1 00:00:03,960 --> 00:00:06,299 Sean Aylmer: Welcome to the Fear and Greed business interview, I'm Sean 2 00:00:06,300 --> 00:00:08,910 Sean Aylmer: Aylmer. It's been a big week for the aviation industry. 3 00:00:08,910 --> 00:00:13,259 Sean Aylmer: First, Virgin Australia's CEO Jayne Hrdlicka, announced she was stepping 4 00:00:13,259 --> 00:00:16,320 Sean Aylmer: down after almost four years of rebuilding the airline following 5 00:00:16,320 --> 00:00:19,260 Sean Aylmer: the pandemic. But her departure has thrown plans for a 6 00:00:19,260 --> 00:00:23,430 Sean Aylmer: potential IPO of the company into disarray. Then Qantas announced 7 00:00:23,430 --> 00:00:26,100 Sean Aylmer: the new chair with John Mullen to replace Richard Goida. 8 00:00:26,280 --> 00:00:28,590 Sean Aylmer: On the same day, the government declared it'll start auditing 9 00:00:28,590 --> 00:00:31,080 Sean Aylmer: slots at Sydney Airport and force the airlines to explain 10 00:00:31,349 --> 00:00:35,098 Sean Aylmer: why they've canceled flights. Then yesterday, Qantas announced its half- 11 00:00:35,100 --> 00:00:38,010 Sean Aylmer: year results with a lower profit after the boom result 12 00:00:38,010 --> 00:00:41,909 Sean Aylmer: last year and a $ 400 million share buyback. Plenty to 13 00:00:41,909 --> 00:00:45,269 Sean Aylmer: discuss. Geoffrey Thomas is the editor- in- chief of Airline Ratings. 14 00:00:45,450 --> 00:00:49,050 Sean Aylmer: com, and I would say the most respected aviation commentator 15 00:00:49,080 --> 00:00:51,750 Sean Aylmer: in the country. Geoffrey, welcome to Fear and Greed. 16 00:00:52,199 --> 00:00:53,909 Geoffrey Thomas: Well, thank you very much for that intro. 17 00:00:54,990 --> 00:00:57,480 Sean Aylmer: Now, I am delighted that you are actually speaking. There's 18 00:00:57,480 --> 00:00:59,190 Sean Aylmer: a bit of background noise because you're actually at an 19 00:00:59,190 --> 00:01:00,660 Sean Aylmer: airport terminal, is that right? 20 00:01:01,290 --> 00:01:04,080 Geoffrey Thomas: Yes. I'm actually at a Qantas terminal. I'm about to take a flight, so yes. 21 00:01:05,849 --> 00:01:09,328 Sean Aylmer: Right. We will hurry this because I'm sure it won't 22 00:01:09,330 --> 00:01:13,380 Sean Aylmer: be late. Let's keep talking Qantas. Yesterday's result, it wasn't 23 00:01:13,380 --> 00:01:17,010 Sean Aylmer: as high as 12 months ago. But 12 months ago we had that post- 24 00:01:17,670 --> 00:01:20,639 Sean Aylmer: COVID boom in travel. They've still got enough cash to 25 00:01:20,639 --> 00:01:24,209 Sean Aylmer: be throwing around a $ 400 million share buyback. What do 26 00:01:24,209 --> 00:01:27,239 Sean Aylmer: you take of Vanessa Hudson's first result? 27 00:01:28,469 --> 00:01:32,340 Geoffrey Thomas: Look, it's a good result. We expected the revenue to 28 00:01:32,340 --> 00:01:36,630 Geoffrey Thomas: decline as capacity has come back into the market and 29 00:01:36,630 --> 00:01:40,469 Geoffrey Thomas: fares have normalized, because last year they were anything but 30 00:01:40,469 --> 00:01:45,029 Geoffrey Thomas: normal and certainly the year before that. So fares have 31 00:01:45,030 --> 00:01:48,360 Geoffrey Thomas: normalized. They've got a fair way to go, but they've 32 00:01:48,360 --> 00:01:51,870 Geoffrey Thomas: also increased the flying. So the revenues bumped up as 33 00:01:51,870 --> 00:01:54,930 Geoffrey Thomas: a total, but the yield has gone down. So look, 34 00:01:54,930 --> 00:01:58,469 Geoffrey Thomas: I think it's a result that we expected. It's in 35 00:01:58,469 --> 00:02:03,239 Geoffrey Thomas: line with the predictions from analysts. So yeah, I'd give 36 00:02:03,240 --> 00:02:05,130 Geoffrey Thomas: her a tick. And she's spending a lot of money 37 00:02:05,459 --> 00:02:09,060 Geoffrey Thomas: on a lot of initiatives to please the passengers. 38 00:02:09,900 --> 00:02:13,019 Sean Aylmer: Okay, so let's go down that path a bit. She 39 00:02:13,020 --> 00:02:17,820 Sean Aylmer: is a very different personality to Alan Joyce, undoubtedly. How 40 00:02:17,820 --> 00:02:20,129 Sean Aylmer: would you rate her first six months or so, or it's 41 00:02:20,130 --> 00:02:22,410 Sean Aylmer: less than six months, in the job? 42 00:02:22,799 --> 00:02:26,100 Geoffrey Thomas: Well, look, that's an interesting point. She's different to Alan 43 00:02:26,100 --> 00:02:28,768 Geoffrey Thomas: Joyce. I think she may be a little bit more 44 00:02:29,040 --> 00:02:33,660 Geoffrey Thomas: willing to compromise. However, having said that, she still has 45 00:02:33,660 --> 00:02:39,480 Geoffrey Thomas: to run an ASX listed airline facing competition from a 46 00:02:39,480 --> 00:02:42,959 Geoffrey Thomas: lot of airlines that are government- owned or partly government- 47 00:02:42,960 --> 00:02:46,830 Geoffrey Thomas: owned, or have labor costs that are up to one- 48 00:02:46,830 --> 00:02:50,639 Geoffrey Thomas: seventh those of Qantas'. So there's lots of challenges for 49 00:02:50,639 --> 00:02:54,389 Geoffrey Thomas: Qantas, particularly in the international arena. And so there's only 50 00:02:54,389 --> 00:02:58,320 Geoffrey Thomas: so many levers that she can pull in her pursuit 51 00:02:58,320 --> 00:03:01,950 Geoffrey Thomas: of charting a different course, and she's going to be 52 00:03:02,040 --> 00:03:05,609 Geoffrey Thomas: facing a lot of problems with the unions because they're saying, " 53 00:03:05,610 --> 00:03:09,510 Geoffrey Thomas: Well, look, Alan's gone, now we can get better paying 54 00:03:09,510 --> 00:03:12,809 Geoffrey Thomas: conditions." There's not a lot of room for her to 55 00:03:12,809 --> 00:03:14,700 Geoffrey Thomas: move in that regard. 56 00:03:15,570 --> 00:03:18,450 Sean Aylmer: Also, plenty of regulatory scrutiny, I'm guessing over the next 57 00:03:18,450 --> 00:03:20,340 Sean Aylmer: year or two, for Qantas and all the airlines. 58 00:03:21,210 --> 00:03:26,010 Geoffrey Thomas: Look indeed, and that's one of the big concerns. The 59 00:03:26,010 --> 00:03:29,999 Geoffrey Thomas: issues that have befallen Qantas and Virgin, but Virgin doesn't 60 00:03:30,000 --> 00:03:32,849 Geoffrey Thomas: get the publicity. They've still had the same problems. In 61 00:03:32,849 --> 00:03:37,890 Geoffrey Thomas: fact, they've had worse problems. Those issues are global. All 62 00:03:37,890 --> 00:03:41,670 Geoffrey Thomas: airlines in the world have faced these problems and some 63 00:03:41,670 --> 00:03:45,360 Geoffrey Thomas: of the airlines are very well healed through government ownership. 64 00:03:45,630 --> 00:03:50,249 Geoffrey Thomas: Therefore, the problems have been smoothed over to an extent. 65 00:03:50,670 --> 00:03:55,110 Geoffrey Thomas: So what concerns me is that we may face a 66 00:03:55,110 --> 00:03:58,380 Geoffrey Thomas: whole lot of regulatory changes, a whole lot of knee- 67 00:03:58,380 --> 00:04:02,370 Geoffrey Thomas: jerk reactions to the media coverage of Qantas over the 68 00:04:02,370 --> 00:04:06,180 Geoffrey Thomas: last year or two. And that would be a mistake 69 00:04:06,540 --> 00:04:11,729 Geoffrey Thomas: because these issues are global. For instance, in this result, 70 00:04:11,969 --> 00:04:15,300 Geoffrey Thomas: Vanessa Hudson said the A350, the plane that's going to 71 00:04:15,300 --> 00:04:19,020 Geoffrey Thomas: go from Sydney to New York, non- stop. Sydney to 72 00:04:19,020 --> 00:04:22,049 Geoffrey Thomas: London, non- stop. Melbourne to London, non- stop. That's a 73 00:04:22,050 --> 00:04:27,270 Geoffrey Thomas: really big airplane for them, a big revenue earner for 74 00:04:27,270 --> 00:04:31,320 Geoffrey Thomas: them. It's delayed another seven months because of supply chain 75 00:04:31,320 --> 00:04:35,039 Geoffrey Thomas: issues affecting Airbus, and they affect Boeing as well. So 76 00:04:35,430 --> 00:04:37,950 Geoffrey Thomas: these issues are not going to go away for another 77 00:04:37,950 --> 00:04:38,428 Geoffrey Thomas: year or so. 78 00:04:39,178 --> 00:04:41,130 Sean Aylmer: Stay with me Geoffrey, we'll be back in a minute. 79 00:04:47,430 --> 00:04:50,849 Sean Aylmer: I'm speaking to aviation commentator, Geoffrey Thomas, editor- in- chief 80 00:04:50,880 --> 00:04:56,160 Sean Aylmer: of Airline Ratings. com. Qantas is competing with government funded 81 00:04:56,160 --> 00:04:59,820 Sean Aylmer: airlines on the international routes, and we tend to forget 82 00:04:59,820 --> 00:05:03,089 Sean Aylmer: that because it is an ASX listed company. Virgin is 83 00:05:03,089 --> 00:05:05,010 Sean Aylmer: privately held but it's still trying to make a profit 84 00:05:05,010 --> 00:05:08,099 Sean Aylmer: at the end of the day. I sometimes get confused 85 00:05:08,100 --> 00:05:12,299 Sean Aylmer: here because certainly Qantas and Virgin get benefits from the 86 00:05:12,300 --> 00:05:15,960 Sean Aylmer: government in terms of the Open Skies Policy. This is 87 00:05:15,960 --> 00:05:18,659 Sean Aylmer: a question rather than a statement. So it does get 88 00:05:18,660 --> 00:05:21,210 Sean Aylmer: some benefit. But then the flip side, which they have 89 00:05:21,210 --> 00:05:23,309 Sean Aylmer: argued and Alan Joyce has argued is, but it's not 90 00:05:23,309 --> 00:05:27,330 Sean Aylmer: a fair playing field because we're fighting against a bunch 91 00:05:27,330 --> 00:05:31,140 Sean Aylmer: of government- backed airlines. Am I right in what I say there? 92 00:05:32,339 --> 00:05:38,820 Geoffrey Thomas: Well, it's interesting. I mean, Qantas faces competition, say from 93 00:05:38,820 --> 00:05:42,270 Geoffrey Thomas: Virgin Australia, which is a hundred percent American- owned by 94 00:05:42,270 --> 00:05:47,640 Geoffrey Thomas: Boeing. Bonza is a hundred percent American- owned. Now, you can't do 95 00:05:47,640 --> 00:05:50,580 Geoffrey Thomas: that in America. You cannot run an airline in America 96 00:05:50,580 --> 00:05:54,270 Geoffrey Thomas: that's a hundred percent Australian- owned. So that's an uneven 97 00:05:54,509 --> 00:05:57,629 Geoffrey Thomas: playing field. Now, the other dynamic and talking of America, 98 00:05:58,139 --> 00:06:01,650 Geoffrey Thomas: is every American airline that flies into Sydney or Melbourne 99 00:06:01,650 --> 00:06:06,810 Geoffrey Thomas: or Brisbane has gone bankrupt over the last 10 or 20 years. 100 00:06:07,050 --> 00:06:10,920 Geoffrey Thomas: And when they go bankrupt, go into chapter 11, they 101 00:06:10,920 --> 00:06:14,308 Geoffrey Thomas: tear up the contract, the labor contracts and present a 102 00:06:14,309 --> 00:06:19,020 Geoffrey Thomas: new one. Now, American pilots have lost 40% of their 103 00:06:19,200 --> 00:06:23,219 Geoffrey Thomas: remuneration over the last 20 years because of the bankruptcy 104 00:06:23,220 --> 00:06:26,760 Geoffrey Thomas: of these carriers. So one of the things that they have 105 00:06:26,760 --> 00:06:29,579 Geoffrey Thomas: said about Alan Joyce, one of the problems he had 106 00:06:29,820 --> 00:06:32,670 Geoffrey Thomas: was the Qantas has never gone bankrupt and where you 107 00:06:32,670 --> 00:06:35,190 Geoffrey Thomas: could tear up all the labor contracts and start all 108 00:06:35,190 --> 00:06:38,940 Geoffrey Thomas: over again. That would be a very severe thing to 109 00:06:38,940 --> 00:06:44,639 Geoffrey Thomas: do, but it would certainly bring Qantas' labor costs more 110 00:06:44,639 --> 00:06:47,190 Geoffrey Thomas: in line with its competitors than they're today. 111 00:06:47,940 --> 00:06:51,240 Sean Aylmer: Okay. Let's turn to Virgin. Jayne Hrdlicka has run the 112 00:06:51,299 --> 00:06:54,329 Sean Aylmer: airline, the carrier, for the last four years since Bain 113 00:06:54,330 --> 00:06:58,469 Sean Aylmer: purchased it. What's the prognosis for it? How is that 114 00:06:58,470 --> 00:07:00,839 Sean Aylmer: performing at the moment, and what do you think about 115 00:07:00,839 --> 00:07:03,210 Sean Aylmer: an IPA? Do you think there's room in the market for it? 116 00:07:05,070 --> 00:07:08,730 Geoffrey Thomas: Look, I do. I mean, what Jayne and Bain have 117 00:07:08,730 --> 00:07:14,490 Geoffrey Thomas: done and through the administration and receivership of Virgin Australia, 118 00:07:14,730 --> 00:07:18,630 Geoffrey Thomas: is they have stripped away all the excesses that were put 119 00:07:18,630 --> 00:07:22,349 Geoffrey Thomas: in there in the prior five or six years. So 120 00:07:22,349 --> 00:07:24,990 Geoffrey Thomas: all the frills or most of the frills are gone, 121 00:07:25,740 --> 00:07:29,939 Geoffrey Thomas: and the fleet has been rationalized to basically one mainline 122 00:07:29,940 --> 00:07:34,920 Geoffrey Thomas: type, the 737. And so they have repositioned it. They've 123 00:07:34,920 --> 00:07:38,130 Geoffrey Thomas: still got a great product, they've still got fabulous cabin 124 00:07:38,130 --> 00:07:43,950 Geoffrey Thomas: crew and fabulous customer service interface. From that perspective, it's 125 00:07:43,950 --> 00:07:49,289 Geoffrey Thomas: really good. So it's a much leaner operation, and I 126 00:07:49,290 --> 00:07:53,130 Geoffrey Thomas: think it's primed for an IPO. And I believe that 127 00:07:53,130 --> 00:07:56,550 Geoffrey Thomas: they will go down the route of buying some international 128 00:07:56,820 --> 00:08:02,459 Geoffrey Thomas: aircraft, probably 787s, a fleet of those, to start flying 129 00:08:02,460 --> 00:08:06,900 Geoffrey Thomas: internationally in their own right. And I believe that one 130 00:08:06,900 --> 00:08:10,470 Geoffrey Thomas: of the gentlemen on the advisory board, the Safety Advisory 131 00:08:10,470 --> 00:08:14,340 Geoffrey Thomas: Board, Ed Simms, who has amazing credentials in the airline 132 00:08:14,340 --> 00:08:18,930 Geoffrey Thomas: industry, he'll become the replacement for Jayne Hrdlicka. 133 00:08:19,740 --> 00:08:23,160 Sean Aylmer: Okay, heard it here first. What about the other airlines? 134 00:08:23,160 --> 00:08:25,050 Sean Aylmer: Now, I grew up in Orange and my family were 135 00:08:25,050 --> 00:08:27,900 Sean Aylmer: family friends with the Hazeltons. Max Hazelton is a legendary 136 00:08:27,900 --> 00:08:31,650 Sean Aylmer: aviator in Australia. It's now part of Rex. Hazelton Airlines 137 00:08:31,650 --> 00:08:35,250 Sean Aylmer: became part of Rex along with Kendall, et cetera. Is 138 00:08:35,250 --> 00:08:37,588 Sean Aylmer: there room for a third airline like that and let 139 00:08:37,590 --> 00:08:39,780 Sean Aylmer: alone the subsidiaries of some of the global players who 140 00:08:39,780 --> 00:08:40,529 Sean Aylmer: are also flying? 141 00:08:41,670 --> 00:08:46,470 Geoffrey Thomas: Well, that's a very good question. In that parliamentary inquiry 142 00:08:46,470 --> 00:08:48,600 Geoffrey Thomas: we had last year, we had people saying we should 143 00:08:48,600 --> 00:08:52,020 Geoffrey Thomas: break up Qantas and break it up into two or 144 00:08:52,020 --> 00:08:57,960 Geoffrey Thomas: three airlines, which is just crazy. Look, we are challenging 145 00:08:58,708 --> 00:09:02,700 Geoffrey Thomas: the size of our market by adding more airlines. Now, 146 00:09:02,700 --> 00:09:05,640 Geoffrey Thomas: Rex, which is the airline that came out of the Hazelton- 147 00:09:06,090 --> 00:09:11,789 Geoffrey Thomas: Kendall Dynasty, that's got a really great regional footprint now operating 148 00:09:11,790 --> 00:09:16,319 Geoffrey Thomas: 737s. I think they've got 10 altogether, or they will have 10 very shortly, and 149 00:09:16,320 --> 00:09:18,960 Geoffrey Thomas: they want to expand it further. And I think there's a 150 00:09:18,960 --> 00:09:21,450 Geoffrey Thomas: really good market for them, and they've carved it out. 151 00:09:22,860 --> 00:09:28,530 Geoffrey Thomas: The Bonza Airline is a totally different operation, connecting other 152 00:09:28,860 --> 00:09:32,249 Geoffrey Thomas: point to point that are not currently connected. I think 153 00:09:32,250 --> 00:09:34,829 Geoffrey Thomas: the market is just right the way it is, and 154 00:09:34,830 --> 00:09:38,610 Geoffrey Thomas: I'd like to see Virgin increase their market share. I'd 155 00:09:38,610 --> 00:09:41,940 Geoffrey Thomas: like to see Qantas decrease its market share. But at 156 00:09:41,940 --> 00:09:45,030 Geoffrey Thomas: the same time, it would grow as the market grows. 157 00:09:45,270 --> 00:09:47,490 Geoffrey Thomas: I would like to see Virgin pick up that growth 158 00:09:47,490 --> 00:09:47,970 Geoffrey Thomas: or more of that growth. 159 00:09:47,970 --> 00:09:51,389 Sean Aylmer: Okay. The 64 dollar question for all of us who 160 00:09:51,389 --> 00:09:55,470 Sean Aylmer: fly and search online for the cheapest airfares, what will 161 00:09:55,470 --> 00:10:00,300 Sean Aylmer: happen to airfares both domestically and international, globally over the 162 00:10:00,300 --> 00:10:01,170 Sean Aylmer: next 12 months or so? 163 00:10:02,670 --> 00:10:04,799 Geoffrey Thomas: They're definitely going to go down, no question about it. 164 00:10:05,070 --> 00:10:08,160 Geoffrey Thomas: For instance, for Australia, we've got all sorts of airlines 165 00:10:08,160 --> 00:10:11,758 Geoffrey Thomas: that are still coming back to this country out of 166 00:10:11,760 --> 00:10:15,598 Geoffrey Thomas: Perth, for instance. Thai International is returning for the first 167 00:10:15,600 --> 00:10:18,840 Geoffrey Thomas: time at the end of March. South African Airways is 168 00:10:18,840 --> 00:10:21,360 Geoffrey Thomas: returning for the first time at the end of March. 169 00:10:21,599 --> 00:10:26,340 Geoffrey Thomas: Cathay Pacific, but used to have 10 services a week 170 00:10:26,340 --> 00:10:31,080 Geoffrey Thomas: into Perth, has just, as of a couple of weeks ago, 171 00:10:31,770 --> 00:10:34,950 Geoffrey Thomas: got up to a daily service. So there's lots of 172 00:10:34,950 --> 00:10:39,179 Geoffrey Thomas: capacity still to come back, and Qantas itself is still 173 00:10:39,179 --> 00:10:43,020 Geoffrey Thomas: waiting for a some A380s. So it's also waiting for capacity. 174 00:10:43,410 --> 00:10:47,369 Geoffrey Thomas: So fares will come down with that capacity and they'll 175 00:10:47,369 --> 00:10:52,530 Geoffrey Thomas: continue to decline. Apart from this COVID blip airfares continue 176 00:10:52,530 --> 00:10:55,380 Geoffrey Thomas: to decline in relation to average weekly earnings, and they've 177 00:10:55,380 --> 00:10:59,130 Geoffrey Thomas: been doing so ever since man and woman first stepped 178 00:10:59,130 --> 00:11:01,679 Geoffrey Thomas: foot on an aeroplane. It's just all to do with 179 00:11:01,679 --> 00:11:05,820 Geoffrey Thomas: engine technology and efficiencies within the airline industry. 180 00:11:06,360 --> 00:11:09,000 Sean Aylmer: What an upbeat way to finish the chat. Geoffrey, thank 181 00:11:09,000 --> 00:11:10,200 Sean Aylmer: you for talking to Fear and Greed. 182 00:11:10,770 --> 00:11:11,310 Geoffrey Thomas: It's a pleasure. 183 00:11:11,970 --> 00:11:15,240 Sean Aylmer: That was aviation commentator, Geoffrey Thomas, editor- in- chief of 184 00:11:15,330 --> 00:11:19,919 Sean Aylmer: Airline Ratings with an S. AirlineRating. com. This is the Fear 185 00:11:19,920 --> 00:11:22,109 Sean Aylmer: and Greed business interview. Join us every morning for the 186 00:11:22,109 --> 00:11:25,320 Sean Aylmer: full episode of Fear and Greed. Australia's best business podcast. 187 00:11:25,530 --> 00:11:27,240 Sean Aylmer: I'm Sean Aylmer. Enjoy your day.