Mr Montgomery is looking at metrics that matter.
As we approach the reporting season Qantas will state;
This is a non statutory measure. This number is not audited, as it is non GAAP/IFRS. It is detailed in the notes to the financial statements.(it is decided by the Chief decision maker..Guess who?) It conveniently leaves out things that management would rather not deduct from 'profit'. There is nothing illegal in this, but it is nothing real about it, simply a bigger number...
- The sale of the catering arm is an extraordinary item which will lessen the impact of the fuel rise, but it is a one off. As it was with the sale of the terminal leases.
First, while the company’s cash flows look great, they have benefited in recent years from generally declining oil prices. In July 2008, West Texas Intermediate crude oil traded at $US147 a barrel. By February 2016, the oil price had fallen to less than $US26. But since then oil has almost tripled to over $US70 and analysts at UBS now believe Qantas could be hit with a $700m negative shift in fuel costs from FY18 levels to the current spot price.
Jet fuel is priced much higher than the current USD$74.39, and will affect Qantas disproportionately as their fleet metrics are much worse than their competitors. As Qantas saved' $597 million in fuel expense in FY15 (the
transformation year) when prices fell, they now are exposed as has been repeatedly stated. They are hedging into higher fuel prices with more price risk further eroding the 'transformation'.
Their fleet metrics are shocking. Executive management have wasted a decade. The board is duplicitous. The Chairman is, as the tide goes out, exposed as the self professed 'lightweight' he admitted to being.. Stick to rocks Leigh.
On that matter, having served as CEO for almost a decade, it’s time to wonder whether Alan Joyce will stick around through the next potentially more challenging period, or perhaps leave that job to Alison Webster, who runs Qantas International.
Whichever way you spin it, investment bank UBS notes Qantas’s “fleet age has increased from 7.7 years in 2015 to a current 10.2 years”. They also note that the fleet is now older than the last peak of nine years in 2007. According to the same report, Qantas has introduced just nine new aircraft or 3.7 per cent of group seat capacity over the last three years and so a minimum of $1.4bn a year will be required to maintain a constant fleet age, with an additional $300m spend on the nonaircraft asset base making $1.7bn.
As we stated at the outset,
Share buy backs and capital give back were not prudent use of shareholder funds. They spent $1.75 billion.
Take out the JQ hero (creation) myth Alan Joyce repeats to any journalist flying Y class looking for an upgrade, and the Qantas fleet is over 11 years old.
The fleet metrics are shocking and the tide is receding. Like all great 'leaders' Little Napoleon will parachute out and with all of five minutes as an 'airline CEO' sure throw Alison in there, the bus is coming.
Qantas need a new fleet.