's right... he has family in the industry (for the next job) and wealthy mates lining up everyday to pat him on the back and get a slice of the shrinking pie at the top end of the structure.

Another filthy, lying, rich, pig with his nose in the trough this country has become. Share holders should be investing in forensic business malpractice investigations of board decisions and accounts and then taking the corporate mongrels into a class action.

As with all these "downturns" that shareholders and taxpayers suffer, I can never understand... Where has the money (company value) gone?

[Reads90]

Well I fly a lot with Qantas. In fact on a Flight on Monday.

I have Platinum Frequent Flyer membership with Qantas , Manly due to my company has a fly Qantas only policy.

I honestly believe that Qantas will be owned by Emirates by the end if the year.

All part if a master plain that has been building for the last few years with the help from the unions.

Qantas will be foreign owned and foreign based.

[Cobber]

I honestly believe that Qantas will be owned by Emirates by the end if the year. so do I. I've been saying for a couple of years that I think Emirates ownership is inevitable :(

What annoys me most about the Irish git in charge is that he seldom answers any of the hard questions, instead relying on his people to take the flack. Maybe it's a perk of being CEO but at the end of the day the buck stops with him :mad:

[Bigbjorn]

I have been flying with Virgin both local and overseas where they run a service. Qantas wore me down with poor service, stuff-ups, low staff morale. Very satisfied with Virgin as are my family who now also use Virgin exclusively where possible.

[Ferret]

Yep, cashed all my points in on a business class flight home from Europe.

[steane]

I have been flying with Virgin both local and overseas where they run a service. Qantas wore me down with poor service, stuff-ups, low staff morale. Very satisfied with Virgin as are my family who now also use Virgin exclusively where possible.

I fly a couple of times a month. Virgin think nothing of cancelling your flight or delaying it by hours. I was once booked on a 6am flight and recieved an sms at 1am the same morning to tell me it was cancelled. Ive sat at tullamarine and been bounced from one gate to another and then eventually to a different terminal before finally boarding a flight 3hrs after it was due to leave. When you travel a bit all you want is the damn plane to be on time or close to it. Virgin dont get that.

They also have noticeably less knee room on their planes, at least the ones I've been on.

I will never ever fly virgin again. Only qantas now for domestic flights. Two years flying qantas without issue. Gave virgin one go last year and they stuffed it up.

[beefy]

fly virgin every time even if I have to wait. much better then qantas. in the last 15 trips to the pilbara been upgraded every time.

[BMKal]

My experience is closer to what Steane has described.

Last flight booked with Virgin - Perth to Newman. Sat in the airport for nearly 3 hours waiting, with little to no advice as to what was going on. Flight was eventually cancelled - and then it took another two hours to get my luggage back from them.

Have told the girls in the office who book our travel never to book me on a Virgin flight again. ;)

A bunch of incompetent muppets if you ask me ......................

[weeds]

I just take the cheapest flight available within aus.......

I had to fly my bride Brisbane to Rockhampton at short notice just before xmas i.e. had her on a plane within 70 minutes of making the decision

to my surprise Qantas were the cheapest by close to $100 and extremely helpful over the phone esp. when they realised we were not actually at the airport

[VladTepes]

to my company has a fly Qantas only policy.



Who do you work for? Pleae tell me as I need to avoid buying from a company thats likely to over-price their product to cover such a policy...... :lol2:

I work for the gov't so "cheapest available fare" is the firm policy.

Fortunately Tiger is excluded from this policy as our bosses want to be reasonably sure we will turn up in the right city, on the right day. Or maybe it's a WH&S thing.....

[Reads90]

Who do you work for? Pleae tell me as I need to avoid buying from a company thats likely to over-price their product to cover such a policy...... :lol2:

I work for the gov't so "cheapest available fare" is the firm policy.

Fortunately Tiger is excluded from this policy as our bosses want to be reasonably sure we will turn up in the right city, on the right day. Or maybe it's a WH&S thing.....

Pacific Brands
You Can't help buying from them

Bet there is at least 7 of their items in your house right know and you don't even know it. More than likely have a few on you right now.

So Vlad you don't support an Australian owned group supporting another Australian company.

While your on your high horse Don't forget Jet Star is also Qantas.
What it really means is we can't fly Virgin or tiger airlines. Basically not usingn foreign airlines

[weeds]

Who do you work for? Pleae tell me as I need to avoid buying from a company thats likely to over-price their product to cover such a policy...... :lol2:

I work for the gov't so "cheapest available fare" is the firm policy.

Fortunately Tiger is excluded from this policy as our bosses want to be reasonably sure we will turn up in the right city, on the right day. Or maybe it's a WH&S thing.....

out of the last four return trips I have done Qantas was the cheapest option twice......plus I get something to eat thrown in

are you sure the government is cheapest available? normally they locked into a contract where I reckon at the time of booking there would be a cheaper flight on the same plane

[numpty]

I fly Brisbane/Sydney/Ayers Rock/Sydney/Brisbane every month with Virgin with a Government owned company (Air Services Australia) Cheapest available flight is how its booked.

We used to fly Qantas as they were the only airline that came here, but they pulled out and Jetscare took over but they only fly 4 days a week and we needed the flexibility of every day flights. Virgin started coming here around the same time.

I'm lucky enough to fly Business Class too :D which is great on the way home, but wasted on the way out here. Their service has been quite good so far.

Just as an aside, it is bucketing down with rain here at the moment too

[Tote]

out of the last four return trips I have done Qantas was the cheapest option twice......plus I get something to eat thrown in

are you sure the government is cheapest available? normally they locked into a contract where I reckon at the time of booking there would be a cheaper flight on the same plane

Govt is most definitely best fare of the day. When booking you get a window around your nominated travel time where you have to take the cheapest flight. Doesn't make much difference domestically but it can cut costs by thousands on international travel
Regards
Tote

Sent from my Nexus 7 using AULRO mobile app

[Bigbjorn]

Pacific Brands
You Can't help buying from them

Bet there is at least 7 of their items in your house right know and you don't even know it. More than likely have a few on you right now.

So Vlad you don't support an Australian owned group supporting another Australian company.

While your on your high horse Don't forget Jet Star is also Qantas.
What it really means is we can't fly Virgin or tiger airlines. Basically not usingn foreign airlines

Ah, Pacific Brands, another "Australian" company manufacturing in China.

[Reads90]

Ah, Pacific Brands, another "Australian" company manufacturing in China.

No
Not all of it
My company part of Pacfic brands has nothing to do with China and has a manufacturing factory in Nsw and Vic.

Don't believe everything on today tonight and shows like that. Their motto is the same as green peace. " don't let the truth get in the way of a good story. "

Funny thing is the company I work for has 70% of the market in Australia and that means our product is in 70% of houses if not more and most people don't even know it. Don't know its a pacific brands product and don't even know it is Australian made and owned.

[mrapocalypse]

No
Not all of it
My company part of Pacfic brands has nothing to do with China and has a manufacturing factory in Nsw and Vic.

Don't believe everything on today tonight and shows like that. Their motto is the same as green peace. " don't let the truth get in the way of a good story. "

Funny thing is the company I work for has 70% of the market in Australia and that means our product is in 70% of houses if not more and most people don't even know it. Don't know its a pacific brands product and don't even know it is Australian made and owned.

Sometimes in this country it's better to keep one's head down lest your poppy get chopped off.