'Qantas is in severe financial difficulty'
Posted by: 3AW Drive | 12 May, 2014 - 5:48 PM
Tom Elliott has been sent a leaked document that appears to show the perilous state of Qantas' financial affairs.
The "damaging" internal memo, titled "Liquidity Challenge", details how the airline might be forced to sell its frequent flyer program to pay for a black hole in its budget.
The document, dated Wednesday May 7, also discusses funding being rationed to the airline and suggests that its burden of debt is too great. It also reveals the company is "concerned" its credit rating will be downgraded further.
The memo questions whether Qantas management is at a "tipping point" and also appears to table the sale of its loyalty program.
"If this document is true - and I believe it to be true, it's only a few days old - Qantas is in severe financial difficulty," Tom Elliott said.
"The frequent flyer program is probably the one thing it has that is really worth a lot of money, that you could sell to someone else.
"I think there is a very strong likelihood that Qantas will sell its frequent flyer program.
"This document also talks about things like 'further credit downgrades'.
"And here's a really ominous sentence: the document talks about 'a jigsaw puzzle of issues' and then says 'When will management reach a tipping point?'
Speaking on 3AW Drive, Tom said his program has contacted Qantas to establish the veracity of the document.
In February, Qantas announced a six-month loss of $250 million and plans to shed 5000 jobs.
Qantas sent the following statement to 3AW Drive: "Qantas has been very upfront with the market and the community about the challenges it is facing.
"The suggestion that, effectively, 'It’s much worse than you think' is misleading and wrong.
"The concept of a 'liquidity challenge' seems to ignore the $2.4 billion Qantas has in the bank, not to mention a large number of unencumbered assets (ranging from airport terminals to aircraft). This has been noted by a number of analysts since February.
"We have an obligation to keep the market up to date with our position, and we did that as recently as last Thursday. This was widely reported.
"No decision has been made on Frequent Flyer, so any suggestion to the contrary is simply wrong."