QAN - Qantas Airways

[CanOz]

Downgraded to junk...

 

[piggybank]

 

[Valued]

I think some people are going to get trapped here trying to pick the recent price action as a market bottom. It's been in a line since 24 December. Prices are either forming a line of support or bobbing up against an area of resistance. I would say this is an area of resistance. At any rate, there is a huge supply zone above the current price where people who held are now going to come back into break even. Those who bought on the lows, sub $1, are going to eventually notice this as an area of resistance and sell into it. This will end up trapping some people.

This is one of the cases where people should go look at the balance sheet and see just how much this company is in bad shape. QAN is returning less than a term deposit in equity year on year. People would do well to factor in interest rates. If a company is getting 3% in returns per year and paying no dividends, it makes no economical sense for anyone to hold it when they can put their money in a term deposit and get 4% without any risk. There is no chance of QAN coming across a miracle like a gold explorer can find gold. It is what it is. Any changes will be slow and will take a long time.

Anyone who says this stock cannot get any lower is wrong.

 

[piggybank]

I think some people are going to get trapped here trying to pick the recent price action as a market bottom. It's been in a line since 24 December. Prices are either forming a line of support or bobbing up against an area of resistance. I would say this is an area of resistance. At any rate, there is a huge supply zone above the current price where people who held are now going to come back into break even. Those who bought on the lows, sub $1, are going to eventually notice this as an area of resistance and sell into it. This will end up trapping some people.

This is one of the cases where people should go look at the balance sheet and see just how much this company is in bad shape. QAN is returning less than a term deposit in equity year on year. People would do well to factor in interest rates. If a company is getting 3% in returns per year and paying no dividends, it makes no economical sense for anyone to hold it when they can put their money in a term deposit and get 4% without any risk. There is no chance of QAN coming across a miracle like a gold explorer can find gold. It is what it is. Any changes will be slow and will take a long time.

Anyone who says this stock cannot get any lower is wrong.

Hi Valued,

Thank you for sharing your view(s) with us. I read the other day that they have been voted the safest airline (in the World) by AirlineRatings.com with Air New Zealand coming in second (who's share price is presently hitting 6 year highs on the ASX:AIZ). If the viability depended on how safe the airline was, then Qantas wouldn't be far off the top - which has a fatality free record in the jet era (since 1951). To read more about this can be seen by clicking on this link:- http://www.airlineratings.com/news/201/qantas-the-safest-airline If that doesn't work then copy & paste the address into an empty address box.

Do you think if Alan Joyce was to leave the company (either by being pushed or his own choice), would it have a positive (or negative effect) on the share price?

Cheers
PB

 

[Valued]

Hi Valued,


Do you think if Alan Joyce was to leave the company (either by being pushed or his own choice), would it have a positive (or negative effect) on the share price?

Cheers
PB

It would depend if the stock was in professional accumulation or distribution as to whether it would go up or down. A large operator could take advantage of the news to how they like.

I don't think you can value a company based on how many people they kill or don't kill either lol. Do people pick QAN because they think there is less chance of them dying or do they pick the airline with the lowest price?

 

[galumay]

I have always liked Buffet's thoughts on airlines,

“If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money.

But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in.

You’ve got huge fixed costs, you’ve got strong labor unions and you’ve got commodity pricing. That is not a great recipe for success.

I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: ‘My name is Warren and I’m an aeroholic.’ And then they talk me down.”

 

[piggybank]

Do people pick QAN because they think there is less chance of them dying or do they pick the airline with the lowest price?

Actually I bet a few people (who have a phobia of flying) go with Qantas believe it or not. I remember shortly after 9/11, that a married couple decided to catch a train (because of a fear that there maybe another hijacking) to go to their son's wedding. Unfortunately though the train they were travelling on to their sons house got derailed resulting in several deaths including this couple. In matter of fact it is safer flying on an airplane than any other mode of transport.

http://www.bbc.com/travel/blog/20120127-travelwise-what-is-the-safest-mode-of-travel

http://www.businessinsider.com.au/f...ds-of-dying-as-a-pedal-cyclist-at-1-in-4982-1

http://www.policymic.com/articles/53293/7-reasons-flying-is-still-the-safest-way-to-travel

 

[Valued]

Actually I bet a few people (who have a phobia of flying) go with Qantas believe it or not. I remember shortly after 9/11, that a married couple decided to catch a train (because of a fear that there maybe another hijacking) to go to their son's wedding. Unfortunately though the train they were travelling on to their sons house got derailed resulting in several deaths including this couple. In matter of fact it is safer flying on an airplane than any other mode of transport.

http://www.bbc.com/travel/blog/20120127-travelwise-what-is-the-safest-mode-of-travel

http://www.businessinsider.com.au/f...ds-of-dying-as-a-pedal-cyclist-at-1-in-4982-1

http://www.policymic.com/articles/53293/7-reasons-flying-is-still-the-safest-way-to-travel

I am saying this while meaning no offense at all to you. A large percentage of people think the way you think, including some successful traders. For example, Gann said a lot of stupid stuff to be perfectly honest. The guy was a lunatic lol. What you just said though is the reason people lose money. What they do is they take an idea, such as QAN being the safest airline, and find reasons for it to manifest in their views. What you have done is pointed out how a few people may have a fear of flying. This has not even reached the stage of confirmation bias since you have not met these people. However, given the small percentage of them in terms of overall customer base, the effect is negligible. Further, if you did know of some, it would likely amount to confirmation bias. Moreover, if people were scared of flying, they would likely aim to avoid flying and not become frequent customers of a particular airline.

What you have said about the train derailing is a strawman fallacy. Planes may be safer than trains or they may not be. I am not sure. I am not an engineer. The fact that a train has once derailed is not evidence for that fact. However, if what you say is true, it's irrelevant. A train derailing is not going to make QAN a better company than it is now. It's not going to make us buy shares in this company.

Trying to fit the evidence to one's view point is a mistake most people make. They cannot admit to themselves that they are wrong. The reason is that logic isn't taught in many schools. It is taught in some schools through electives, but it's relatively rare. I am fortunate enough to know a lecturer of logic and philosophy. Most people do not learn things like confirmation bias, logical fallacies and how deductive and inductive logic works. Learning propositional logic is not hard and it doesn't take much work, just most people do not know it exists. It's what holds many back from success in their day to day lives. They lack the logic to defend themselves against attacks by those that would have their opinion influences e.g. advertisers, the media, politicians who intentionally mislead etc.

 

[galumay]

...The reason is that logic isn't taught in many schools. ...

Agree totally, I found the study of behavioural psychology one of the most important tools to improving my investment (and everything else) decision making.

A great starting point is Munger's lecture, "The Psychology of Human Misjudgment"

 

[Smurf1976]

I suspect that Qantas pulling out of Tasmania will in hindsight be seen as the beginning of the end in many ways. Whilst Hobart and Launceston are small markets compared to Sydney or Melbourne, I do see it as significant that the supposed "national" airline no longer flies to every Australian state.

"Qantas" services to Tas are now either by "QantasLink" or in most cases Jetstar, there no longer being actual Qantas mainline services. And Jetstar is, of course, notoriously unreliable.

It's a small decision in terms of their overall operations, but I do see it as symbolic of Qantas' broader problems. By any reasonable definition, Australia's "national" airline is now Virgin, not Qantas, since Virgin is the only airline that actually flies under its' own name to every state plus the NT and ACT.

So far as safety is concerned, I don't dispute Qantas' track record but I do have concerns. I've never worked for an airline, but I've spent plenty of time working with assets where significant maintenance is required to keep them going. That's either work "on the tools" or with planning the work of others. And it has always been the same story. When times are good a lot of maintenance gets done. When times are tough, maintenance is always the first thing to be cut at least in terms of budgets. At best, it gets done more cheaply or less often. At worst, it doesn't get done at all.

I'm aware that aviation is a highly regulated industry in terms of safety, but I find it hard to believe that an airline struggling financially would be maintaining things as well as one that's profitable. Maybe they do, but I seriously doubt it. All that gives me a nasty "it's only a matter of time" feeling so far as safety is concerned.

From an investment perspective, I'm keeping well away from this one. It looks as though, slowly but surely, it's falling apart.

 

[matty77]

Joyce is there to run it into the ground so then Jetstar can "take over" what Qantas left behind (including the 30 year baggage that QAN carries) no pun intended.

QAN was dead 5 years ago but nobody has noticed yet.

 

[Garpal Gumnut]

An interesting article from Grace Collier in the Weekend Australian.

http://www.theaustralian.com.au/opinion/columnists/workplace-apartheid-clips-wings/story-fnkdypbm-1226804170465

It indicates that the company is hog-tied by an ageing workforce with a sense of entitlement, on unsustainable wages.

Anyone putting their hard earned in to QAN after reading it, needs their head examined.

Nobody can save this union bedevilled company with a dual pay structure depending on deals struck in the sixties, on seniority.

Best it go to the dogs, and be resurrected as a new company.

gg

 

[galumay]

Nobody can save this union bedevilled company with a dual pay structure depending on deals struck in the sixties, on seniority.

Best it go to the dogs, and be resurrected as a new company.

gg

Typical Murdoch rubbish IMO, wages arent the problem with this or any other airline. The problems are mainly structural and common to all all airlines. Labour costs are actually are fairly small % of the business costs.

 

[tinhat]

I haven't read through this thread for some time and I haven't read the recent flurry of posts. I just wish to remind readers that - in terms of market economics - there are no profits in airlines. International air travel is a fully contestable market. There is no profit in the long run.

I looked into REX a while ago because it had a decent dividend yield and seemed to be making reasonable returns in servicing regional domestic routes. Turns out it was on the back of government subsidies and perhaps the mining boom. I did not buy as their business did not seem compelling and I know that airlines do not make money.

There are two industries I studied whilst an undergraduate with a microeconomics minor at UNSW some 25+ years ago. Airlines and electricity distribution. I can tell you - and all power to the academics that taught me against the fancy-pancy intellectualism of the time (remember that John Hewson was Professor of Economics at UNSW at that time) - that what I was taught about those two industries and what was the academic observation of them turned out to be 100% correct.

The airline industry is highly contestable and there are no super-normal profits.

 

[coolcup]

I haven't read through this thread for some time and I haven't read the recent flurry of posts. I just wish to remind readers that - in terms of market economics - there are no profits in airlines. International air travel is a fully contestable market. There is no profit in the long run.

I looked into REX a while ago because it had a decent dividend yield and seemed to be making reasonable returns in servicing regional domestic routes. Turns out it was on the back of government subsidies and perhaps the mining boom. I did not buy as their business did not seem compelling and I know that airlines do not make money.

There are two industries I studied whilst an undergraduate with a microeconomics minor at UNSW some 25+ years ago. Airlines and electricity distribution. I can tell you - and all power to the academics that taught me against the fancy-pancy intellectualism of the time (remember that John Hewson was Professor of Economics at UNSW at that time) - that what I was taught about those two industries and what was the academic observation of them turned out to be 100% correct.

The airline industry is highly contestable and there are no super-normal profits.

Can you share the observation on electricity distribution?

 

[DJG]

The majority of Australian's would prefer to save 500 dollars and fly an inferior air line safety wise than fly the safest in the world. Look at the flurry of budget airlines.

Statically speaking there may be a higher chance of having a train crash or similar than a plane crash yet the change of survival from a plane crash is probably almost 0 in most cases. So therefore I view it has having no merit in general, let alone investing.

I'm also interested in the electricity distribution write up being an undergrad myself.

I'll be watching this thread with interest on what not to invest in.

 

[piggybank]

The majority of Australian's would prefer to save 500 dollars and fly an inferior air line safety wise than fly the safest in the world. Look at the flurry of budget airlines.

Well given that the majority of most people (here in Australia) don't purchase brand new cars made in Australia, it is not surprising that the car industry here is going to the wall. So if they don't want to help keep their fellow country folk in work, why should they care about Qantas flying into oblivion?:1zhelp:

In an earlier post I did on this thread pertaining "to a few people who prefer to fly with Qantas because of its safety record" has been taken out of context. After all how many people buy a car because of its safety rating?

Regards
PB

 

[coolcup]

After all how many people buy a car because of its safety rating?

It is actually one of the first things I look at. If it is not safe, then I won't feel right putting my family in it.

 

[DJG]

Well given that the majority of most people (here in Australia) don't purchase brand new cars made in Australia, it is not surprising that the car industry here is going to the wall. So if they don't want to help keep their fellow country folk in work, why should they care about Qantas flying into oblivion?:1zhelp:

Exactly, and it's usually the same people who are doing that are the first to complain that we're being bought out by foreigners not realising the contradictoriness of it all.

In an earlier post I did on this thread pertaining "to a few people who prefer to fly with Qantas because of its safety record" has been taken out of context. After all how many people buy a car because of its safety rating?

Regards
PB

I know of a few parents that will only allow their kids to buy their first car with decent safety ratings. I don't know what extent adults go to in order to make sure they only buy safe cars.

 

[tinhat]

Can you share the observation on electricity distribution?

Warning - Off Topic. As I recall, it was basically that a price regulated natural monopoly such as an electricity supplier has little incentive to minimise its costs, especially where the regulator sets price on a cost basis (cost plus margin) especially when management's remuneration is also based or justified by the turnover of the business. Management is more likely to feather their own nests, be more amenable to union demands and generally inflate their cost base.

This is also the case of pricing based on a return on investment model as is the case in NSW. The blatant "gold plating" of the electricity distribution infrastructure in NSW in recent years is a classic response to a poorly framed regulatory regime. Electricity distributors have been pouring money into inefficient infrastructure spending, relatively risk free (given that electricity demand is relatively inelastic and distribution is a natural monopoly), knowing that the regulator has to set a price that will guarantee a minimum rate of return on that investment.