No secret there 772. Only have to look at the half yearly report to see that Qantas has Negative working capital. It shows a current ratio (current assets/current liabilities) of approx 0.88
Then look at Virgin. Same story but appears worse. Current ratio is approx 0.7! Shock Horror!
It doesn't mean they are insolvent.
About half the current liabilities for each is unearned revenue. That is, tickets sold but not yet travelled. That's the nature of the business and shows why Current Ratio is not a good analytical tool when looking at airlines. In fact a high unearned revenue would indicate a good thing as it reflects positive forward bookings.
Both are operationally cash flow positive, which is probably more important short term wise.
Suggest you read up on Accounting 101 before scaremongering!
Last edited by The The; 30th Jun 2012 at 15:41.