Qantas has followed this morning’s last minute profit downgrade by Virgin Blue with a note inside its provisional April traffic and yield figures posted on the ASX this afternoon that its guidance for the full year is for a profit before tax (in underlying terms) of between $300-$400 million, which is unchanged.

It says something about the beating airlines have taken in recent times that this is good news for Qantas shareholders, yet only between 21-28% of the record PBT of $1.4 billion it made in fiscal 2008, before a fuel crisis that was followed by the global financial crisis, and which might soon be known retrospectively as GFC-1.

The Virgin Blue statement (below) makes it clear, as does the Crikey report that something is going to give when it comes to V Australia which is dragging down the group. Not closure, or anything like that, but a major reworking of its network and fleet deliveries.

VBAConsider this. If Qantas is going to make $300-400 million for the year, including its loyalty program and international, and Virgin Blue is going to make $100 million on a comparable PBT basis on its domestic routes as it advised the ASX, then Virgin Blue is doing quite well with a fraction of the Qantas fleet and a much smaller loyalty program.

What will new CEO John Borghetti do? He can look forward to well structured alliance arrangements with Air New Zealand, and a trans Pacific joint venture with Delta, but how painful is the use of Boeing 777-300ERs to Johannesburg for a sector that can take almost 16 hours because of twin-engined operating restrictions compared to around 13 hours, and often less, on a Qantas 747-400?

The 777-300ER is a brilliant beast everywhere except long oceanic routes far from alternative airports, where some very sensible safety regulations hold it back. If only JB could persuade SRB to lend it two Virgin Atlantic A340-600s to do daily returns across the far southern Indian Ocean, and stick it to the 744s! And maybe trade hours on the 777-300ERs flying for Vigin Atlantic, such as taking over some of its frequencies from Los Angeles to London, or similar.

Just a thought, and let’s face it, journalists know nothing really worth knowing about running airlines, but can sometimes see problems even if they don’t know the answers.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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