Thank you Mr.T for the 20 days.

[Oasis]

Really, I mean it.
But please sort out the other stuff too...

Cheers.

[BlueEagle]

Forgive my curiosity Oasis but just wondering where you see this thread going and what input you are expecting from the Fragrant Harbour in order to generate a discussion?:confused:

regards,

BlueEagle - Moderator.

[Oasis]

Blue Eagle, I didn't think that far ahead. Just wanted to express my gratitude, not really having goal or a cunning plot in mind. For this I apologise to the pprune, and to everyone else whose time I seem to be wasting.
(not all posts have to be bad news or discontent, I hope?)

I'll be quiet now.
:=

[hymie]

And here was cynical me thinking you were sarcastically having a go at the formula changinghttp://www.gamers-forums.com/smilies/contrib/dvv/pissed.gif, data manipulatinghttp://216.40.249.192/s/contrib/dvv/po.gif, 13th month stealing bastards.http://www.gamers-forums.com/smilies/contrib/ruinkai/screama.gif

[graffiti]

I would hope that no one would even begin to downplay receiving 2/3 of a month salary bonus when so many in our industry...especially pilots...are being asked to give back their hard earned pay. Bottom line is you received your full salary, plus a 13th month, plus 2/3 of another month on top of that.
Would somebody please tell me how many other airline companies paid this out in 2002?

[jtr]

Would somebody please tell me how many other airline companies paid this out in 2002


Probably every airline that made about US$1.4 million per DAY profit.

It's all relative.

Did they change the formula by which PS is caclulated?
Did they write off the classics at zero?
Did this contribute to the 13th month being withheld?

Yes, Yes, and Yes.

I think employees are entitled to feel a bit screwed in light of the treatment received.

[Traffic]

JTR

You mean like SQ and QF?

QF announced a good profit while in the same breath indicating they have contingency plans in place to vapourise 1,500 jobs.

It is at least an odds on bet the whole aviation biz could turn to custard in a matter of days. The fallout could last for the balance of 2003.

I would think that it behoves any airline to bolster its balance sheet as best it can as once the cash flow slows down even a healthy company can go from rooster to feather duster in a matter of months a la American Airlines.

[jtr]

Traffic, to save me explaining what may be the obvious, can you tell me if you understand what happened re. the classics being written off, when it happened, and what the result was?


Before hearing the answer to that, I can tell you that QF made about 1/2 the net profit that CX did, so the two are not really comparable. RTFP.

[HotDog]

jtr,to answer you as a happy and long standing ex CX member; aren't you glad you don't fly with QF? They didn't sell many classics but they are threatening to get rid of 1500 staff in spite of a very handsome profit. Like it or not, most airlines in the world are now run by beancounters and only the bottom line counts. Traffic seems to be able to see past his nose. In this day and age, you should count your blessings, however meager you may consider them, but at least you are not one of 51 nor one of 1500. Having said all that, in view of the present climate, I am slowly getting to terms with retirement and don't miss the scene quite as much after 33 years. Cheers, HD.

[hymie]

What the hell has QF got to do with any of this?

Good point HotDog. I don't think we should complain about anything. Hell I know someone who was laid off in US Air, come to think of it, I know someone who lost their medical. Come to think of it, I know someone who never could get a medical. Come to think of it, I know someone who never could afford not to get a medical. Come to think of it...:rolleyes:



At least Blue Eagle is happy, this post has managed to be drawn tangentially away from where it started, and exactly where Oasis thought it would go. Only disappointment is that Shortly hasn't popped up with his CX management rhetoric (yet)

[Oasis]

Because our contract says that 13th mo. and profit share is a given per discretion of management, I dont expect it...
However if I get a bonus that buys me a widescreen plasma tv, things could be worse.
Yet, things could also be better.

[BlueEagle]

Yes, I'm happy Hymie , it is still pretty much in the ball park, a discussion on remuneration, pros and cons.;)

[Traffic]

jtr

Whilst not an accountant in my spare time, my take is as follows.

At the end of December 2002 approx USD400m was written off the value of the owned fleet. A decent slab of this was the complete write-off of the Classics.

It was overdue and given the results in 2000/2001 substantial writedowns could not be comfortably handled in the previous financial year.

If you look at the Net Book Values of the whole fleet, they are still quite high if you were to mark-to-market the current residual asset values in today's market. If you make some assumptions that things will gradually return to normal then they are probably about right. Average book value of the owned fleet is about USD 84m per a/c. for the leased fleet it is about USD 72m per a/c (probably the exact residual values as stipulated in the lease agreements).

The lease vs owned decision is primarily based on the net cost of funds and there are certain tax effective 'double-dipping' arrangements in some countries such as Japan. Lease arrangements and payments can be balanced against income streams in various currencies providing a hedge against currency fluctuations. Leasing also provides balance sheet leverage but there can be a snowball effect unless leases are staggered properly.

Residuals on leases are often quite high and when a/c leases expire they generally flow over to the owned column unless disposed off. At present residuals are significantly higher than current market values and this has to be dealt with not pushed out into the never never like some companies do.

Basically the Classics are only worth their net income stream. Their depreciation stream is gone and to keep them on the books at well above market value creates a negative income stream against the cost of funding that book value. Disposal value in the current market is zero.

In the current market there would be a strong argument to be more aggressive on write-downs. The reality is that the beanies take a longer term view even though many may not think so.

Finally, if QF made half the profit of CX then they received half the bonus? Instead they setup their own B-scale airline.

As many have said, some things still need fixing but IMHO accounting practise is not one of them.

[jtr]

Thanks for the in depth reply Traffic, I THINK we are reading from the same sheet of music, except that you mention Dec 2002 in para 2. I believe this is meant to be Dec 2001, and will assume so unless you state otherwise.

I have to take you up on a few points.



If you look at the Net Book Values of the whole fleet, they are still quite high if you were to mark-to-market the current residual asset values in today's market. If you make some assumptions that things will gradually return to normal then they are probably about right.

CX has usually attributed a higher than av book value to all its fleet in recent history. Damn right they are assuming things will return to normal, otherwise they would have withheld PS

Basically the Classics are only worth their net income stream.

Disagree. Basically the classics (parked or not) are at least worth a %age of their market book value. Using your above logic, they woudl have tried to write off the classics when they were operating to Aus. as they made a loss most of the time we were alsways told!


In the current market there would be a strong argument to be more aggressive on write-downs. The reality is that the beanies take a longer term view even though many may not think so.

Are you suggesting that CX accountants are not depreciating the fleet as fast as there penny grabbing little fingers (and the taxation guidelines for plant and equipment depreciation) will
allow them?

Disposal value in the current market is zero.

Tell PIA that

Finally, my contract says...

".....the Company will only cap, reduce, or withhold the ADB... in years when the profit is considered... to be marginal, or negative"

So a net profit of 650 odd mill in 01 is considered marginal?

Before anyone draws breath to bleat on about Equant, have a look at the 98 figures, and try to put those three in relation to each other.

[Traffic]

jtr

Sorry cobbler, just out the door, cap in hand but briefly:

I was referring to the Dec 2002 balance sheet.

The higher than book value is basically due to the fact that the leased fleet is about 70% and the beanies have to live with the residuals in the leases for the length of the leases. When loan covenants become an issue they write off book value on the owned fleet as quickly as they can while maintaining a dividend stream.

Classic book value and real value in the market is ZIP. Just look at what QF have done with their classic fleet. One to the museum, one to the desert and refurb the 300's for carrying uncomplaining Japanese pax.

At zero book value they make sense. In any other financial config...NO.

What I am suggesting is that they are depreciating as fast as they can but the terms of the leases limit flexibility.

Finally the PIA deal...well I saw one of the old beauties at LHR the other morning and she looked in great shape!! Oh how we should miss them. At zero book value they are a license to print money. Guess some rue the day they were disposed of.

Well, mate, our lives are run by accountants but the real world in which we live today is about shareholder confidence and dividend stream NOT about capital gain.

FWIW, I think the beanies have got it about right.

Ultimately we get the leftovers...which is still better than what anyone else is getting this year.

In the immortal words of Brian L....I'll take three greens anytime.

Take care and best regards

[HotDog]

What Brian L needed was five greens Traffic.

[VR-HFX]

...and an F/E of HD's calibre would also have helped.