Qantas CFO responds to recent criticism

[UP4014]

I'm going to be a heretic here and blame not only management but the unions. Just look at Holden and Toyota.
For years (decades) we (as in Australians) have been overpaid for the work we have actually done. i.e. it cost Holden (allegedly) $3,000 more to produce a car than it was sold at wholesale/retail value. That is simply unafordable nowdays.
QF stuffed up by not going with 777s like most other airlines. Launched multiple Jetstar asias. Bled domestic profits to keep its international arm alive. That is in their own control.
Solution is simple - ditch the underperforming international arm and concentrate on domestic. Any FA who is earning $150k a year should be retired - what a joke.
/will now duck for cover

I have a sibling who works fo QF, "if only" came back re your $150K remark.

What I think you don't realize the numbers are so big you don't need to move any of them very much to be back in the black. The difficulty is getting smart enough management to make the correct choices for the coming year.

Matt

 

[straitman]

I'm going to be a heretic here and blame not only management but the unions. Just look at Holden and Toyota.
For years (decades) we (as in Australians) have been overpaid for the work we have actually done. i.e. it cost Holden (allegedly) $3,000 more to produce a car than it was sold at wholesale/retail value. That is simply unafordable nowdays.
QF stuffed up by not going with 777s like most other airlines. Launched multiple Jetstar asias. Bled domestic profits to keep its international arm alive. That is in their own control.
Solution is simple - ditch the underperforming international arm and concentrate on domestic. Any FA who is earning $150k a year should be retired - what a joke.
/will now duck for cover

So you blame the unions but then list problems that are fully owned my management. How were the unions to blame for fleet choice, setting up jetstar airlines or financial management of the company? It'd be good if you had something more that "I'm going to blame the unions".

medhead,

themanfromoz only ever said that he blamed the unions as part of the problem along with the management issues inclusive of incorrect aircraft choices. He never said it was solely a union issue and he did say a lot more than "I'm going to blame the unions"

This is actually a very complicated subject with many levels and areas of blame so it is unreasonable to say that any specific area should bear all or non of the blame.

 

[amaroo]

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.

+ 1 here is the article OATEK is referencing Airline Ratings

 

[JamesMiddleton]

High QF wages especially for pilots are apparently the main reason why Emirates will not invest in Qantas.

Yes EK has plenty of money to splash around on aircraft and lounges and terminals etc and yes it is Qantas' new best friend but despite that it will not invest one cent into Qantas, nothing to do with the foreign ownership rules which Qantas keeps bleating about wanting to be changed, EK could take something like 25% to 35% of Qantas if they wanted to, but they don't want even 0.01%.

Until QF can get wages under control this will remain their biggest problem.

We need something like the 'Chapter 11' provision in the USA which lets a company declare bankruptcy but go back to the drawing board and come out with a whole new structure having gotten rid of all the 'legacy' stuff which was holding them back and dragging them down.

 

[straitman]

High QF wages especially for pilots are apparently the main reason why Emirates will not invest in Qantas.

Yes EK has plenty of money to splash around on aircraft and lounges and terminals etc and yes it is Qantas' new best friend but despite that it will not invest one cent into Qantas, nothing to do with the foreign ownership rules which Qantas keeps bleating about wanting to be changed, EK could take something like 25% to 35% of Qantas if they wanted to, but they don't want even 0.01%.

Until QF can get wages under control this will remain their biggest problem.

We need something like the 'Chapter 11' provision in the USA which lets a company declare bankruptcy but go back to the drawing board and come out with a whole new structure having gotten rid of all the 'legacy' stuff which was holding them back and dragging them down.

You post this as though it is authoritative. Do you have some inside knowledge or is this purely your opinion?

Having said all that I agree with your sentiments in the third and fourth paragraphs but not your first as there are many areas that have high type wages and not just the pilots.

 

[MEL_Traveller]

We need something like the 'Chapter 11' provision in the USA which lets a company declare bankruptcy but go back to the drawing board and come out with a whole new structure having gotten rid of all the 'legacy' stuff which was holding them back and dragging them down.

I only agree with this if the airline has done everything it can to turn around its fortunes.

high wages are not necessarily a barrier to profitability.

but there have been lots of issues... fleet choice, cabin interior choice, route choice, IT problems, price fixing, running out of beverages, downgraded catering, ground staff not knowing the rules and impacting on the travel experience... and the list goes on. you don't need chapter 11 to fix all of those.

why immediately look at wages?

 

[Isochronous]

Am I understanding this correct, you are suggesting and upgrade to a series of J cabins will change QFi will have an effect that could turn their fortunes around.
Surely I'm am mistaken??

Yes. Everyone knows that paying J pax are what make the biggest difference to whether a flight is in profit or loss. QF cannot compete internationally into Asia when the seat and IFE is so inferior to CX, SQ, TG, etc. They should also include a small PE cabin on the A330s like CX do.

 

[raleyoz]

Iso, I agree with your point , the full fare premium fares are profitable , but I fail to believe that the majority of Full fare Passenger even have a clue what plane they're in, let alone how that cabin compares to other carriers, personally I think QF product is great, but each to their own,
Is updating the cabin really going to make that much of a difference,
I believe most people choose flights that suit their schedules first, ( we at AFF I suggest are more selective , re planes and fit out) but surely better scheduling is more important so you can get where you want easier.

Then the point of how many premiums are real full fares, I don't know the answer , and not sure anyone really does, how much money actually goes in the bank.

Amazingly accountants across all companies seem to think banking percentages is profitable or justification of profitability, however any paying customer that fills and empty seat should be their first focus.

Whilst QFd has had amazing advantage , QFi has had to do its best to keep up with competitors that have massive markets like, i dont know -- everywhere else!

IMO , whilst not a fan of AJ , I think he has a massive PR problem, and lost trust of Australians, some things are I believe better, QFi on board experience, for 1.

FWIW .. what worries me is that if we do lose the Red Roo internationally, where does that leave us, well be fine when things (economies) are good , but when airlines are doing it tough, I reckon we might be the first in the firing line for cuts and reductions, they don't really care if Aussies can fly the way we expect to now. How many SQ, MH,CX staff are watching this forum to see how we feel about their performance, do you really think they give a cough. I could be wrong , but I know 1 airline is listening. I just reckon we should be careful what some of us which for

Sorry rant over!,

 

[MEL_Traveller]

Iso, I agree with your point , the full fare premium fares are profitable , but I fail to believe that the majority of Full fare Passenger even have a clue what plane they're in, let alone how that cabin compares to other carriers, personally I think QF product is great, but each to their own,
Is updating the cabin really going to make that much of a difference,
I believe most people choose flights that suit their schedules first, ( we at AFF I suggest are more selective , re planes and fit out) but surely better scheduling is more important so you can get where you want easier.

Interesting point - i agree some frequent flyers may not have a clue which plane they're on - but the product is important... airlines spend millions of dollars investing in new product and advertising it heavily. If the product wasn't so important, CX could have stayed with its 'coffin' seats in business class rather than moving to the new herringbone. Both are full flat. But the former received a lot of criticism.

given some of the feedback out there, plenty of people are surprised the QF 767 to HNL is still operating with cradle seats in business. They don't care if it's a 767 or a330 or whatever esle... but they do get surprised when they're paying top dollar and don't get a bed.

 

[Simo]

QF will not be able to reduce wages for pilots as this could spell disaster for the airline and the safety standards would drop.

QF have to look at all costs and not just pick on wages as wages is your greatest cost but can be you best cost if you have the right people.

 

[medhead]

medhead,

themanfromoz only ever said that he blamed the unions as part of the problem along with the management issues inclusive of incorrect aircraft choices. He never said it was solely a union issue and he did say a lot more than "I'm going to blame the unions"

This is actually a very complicated subject with many levels and areas of blame so it is unreasonable to say that any specific area should bear all or non of the blame.

You've completely missed my point. Did I deny blame to any area? Want to blame someone? Try listing issues that are within the control of that person or group. Doesn't matter how complicated the issues this still applies.

 

[AL10]

+ 1 here is the article OATEK is referencing Airline Ratings

Interesting article!

 

[Robbi]

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.

Yes, JQ lower prices are effectively subsidised by QF higher prices. It should either be fee for service or ticket prices rise.

 

[straitman]

You've completely missed my point. Did I deny blame to any area? Want to blame someone? Try listing issues that are within the control of that person or group. Doesn't matter how complicated the issues this still applies.

... as you have missed mine.

There were no specifics in my post just that there are many areas of blame.

themanfromoz did specify and listed some, though not a comprehensive list, of management issues and also an incomplete list of union issues. i.e. it is not just union and not just management that have caused this. It is partially both.

Not touched in this discussion but there are huge external influences also which probably are more significant again.

 

[medhead]

... as you have missed mine.

There were no specifics in my post just that there are many areas of blame.

themanfromoz did specify and listed some, though not a comprehensive list, of management issues and also an incomplete list of union issues. i.e. it is not just union and not just management that have caused this. It is partially both.

Not touched in this discussion but there are huge external influences also which probably are more significant again.

There were only management issues listed in that post when I replied. The only possible union issue is high wages, but only to the extent that unions ask for those high wages. At the end of the day management have agreed to the wage increases over an extended period of time. Management should know if the business can afford the higher wages.