Qantas Grounded

[kaz3g]

Shutting the airline down without notice really lets Qantas customers know how much the management really values them.

When I was growing up, Ansett, ANA, TAA and Qantas were household names. I used to run outside when I heard the growl of those big P&W's in the sky and I'd watch in awe as their DC3's and occasional 4-engined aircraft went flying past. Qantas is the only one left.

 

Three years ago I did a big trip around the Centre in my Auster. One of the real highlights for me was visiting the various "homes" of Qantas in Qld, especially Longreach. Even then, however, the value and reputation of Qantas was being dragged down by the pig-headed approach to decision-making of its most senior management. The cost has been horrendous and it ain't finished yet http://blogs.crikey.com.au/planetalking/2009/08/17/v-australia-reminds-qantas-how-wrong-it-was-about-the-777/ And how different to the early days when its decision to stall the Government desired purchase of the British Comet saved it from the financial distress that affected BOAC so extensively?

 

I have a platinum Frequent Flyers VISA that I use for all my spending. I pay the increased costs associatd with it because it earns me points (a silly foible without cost-benefit) and because it is accepted anywhere. I have around 170,000 points accrued at the moment and am now seriously thinking of taking a trip to use them up then changing to a low-cost card instead. I think I need to do this before the company goes belly up like those others I remember so well.

 

You can't run an airline without customers and I think there are an awful lot out there right now who are totally peeeed off. There will be more when the fact of them pre-booking lots of motel rooms in recent weeks becomes more widely known.

 

kaz

 

Last couple of domestic flights I went Tiger and have no complaints at all. My youngest son is moving from Tokyo to Singapore very shortly and I'll happily fly Singapore airlines to visit

 

 

[kaz3g]

For those interested in some of the not so recent history of Qantas, the Super Constellation was awe-inspiring for a youngster in the 50's http://ashet.org.au/constellation/ Note that BOAC held half the shares in Q at that time.

 

And another part of Qantas I remember so well was its Empire class flying boats. There is a little bit of nostalgia at the end of this article of Ben's and it's worth the read http://blogs.crikey.com.au/planetalking/2010/07/07/the-flying-boat-that-outperformed-the-super-constellation/

 

kaz

 

 

[Guest Andys@coffs]

So as I inferred in an earlier post we are all keen to line up and blame someone. SOme will line up on the unions side and others on management.

 

No one will blame consumers yet it is us consumers who have mandated that the cost of an airline seat, especially in domestic markets must be cheaper than the taxi fare to and from the airport at each end, and further the taxi can be a complete dump not fit for human habitation but the aeroplane must be spotless and the service beyond reproach. I believe the unions havent kept up with the times and are still operating as though fares today represented 1980's AUD buying power. In real terrms the cost of travel hasnt really changed in the number of $ between then and now, so why would they expect that their salaries would....yet they live in Australia and their cost of living doesnt get a break because they are airline workers. If we believe in our capitalist market then market forcres must dictate they accept a lower quality of life or change jobs whereupon a new equalibrium will be found, perhaps human resources become scarce in Australia and as such its gets moved off shore.

 

Management is just applying triage to keep the beast alive. The groundings are all about forcing a timescale for resolution that means they'll have clarity on what to do next in days not the 18months or so that the unions are talking about. I personally cant blame them for choosing a fast resolution rather than death by 10000 cuts. Everyone says its extreme and they had other legal options open to them, and thats true, but nothing that will get a resolution like this will. What chance for getting a legal hearing at 10pm on a Saturday night and again at 2pm on a Sunday afternoon through "usual means"?

 

I through necessity have already abandoned them 3 weeks ago, I need certainty as do all other business flyers, arguably all flyers full stop. in a few more weeks of industrial action they wont have had any customers left to disapoint, except those trying to cash in on their FF points before they do an Ansett on them.

 

Im amazed that the unions are suprised that they escallated to this extent, as Windzor suggested VB is doing very well out of this sofar, which by inference must mean that Q is doing very poorly. No matter what people say about how you treat customers etc, keep loosing money week on week and that wont matter what your customers thought of youin a relatively short timeframe.

 

People also talk about the size of the profit, surely if they make $M lots as profit then they are clearly like pigs in a feed trough.........Its all relative to capital employed.if $m lots represents a 2% return on investment and teh bank will give you 6% why on earth would you continue to do what youve always done.

 

We can have the benefits of global competition or a protected industry, but not both. If we want Australian Aviation workers to have an Australian quality of life similar to other Australians (Im thinking more of the less skilled staff that the proffesional pilots) then we have to accept that the cost of flying reflects that, and I doubt for one moment that will happen. SO while we are all sorry and outraged over their treatment, the reality is we arent outraged enough to put our money where our mouth is.

 

Andy

 

 

[facthunter]

Some good points there Andy. We all rush to get the absolute lowest price for an air fare regardless of any other consideration, and for years have not been prepared to pay the proper price of an airfare. It has to be cheaper than a bus or train. Why would that be so?

 

The investment in the right type of aircraft, and need to predict a market accurately are critical. If your load factors are not up you lose money fast. The profit per dollar of cashflow is small. Airline profitability is difficult to achieve.

 

OK that is a general statement. The current situation is an EXTREME action. This is playing for high stakes with the potential for great losses in jobs, friendships, the airlines reputation, careers, reputations, and the welfare of thousands of passengers stranded , who will never fly Qantas again.

 

The last big fiasco 22 years ago resulted in the " obliteration" (Quote Kim Beasley) of the then Australian Airlines, and Ansett being burdened with a debt of over 2.3 billion dollars which I believe mortally wounded Ansett till it's eventual demise. Another consequence of it was to give other airlines (competitors) around 650 of their highly experienced and well trained flight staff FREE.

 

There will be/is an enormous demand for pilots in the Asia region. Will the pressure to supply thie market with pilots result in a watering down of standards of safety. Conditions many workers work on aircraft in overseas, would not be permitted in this country, under OH&S .

 

I cannot believe that something more considered and less BELLIGERENT is not possible . IF this is not availaible the COST will inevitably be large and somewhat inpredictable as to it's extent. Those who gamble should only do so if the costs of losing are able to be coped with. Nev

 

 

[winsor68]

All part of the cunning plan dazza...

 

The only question is whether Mr Joyce is the patsy or a player... either way he has got his BIG payout so he can't complain...

 

 

[dazza 38]

All part of the cunning plan dazza...The only question is whether Mr Joyce is the patsy or a player... either way he has got his BIG payout so he can't complain...

HI Don, I dont know mate, but I have a pretty good idea.lol I can see a Start up Airline owned by QANTAS, Starting up and being based in either KL or HK.In the not to distant future.

Just adding to Nevs Post-I have read that the figures getting bandied around is around 23 000 Pilots/Technicians been needed in the Asia Pacific Region with in the next 10 years.Especially as China, is going to explode with domestic travel. I read this somewhere not long ago, but I cant find the source.

 

 

[Powerin]

Just want to make an off-topic comment about "cheap" airline fares. While it is true that *some* fares are cheaper than a bus or train, that fare only applies to a limited number of seats on each flight. First come, first serve. Those seats are usually filled months ahead by people (and I include myself in this category) that could never have previously afforded to fly RPT. And it probably fills what would have been otherwise empty seats on each flight.

 

For example, if I were to fly Melb-Bris on Virgin today, it would cost me $515. In 6 months time I can get the same seat and same level of service for $125. Cheap seats are just part of an overall pricing model that gets more bums on seats. I'm not sure it can be said that airfares in general are cheaper than a taxi ride or that we are not paying a proper price for them.

 

 

[dazza 38]

Just want to make an off-topic comment about "cheap" airline fares. While it is true that *some* fares are cheaper than a bus or train, that fare only applies to a limited number of seats on each flight. First come, first serve. Those seats are usually filled months ahead by people (and I include myself in this category) that could never have previously afforded to fly RPT. And it probably fills what would have been otherwise empty seats on each flight.For example, if I were to fly Melb-Bris on Virgin today, it would cost me $515. In 6 months time I can get the same seat and same level of service for $125. Cheap seats are just part of an overall pricing model that gets more bums on seats. I'm not sure it can be said that airfares in general are cheaper than a taxi ride or that we are not paying a proper price for them.

Excellent Point, you have made, Mate. Domestic flying in Aus, is profitable.Hence JetStar making a profit of $169 millon. As you have mentioned, not all seats on the jet are cheap.Airlines make profit on pure turn over.Back in 1956 It cost $500 to fly from the US to Australia.Average wage was $40. Only the rich and shameless, could affort to fly.Now everybody can afford to fly.Turnover (with profit) being the key.Modern airliners are more fuel efficent than they where back then (fuel burn/speed/capacity).Prebooking months in advance, helps a airline plan ahead, hence cheaper flights.If sombody has to fly that day, and book that day.They pay through the nose, to get on that flight.

 

 

[Guest Andys@coffs]

..... I'm not sure it can be said that airfares in general are cheaper than a taxi ride or that we are not paying a proper price for them.

My statement was a generality, as all these statements are, as none of us have access to the details. I am sure however, that 20 years ago I could absolutely not fly cheaper than the sum of a taxi fare at both end no matter how far in advance I was prepared to book, yet I can today. It used to cost me $60 taxi from Northern suburbs of Adelaide to the airpoint ($120 round trip) and $70 (plus tolls) each way fron Melb,Tulla to Williamstown ($140 round trip) so $260 taxi and a $49 (x 2 for return) tiger airfare Adl to Melb. I agree that not everyone would have paid $49 for their seat (plus cc surcharge, breathing oxygen surcharge, seat belt rental surcharge, feet touching the floor surcharge and so on) but even so, compared to the $260 taxi charge theres a fair (perhaps fare even) bit of room for that to grow before they break even.

 

In the end Im sure that there is an average cost per seat per sector that correlates to all those who got bent over by buying on the last day against those that gave an interest free loan to the airlines for 6months or more. Im equally sure that the average today in real terms is likely significantly less than 10-20yrs ago.

 

BTW, I suggest that we stop talking about profits in $m, they look huge and the inference is they are close to excessive, I think we should talk about them as return on capital as an investment return. When you get a 5%pa return on capital employed it doesnt look anywhere near as impressive as $500m profit.....

 

Andy

 

 

[turboplanner]

All good philosophy with a vital element missing, the Australian customer who consistently has sent a message over decades the he/she is not interested in buying Australian or supporting any group of workers, but will consistently buy increasing volume when the price is lowered.

 

The Wool and Textile industry ignored this

 

The Automotive manufacturing industry ignored this

 

The Meat industry ignored this

 

The Rail industry ignored this

 

The Plastics industry ignored this

 

......and so on.

 

As painful as it is for Australians to be losing jobs, it's only a matter of some now or many later.

 

 

[fly_tornado]

Nothing hurts your cause more than a wildcat strike and claiming the other guy forced you.

 

 

[dazza 38]

All good philosophy with a vital element missing, the Australian customer who consistently has sent a message over decades the he/she is not interested in buying Australian or supporting any group of workers, but will consistently buy increasing volume when the price is lowered.The Wool and Textile industry ignored this

 

The Automotive manufacturing industry ignored this

 

The Meat industry ignored this

 

The Rail industry ignored this

 

The Plastics industry ignored this

 

......and so on.

 

As painful as it is for Australians to be losing jobs, it's only a matter of some now or many later.

I 100 percent agree, Turbo.That is why i reckon we will see a start up airline owned by QANTAS based in Asia, flying international and domestic just in Asia.

I dont balme AJ, for making decisions.I just think he could have announced a grounding starting in 5 or 10 days time.Not grounding and announce it immediately.They way he has done it, has disrupted alot of travelling plans for thousands of people.He could have looked after his customers a bit better I think.IMO

 

 

[fly_tornado]

Isn't the purpose of this sort of union busting action designed to keep the big money boys happy so they will invest in the new airlines?

 

 

[Ultralights]

dont forget there has only been just 4 hrs of strike action taken so far, Just 4...

 

the long term plan has been to shut Qantas down, ever since the failed take over bid a few yrs ago. Qantas has legal obligations to be 51% australian owned, and employ Australians, its Subsidiaries do not. Jetstar and jetstar Asia have been used to bleed Qantas dry, once Qantas is gone, they are free to Staff and sell both jetstars to anyone, and employ anyone on third world wages. maybe even to the point that Jetstar Asia is Renamed QANTAS ASIA.... just all crewed with people with strange accents on $5 a week.

 

 

[winsor68]

HI Don, I dont know mate, but I have a pretty good idea.lol I can see a Start up Airline owned by QANTAS, Starting up and being based in either KL or HK.In the not to distant future.Just adding to Nevs Post-I have read that the figures getting bandied around is around 23 000 Pilots/Technicians been needed in the Asia Pacific Region with in the next 10 years.Especially as China, is going to explode with domestic travel. I read this somewhere not long ago, but I cant find the source.

They already have one Dazza... It's called Jetstar.

 

 

[HeadInTheClouds]

Wasn't a decision supposed to be reached by now?

 

 

[winsor68]

This is just the final play... it started years ago when Airline Employees with the start up Low Cost Carriers were allowed to send 90% of their jobs to contractors whether in Australia or Asia...

 

 

[kaz3g]

Nothing hurts your cause more than a wildcat strike and claiming the other guy forced you.

A recent speech by Seantor Xenaphon gives us a very interesting perspective on where things are at right now:

 

Xenophon speech 23rd August

 

Senator XENOPHON (South Australia) (19:37): I rise to speak tonight on an issue that is close to the hearts of many Australians, and that is the future of our national carrier, Qantas. At 90, Qantas is the world's oldest continuously running airline. It is an iconic Australian company. Its story is woven into the story of Australia and Australians have long taken pride in the service and safety standards provided by our national carrier. Who didn't feel a little proud when Dustin Hoffman uttered the immortal line in Rain Man, 'Qantas never crashed'?

 

While it is true that Qantas never crashes, the sad reality is that Qantas is being deliberately trashed by management in the pursuit of short-term profits and at the expense of its workers and passengers. For a long time, Qantas management has been pushing the line that Qantas international is losing money and that Jetstar is profitable. Tonight, it is imperative to expose those claims for the misinformation they are. The reality is that Qantas has long been used to subsidise Jetstar in order to make Jetstar look profitable and Qantas look like a burden. In a moment, I will provide detailed allegations of cost-shifting that I have sourced from within the Qantas Group, and when you know the facts you quickly see a pattern. When there is a cost to be paid, Qantas pays it, and when there is a profit to be made, Jetstar makes it.

 

But first we need to ask ourselves: why? Why would management want Qantas to look unprofitable? Why would they want to hide the cost of a competing brand within their group, namely Jetstar, in amongst the costs faced by Qantas?

 

To understand that, you need to go back to the days when Qantas was being privatised. When Qantas was privatised the Qantas Sale Act 1992 imposed a number of conditions, which in turn created a number of problems for any management group that wanted to flog off parts of the business. Basically, Qantas has to maintain its principal place of operations here in Australia, but that does not stop management selling any subsidiaries, which brings us to Jetstar.

 

Qantas has systematically built up the low-cost carrier at the expense of the parent company. I have been provided with a significant number of examples where costs which should have been billed back to Jetstar have in fact been paid for by Qantas. These are practices that I believe Qantas and Jetstar management need to explain. For example, when Jetstar took over the Cairns-Darwin-Singapore route, replacing Qantas flights, a deal was struck that required Qantas to provide Jetstar with $6 million a year in revenue. Why? Why would one part of the business give up a profitable route like that and then be asked to pay for the privilege? Then there are other subsidies when it comes to freight. On every sector Jetstar operates an A330, Qantas pays $6,200 to $6,400 for freight space regardless of actual uplift. When you do the calculations, this turns out to be a small fortune. Based on 82 departures a week, that is nearly half-a-million dollars a week or $25½ million a year.

 

Then there are the arrangements within the airport gates. In Melbourne, for example, my information from inside the Qantas group is that Jetstar does not pay for any gates, but instead Qantas domestic is charged for the gates. My question for Qantas management is simple: are these arrangements replicated right around Australia and why is Qantas paying Jetstar's bills? Why does Qantas lease five check-in counters at Sydney Terminal 2, only to let Jetstar use one for free? It has been reported to me that there are other areas where Jetstar's costs magically become Qantas's costs. For example, Jetstar does not have a treasury department and has only one person in government affairs. I am told Qantas's legal department also does free work for Jetstar.

 

Then there is the area of disruption handling where flights are cancelled and people need to be rebooked. Here, insiders tell me, Qantas handles all rebookings and the traffic is all one way. It is extremely rare for a Qantas passenger to be rebooked on a Jetstar flight, but Jetstar passengers are regularly rebooked onto Qantas flights. I am informed that Jetstar never pays Qantas for the cost of those rebooked passengers and yet Jetstar gets to keep the revenue from the original bookings. This, I am told, is worth millions of dollars every year. So Jetstar gets the profit while Qantas bears the costs of carriage. It has also been reported to me that when Qantas provides an aircraft to Jetstar to cover an unserviceable plane, Jetstar does not pay for the use of this plane.

 

Yet another example relates to the Qantas Club. Jetstar passengers can and do use the Qantas Club but Jetstar does not pay for the cost of any of this. So is Qantas really losing money? Or is it profitable but simply losing money on paper because it is carrying so many costs incurred by Jetstar? We have been told by Qantas management that the changes that will effectively gut Qantas are necessary because Qantas international is losing money but, given the inside information I have just detailed, I would argue those claims need to be reassessed.

 

Indeed, given these extensive allegations of hidden costs, it would be foolish to take management's word that Qantas international is losing money. So why would Qantas want to make it look like Qantas international is losing money? Remember the failed 2007 private equity bid by the Allco Finance Group. It was rejected by shareholders, and thank goodness it was, for I am told that what we are seeing now is effectively a strategy of private equity sell-off by stealth.

 

Here is how it works. You have to keep Qantas flying to avoid breaching the Qantas Sale Act but that does not stop you from moving assets out of Qantas and putting them into an airline that you own but that is not controlled by the Qantas Sale Act. Then you work the figures to make it appear as though the international arm of Qantas is losing money. You use this to justify the slashing of jobs, maintenance standards and employment of foreign crews and, ultimately, the creation of an entirely new airlines to be based in Asia and which will not be called Qantas. The end result? Technically Qantas would still exist but it would end up a shell of its former self and the Qantas Group would end up with all these subsidiaries it can base overseas using poorly paid foreign crews with engineering and safety standards that do not match Australian standards. In time, if the Qantas Group wants to make a buck, they can flog these subsidiaries off for a tidy profit. Qantas management could pay the National Boys Choir and the Australian Girls Choir to run to the desert and sing about still calling Australia home, but people would not buy it. It is not just about feeling good about our national carrier—in times of trouble our national carrier plays a key strategic role. In an international emergency, in a time of war, a national carrier is required to freight resources and people around the country and around the world. Qantas also operates Qantas Defence Services, which conducts work for the RAAF. If Qantas is allowed to wither, who will meet these strategic needs?

 

I pay tribute to the 35,000 employees of the Qantas Group. At the forefront of the fight against the strategy of Qantas management have been the Qantas pilots, to whom millions of Australians have literally entrusted their lives. The Australian and International Pilots Association sees Qantas management strategy as a race to the bottom when it comes to service and safety. On 8 November last year, QF32 experienced a serious malfunction with the explosion of an engine on an A380 aircraft. In the wrong hands, that plane could have crashed. But it did not, in large part because the Qantas flight crew had been trained to exemplary world-class standards and knew how to cope with such a terrifying reality. I am deeply concerned that what is being pursued may well cause training levels to fall and that as a result safety standards in the Qantas Group may fall as well. AIPA pilots and the licensed aircraft engineers are not fighting for themselves; they are fighting for the Australian public. That is why I am deeply concerned about any action Qantas management may be considering taking against pilots who speak out in the public interest.

 

A lot of claims have been made about the financial state of Qantas international but given the information I have presented tonight, which has come from within the Qantas Group, I believe these claims by management are crying out for further serious forensic investigation. Qantas should not be allowed to face death by a thousand cuts—job cuts, route cuts, quality cuts, engineering cuts, wage cuts. None of this is acceptable and it must all be resisted for the sake of the pilots, the crews, the passengers and ultimately the future of our national carrier.

 

If the Senator's revelations are even half correct, it would seem that all this is part of a grand plan to circumvent the privatisation rules that have applied to the sale of Qantas since it occurred. If the rumours of mass motel bookings being made weeks ago are also correct this supposition will have been proven true. I suspect ASIC may already be looking at this along with FairWork Australia.

 

kaz

 

 

[Old Koreelah]

I also suspect that there is a hedge fund that wants to buy Qantas and needs the share price suppressed...

You may be right!. The problem is cruddy management, but no LEADERSHIP. They seem to be losing sight of QANTAS' major assets- safety, reliability and STAFF MORALE. Remember when Apple threw out Steve Jobs and employed a sucession of CEO's whose main focus seemed to be refurnishing their office. Perhaps we should bring back Hudson Fysh!

 

 

[Litespeed]

Qantas is fundamentally in great shape but run by absolute morons and greed.

 

A forensic investigation is warranted and charges should be laid where laws have been broken.

 

The fraudulent accounting practices alone should mean charges are laid.

 

The breaches of aviation laws and operation certificate conditions should be prosecuted.

 

A proper inquiry like called for by Xenophon is a good idea, but the federal police, ASIC, CASA etc, should jump in and investigate and lay charges.

 

The full power of law should be exercised, our National interest demands no less.

 

 

[winsor68]

It has to look at the WHOLE Industry IMO...

 

 

[Litespeed]

Yes the whole industry needs to be looked at, but it is Qantas thats breaking the law and that needs to be foremost.

 

No claims made by Qantas can hold any credibility until they are held to account. They have clearly manufactured the crisis to suit their aims and any discussion on its ability to turn a profit and competition is redundant. We are dealing with financial accounts that have been engineered and bear no resemblence to legal standards and reality.

 

I expect Joyce will choke on his kangaroo steak.

 

 

[winsor68]

It is about the whole industry not just Qantas... Its about safety and fair work conditions...

 

http://infrequentrant.blogspot.com/2011/10/qantas-lockout-what-unions-want-what.html?m=1

 

 

[turboplanner]

Yes the whole industry needs to be looked at, but it is Qantas thats breaking the law

I don't think so LS, Fair Work Australia is not indicating that by their 2 am decision ordering full termination of Industrial Action against Qantas

 

Alan Joyce has gone very solidly on the record at least twice that Qantas is not trying to replace employees with cheap Asian labour, but is trying to grow the business which will ensure Australian jobs are protected, so we might have to wait and see for a little while.

 

 

[David Isaac]

A recent speech by Seantor Xenaphon gives us a very interesting perspective on where things are at right now:.....If the Senator's revelations are even half correct, it would seem that all this is part of a grand plan to circumvent the privatisation rules that have applied to the sale of Qantas since it occurred. If the rumours of mass motel bookings being made weeks ago are also correct this supposition will have been proven true. I suspect ASIC may already be looking at this along with FairWork Australia.

As you say Kaz ... If what the Senator says is correct, the issue seems more of an orchestration of lies and manipulation right at the front end of Qantas ... which is incidentally what Nev said.I also hold our Federal government responsible for not stepping in on this as they have the power and obligation to do.

 

I note this morning it is over and Q is back in the air as of this afternoon. This could have been resolved and never happened as Q had this well planned days in advance, you cant tell me Julia's mob did not know about this, they are implicit in this as much as all the parties from what I can see.