Empires end in a whimper, not a bang

[browski]

Ruminating on the latest Qantas/RR issues, has lead me to conclude that Qantas cannot survive as a single entity for the foreseeable future.

I know that it is premature to make these predictions, but I'll take a stab anyway.

3 key elements to failure:

1. Low share price. Takeover target?
2. Decline versus growth. Qantas are not looking to expand they are diminishing - or at the very least being consumed by JetStar
3. You cannot cost-cut your way to success. Having a CEO who cannot imagine an increased bottom line through growth cannot bode well.

However, Qantas can reverse this decline but gee, they need to throw a few punches. The creation of JetStar was a good defensive measure, but surely now is the time for Qantas to attack. This stagnant, cost-cutting approach is such a soft, sad option. People will pay for quality, won't they?

 

[medhead]

Interesting thoughts. Totally agree on the jetstar/cost cutting points.
I don't think you can consider share price alone in isolation. Market value is probably more relevant for judging takeover chances. Also major blocking factors. e.g. Isn't qantas subject to a 25% foreign ownership cap? I can't imagine there are too many Australians would are capable and would want to owe qantas - maybe wesfarmers. Coal, supermarkets and airline all in one. Talk about diversified.

 

[docjames]

Interesting thoughts. A takeover is problematic unless the foreign ownership laws (QF-specific) are changed.

2. Decline versus growth. Qantas are not looking to expand they are diminishing - or at the very least being consumed by JetStar
3. You cannot cost-cut your way to success. Having a CEO who cannot imagine an increased bottom line through growth cannot bode well.

However, Qantas can reverse this decline but gee, they need to throw a few punches. The creation of JetStar was a good defensive measure, but surely now is the time for Qantas to attack. This stagnant, cost-cutting approach is such a soft, sad option. People will pay for quality, won't they?

I agree with this entirely.

 

[harvyk]

I disagree,

QF is one of the strong non-lcc airlines out there. Whilst their "full service" brothers where taking a hammering during the "GFC" QF managed to survive.

Whilst I don't think Mr Joyce is the best choice of CEO considering his LCC history. I think he is simply doing what he understands, getting BIS traffic where everything has a price rather than premium where there a "freebees". I don't think the writing is on the wall just yet.

 

[markis10]

3 key elements to failure:

1. Low share price. Takeover target?
2. Decline versus growth. Qantas are not looking to expand they are diminishing - or at the very least being consumed by JetStar
3. You cannot cost-cut your way to success. Having a CEO who cannot imagine an increased bottom line through growth cannot bode well.

I disagree with your assessment, while the rate of growth with JQ outstrips QF, both are expanding. Let me tackle those points one by one:

Low Share Price - not compared to historical lows and trending differently to other airlines around the world, I cannot see a takeover happening based on historically low PE rations and the added issue of getting approvals from the FIB and ACCC.

Decline versus growth. Qantas are not looking to expand they are diminishing - or at the very least being consumed by JetStar. Not true at all, if you look closely at their changes in the last 12 months and plans you would see the significant added capacity and expansion, look at how they have targeted the FIFO market and regional Australia with fleet additions and route expansion. Net capacity gain through fleet changes is something like 15% this year?

You cannot cost-cut your way to success. Having a CEO who cannot imagine an increased bottom line through growth cannot bode well. I do partially agree with this, however I dont think the cost cutting has been that great all things considered.

 

[samh004]

Likewise I would’ve said any other major airline looking to absorb Qantas *cough* BA *cough* probably wouldn’t get approval from the government anyway.

 

[markis10]

Likewise I would’ve said any other major airline looking to absorb Qantas *cough* BA *cough* probably wouldn’t get approval from the government anyway.

They could not get approval from QF let alone the government in 2008.

 

[simongr]

How on earth could BA fund an acquisition of QF when they can't meet pension liabilities???

 

[samh004]

How on earth could BA fund an acquisition of QF when they can't meet pension liabilities???

I didn’t say they could, just I know they want to. I do wonder why Iberia is in bed with them, surely they must know where their profits will be going for the next few years…