Melburnian1
Enthusiast
- Joined
- Jun 7, 2013
- Posts
- 24,673
QF has announced its annual result for 2019-20:
www.qantasnewsroom.com.au
Yes, it is way more profitable than VA (the latter usually incurs losses), but there are some headwiinds.
Reading between the lines, my 'take outs' are:
1. Don't bet on JQ continuing 'for ever' with domestic operations in NZ - it's unprofitable.
2. JetstarAsia (3K) doesn't have its profitability or losses identified in the above but the comment about increased taxes and charges at SIN is a negative, although probably this operation is more strategically important than domestic NZ.
3. With a quick read, no mention as to how the QF domestic fleet (especially many of the B738s) continues to age. Good maintenance is the key but some of these aircraft are 17 years old. That by itself might not be a concern, but the lack of orders for replacement aircraft means that Alan Joyce's boasting about how 'net debt is below target' is open to questions. I assume as with most transport equipment, the costs of maintaining aircraft rise as they age, and older aircraft typically are less fuel efficient than newly introduced models.
4. Years ago transPacific flights from Oz to USA were a huge moneyspinner for QF but for at least three years they've been unprofitable. Will we see some further seating capacity cuts as more B789s arrive?
5. QFi boasts that its international seat load factors have risen by two per cent to 86 per cent and says performance in the second half of 2019-20 (i.e. to 30 June 2019) improved, but my sources inform me that international leisure bookings out of Australia are poor looking forward. Business travel may also not be robust: it isn't domestically. So even though some competitors are reducing capacity, and QF suggests fares 'have adjusted to higher fuel prices', it's an unconvincing argument. And on top of that mainland Chinese tourism to Australia just isn't rising at the rate it was one or especially two years ago, and may shortly begin to decline year-on-year. While QF has only a minor share of Oz - mainland China capacity, Joyce is on record saying that on average, a mainland Chinese tourist takes travels on two to three flights domestically within Australia, so any reduction will hit QF.
6. Those I know who travel for business domestically tell me that they detect no rise in corporate tarvel since the Federal election, perhaps a continuing small decline (at best.) So not rosy.
7. Despite the media release about three 'Project Sunrise' test flights from JFK or LHR to SYD, Joyce comments briefly that this project has to stack up financially. That's true for any business (unless it's a promotional 'loss leader') but there's no guarantee it will occur. Some cynics might suggest it's been great publicity for this second rate airline, but not an attractive proposition for the bottom line.
8. While rarely if ever mentioned by airline top brass, the continuing, frequent delays into and out of MEL and SYD airports must be a concern. No doubt airlines budget for a certain amount of holding and departure delays but punctuality performance has become worse for all the four major carriers domestically, and our two major airports (and congested airspace around them( are part of the reason. This can't be assisting QF (or VA) in keeping a lid on fuel costs.
9. The decline in the A$, on balance, is a negative.
Readng the detailed presentation, there's further:
www.asx.com.au
10. The 'operating margin' for QFi has declined in 2019-20 to 3.8 per cent, a quarter of domestic (12.1 per cent) and a drop from last year's 5.7 per cent. QFi may drop further. Will it start to incur losses again?
11.In this supplementary document, the QF unit cost - cents per kilometre in operating costs - is disclosed as increasing by 8.4 per cent, largely to do with fuel. Nonetheless that's way ahead of inflation (c.1.3 per cent).
12. QF Group aircraft totalled 314 as at 30 June 2019. Then only changes were scrapping of three B744s, addition of three B789s, plus (for JQ) one A320 (lease) for 3K. So (as noted above) the fleet is ageing, and there's no orders IIRC placed yet for new domestic aircraft. Smacks of insufficient capital being spent to replace key assets.
QANTAS GROUP POSTS RECORD REVENUE, STRONG PROFIT IN FY19
Keep up to date with Qantas' latest news and information, media releases, articles, images and more with the Qantas News Room.
www.qantasnewsroom.com.au
Yes, it is way more profitable than VA (the latter usually incurs losses), but there are some headwiinds.
Reading between the lines, my 'take outs' are:
1. Don't bet on JQ continuing 'for ever' with domestic operations in NZ - it's unprofitable.
2. JetstarAsia (3K) doesn't have its profitability or losses identified in the above but the comment about increased taxes and charges at SIN is a negative, although probably this operation is more strategically important than domestic NZ.
3. With a quick read, no mention as to how the QF domestic fleet (especially many of the B738s) continues to age. Good maintenance is the key but some of these aircraft are 17 years old. That by itself might not be a concern, but the lack of orders for replacement aircraft means that Alan Joyce's boasting about how 'net debt is below target' is open to questions. I assume as with most transport equipment, the costs of maintaining aircraft rise as they age, and older aircraft typically are less fuel efficient than newly introduced models.
4. Years ago transPacific flights from Oz to USA were a huge moneyspinner for QF but for at least three years they've been unprofitable. Will we see some further seating capacity cuts as more B789s arrive?
5. QFi boasts that its international seat load factors have risen by two per cent to 86 per cent and says performance in the second half of 2019-20 (i.e. to 30 June 2019) improved, but my sources inform me that international leisure bookings out of Australia are poor looking forward. Business travel may also not be robust: it isn't domestically. So even though some competitors are reducing capacity, and QF suggests fares 'have adjusted to higher fuel prices', it's an unconvincing argument. And on top of that mainland Chinese tourism to Australia just isn't rising at the rate it was one or especially two years ago, and may shortly begin to decline year-on-year. While QF has only a minor share of Oz - mainland China capacity, Joyce is on record saying that on average, a mainland Chinese tourist takes travels on two to three flights domestically within Australia, so any reduction will hit QF.
6. Those I know who travel for business domestically tell me that they detect no rise in corporate tarvel since the Federal election, perhaps a continuing small decline (at best.) So not rosy.
7. Despite the media release about three 'Project Sunrise' test flights from JFK or LHR to SYD, Joyce comments briefly that this project has to stack up financially. That's true for any business (unless it's a promotional 'loss leader') but there's no guarantee it will occur. Some cynics might suggest it's been great publicity for this second rate airline, but not an attractive proposition for the bottom line.
8. While rarely if ever mentioned by airline top brass, the continuing, frequent delays into and out of MEL and SYD airports must be a concern. No doubt airlines budget for a certain amount of holding and departure delays but punctuality performance has become worse for all the four major carriers domestically, and our two major airports (and congested airspace around them( are part of the reason. This can't be assisting QF (or VA) in keeping a lid on fuel costs.
9. The decline in the A$, on balance, is a negative.
Readng the detailed presentation, there's further:
QAN share price and company information for ASX:QAN
View today’s QAN share price, options, bonds, hybrids and warrants. View announcements, advanced pricing charts, trading status, fundamentals, dividend information, peer analysis and key company information.
10. The 'operating margin' for QFi has declined in 2019-20 to 3.8 per cent, a quarter of domestic (12.1 per cent) and a drop from last year's 5.7 per cent. QFi may drop further. Will it start to incur losses again?
11.In this supplementary document, the QF unit cost - cents per kilometre in operating costs - is disclosed as increasing by 8.4 per cent, largely to do with fuel. Nonetheless that's way ahead of inflation (c.1.3 per cent).
12. QF Group aircraft totalled 314 as at 30 June 2019. Then only changes were scrapping of three B744s, addition of three B789s, plus (for JQ) one A320 (lease) for 3K. So (as noted above) the fleet is ageing, and there's no orders IIRC placed yet for new domestic aircraft. Smacks of insufficient capital being spent to replace key assets.
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