Thursday, 28 August 2014

Qantas and Alan Joyce - worse than expected, and that's just their financial performance

Qantas today reported an underlying loss before tax of AU$646 million - with a statutory loss after tax of AU$2.8 billion, but Alan Joyce is not to blame.

It was all the other airlines fault, for being more competitive and putting too many seats on the market. Oh, and fuel got more expensive (wasn't it more expensive for all airlines?). Oh, and we did some restructuring, and sacked people and had to pay them out - which cost us quite a lot of money - but really that is a saving! Oh, and less people decided to fly (with us), so its really their fault. Oh, and we did save quite a lot of money by giving people shittier meals and less service (Ahem!) I mean more efficient service.

Let me do some translation from Alan Joyce's opening remarks about underlying results:
  • 'The cumulative effect of two years of market capacity growth outstripping demand,'
    = we put on too many flights that no one wanted to travel on in an attempt to beat Virgin
  • 'A record high fuel cost of $4.5 billion, up $253 million on the prior year, and'
    = compared to other airlines we got our fuel hedging strategy wrong?
  • 'Weaker demand due to an environment of lower consumer confidence, with reduced activity by business, particularly the mining and government sectors'
    = we fiddled around with other stuff while consumer demand burned
He goes on to say that that 2.6 billion write-down is really just an accounting thing now that they are doing a corporate restructure in line with the legislative changes so that they can have greater foreign ownership, and the amount is soooooo big because they bought the aircraft when the Australian dollar was low, and now its high, but since they're not planning on getting rid of the planes, this doesn't really affect anything (so it means they will keep those old tired planes?).

Now - I have a lot of sympathy for Alan Joyce, he took over an airline that had kind of been coasting because its management was more focused on selling to private equity, and making a lot of money for themselves rather than bringing the airline in to the 21st century. But he has been there quite a while now (CEO since 2008), and along with the board, made some very bad decisions. The airline seems bent on contraction, rather than finding a way to expand. It has become way meaner to both its staff and customers on its path to becoming leaner.

Have a chat to any Qantas staff member who engages with the public, and you will only see eyes raised in disbelief at management decisions, and hear polite but none the less derisive comment about Qantas public pronouncements. So whatever they are doing, and whatever they are saying, they are not bringing staff and their customers with them.

Over the pas year I have travelled a lot with Qantas. They gave me Gold Status, and so in return I have remained fairly faithful - but the recent changes in the Frequent Flyer scheme - effective lowering of points and status credits on most of my regular routes and fare catagories has made me question their loyalty to me. I havn't flown with them longhaul international for years on the basis of cost and service. I am about to do so next month. I'll tell you then what I think all this 'transformation' means for the international customer.

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