Originally Posted by
morno
That’s nice. I notice in both articles, they mention that stock buybacks used to be illegal. Let’s say that one more time, used to be illegal. That means they’re not now. So who cares.
Your company is making money and you have jobs. Tell me where the problem is.
The legality of the practice is not at issue.
That the management can find no other use of cash than re-purchasing their shares is curious.
After all, with debt so cheap (and interest rates at 3,000 year lows) why bother investing in plant and equipment when you can simply buy your own shares on market and pump the EPS.
Investment horizons being what they are, the EPS pump is rather conveniently tied to Executive remuneration, whereas the impact on operating cost and margins with a new fleet may take time to materialise.
Alan Joseph Joyce has been a substantial shareholder...
As fund manager Roger Montgomery highlighted last year, the CAP EX required to maintain a fleet age of around 11 years necessitates a spend per annum of $1.7 billion dollars.
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. That matches depreciation, but depreciation is based on historical costs so it is still probably undercooking how much is needed to
keep the fleet fresh, new and competitive.
So clearly there is nothing better the region's most well remunerated CEO can find to spend net positive cash flow on than buying back shares...