How can QFi not be making any money? packed flights to the UK

[dajop]

Qantas was fine till he took over... & will be after he as gone.. For as long as he s CEO I will not travel Qantas.

Sheesh, what an oversimplification. I suspect a lot of the malaise set in when Dixon was CEO, apart from the absence of 777's in the QFi fleet (which could be debated endlessly), QF got complacent on the back of their virtual monopoly in the domestic (corporate) market and being the dominant player in a duopoly on routes to/from the US. When Joyce took over he was hit with the GFC, 2 more competitors in the AUS/US market - where Dixon had stated most of QFi's profits came from, and a revitalised Virgin that started actively chasing the corporate market. Not to mention EK hitting the accelerator big time and now of course the return to high fuel prices. When you think about all of this, it's actually a miracle that QF isn't doing worse.

I am not certainly not a QF apologist ( my only paid fare on them in the last two years has been a three short domestic flights - that is after 9 years of being a WP) , but I really wonder if the situation would have been any different had Dixon been still at the helm.

 

[possum FF]

Talking the company down. Driving business travellers away. Untrustworthy.

the emergence of the middle Eastern airlines and government subsidies, creative accounting and the use of legislative loopholes (AA bankruptcy), far cheaper labor costs in other countries, but most importantly the tyranny of distance syndrome with respect to Australia, most places at the end of the line will do it hard, compared to a real hub such as Singapore.

 

[bcworld]

Every QFi flight i've taken over the years has been at, or very close to, max capacity.

It's clear they're filling the birds, but obviously there's other factors at play. Too many cheap seats? Higher base operating cost? Taxes? I don't know but i'm sure it's a combination of it all.

I flew LHR-MEL on QF10 in June. Every seat appeared to be taken, well between LHR-SIN at least. But 24 hours before departure it was showing J8...and as a bronze who spent $1000 on the fare (the base fare was GBP299 I think, booked just a few days in advance) I was cleared for an upgrade to business on both sectors at T-23 hours. Can only assume there were quite a few passengers in the J cabin who hadn't paid a J fare.

 

[Qld4101]

I have to agree completely with greglow, I always work on the principle its cheaper to retain existing customers rather than go after new ones - I have now gone from Plat and have all (where possible) flights with Virgin (they actually seem to want your business - unlike QF to who pax seem to be more of an annoyance, than actually be the reason they are in business!).
I had one email about a double status credit period, not flying with them anymore so not about to earn any with them............

 

[djh53]

Until recently, one reason had to be comfort on long-haul flights compared to other carriers on the same route. For example, in 2010 Premium Economy meals, service and seating on Virgin's 777 flights to LAX from Oz were far superior (and cheaper) to what Qantas offered on 747s over the same route. The seating, especially, was a very different thing. The introduction of the A380, despite the drama surrounding it, was something Qantas had to do.

Another reason may have had to do with the way Qantas treated bookings through One World. Working in NYC a decade or so ago, I was never able to use my points to get a QF business class seat. However, I had no problem getting business class on Cathay and JAL. That puzzled me, but the upside was I got to fly with two good airlines.

 

[greglow]

There are a few other reasons that we've made the change.

First is that Virgin staff seem more enabled to fix issues in a sensible way, particularly when it's beneficial to both them and me. QANTAS staff seem stuck with their rigid policies and never have the power to fix problems, or more importantly avoid problems, even when it's blatantly obvious to all involved that that's what should happen.

As one example, the last QF flight I had booked out of New York was on a Thursday night. On Wednesday, the weather bureau was telling everyone that the biggest snowstorm for years was coming on Thursday. So I rang QANTAS and said "Hey I need to be back in Oz before Monday, can I get out of here tonight, as you won't be flying tomorrow?". Answer was that my flight was still scheduled for tomorrow and so they couldn't do anything about it. I said "have you looked at the weather forecast? You won't by flying and tomorrow you'll be trying to sort this out for hundreds of people so why don't we fix it now?" When I called to ask them on Thu morning, what time I could check in, they said "Oh sorry, your flight was cancelled. We've booked you for Friday night". They hadn't even called to tell me either. By then the weather bureau was saying that Friday was going to be even worse.

On Wednesday, when talking to QANTAS, I said "I don't care which city you send me to tonight, I just need to be out of New York. I'll go anywhere that I can connect to LAX tomorrow". They wouldn't change anything. I said "There's an AA flight tonight at 9PM with 30 free seats". They said "There are no seats on that flight that we can use".

The good part is that I then tried to book with AA directly. They wouldn't take my booking without a US billing address on my credit card and told me to book on the Austalian AA website. It wouldn't take a booking for Wednesday night because it was now Thursday in Australia, even though it was still Wednesday where both the plane and I were... (And Expedia was melting down at the time). I ended up booking myself on a Virgin America flight and got across to LAX ok.

A second big reason is the constant attempt to convert QANTAS into Jetstar. If I wanted to fly Jetstar, I'd book with them. 99.999% of the time, I don't want to. Yet QANTAS keeps replacing routes with Jetstar, and sorry, but I don't want to be there. On Dec 27th, I stood in a Jetstar bagdrop queue in the middle of the day in Melbourne for 2 1/4 hours. I will NEVER do that again. It's pointless having status with QANTAS where I can avoid stupid queues but then be pushed into Jetstar queues instead. A big benefit I've found since moving to Virgin is that at least I can fly with the same airline to mid-sized regional ports like Newcastle, Launceston, etc. and I can still miss the queues, my baggage comes out quickly, etc. etc.

 

[thedrivesman]

I have hardly seen space on SYD-HKG and SYD-PVG, in fact a flight earlier this year back from HKG was 100% full, so I could not be relocated from a broken seat (another thread needed to elighten people of A380 seat mechanics, methinks!). One one of those flights a cabin crew member postulated a theory that alleged the company's philosophy was shedding routes to JQ and internal accounting was skewed to put less costs to JQ and overburden QF. I have no facts to back this up, maybe someone else has?

 

[thatwouldbher]

Its only been cough since Alan Joyce took over!!! I travel to USA all the time, the cabin crew are there to serve dinner & breakfast, & after dinner they give you a pack fr thru the night, after that there s no servce on a 14 hour flight... Fuel surcharges are the highest in the world... Air fares are highest in world, the last time I flew Qantas the planes were a disgrace.

 

[Brian Allen]

QANTAS - probably terminally - is nobbled by an employee mentality stuck in the "good ol' days" when it was impossible to tell where the ALP ended and the unions began and salaries and First-Class & Five-Star perks for unionists and politicians and bureaucrats and all of their brats, were oil sheikh-ish.

Nowadays the bloody-minded airplane plumbers' gang is perhaps the most visible and the most destructive of QANTAS and of the company's morale but cabin ... um ... people ... demands still have a very long way to be trimmed to get them closer to the range of airborne waitress wages - where they belong. If the company can (perhaps by moving offshore) outmanoeuver or outlive the old "public servant"-oriented help that cannot handle the Free Market, it might have a future.

But it is otherwise doomed to follow (eg) America's more than 50-years established Eastern Airlines, destroyed by similar airplane-plumber and other union coughy!

 

[ninin]

Couldn't agree with previous poster..... It is becoming more and more difficult to fly internationally from Melbourne (and I assume cities other than Sydney). Not all of us are willing to add another (at least) 3 hours to our international journey by having to fly via Sydney. And don't even get me started about that whole third world transfer arrangement where you are shoved into the dungeon while you wait for the bus (only to find it becoming more and more crowded and people standing closer to the doors to make sure they re first on the bus).

Look at Mel to Hong Kong - no premium economy option any more! Only one flight and at a ridiculous time. Cathay have three direct daily flights from Melbourne.

Qantas are simply becoming less attractive, less competitive with fewer routes and fewer direct routes from cities other than Sydney.

I put up with it the inconvenient flight times, higher fares, flying via Sydney and yes - even flying Jet-scare- as I expect to reach LTG next year. But when I do, I will be far more flexible about which airline I fly. And to be honest, I am quite excited about giving other airlines a try - something I wouldn't have thought possible a few years ago.

 

[gilant]

I favour the mismanagement excuse being just as valid as the overseas government subsidy and higher wages cost.

Being a Perth resident I have constantly told QF that they are leaving business on the table not providing a straight through ( 1 stop) flight to UK from here. Perth has high income and high ppn UK and European ex pats, but no QF do nothing and Emirates Singapore Air Asia and now Qatar are showing them the door. Until 9 months ago a Perth resident could not even book a premium economy seat from Singapore on the Sing London leg.

 

[dajop]

Being a Perth resident I have constantly told QF that they are leaving business on the table not providing a straight through ( 1 stop) flight to UK from here.

?????? Do you mean non-stop? QF provide a 1 stop flight to the UK via SIN.

 

[elbarto]

Get rid of Allan Joyce and his high-flying plans in Asia

The idea of capitalising on Asia is actually a good one. It's just the execution of that idea, to date, has produced about as much fruit as my tomato plant.

Melbourne people nowdon't get much opportunity to fly Qantas international; we get shoved onto Jetstar.

If I were QF CEO I'd just pretend Melbourne didn't exist </sarcasm>

I favour the mismanagement excuse being just as valid as the overseas government subsidy and higher wages cost.

Being a Perth resident I have constantly told QF that they are leaving business on the table not providing a straight through ( 1 stop) flight to UK from here. Perth has high income and high ppn UK and European ex pats, but no QF do nothing and Emirates Singapore Air Asia and now Qatar are showing them the door. Until 9 months ago a Perth resident could not even book a premium economy seat from Singapore on the Sing London leg.

Which is why I think they need to refit international flying A330s to a similar standard of product as the A380 and 747

 

[Moopere]

Yep. I agree. How many flight options do I see from PER that involve flying to SYD first then essentially flying back west to go wherever? Adds cost + about 8 or so hours to any journey. Tons of expats from everywhere here and tons of money too - its really strange that QF are not really paying attention and others are milking the cow instead.

 

[superpang]

I just flew on BA from BKK to LHR on what would have used to be QF metal. I was in Y class but it was interesting to note that the cabin was only about 80% full. Just thought id share it.

 

[mannej]

Being a Perth resident I have constantly told QF that they are leaving business on the table not providing a straight through ( 1 stop) flight to UK from here. Perth has high income and high ppn UK and European ex pats, but no QF do nothing and Emirates Singapore Air Asia and now Qatar are showing them the door. Until 9 months ago a Perth resident could not even book a premium economy seat from Singapore on the Sing London leg.

PER-SIN-LHR on QF, is that not 1 stop?

Can be done around the 19-20 hour mark as well.

Air Asia are not showing them the door, they pulled out of LHR and Europe completely as they were struggling.

A Perth resident could always book Y+ between SIN and LHR, it just had to be done from the QF Singapore site. Yes I know you could not do it ex-PER, but that is not what you are saying.

For one I do agree that internationally ex-PER, I do scratch my head and wonder. The Roo seem to be downsizing where they can.

I find it interesting that they are putting the 330-200's on the routes out of PER, yet EK add capacity, SQ add capacity and bigger aircraft, CX do have double daily flights and NZ put the 777 all out of PER. It doesn't help that the flight times into PER aren't that great, it does seem as if they are trying to limit the market that they appeal to.

 

[RAM]

Smoke and mirrors are great accounting tools. Spin doctors are masters at blaming evil foreign governments who subsidise their home grown airlines. Trouble is the Govts who did subsidise the airlines (and could be proven to be doing so) were mainly European and we saw what happened to them.

Equally the finger is pointed at the Middle Eastern airlines supposed to be getting cheap oil, wages etc. The facts say differently. A number of the usual suspects have had financial collapses themselves (just run through the list of Middle Eastern countries that our Australian Construction groups have lost huge sums in).

The major cost difference for most of them comes down to the fleet age. An 8 to 10 year younger fleet can cut operating costs (fuel & maintenance etc) anywhere from 10 to 25%.

So to be talking about a margin of 1% profit is meaningless in this context. Equally the other excuse trotted out by Qantas as being an end-of-line vs hub airline is severely over-used. Japan, for example, has a much larger domestic base to serve for international travel. Is in close proximity to Asia's densest markets yet the major Japanese carriers fleets also followed an aging profile and the equivalent rising cost structure and have either been bailed out or are just scraping through.

But curiously enough Jetstar can offer $199, $299 etc flights to Japan and be profitable but Qantas is losing money on $599+. Just look at the difference in aircraft type and age being used respectively.

Before Qantas was floated it went through an aircraft upgrade at the tax payer's expense and ended up with one of the youngest fleets in the airline business.

Then through a number of "efficient" tax structures (many organised pre-float) set up many leveraged leases etc to transfer tax benefits out for receiving payment. So Qantas was ridiculously profitable but not through good operational management but brilliant tax minimisation. A search of several very large Australian financial companies' annual reports will show them as proud owners of may 747-400s in the 1990s.

However you can only arbitrage the change from public to private once (milk the tax payer).

A great airline analysis in the early 2000s looked at the ratio of senior management, middle management to operational staff across many airlines over time (early 90s vs early 2000s). Guess which airline had started to become bloated and increasing cost structures?

The age of the Qantas fleet moved it from a low maintenance cost operation to a much higher cost operation and due to weak senior management giving in to ever increasing demands the cost structure did blow out to a certain extent but that is only part of the story.

At the same time Qantas had followed a fuel hedging program where they locked in a very large amount of their fuel costs through either a quasi-futures or option combination to lock in a fuel price they were happy to operate with. When the price would drop significantly they would extend the hedging out into multi-financial years to lock in an acceptable operating margin.

Once China turned into a net importer of oil the Asian oil, petrol, avgas prices began to soar relative to West Texas or Brent and their related derivatives. Qantas no longer could lock in acceptable prices that would guarantee operating profits so the hedging levels dropped significantly.

Qantas' recent explanation that their fuel bill went from $3.8bn to $4.4bn (from memory) so that's why they have not cut the fuel levies despite the Asian fuel prices falling 15-23% could be another example of the smoke and mirrors. The details are not out yet to allow a full calculation to see whether they match. If the banks repeatedly did not cut mortgage rates etc at all imagine the outcry from the usual suspects.

Yet Qantas has not cut the fuel surcharges (and relatively recently increased them) and there has not been a word from Wayne Swan, Bill Shorten or the normal posturing from the Independents. WHY NOT?

But since current fuel levies are prospective (for future flights) and the fuel bills quoted are for historical (past) flights the explanation given recently does not hold up to much scrutiny.

Qantas COULD lock in current fuel prices (just like they used to) but they appear to have chosen not to do so to any noticeable extent. Why this is the case has not been mentioned but that means that they could (and should) drop the fuel levies as their costs have fallen and if that is what the fuel surcharge is really for. As it must be as that is what Qantas said it was to cover.

Compare this with the recent debacle in Victoria with Melbourne Water charging for desalination costs that it has not had to pay. The parallel with Qantas charging outsized fuel surcharges are obvious.

If Qantas did choose to pad its airfares then it should not mislead (unwittingly of course) by calling them fuel levies that supposedly match the "high" fuel cost. Equally the additional amount should be added to the base fare and not described as a fuel surcharge/levy. Otherwise an ACCC complaint about misleading and deceptive practice could be made, or an enterprising class action law firm may launch a legal action in a similar vein to that discussed about Melbourne Water.

Coincidentally as most FFers are well aware the fuel surcharges are added onto any FF point booking. So how does Qantas account for a FF booking I wonder? Where does the fuel surcharge cash for a reward booking get passed through the accounts - Qantas International or Qantas Frequent Flyer? Makes you wonder doesn't it? QFF is a very profitable operation for many reasons if you look through the Annual Report.

So many questions to ponder.

 

[serfty]

...
So many questions to ponder.

Including why you failed to refer to differences in wage and working conditions. May go a bit to explain the cheaper JQi SIN prices...

 

[Limewood]

Is JQ aircraft maintenance done overseas?

 

[djh53]

"Virgin staff seem more enabled to fix issues in a sensible way, particularly when it's beneficial to both them and me."

Greg, that's our experience, too.

My wife and I were delayed out of LAX when Virgin had to cancel a flight. Questions were answered courteously in a chaotic airport environment, transport was provided to the Hilton, all rooms and meals were covered for 3 nights and, when we returned to Oz, a $500 travel voucher was sent to each of us. The voucher was transferable and valid for 12 months, so we were able to help out a couple of my colleagues who were headed to the US the next year.

My wife was a bit annoyed with the length of the delay, but I got to watch the baseball finals and chinwag in the airport bar. Not all bad!

We'd never say never to flying Qantas. However, given this sort of service from Virgin, the likelihood that we'll do so has diminished.