In the past most GF issues boiled down to one concern. Are they serious? Are the shareholders committed to capitalizing and funding an airline with a real future?
Relatively soon after JH took over,perhaps it was late 2003, I opened my PH one day and there was that handsome publication with the title A Journey of Change, featuring the one and only GF Balance Sheet we have ever been shown, and the answer was clear. They weren't. The four shareholders had never put up the required equity( indeed,one, Qatar had just done a bunk), with the total share capital only USD330m and the net equity a startling USD 149m, this financial horror clearly like a fire bell that the Report couldn't silence and which required an enigmatic KPMG footnote to explain. Obviously,the airline had only been surviving on ad hoc cash handouts for years.
I have always assumed that the reason JH went public with that one and only Balance Sheet, apart from trying to cultivate a branding image of transparency and accountability , was to embarass the BOD into action.
After all, it wasn't a pretty picture. Let me just remind you of the limited liability company's state of affairs at the end of 2002.
The net profit for the year was a loss of USD 104m.
The Owner's funds or capital employed was USD 149m, giving a return on investment of - 69.9 %!
The Company was technically insolvent, with current assets of USD 322m versus current liabilities of USD 458m.
The accumulated losses were USD 382m.
The Term Loans( with varying rates of interest, costing USD 40m per year) plus funds due to owner states plus employees' indemnities( a liability, by the way, which doesn't have to be funded) totalled USD 699m.
The company's assets? 2 A320, 6 A330, 5 A340, plus spares and engines, all with a net book value of USD 770m. The HQ was noted to be on land that belonged to ' a shareholder ' and was rent free.
Since then, we have been told, the situation has only got worse. AD announced that in 2006- 2007 the losses were USD 1m per day! The assets have depreciated. And two more shareholders have pulled out.
My point in rehashing this sad story is to ask the same question as we have been asking all these years. Is the sole surviving shareholder serious? Will they capitilize and fund the airline? Will they restructure and make public a balance sheet which reveals a totally transformed equity picture? So far, it seems, they haven't. They've followed the same old route of monthly handouts. They've flogged off any asset they can get their hands on, and, I believe, have plans to offload the whole Training Centre.We have even heard that another airline with an authorised capital of USD 1 billion has been estalished.
IMHO, no new salary package, no weekly newsletter from the CEO heralding a new dawn, no new route structure or customer initiative, can be a substitute for showing us another, transformed balance sheet. Until we see one, we should be very cautious and sceptical