QAN,
I think the comment was that International had only made an adequate return on capital 3 times in 15 years, not profit. If International has $5bn of capital employed it needs to earn, conservatively, $500m to justify the investment.
Where did you get your figure of 10% ROC? From what I can gather, the cost of capital is closer to 7%. That would mean QF Int would need to make $350m.
So QF Int has lost $200m. But if you add FF ($326m), the A380 being grounded (at least $100m) and natural disasters (about $50m) you are getting close to making the required ROC. This doesn't include freight fines, deals with the Vietnamese government, adverse media reports on safety, aircraft writedowns etc etc. Without these QF Intl would be making its cost of capital.
Other things to consider :
1. Cross subsidising Jetstar / transfer of assets to Jetstar.
2. Commsec data shows that in the last 10 years, QF have made a ROC of 7% or greater in 5 years. These were generally years before Jetstar was profitable. I haven't checked every single Annual report but the ones I have show Intl as much more profitable than Dom. These were years that Qantas was acclaimed as the world's most profitable airline and a solid investment, returning a solid dividend. In 3 out of the last 10 years, QF achieved a ROC of 6%, just shy of 7%. I don't seem to remember any complaints from the board or investors during those years either. I'd like to know on what information AJ bases his assertion that Intl has met it's cost of capital on only 3 out of 15 years.
3. Of course, the Annual Reports I've looked at from that era don't separate QF Frequent Flyer from Intl. In fact, I remember it as being a liability back then. Now, in a short few years it's the complete opposite - Intl is the liability, FF is the cash cow asset. More accountants' magic tricks to justify their actions.
4. Check out the BITRE Intl load factors. As far as I can see QF Intl has the highest load factors compared with all our major competitors.
QF 82.8%
CX 82.2% - They made over $1B profit
SQ 79.4%
EK 66.2% - No problems getting on staff travel with EK
JQI 76.8%
JQ Asia 61.5% - yet these are both "amazing businesses"
5. Managements' propensity to lie and spin to the media, government, courts, employees, public etc. It doesn't take a giant leap of faith to believe that they might do the same with the financial reports.