Thursday, January 29, 2009

Amid all its problems, Qantas is running around like a headless chook

Wotta lotta crap the story below is. It is more money spent on engineering inspections and maintenance that is needed, not more talk. Passengers are a lot more worried about bits falling off the aircraft than they are about the brightness of someone's smile. And how about having enough check-in desks open so that passengers can board without waiting in line for an hour or more? And WTF has wine appreciation got to do with any of QANTAS's problems? John Borghetti must be another typically clueless business-school graduate. It sounds to me like Qantas is headed the way of the now defunct Ansett -- a once great Australian airline that also lost its way

QANTAS is about to send 18,000 staff, from the chief executive down, back to school as part of a massive push to boost customer service standards. A high-tech $10 million training facility, which opened yesterday in Sydney, is at the centre of the strategy to propel the Qantas brand back to the top.

The move comes after a horror year for the airline where delays and maintenance problems battered its reputation with travellers, The Australian reports. Up to a third of its planes ran late and cancellations sky-rocketed as a result of an industrial row with engineers. It also comes as full-service airlines, which face a downturn in premium passengers because of the economic crisis, are being forced to compete more fiercely to fill business and first class seats.

The new Centre of Service Excellence brings all Qantas customer service training under one roof and covers areas ranging from makeup and grooming to telesales, check-in procedures and wine appreciation. Facilities include a 126-seat auditorium, four cabin-crew training pods that simulate aircraft environments and a hi-tech area where staff can send suggestions to management using interactive screens. It also features "customer experience zones", demonstrating the environments that passengers in various classes, and on various arms of Qantas, experience in the course of their journey.

Qantas executive general manager John Borghetti, who will be the first top executive to undergo training, said one of the main changes Qantas passengers could expect as a result of the new centre was more consistency in the airline's customer service. He said customer service would be a big differentiator for airlines competing for high-end customers in difficult times.


Big Four Australian banks join global elite

THE crisis in the financial system catapulted all four majors into the ranks of the top 20 global banks for the first time. As a result Australia's big banks are expect to grab new business opportunities and draw the attention of more international investors, The Australian reported.

Although shares in the Big Four banks have collapsed more than 50 per cent in the past year, with new multi-year lows struck on Friday, they have stood up far better than their UK and US counterparts.

Despite pressure on their funding and bad-loan books, they remain highly profitable while banks overseas seek government handouts, are nationalised or allowed to collapse. In the US alone, the global shake-up means Australia's four largest banks, which have retained their AA rating, are now considered some of the biggest in the world.

The banks believe their newfound status will increase their participation in markets such as foreign exchange trading, where opportunities in the past have been limited because of the presence of bigger global players.

The elevation in world rankings has brought extra attention from fund managers, particularly in the US, and the banks expect more share buying from overseas institutions.

Westpac has already experienced an increase in foreign exchange deals, with a sharp surge in the number of $1billion-plus transactions being carried out by the bank's trading desk.

On stock market capitalisation, Westpac is now considered the world's ninth-largest bank, with a worth of $US28.2 billion ($43.2 billion), ahead of Commonwealth Bank at No15, National Australia Bank at No17 and ANZ at No19. Remarkably, all four Australian banks now rank ahead of past giants such as Citigroup and Morgan Stanley in the US, Barclays in Britain and Deutsche Bank in Germany. There are now only 13 AA-rated banks in the world, compared with 20 when the global financial crisis emerged.

The world's largest bank is now HSBC, the British institution, which is worth four times the average value of an Australian bank, while US banks JPMorgan Chase and Wells Fargo are next according to market capitalisation.

The renewed bout of fear about financial system stability, particularly in Britain, has decimated the value of a number of global institutions. The headline British banks of Lloyds, Halifax Bank of Scotland, Royal Bank of Scotland and Barclays are now worth about half of the Australian banks.

One of the largest casualties among the banks but still afloat is Citigroup, which was once the world's biggest bank but is now worth just $US15 billion and ranks No22.

Westpac head of institutional banking Phil Chronican said the maintenance of the bank's market capitalisation and value compared with its international peers had increased its reputation and knowledge among major institutional investors.

He said Westpac's move to being a stronger counterparty risk holder had brought increased foreign exchange market participation. "I don't think any of us had been in the top 40 banks until relatively recently," Mr Chronican said. "With the merger of St George being quite large, we've attracted the attention of our global peers and larger customers. We are finding more and more that we are quoting for large foreign exchange transactions. The customers have large amounts of money to move, more than $1billion in individual transactions. They have become much more frequent for us. We are seen to have counterparty stability."

Mr Chronican said Westpac's foreign exchange business would grow as the bank snared more international deals among fund managers and hedge funds. "The FX (foreign exchange) business is increasingly profitable because there are fewer banks and the pricing is more competitive and intensive," he said. "One of our strongest improving businesses has been in FX because of the margins and volume."

Bank of America-Merrill Lynch banking analyst Matthew Davison said the Australian banks were now large enough to be seen as serious contenders for overseas expansion, although it was more likely the majors would concentrate on the Australian market.

Bank stocks led a massive fall on the Australian share market on Friday, with NAB hitting its lowest level for almost 12 years after a $1.17, 6.5 per cent slide to $16.94.

Others also hit record lows -- ANZ its worst for nine years at $12.06 and Westpac and the Commonwealth their worst for six years -- on fears about the global economy.

US and British banks, which unlike Australian banks are not protected by a ban on short-sellers, collapsed last week, ahead of a second round of bailouts by the British and incoming US governments.


As government schools steadily deteriorate, guess what parents do?

They have been doing the same sort of thing in Britain and the USA for many years

PARENTS are buying houses in areas close to desirable schools and intervening more than ever to ensure their children are positioned for success in their education, University of Sydney research has found. The belief that bright children will do well at any school has been superseded with distrust in leaving anything to chance. Anxious middle-class parents have become more proactive in making sure their children enrol in "the best" school, whether measured by academic or cultural standards.

Frustration had displaced any sense of entitlement Anglo-Australians once felt in sending their children to selective high schools, a tradition that could no longer "be handed down along with the family silver". This had given way to resentment with the growing role coaching colleges played in helping students, particularly those from Asian-Australian families, gain selective school entry.

Despite feeling that coaching colleges were beneath them and a form of "cheating", some Anglo-Australian families admitted they had "given in" and commissioned their services, or had drilled their children on past selective school entry test papers, even if only the once.

The findings are based on 1350 surveys and 63 interviews with parents of year 7 students. The researchers, Craig Campbell, Helen Proctor and Geoffrey Sherington, also examined Australian census data from 1976 to 2001 for their new book, School Choice: How Parents Negotiate The New School Market In Australia.

The research highlights a shift in middle-class attitudes towards education as a commodity. Those committed to the public school system felt upset that they were being "forced" into non-government schools because of insufficient government investment in state schools. Satisfaction with the local school was more common in middle-class areas where some families had moved for no other purpose than securing a school enrolment.

Associate Professor Campbell, from the University of Sydney's faculty of education, said middle-class families interviewed for the project had expressed firm ideas about where their children should go to school. Those with the resources were moving to the catchment areas, such as Sydney's Hills District, to be near reputable public schools. Those who did not were often opting for low-fee Catholic and Christian schools despite having no religious convictions. "A good government school was still the first choice for most people," Associate Professor Campbell said, "but a lot of people are feeling frustrated that it is decreasingly available to them."

A mother of two young daughters who lives in the Ryde area yesterday told the Herald that she was considering moving to another suburb because her only choice of public school catered to a majority of children who spoke Mandarin as their first language. Her comments were given on the condition of anonymity because she was "all for multiculturalism" and did not want to "appear racist". "The school is focused on getting the kids into selective schools and there isn't much attention given to things like dance and sport," she said.

Working-class parents were generally more willing to respect their children's wishes by sending them to the same school as their friends. "Parents feel they have to intervene more than they have in the past," Associate Professor Campbell said. "The pressure has really racked up."

Meanwhile, the NSW Department of Education was yesterday embarrassed by a series of newspaper advertisements which incorrectly stated classes for the new school year started next Tuesday instead of today.


Labor's plan is having a lend of us all

Why on earth is the Rudd government intent of propping up commercial propertty owners? Is that the best thing they can do with taxpayers' money??

ALTHOUGH the details of the Government's proposed lending facility for commercial property are not yet known, it is fair to say that what is known raises more questions than answers.

At its simplest, why would supporting loans to developers of shopping centres and other forms of commercial property be a particular priority of policy? The vast bulk of loans relate to assets that already exist or are at advanced stages of development. When commercial property prices fall, the owners of those assets take a loss, while the purchasers of the assets, and the assets' users (that is, tenants) make a gain. As revenues from the buildings almost invariably continue to exceed the buildings' operating costs, the assets continue to be operated, so the real flow of services to the economy is unchanged.

Obviously, reductions in commercial property prices force banks to write down the value of their property investments. In practice, the impacts are likely to be very small, as most of the banks' commercial property loans have been securitised and are no longer on the banks' books.

But even putting that aside, any such impacts are no different from those that occur when prices fall for the many other asset classes that banks have invested in or relied upon as collateral. Should the result threaten the adequacy of banks' capital base, the right policy response is to facilitate the banks' recapitalisation, rather than artificially propping up the price of one particular kind of asset. Directly facilitating recapitalisation would be far more transparent and far less distorting of the pattern of asset prices in the economy as a whole.

With commercial property accounting for some 12 per cent of the investments made by Australian super funds, reductions in commercial property prices would also have an impact on the funds and especially on those that have been negligent or tardy in writing down the value of their property investments. It is understandable that the Government would be concerned about the resulting write-downs. But moving to a policy of trying to control asset prices is a very big call; and it seems foolish to get into that game by targeting the prices of one and only one class of asset, and a relatively minor one at that, for the purpose of protecting funds that are so poorly managed that they have failed to properly disclose the deteriorating quality of their balance sheet.

All this is not to deny that credit restrictions will result in some development projects for commercial property being cancelled or deferred. But the projects at risk are those that are most marginal and whose value to the economy has in fact diminished as growth has slowed. It makes no sense for the Government to prevent those cancellations and deferrals from occurring, all the more so as our economy, whatever its defects, is hardly short of office blocks.

This is especially the case as commercial property values are notoriously cyclical. Developers know this, and most developers hedge their position by securing anchor tenants (such as large supermarket chains in the case of shopping centres) to underpin their revenue base and their ability to secure finance. By intervening to prop up the market, the Government sends all the wrong signals, both in the short run and in the longer term.

In the short run, the scheme seems likely to induce developers to play off their existing foreign lenders against the safety net the scheme provides. This could accelerate the very withdrawal of foreign lenders the scheme is intended to guard against, while allowing developers to secure some free kicks on the basis of what amounts to taxpayer-funded insurance.

As for the longer run, the risk is that of protecting precisely those developers who did not take adequate precautions, while signalling to others the likelihood of government bailouts. The result will be to make property markets more, rather than less, cyclical.

What about the impact on jobs? This seems a furphy. To begin with, changes in the value of existing assets in no way directly alter employment prospects. Indeed, were rents to fall, business costs would be reduced and that might improve conditions across a wide range of sectors. True, the development projects that would otherwise not occur may create some jobs. But why would those jobs be any more valuable than the jobs that could be created by using the $2 billion for other purposes, including cutting economically distorting taxes?

The Government claims that taxpayers will make money from its proposed investments. This claim seems difficult to believe, especially when account is taken of the high level of risk involved in what are likely to be the most marginal commercial property projects in Australia. Funds devoted to those projects need to earn a return far above the bond rate if they are to cover their economic costs: and that is precisely why banks, foreign or domestic, are reluctant to underwrite them. If the Government has credible estimates that show it can do better as an investor than the commercial banks, with their many years of experience in real estate lending, it should make those estimates public. Until it does, taxpayers will have every right to be sceptical.

At the end of the day, the only sense one can make of the proposed fund is as a wealth transfer: from taxpayers to property developers, banks and the managers of the most poorly run superannuation schemes that would otherwise have had to incur reductions in asset values. If forcing taxpayers, most of whom have low incomes, to underwrite the incomes of property developers and financiers is not "extreme capitalism", it is very difficult to know what is.


More Greenie foot-shooting

Imported biofuel a threat to trees and wildlife. Just about all Greenie policies these days are destructive in one way or another.

AUSTRALIA is contributing directly to the widespread destruction of tropical rainforests in Indonesia and Malaysia by importing millions of tonnes of taxpayer-subsidised biodiesel made from palm oil. Imports of the fuel are rising, undermining the Rudd Government's $200 million commitment to reduce deforestation in the region - a problem that globally contributes to 20 per cent of the world's carbon emissions. The bulldozing of rainforests to make way for palm oil plantations is also putting further pressure on orangutans and other endangered wildlife throughout Southeast Asia. And the Australian biofuels industry says it is struggling to compete with the cheap imports from Asia, which are touted as an environmentally friendly alternative to diesel.

Without action, the problem will only get worse, with demand for biodiesel imports likely to rise sharply when NSW legislates to introduce Australia's first biodiesel mandate - 2 per cent this year, rising to 5 per cent when sufficient supplies become available. But the Rudd Government is likely to come under pressure to follow the lead of other Western nations in banning imports of palm oil-based biodiesel. Biodiesel manufacturers in Australia use primarily tallow from abattoirs and recycled cooking oil.

Caltex, the biggest biodiesel customer in Australia, refuses to use palm oil-based fuel on environmental grounds, but it is being imported by independent operators. Federal Resources Minister Martin Ferguson, who is conducting a review of government assistance to the biofuels industry, declined to comment on whether he was aware of the Asian biodiesel imports.

Unlike imported ethanol, imported biodiesel is not subject to the 38.14c-a-litre fuel excise, so the biodiesel imports from Asia are effectively subsidised by Australian taxpayers. Rex Wallace, the chief financial officer of the Adelaide-based Environmentally Friendly Fuels, said his company had purchased five million litres of palm oil-based biodiesel in recent years. "We would not need to import it if people could produce a quality product on a regular basis in Australia," he said. "We would love to buy more local produce but it's just not there." Mr Wallace said his company imported from certified plantations in Malaysia that had been developed on land cleared historically for other purposes such as rubber plantations.

Australian Biodiesel Group chief executive Bevan Dooley said the industry estimated that 10million litres of palm oil-based biodiesel was imported a year. "Europe and the US are closing the gates on this product, but Australian taxpayers are subsidising its import," Mr Dooley said. He said it was difficult to establish if certified plantations were environmentally friendly, and Australian imports were helping to fuel demand worldwide for "environmentally destructive" biodiesel from Malaysia and Indonesia. "These imports are causing many Australian producers to suffer losses and are detrimental to the establishment of a biodiesel industry in Australia," Mr Dooley said. "Australia is seen as a dumping ground for palm oil-based biodiesel as there is no requirement for the fuel to be derived from sustainable resources." He said there was ample capacity in Australia to meet demand.

The Australian industry produces about 50million litres of biodiesel a year, but has the capacity to produce much more. About 80 million litres will be needed annually to meet a 2 per cent mandate in NSW. Indonesia has about 6 million hectares of palm oil plantation and Malaysia 4.5 million ha. Indonesia plans to double palm oil production by 2025 and is developing a plantation of 1.8 million ha in east Kalimantan. To make way for the plantation, the largest remaining area of lowland rainforest in Kalimantan is being bulldozed, with the loss of habitat for orangutans, clouded leopards and other rare animals.


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