QF and JQ split

[Rated De]

I hope they go it alone there is no reason JQ couldn't survive without "big brother", they would most likely be better off and so would the crew..

As a total split between the two and them starting to compete with each other? Not a chance. JQ would be toast within weeks without big brother's support.

There are a number of reasons why JQ will not go it alone.

1. There has never been a tangible reported profit from any (offshore) associate AASB128 entity. All of these entities require substantial capital. 'Big brother' provide that. JQ Asia is consolidated under AASB127 into the JQ segment as Qantas claim control. What is very interesting is the structure of their lease obligations. Funding to cover the operating shortfall comes from Qantas NOT Mr Choo (The alleged majority owner) Without capital would these businesses actually survive is a good question.
2. JQ is not broken into two operating segments under AASB 8. Management choose to report Qantas this way and despite JQ operating as many aircraft as big brother they refuse the same transparency. Wonder why?
3. Any organisation undertaking due diligence on a 'purchase' would be extremely interested in 'materiality thresholds'. These thresholds are internally set by executive management. Such detail is not required to be presented in Consolidated Accounts under AASB 10. Any purchaser would investigate this relationship fully to see who pays for what.

JQ was of course being positioned to take over from 'big brother' in fact it is well known that management sought changes to bilateral access in 2011. No doubt conceived by the hardy souls of Consulting groups and IR, the theory of LH Low Cost is a very difficult proposition on longer sector lengths, something Mr Buchanan tried to tell them before being sent packing.

Probably more like what Wesfarmers is doing with Coles, spin it off. Jetstar is really now at the scale and level of profitability where it should be demerged and managed as it’s own.

Nonetheless JQ had and continues to have a role: it ought provide demand stimulus to elastic travelers. Flying some 48% of the ASK of 'big brother' yet only generating 22% of the revenue, we would politely point out is indicative of being over-scale which adversely affects profitability. Reducing its scale is a difficult proposition with the incumbent CEO welded to the 'creation myth' he clings to about JQ.