Senator XENOPHON: Can you just explain to me the contrast between the two. You are saying that there is a loss but you are now saying that Qantas international is cash flow positive.
Mr Joyce : There is a difference, as you know, between the P&L and the cash flow position. I will let Gareth talk about that.
Mr Evans : I think the difference that you are talking about is exactly that—the difference between the P&L and the cash flow.
Our international business has about $800-$900 million worth of depreciation charge to it every year—the depreciation of the aircraft fleet primarily, and the other infrastructure that the international business uses. That is a non-cash charge because it relates to the depreciation of the assets. The businesses, the routes, do in the main generate cash. One route that has not been generating cash in the recent past is Perth-Singapore as an example. As a result of that, that is a route that we are terminating because we cannot afford to have routes where we actually do not even cover the cash costs of our business. The issue in the longer term for the international business is that it does need to spend some significant amounts of capital in the future to reinvest in its fleet. Today, we have a good fleet with great product, and in fact that fleet is moving into a simplification phase and part of the transformation is that it will need to reinvest at some points in the future.
Mr Joyce : That is an important issue. You can generate cash, but if the cash is not sufficient enough to generate the renewal and the replacement of the fleet, then the businesses in turn will decline. That is the definition of terminal decline. If you cannot replace the assets eventually, then that business is not going to be able to renew, it is not going to be ongoing. The requirement for us to turn the business around so it covers the cost of the replacement of its aircraft is critical. That is how the business can renew itself and continue to operate and to grow. At the moment, when the business is not covering the depreciation of those assets, it is in a business that cannot afford to replace those assets into the future.