QAN - Qantas Airways

[Wysiwyg]

What a shocker. 5,000 jobs gone. Routes axed including Perth-Singapore (which is pretty ridiculous for a so called national carrier). 50 aircraft to be sold or deferred delivery. The board and Joyce need to be sacked.

Yes.
The managerial plan for an efficient and profitable company has failed yet it's the employees that have to take that responsibility. Why are staff employed when not absolutely required? Joyce is a failure and should go now.

 

[McLovin]

No.

The performance of the airline is unacceptable and unsustainable. The performance of the Board and Mr Joyce have been awesome. Sack everyone except the Board. That way it will reduce losses to ~$10m a year - a significant turnaround. It will also continue to invest in new air hostess attires to show their committment to better customer service.

Oh the new uniforms make a huge difference!

I was speaking to someone who works at Qantas, basically the problems go back to Dixon. He decided that Qantas should buy those A380's, which internally are considered to have been a very poor decision. They are too heavy and when they're carrying a full load of passengers (a) have to fly slowly to reduce fuel burn (b) have to carry significantly reduced amounts of cargo. It's so bad, Qantas was actually considering bringing in its own cargo aircraft to plug the hole. (c) It's meant Qantas is running a crappy schedule for business (ie money makers) travellers. Take Sydney-Hong Kong, Cathay is going to be flying 5x daily on an A330 (which is a smaller aircraft) whereas Qantas has one flight/day on the A380. If you want timetable flexibility, you go with Cathay. The same is happening on flights to Singapore.

Dixon also didn't like Borghetti personally, but loved Joyce. Whereas almost everyone in QAN believed that Borghetti was far better suited to the job, Dixon picked Joyce. He's really killed staff morale. Running a profitable airline is exceedingly difficult, but Joyce really seems to have screwed the pooch.

I'm sure Borghetti is giggling like a school girl over at Virgin!

 

[Boggo]

Oh the new uniforms make a huge difference!

And the newly renovated management building on Bourke Rd looks spectacular too and should make an enormous difference

 

[drsmith]

Interesting tid bit on this evening's ABC PM current affairs show,

BRENDAN TREMBATH: The airline will defer delivery of eight Airbus A380-800s, the distinctive wide bodied double-deckers.

FRANK ROBERTS: We call them the dugong. When they're in the landing configuration they look like a dugong grazing on the bottom of the ocean.

BRENDAN TREMBATH: The Australian and International Pilots Association president, Nathan Safe, says passengers might like the interiors of the A380s, but the planes burn through too much fuel on longer legs.

NATHAN SAFE: They're a hopeless economic choice on the routes that we fly them, which is a 14 and 15 hour sectors across the Pacific. They're competing against 777s with half the fuel and carrying almost as many passengers. It's just an equation that you can't beat no matter how much you lower your other costs.

So whilst we welcome in isolation the fact that the older aircrafts are going, the sad part is there's no clear plan to introduce newer fuel efficient aircrafts to replace them.

http://www.abc.net.au/pm/content/2014/s3953793.htm

For context, I also post a link that outlines Nathan Safe's role.

http://www.aipa.org.au/

My bolds.

 

[McLovin]

Borghetti getting stuck into them...

Mr Borghetti says he opposes the government providing a debt guarantee to Qantas.

“We have earned our right to exist,” he said.

“If Australia is to prosper in the age of globalisation, then the age of entitlements needs to go.

“Nobody is entitled to a certain percentage of the market – you need to work hard to get that.”

Mr Borghetti says Virgin has contributed $11 billion to the Australian economy, bolstered the tourism industry through co-operation with state and federal tourism bodies, brought prices down while improving service delivery, and created jobs.

“Why would any government or opposition consider setting us back?” he said.

Get rid of the Sale Act but it's completely unreasonable to give a debt guarantee to a private company merely because management are incompetant and/or the competition is doing a better job.

 

[skc]

Borghetti getting stuck into them...

Definitely a good drama to watch...

Get rid of the Sale Act but it's completely unreasonable to give a debt guarantee to a private company merely because management are incompetant and/or the competition is doing a better job.

Well I think you don't ditch the Sale Act (which essentially means the government thinks QAN is strategically important) then there's some case of offering a debt guarantee.

Although what's the implication of a debt guarantee?

Interest costs will likely drop but they only paid $96m in the half year so that alone is not going to move the dial.

But if there's a debt guarantee which basically means unlimited access to the debt market, you would just replace as much equity with debt as you can and turbocharge the ROE...

But QAN's return on equity has been pretty poor (and probably lower than the cost of debt over the long run) and the shareholders don't really "demand" much return, may be it'd be worse off

 

[McLovin]

Although what's the implication of a debt guarantee?

I think it's because once you break the seal then the hop to government equity support becomes a lot shorter. Realistically, there is no way the government will let Qantas fail. Even with all the tough talk on ending entitlements etc, it would be far too unpopular to let what many consider to be an icon of Australia to fall into a heap. Having said that, a debt guarantee also comes with an implied vote of confidence in managment and the board because they're pretty much being given a blank cheque courtesy of John Q Taxpayer. I doubt the government wants to send such a message.

 

[matty77]

oh haven't they gone under yet?
"
but seriously I feel sorry for anyone that holds, and anyone that purchased this "solid Australian owned company"

 

[Boggo]

From an article in the media in 2001 when Ansett was about to go belly up...

Crucially for Virgin Blue and Qantas, the Federal Government ruled out any sort of financial rescue or support package to keep Ansett flying.

In a rare coincidence of interest, both surviving carriers lobbied hard in Canberra to point out that this would be ruinous for the public purse, not to mention theirs.

There could be no fair competition if Ansett was kept alive with the necessary massive transfusion of taxpayer funds.

 

[nulla nulla]

.... Joyce is a failure and should go now.

Agreed and so should the Chairman of the Board.

........I'm sure Borghetti is giggling like a school girl over at Virgin!

Proving the incompetence of the Qantas Board and their choice of replacement for Dixon, Mr Borghetti has demonstrated how to build and run an airline providing a stark comparison to Mr Joyce's demonstration of how to destroy a successful airline while blaming everyone else.

And the newly renovated management building on Bourke Rd looks spectacular too and should make an enormous difference

They'll probably have to sell it soon, to cover Joyce's severance package.

 

[Smurf1976]

Realistically, there is no way the government will let Qantas fail. Even with all the tough talk on ending entitlements etc, it would be far too unpopular to let what many consider to be an icon of Australia to fall into a heap.

I can't see it being allowed go fail completely for those reasons, but I can certainly see it withering away over a period of time. That is, a slow but sure loss of international market share (already pretty much happened) and then a gradual loss of domestic market share as well.

Whilst it's only a minor part of the market, I do see Qantas' pulling out of Tasmania as a significant event. The Australian "national" airline no longer flies under its' own name to every Australian state. I suspect that in due course this will come to be seen as a turning point amongst many others.

Slowly but surely, they could well end up being nothing more than a transport service between mainland capital cities and that's it. Even amongst those routes, I do wonder how profitable Adelaide and Canberra are when compared to the Brisbane - Sydney - Melbourne routes?

If Qantas keeps going the way it is, then slowly but surely I expect we'll see them flying to fewer destinations both international and domestic. At some point, they could well end up small enough that an outright collapse would cease to be a major national issue as such. With a domestic market share somewhere around 60% for Qantas mainline they are "too big to fail" but that changes if market share drops to 50, 40, 30, 20% over the coming years and Virgin ends up as the largest operator.

 

[piggybank]

An interesting take on recent events...

A Senate inquiry has been told a decision by Qantas to slash thousands of jobs is illogical and appears to have been financially and politically motivated.

http://www.sbs.com.au/news/article/..._content=643477&utm_campaign=Saturday&modapt=

 

[ALOKNATH]

Hi, Everyone sounds very bearish on this stock.

But here are some of the positives -
- 2 billion of cost reduction coming out
- reducing Capex and dropping unprofitable routes
- the new codeshare agreement with Bangkok airways
- Starting of new regional routes
- alliance with Emirate Airways
- last but not least 36% reduction in Joyce pay cut

Will this improve the next quarter results ?

Just wanted to know the future potential of this stock for next 3-6 months.
Is there going to be any upside on this stock?

 

[Bill M]

They are making changes to how you earn points in the air. It affects me as I only fly discount economy or economy so I end up earning much less points than before on the same leg of travel. They say it is a fairer program, I say it is the greater majority who fly economy who will earn less points and will have to wait much longer for that classic award fare. Getting the points use to sway me to fly Qantas previously, with these cuts I am better off flying with others now.

Full story at this link: http://www.qantas.com.au/fflyer/dyn/program/fairer-flying

And calculator here: https://www.qantas.com.au/fflyer/do/dyns/initialPointsEarned

 

[McLovin]

They are making changes to how you earn points in the air. It affects me as I only fly discount economy or economy so I end up earning much less points than before on the same leg of travel. They say it is a fairer program, I say it is the greater majority who fly economy who will earn less points and will have to wait much longer for that classic award fare. Getting the points use to sway me to fly Qantas previously, with these cuts I am better off flying with others now.

Full story at this link: http://www.qantas.com.au/fflyer/dyn/program/fairer-flying

And calculator here: https://www.qantas.com.au/fflyer/do/dyns/initialPointsEarned

I mentioned this upthread, but I switched to American Airlines AAdvantage years ago. Much, much better.

 

[tinhat]

This current management have done a good job at eroding the brand value.

For what it's worth, regarding mention of the newly renovated Bourke St office, I understand this building is leased from Cromwell Property Group (CMW) (which I hold in the SMSF). Qantas claim they are saving money due to the energy efficiency of the refurbishment.

 

[DJG]

For what it's worth, regarding mention of the newly renovated Bourke St office, I understand this building is leased from Cromwell Property Group (CMW) (which I hold in the SMSF). Qantas claim they are saving money due to the energy efficiency of the refurbishment.

And what are Cromwell claiming the advantage is for them?
Love to know how long it is until this 'energy claim' is paid back. The company won't be around in 10 years at this rate in order to save energy.

 

[tinhat]

And what are Cromwell claiming the advantage is for them?
Love to know how long it is until this 'energy claim' is paid back. The company won't be around in 10 years at this rate in order to save energy.

For what it's worth, here is the spiel from Cromwell's marketing:

Qantas Headquarters
SECTOR Office
LAND AREA 27,160 sqm
LETTABLE AREA 46,546 sqm
ACQUISITION DATE August 2010
MAJOR TENANT Qantas Airways Limited
BOOK VALUE $320.0 m
EXTERNAL VALUE $320.0 m (Dec*13)
OCCUPANCY 100.0%
CAP RATE 7.00%
WALE 17.6 years
NABERS ENERGY Under Tenant Control
NABERS WATER Under Tenant Control

Qantas and Cromwell partner
for a successful outcome
The newly expanded and refurbished
Qantas Global Headquarters at Mascot
in Sydney was officially opened by
Qantas CEO Alan Joyce and Cromwell
CEO Paul Weightman in January 2014.
The $131 million project, carried out over
a three year period, has transformed
the Cromwell-owned site into a
contemporary campus-style facility.
The refurbishment has enabled
Qantas to achieve cost efficiencies
by consolidating 3,500 staff into one
Global Headquarters and Operations
Centre, as well as overhaul the energy
efficiency of the facility.
Qantas was able to consolidate their
property footprint from seven buildings
to four, thereby improving the working
conditions and efficiency for employees.
The airline was also delivered $8.5
million annual savings via reduced
rental expense.
The refurbishment includes a number
of Environmentally Sustainable Design
elements that are expected to raise
the NABERS energy rating of the
asset from one and a half stars to five
stars. Foremost among these is one of
Australia’s largest trigeneration power
plants, which is expected to cut carbon
emissions by around 14,000 tonnes per
year.
Cromwell acquired the asset in July
2010 for approximately $143 million.
It is now estimated to be worth more
than $320 million and represents
approximately 15% of Cromwell’s total
portfolio.
Cromwell agreed to refurbish and
enlarge the asset to create a new
interconnected campus-style facility
and Qantas, committed to the vision of
the asset, extended their lease by ten
years to 2032.
Cromwell worked closely with Qantas
for more than a year to bring the project
to contract, and was instrumental in
delivering legal, financial and technical
strategies and solutions, as well as
the development of project briefs,
preparation of contract documentation
and contractor selection.
The Qantas Global Headquarters
transformation project perfectly
demonstrates the benefit of a long-term
relationship between a property owner
and management team working in
partnership with the tenant to deliver an
inspirational workplace.
Throughout the process, Cromwell has
applied an owner directed approach to
create a unique workplace environment
to significantly reduce occupancy
costs for Qantas, as well as increase
productivity and support creative
collaboration, while delivering value for
Cromwell securityholders

http://www.cromwell.com.au/_uploads/documents/CMW_Corporate_Profile_Dec_2013.pdf

 

[McLovin]

Ken Cowley had an interesting view on Joyce in the Weekend AFR...

“It’s important that Qantas remains successful and properly funded and again that’s people,” Cowley says. “Alan Joyce is a strange man. I’ve had one of his top people come to see me. It was scary. He’s worried where Qantas is going or not going.

“It’ll be interesting to see where Alan Joyce finishes up. I think he’s a misfit.”

And this corker about Lachlan Murdoch...

“I like Lachlan,” Cowley says. “He’s a nice man but he’s not a great businessman. He’s not a big and good decision-maker in my opinion.”

I think he might be off the Christmas card list. I notice he's already denying he made those comments.

 

[tom82]

What are peoples thoughts of QAN technically?
Double bottom, trading above 30EMA weekly.