Qantas CFO responds to recent criticism

[maninblack]

The lack of a level playing field is an excuse for QF's predicament not the reason for it.

Unlike VA a huge amount of QF's infrastructure and former playing field advantage were payed for over decades by you and me - the taxpayers pre-QF (TAA / Australian) going public. Then QF got a big on field advantage of a near monopoly post Ansett collapse including virtually all government and major corporate sector contracts for nearly a decade.

Truth is QF has never really had to compete and now that they have to, they are not structured for it and don't know how.

The world has changed. Melbourne will be Australia's biggest city by 2020 but QFi has minimal presence and there are no European carriers at all. Thai, Malaysian, Etihad, Singapore, Emirates, Cathay, Air New Zealand and others dominate the ramp

QSA has to go, it is unfair, but it's not the reason for their woes.

 

[pauly7]

Interesting post.

A lot of the armchair experts reside here on AFF as we know

 

[maninblack]

It is a regretable but demonstrable indication of QF's desperate plight when they send their CFO out to lambast the "armchair critics". Many people shrug off QF's financial woes because they do not own Qantas shares - wrong. The majority of working or retired Australians are or have been exposed to Qantas shares through their superannuation fund holdings, even if only in small amounts, but those small amounts add up to large amounts. Many other Australians own Qantas shares outright. The "armchair critics" are the shareholders, the people who actually own the company. As such they have every right to comment.

 

[MEL_Traveller]

there is nothing wrong with armchair critics - it's a part of the world we live in. People criticise judges, lawyers, politicians, public servants all the time.

No one should be exempt for question or criticism - all of the above and doctors, pilots, other professionals and anyone else included. (on a side note - although many people lament that Australia is progressing to a litigious society, it has the advantage of holding people accountable.)

true professionals will take note of what the critics say, whether they are expert or armchair. Among the 100 daft ideas there might just be one or two good ones. Systems can always be improved, you don't need to be earning $5 million a year to have a good idea.

 

[Paddy55]

It is a regretable but demonstrable indication of QF's desperate plight when they send their CFO out to lambast the "armchair critics". Many people shrug off QF's financial woes because they do not own Qantas shares - wrong. The majority of working or retired Australians are or have been exposed to Qantas shares through their superannuation fund holdings, even if only in small amounts, but those small amounts add up to large amounts. Many other Australians own Qantas shares outright. The "armchair critics" are the shareholders, the people who actually own the company. As such they have every right to comment.

Very much agree... sending the head bean counter to speak to the world sends a very clear message to me that QF is more about reducing costs than increasing revenue... a slippery slope!
Where's the operational heads talking up new product, new routes, better service... more innovation... more $$$?

 

[moa999]

Qantas does talk up new products every now and then - new A330 skybeds, lounges in HKG and LAX - so it is not like there is no investment.
No new routes are going to get announced as the fleet will continue to shrink with retirement of 747s and 767s, only offset by 330s back from JQ. Only potential changer on this is activating the 789 options.

But the reality is the aviation game is primarily a commodity game - most out there are looking for the cheapest, or at lest competitive (taking into account things like FF points, meals, seat, lounges etc) airfare. QF is already pretty much near the top on most airfares I see, and I don't think a lambswool seatcover and gold plated seat controls is going to make many pay more.

Thus the only way to get back to profitability, given your seat pricing is already at the top end, is to get your costs down towards the same levels as your competitors.

 

[MEL_Traveller]

Where's the operational heads talking up new product, new routes, better service... more innovation... more $$$?

you would need to have all of those to talk about them.

new planes are going to JQ. New seats won't be out until end of 2014. 767s have been refurbished but didn't introduce new overhead bins: Ipads only work through one ear (or is that just me?). Service can be outstanding, but often can be not so good, and sometimes down to the point where it almost ruins the flight.

new uniforms? does anyone fly an airline because of a new uniform?

why not change the chef? introduce something new and exciting that way? someone with a fresh perspective. (i'm a little tired of tagine with cous cous. Was fun the first few months, but years later? bored with it)

 

[maninblack]

QF is more about reducing costs than increasing revenue... a slippery slope!
Where's the operational heads talking up new product, new routes, better service... more innovation... more $$$?

Right. I look at a route i have been travelling regularly for many years, HNL. QF is running the worst, oldest aircraft in it's fleet on this route and expects customers to stay? In the meanwhile they have just watched the opposition walk in on their turf and expand from 4 services a week ex- AUS to running 15 + this winter season. That is an increase of about 3000 seats a week. This is not an Asian or ME airline, not a LCC. HA is a full service US airline running primarily new aircraft in 2 class config (meals, snacks, checked baggage, AVOD included) and Qantas has just stood by and watched and not increased or improved it's service at all. Remarkable really. There must be a reason.

 

[eastwest101]

Right. I look at a route i have been travelling regularly for many years, HNL. QF is running the worst, oldest aircraft in it's fleet on this route and expects customers to stay? In the meanwhile they have just watched the opposition walk in on their turf and expand from 4 services a week ex- AUS to running 15 + this winter season. That is an increase of about 3000 seats a week. This is not an Asian or ME airline, not a LCC. HA is a full service US airline running primarily new aircraft in 2 class config (meals, snacks, checked baggage, AVOD included) and Qantas has just stood by and watched and not increased or improved it's service at all. Remarkable really. There must be a reason.

Because the CFO and other management are regurgitating corporate spin and attacking "armchair critics" on the internet and engaging in personal vendettas with ex-employess and board members when QF management really should be concentrating on turning around an increasingly unprofitable airline group by making tough decisions about costs, staff and fleet (which will not be quick or easy to fix), not promoting Jetstar frolics in Asia and general missallocation of resources towards JQd and JQi, a lot of people generally accept and take their point about the problems with the QF Sales Act but if that were removed tomorrow then QF would still have an old inefficient fleet and inefficient demotivated workforce, the same incompetent management, the same fuel costs as everyone else, the same legacy labour issues, the same competative pressures from overseas and general macro-economic background, the same domestic competitor (VA), the same international competitors, the same stupid 65% "line in the sand" flooding the market with excess capacity, the same dysfunctional OW partners etc etc.

Under current management I think the whole enterprise is doomed at some point, and probably needs to go through the process of being allowed to fail and the entire thing restructured from the wreckage by some people whom know what they are doing.

 

[maninblack]

A rather clear case of the Emperor 'having no clothes'.

 

[Paddy55]

Qantas does talk up new products every now and then - new A330 skybeds, lounges in HKG and LAX - so it is not like there is no investment.
No new routes are going to get announced as the fleet will continue to shrink with retirement of 747s and 767s, only offset by 330s back from JQ. Only potential changer on this is activating the 789 options.

But the reality is the aviation game is primarily a commodity game - most out there are looking for the cheapest, or at lest competitive (taking into account things like FF points, meals, seat, lounges etc) airfare. QF is already pretty much near the top on most airfares I see, and I don't think a lambswool seatcover and gold plated seat controls is going to make many pay more.

Thus the only way to get back to profitability, given your seat pricing is already at the top end, is to get your costs down towards the same levels as your competitors.

I agree in part.... new A330 skybeds announced so far in the future your eyes glaze over... I think it's called 'vapour-ware' in IT
CX roll out J class coffins... many don't like them and so they've moved to a new and great J seat across all A330s and 777. Makes QF's commitment to new seating look real lame.
In another thread on which OW J seat to fly in it seems about 85% (including me) advocated CX and they don't seem to have much trouble filling up J from SYD-HKG 4x per day so far as I can see.

EK, SQ and CX seem to be thriving... and not just in the cheap seats, aren't they QF?

 

[moa999]

EK is thriving.

--

SQ is struggling to make profits. Much like QF its market share at its home (SIN) has been in continual decline.

Its most recent profits have been driven by aircraft sales above depreciated value rather than flying:
Singapore Airlines Q2 net profit up 78%

On short-haul and medium-hall I suspect its mostly the LCCs doing the damage (including fully owned Scoot and 33% owned Tiger), but mostly AirAsia (in its various guises) and Jetstar.

--

CX is also struggling with its worst result since 2008, barely making a profit
Cathay Pacific Profit Plunges - WSJ.com

And obviously fighting hard against the LCCs (aka Jetstar Hong Kong), but also has the newly reformed Hong Kong Express to deal with.

 

[harvyk]

No they don't pay for the lounge. That was the information provided at the last qantas sponsored Rockpool lunch.

But the lounges is one of QF's expenses which QF have been looking at reducing to save costs (just look at ASP where the booze fridge is now locked until 3pm). I could understand if QF decide not to charge AA pax for use of it's lounge if AA provided a reciprocal agreement (eg QF pax can use AA lounges with no cost to QF), but JQ bring nothing to the table.

I'm not going to pretend that I could stand up and do a better job than the current board, but sometimes the average punter on the street has a better idea of what is really going on than the executive with their heads in the clouds (pun intended), and whilst there would be more than a few armchair experts who have no real idea what's going on, every so often you'll find one that does. Esp if that armchair expert uses services you provide on a frequent basis.

 

[samh004]

No they don't pay for the lounge. That was the information provided at the last qantas sponsored Rockpool lunch.

It seems absurd they don't make them pay for it, considering they are managed by the parent.

I'll try not to assume that removal of lounge access (and/or other benefits) when on JQ would see a drop in their passenger numbers... but I think there'd certainly be some flow on to VA if they did that, which shows business uses JQ, sometimes as a last ditch, and without the benefits they'd consider an alternative... even if the alternative doesn't offer similar to TT currently. And what I'm getting at is that QF and JQ need each other, as much as JQ isn't about loyalty, it does have some loyal QF customers travelling on it that could otherwise not... so ultimately, this business of JQ bringing QF down, it wont end well. I don't understand how execs can't see that.

 

[moa999]

Without knowing what was said at the lunch.
JQ may not pay QF for lounge access, but neither might QF.

Remember that QF FF (which I believe incorporates the lounges) runs as a separate entity

I would expect when a pax earns points/ SCs on either JQ or QF then the airline business pays money to the frequent flyer business.
This is part to pay for future point redemption and part for lounge access etc - as QF FF (I believe) runs/funds the lounges.

When the JQ pax visits lounges, there is no additional charge, as the 'charge' is already incorporated in the points fee.

I acknowledge that JQ gets a bit of a free ride here when JQ pax are not paying for Plus/Max bundles (ie the points) but still gaining lounge benefits.

 

[BAM1748]

Very much a corporate policy view. The idea that QANTAS loves its staff, and the staff love QANTAS as they work together to drive customer satisfaction reflects this. You don't have to travel with QF too often to realise lots of the staff don't love the organisation, and many knowledgeable critics argue that staff costs (incl perks) are a very big contributor to their woes.

One advantage of the armchair critic is they have a bit of distance, whereas this sounds very much like he is the apologist for QF Board and management.

Hi OATEK, not personal, but perhaps you can name the knowledgeable critics. I'm always interested in who exactly is saying what.

I seriously doubt staff perks are a major contributor to $300M worth of red ink, that is my own opinion and while I think I'm knowledgeable on such things you might have more info that my humble self.

Thanks

Matt

 

[MartinO]

It seems absurd they don't make them pay for it, considering they are managed by the parent.

I agree, every non-QF airline pays for their pax to use the F lounge so JQ should be in the same boat. This is yet another example of QF basically underwriting JQ.

 

[dajop]

If QF started charging Jetstar for it's high tier members flying on Jetstar, but using the lounge, I somehow don't think it would make much difference to the the overall profitability and viability of Qantas Airways Limited.

The whole point of the lounges is to create incentives for people to fly Qantas and it's subsidiaries and partners, and one suspects the benefits to QF in attracting and retaining loyal customers - by providing access even when a passenger is flying JQ - may outweigh the marginal cost of providing access (and I say marginal, because generally - perhaps except the FCLs? - QF are not paying a third party lounge operator for each person that accesses the lounge and QF lounges are AFAIK, generally not specifically opened just for Jetstar flights, only remain open for QF flights, or when other operators are paying QF to use the lounge).

 

[OATEK]

Hi OATEK, not personal, but perhaps you can name the knowledgeable critics. I'm always interested in who exactly is saying what.

I seriously doubt staff perks are a major contributor to $300M worth of red ink, that is my own opinion and while I think I'm knowledgeable on such things you might have more info that my humble self.

Thanks

Matt

One example is the article from Airlineratings.com referred to on another thread (http://www.australianfrequentflyer....sale-companion-travel-57099-5.html#post975958). The article in question compares the QF staff costs and perks to its competitors, arguing "the average wage cost at Qantas is $92,000 while at Emirates it is $47,000 and for Singapore Airlines $42,000". Quite a good article IMHO and indicative of what I was referring to.

 

[medhead]

The way it was put, as part of a broader conversation about giving incentives to the statused to fly JQ, was that JQ do not do status benefits and therefore refuse to pay for the lounges. Essentially that QF provide the lounge access when flying JQ.

I always understand qantas club to be separate from QFF.