So you need a new fleet Leigh?

[Rated De]

Originally Posted by a_pilot

Because the discussion here is specifically about a new widebody fleet for QF INTL, and someone here specifically denigrated the Jetstar group as a whole (48% ASK vs 30% revenue, this is the Jetstar Group as a whole that they specifically mentioned).

It is not fair that someone only mentions revenue to denigrate Jetstar without looking at how much profit it actually makes.

Nobody is 'denigrating' anything.

Reading published accounts that are compliant with AASB 10 is one thing, to actually know how costs are allocated between and to segments is beyond the scope of the 'General Purpose Audit'.
To actually derive the genesis and magnitude of the purported profit of Jetstar requires three important steps:

1. Segment Jetstar into two operating segments, Domestic and International
2. Not simultaneously report Jestar Asia as both a controlled entity under AASB 127, yet for the purposes of some select transaction neglect the control element and determine that certain inter-segment revenue is actually external.
3. Allow an audit to ascertain the materiality threshold applied by executive management. Management can simply set a high threshold, say $200,000 whereby any invoice under that amount does not go the the segment incurring it, but is picked up by, say hypothetically Qantas International. Auditors do not investigate 'materiality threshold' they simply at their annual audit see that management applied their threshold consistently, whatever it is. They make no judgement whether it is appropriate, nor are they required to.

These small changes to the accounting of Jetstar would allow the statements made by Mr Evans and Little Napoleon to be tested. When in CY13 Little Napoleon required AUD $3 billion of taxpayer assistance, he quickly backed away because the audit that would need to be conducted was to examine materiality. That is why a mere six weeks later he withdrew his request.

There are reasons management choose not to disclose more detail.
A business with such a huge footprint generating so little revenue for all the ASK, would, ordinarily be viewed closely.
Further, the degree to which management discretion is applied to costs incurred by Jetstar could conceivably massage Jetstar CASK.
This can easily provide a distortion to actual profit.

Qantas could have re-equipped with a wide body international fleet, of two engine variety, lowering the CASK (fuel included), improving their operating margin and probably building yield.
That they don't is peculiar.