Qantas revise profit forecast and slash another 1750 jobs

[Michael Morrison]

http://asx.com.au/asxpdf/20090414/pd...dbxm9rgp7v.pdf

500 Management jobs to go
1250 FTE jobs to be cut
5% reduction in capacity - Routes to be affected will be UK/US and South Africa
Around 10 aircraft grounded (744/767)
4 x A380's to be deferred
12 x 738's to be deferred

Profit downgrade to around $100M-$200M for Full year

[Oliver Gigacz]

These will be the A380s defered

MSN055, MSN062, MSN067 and MSN070 according to A380 Production

http://a380production.com/

And so is JQ A320/A321s still coming?

[NickN]

Not surprising the routes they rape their customers on which have now been smashed by competitive prices are being reduced. Tickets to the US are at an all time low, and they are duking it out with Singapore etc on the SYD-SIN-LHR route with both slashing the price of tickets. Things will never go back to the way they used to, or at least they will be this way for a very long time. They have to bunker down now to protect themselves.

[Oliver Gigacz]

Great News

[Owen H]

NickN,

When will people realise that they were never raping the public on these routes... it was the cost of doing business.

You can claim all you want that you should have sub $1000 fares, but the fact of the matter is that at these rates, the airlines are making losses.

Enjoy them while they last, because at those fares, I can tell you airlines will go out of business. You get your $1000 fare, but Qantas is just scraping a profit and sacking its workforce, while SQ and CX are parking brand new aircraft up against the fence and laying off workers hand over fist.

Air travel is expensive, and maybe now some in the public will wake upto the fact that if you want a service, and you want to fly, you have to pay decent money to do it.

[Lee G]

Qantas faces being gutted and restructered around Jetstar model: aviation expert

QANTAS will no longer exist in its current form if the downturn that is crippling the industry lasts another six months, one of Australia's leading aviation experts has claimed.

Centre for Asia-Pacific Aviation director Peter Harbison said that a currently unprofitable Qantas faces being gutted and reconstructed around a more profitable Jetstar model.

He also told The Daily Telegraph yesterday that the 3300 jobs already axed at the airline would be easily superceded in the coming months if conditions did not improve.

The airline confirmed on Tuesday it was currently losing money and was likely to chalk up a loss of up to $180 million in the first six months of 2009.

To help stem further losses, it also announced a 5 per cent reduction in capacity, the axing of a further 1750 frontline staff and senior managers, grounding of 10 aircraft and multiple delays of new aircraft on order.

Qantas blamed a dramatic fall in international travel for its unglamorous slide into the red. Its bottom line is also being decimated by a cut-throat airfares war that has had ticket prices fall to unprecedented levels.

Those levels simply can't be sustained, Mr Harbison said.

"If this environment continues, we basically have an unprofitable Qantas airline that doesn't have a future.

"Even if we stay at the same level for six months, they really have to look at ripping the airline apart and doing something dramatically different.

"There will definitely be a lot more jobs cuts but, more than that, the whole structure of the company will have to change."

Contrarily, Qantas' budget carrier Jetstar continues to trade positively, largely due to its slim cost base and appeal to budget-conscious travellers.

Mr Harbison said Qantas would not have made it through the current recession if it had not launched Jetstar in 2005 to counter Virgin Blue.

While Qantas management expressed confidence in the airline's future, its boss Alan Joyce seemed to echo those sentiments yesterday

He told Business Spectator it was Qantas' broad portfolio - namely Jetstar and the performing Qantas Frequent Flyer program - that was aiding its survival.

http://www.news.com.au/business/stor...78-462,00.html

[damien b]

Originally Posted by Owen H

NickN,

When will people realise that they were never raping the public on these routes... it was the cost of doing business.

You can claim all you want that you should have sub $1000 fares, but the fact of the matter is that at these rates, the airlines are making losses.

Enjoy them while they last, because at those fares, I can tell you airlines will go out of business. You get your $1000 fare, but Qantas is just scraping a profit and sacking its workforce, while SQ and CX are parking brand new aircraft up against the fence and laying off workers hand over fist.

Air travel is expensive, and maybe now some in the public will wake upto the fact that if you want a service, and you want to fly, you have to pay decent money to do it.

Whilst i agree with your sentiments of airfares being high due to the cost of flying, Qantas and others like it have a history of having high airfares when little to no competition excisted. The TAA/Ansett duoploy is a good case. Its how they make good money and keep shareholders happy - not the flying public. They only lower airfares when they are forced to, as has now occured both domestically and internationally. Competition has now also forced Business and first class airfares down and they where certainly way over priced and since these have fallen by up to 50%, it is where airlines like Qantas is feeeling the pinch. It was how the airlines made good profit and now that those airfares have come down (as very few people are flying business anymore) airlines like QF, SQ etc are hurting.

Having high labour/infrastructure costs doesn't help either. Qantas and others like it will either have to down size whilst the economy is slow (as they are starting to do) or remodel to jetstar like airlines with reduced cost overheads.

People will vote with their money, not loyalty to an airline - the days of flying Qantas just because its Australian despite it being more expensive are long gone for many travellers. Either the airlines take note of this fact or fail.

[Michael Morrison]

Originally Posted by Owen H

NickN,

When will people realise that they were never raping the public on these routes... it was the cost of doing business..

I don't dispute that $1k airfares SYD-LAX are not sustainable for QF, but surely when they have been making the profits like they have for the last few years it goes to show that they have been over charging for a while on some routes.

They are generally more expnsive than their competitors on most international routes.

[John C]

No, conversely, I believe it shows that they have been undercharging on a lot of other routes.

The return on capital invested is so poor, and subject to such risk, in the airline industry, that the owners of QF, VB, and every other airline in the cosmos would make significantly greater returns by dumping the lot and buying a block of flats (admittedly a very BIG block of flats, but you know what I mean)

The only people who seem to make a reasonable return out of aviation are the airport owners who have everyone by the short and curlies - airlines and pax alike - they charge like wounded bulls and "cost recover" everything.

If airlines could "cost recover" we wouldnt be seeing the corporate blood letting that we are seeing at the moment.

Part of the problem is of their own making - dropping unsustainable fares into the market - even if they are only lead in fares, sets an expectation amongst travellers that these low fares represet the real cost of travel and that every other fare is gouging.

When you look at the money invested in a fleet, VB group has 3 777's, 57 or so 737-700/800's and 19 E Jets, QF has significantly more than that - with each 737 costing around 40-50 million US, the 777's in the order of 180-200 million and the E jets around 30 million - that is a lot of money tied up in aeroplanes. If you own/finance say half of that you have a lot of debt, if you lease the other half you have a lot of lease payments - either way you need significant cash flow to keep the doors open.

As an aside, I feel the need to say something about the term "raping" the public. I know it wasnt meant to cause offence, but the fact is that rape is a truly evil crime and to use the term to describe product pricing is unfair to those people who have had their lives touched by this evil. Sorry I dont mean to preach but people use words in such a throwaway fashion sometimes and it ends up diminishing the horror of the act.

[Craig Sandford]

Originally Posted by damien b

The TAA/Ansett duoploy is a good case. Its how they make good money and keep shareholders happy - not the flying public.

I can't remember, when were the domestic airways deregulated? I'm sure fares and timetables were set by a government department rather than the companies up until the late 80's.

In any case, companies will charge what the consumer can bear. That's why Mars bars made in Ballarat and BBQ shapes made in Blacktown are cheaper in Singapore than in Australia - we as a nation have a higher disposable income, so can afford to pay more without diminishing the market demand. Most of my flights between LAX and SYD have been close if not at capacity, obviously they could fill demand at the higher prices. Now that supply has increased, the consumers are saying we will no longer fly at those prices, so they come down.

Yes, shareholders are happier at higher profit levels. But remember, without shareholder funds, then capital investment will be made from more expensive bank loans. Therefore all fares would increase to fund that increased cost of capital. Shareholders aren't bogeymen, they assist economic development. They also deserve a decent return for the increased risk of putting their money into companies rather than into the bank.

The only people who seem to make a reasonable return out of aviation are the airport owners who have everyone by the short and curlies - airlines and pax alike.

That's why I have shares in MAP rather than QAN. The returns are more stable, and the risk is shared across a broader spectrum. The planes have to land somewhere