MERGED: Alan's still not happy......
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Any truth to the rumour that Virgin has taken the gates at SYD T2 vacated by Qlink?
It seemed obvious that the Qlink's move from T2 to T3 was actually to make room for more Jetstar services?
It seemed obvious that the Qlink's move from T2 to T3 was actually to make room for more Jetstar services?
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JPMorgan Thinks Qantas Will Keep Making Losses Until 2016
JPMorgan put out a research note this morning, in which the bank predicted Australia’s national carrier Qantas would post losses until 2016.
In the note, reported by the AFR, JPMorgan also reaffirmed its underweight rating.
Reportedly, analyst Carolyn Holmes thinks Virgin Australia’s goal of constantly expanding its domestic market share means Qantas will not be able to offset the impact on its core profit driver.
According to JPMorgan, this means that this year Qantas will report an underlying pre-tax loss of around $289 million on February 27, which is at the higher end of its $250 million-$300 million guidance.
Virgin is putting pressure on Qantas by undercutting it on domestic routes. Qantas holds the majority of the domestic market in Australia, and relies on this to fund its international business.
Qantas boss Alan Joyce has asked the government for help, after Virgin announced a $350 million capital raising. Virgin Australia’s major shareholders are overseas airlines, which compete with Qantas’ international business.
Joyce thinks they are using Virgin Australia as a proxy to place unfair pressure on its domestic airline, therefor making it harder for the airline to sustain its international arm.
Virgin Australia has argued its capital raising was completely legal, and Qantas was asking for special treatment.
The government is yet to announce an assistance package for Qantas, though options include a public investment, a debt guarantee or a change in ownership laws.
JPMorgan put out a research note this morning, in which the bank predicted Australia’s national carrier Qantas would post losses until 2016.
In the note, reported by the AFR, JPMorgan also reaffirmed its underweight rating.
Reportedly, analyst Carolyn Holmes thinks Virgin Australia’s goal of constantly expanding its domestic market share means Qantas will not be able to offset the impact on its core profit driver.
According to JPMorgan, this means that this year Qantas will report an underlying pre-tax loss of around $289 million on February 27, which is at the higher end of its $250 million-$300 million guidance.
Virgin is putting pressure on Qantas by undercutting it on domestic routes. Qantas holds the majority of the domestic market in Australia, and relies on this to fund its international business.
Qantas boss Alan Joyce has asked the government for help, after Virgin announced a $350 million capital raising. Virgin Australia’s major shareholders are overseas airlines, which compete with Qantas’ international business.
Joyce thinks they are using Virgin Australia as a proxy to place unfair pressure on its domestic airline, therefor making it harder for the airline to sustain its international arm.
Virgin Australia has argued its capital raising was completely legal, and Qantas was asking for special treatment.
The government is yet to announce an assistance package for Qantas, though options include a public investment, a debt guarantee or a change in ownership laws.
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SUB...far from it my friend, I don't wish to see Qanatas fail at all. I was looking at the current QF/EK partnership and I was just posing a question, that was all.
Reportedly, analyst Carolyn Holmes thinks Virgin Australia’s goal of constantly expanding its domestic market share means Qantas will not be able to offset the impact on its core profit driver.
Virgin is putting pressure on Qantas by undercutting it on domestic routes. Qantas holds the majority of the domestic market in Australia, and relies on this to fund its international business.
Joyce thinks they are using Virgin Australia as a proxy to place unfair pressure on its domestic airline, therefor making it harder for the airline to sustain its international arm.
Standby for the Government to step in soon.
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SUB,
This is competition pure and simple, and if it wasn't foreign backed entitities it could be Australian backed entities. Qantas acts like it has a right to 65 % market share! Well it doesn't ! This competition is good for the traveling public, it lifts the standard. As JB said this is no longer a monopoly. Qantas had enviable advantages over Virgin but they have squandered their advantage through their Jetstar businesses in Asia. They have made their own bed and perhaps now they recognise the error of their ways, and whinging and whinining to the Fed gov isn't helping like they thought it would.
Karmas a bitch.
This is competition pure and simple, and if it wasn't foreign backed entitities it could be Australian backed entities. Qantas acts like it has a right to 65 % market share! Well it doesn't ! This competition is good for the traveling public, it lifts the standard. As JB said this is no longer a monopoly. Qantas had enviable advantages over Virgin but they have squandered their advantage through their Jetstar businesses in Asia. They have made their own bed and perhaps now they recognise the error of their ways, and whinging and whinining to the Fed gov isn't helping like they thought it would.
Karmas a bitch.
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And to think they were given a profitable domestic airline for free and they want tax payers funds! Remember folks,QF started as a private company not a public service "enterprise".
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What QF does with Jetstar Asia, where it effectively owns, funds and controls 100% of the company, but directly owns 49% and loans Denis Choo funds needed for him to "own" 51% of the company, with QF having a series of management and loan agreements with Jetstar Asia ensuring they have full control of the company..... is a more blatant version of what Virgin Australia does with its 3 main airline shareholders. Plus didn't Virgin Blue start off as a 100% British owned airline?
Qantas consolidated Jetstar Asia figures into its parent company P&L - meaning that under IFRS they have demonstrated to the auditors they have management control of the company. They do not consolidate Jetstar Pacific and Jetstar Japan figures.
Qantas consolidated Jetstar Asia figures into its parent company P&L - meaning that under IFRS they have demonstrated to the auditors they have management control of the company. They do not consolidate Jetstar Pacific and Jetstar Japan figures.
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Apologies, my phrasing above was rather convoluted. In very simple English:
In Australia:
A domestic airline can be 100% foreign owned
An international airline must be majority Australian owned
Virgin Australia splits its assets into VA (domestic) (where it has all its assets) and VA International Holdings - which is basically a $1 paper company that is majority Australian owned - but bearing in mind this paper company has no assets
VA (domestic) enters into a loan agreement with the paper company, where VA "injects" capital needed into VAIH through a "loan agreement"
VA (domestic) enters into a management agreement with VAIH, whereby management of the $1 company is done by VA (domestic)
In effect - VA (domestic) funds and controls VAIH. The letter of the law is respected, with VAIH being majority owned by Australians - all $1 of it.
VA (domestic) is 70% owned by SQ, EY, NZ, 11% by Virgin Group and the rest of it is free float. It is majority foreign owned, arguably does not respect the spirit of the law, but remains perfectly legal
In Singapore:
A carrier with a Singapore AOC must be at least 51% owned by Singaporeans
Jetstar Asia is on paper a JV company called Newstar - 51% owned by Westbrook (which in turn is owned by Denis Choo) and 49% owned by Qantas
Qantas "loans" Westbrook the requisite amount of money to "buy" 49% of Newstar
Qantas signs a management agreement with Newstar to ensure that they have the right to control the company and its cash
On paper, Jetstar Asia is 51% owned by Singaporeans and has a board made up of a majority of Singapore nationals
In practice, Jetstar Asia is 100% funded and controlled by Qantas
This structure also does not respect the supposed spirit of the law, but remains perfectly legal and blessed by the Singapore government
Unlike Hong Kong, Dixon worked out the structure and got it blessed by the Singapore government in 2003, and even got them in as initial investors.
Such structures are used all over the world where there are restrictions in foreign direct investment in certain industries - such as retail, mining etc. It is easy to dictate that you can't own a direct stake in a certain company. However it is almost impossible to regulate that Company X is barred from lending Company Y money, and enter into a management and franchise agreement with Company Y.
In Australia:
A domestic airline can be 100% foreign owned
An international airline must be majority Australian owned
Virgin Australia splits its assets into VA (domestic) (where it has all its assets) and VA International Holdings - which is basically a $1 paper company that is majority Australian owned - but bearing in mind this paper company has no assets
VA (domestic) enters into a loan agreement with the paper company, where VA "injects" capital needed into VAIH through a "loan agreement"
VA (domestic) enters into a management agreement with VAIH, whereby management of the $1 company is done by VA (domestic)
In effect - VA (domestic) funds and controls VAIH. The letter of the law is respected, with VAIH being majority owned by Australians - all $1 of it.
VA (domestic) is 70% owned by SQ, EY, NZ, 11% by Virgin Group and the rest of it is free float. It is majority foreign owned, arguably does not respect the spirit of the law, but remains perfectly legal
In Singapore:
A carrier with a Singapore AOC must be at least 51% owned by Singaporeans
Jetstar Asia is on paper a JV company called Newstar - 51% owned by Westbrook (which in turn is owned by Denis Choo) and 49% owned by Qantas
Qantas "loans" Westbrook the requisite amount of money to "buy" 49% of Newstar
Qantas signs a management agreement with Newstar to ensure that they have the right to control the company and its cash
On paper, Jetstar Asia is 51% owned by Singaporeans and has a board made up of a majority of Singapore nationals
In practice, Jetstar Asia is 100% funded and controlled by Qantas
This structure also does not respect the supposed spirit of the law, but remains perfectly legal and blessed by the Singapore government
Unlike Hong Kong, Dixon worked out the structure and got it blessed by the Singapore government in 2003, and even got them in as initial investors.
Such structures are used all over the world where there are restrictions in foreign direct investment in certain industries - such as retail, mining etc. It is easy to dictate that you can't own a direct stake in a certain company. However it is almost impossible to regulate that Company X is barred from lending Company Y money, and enter into a management and franchise agreement with Company Y.
Then why does the 2013 financial results show Jetstar Asia is a 49% Qantas owned company. Isn't this a little misleading? And why isn't Jetstar Asia not included under the Qantas Sale Act? Why wasn't the creative accounting questioned when Virgin did it's thing and what is the definition of owned and controlled entity under the Air Navigation Act? This is very messy. Maybe successive Australian Governments should have taken a little more notice. Those American Consultants will be running for the hills now.
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small correction?
Was:
supposed to read:
Qantas "loans" Westbrook the requisite amount of money to "buy" 51% of Newstar
Stay Alive,
Qantas "loans" Westbrook the requisite amount of money to "buy" 49% of Newstar
Qantas "loans" Westbrook the requisite amount of money to "buy" 51% of Newstar
Stay Alive,
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busdriver,
because legally Qantas only owns 49%!
Westbrook has the other 51%.
Now whether Qantas has other side agreements or loans, as alleged above, to Westbrook is difficult to tell, or indeed whether any loans have any equity like clauses
(e.g say Jetstar Asia is sold to AirAsia or floated on the Singapore market for $1bn assuming no debt (Air Asia has MCap of about US$2bn) - Qantas entitled to $500m, Westbrook to $500m. If say there is a $100m loan from Qantas to Westbrook - is the split $600/400, or is there something else.)
because legally Qantas only owns 49%!
Westbrook has the other 51%.
Now whether Qantas has other side agreements or loans, as alleged above, to Westbrook is difficult to tell, or indeed whether any loans have any equity like clauses
(e.g say Jetstar Asia is sold to AirAsia or floated on the Singapore market for $1bn assuming no debt (Air Asia has MCap of about US$2bn) - Qantas entitled to $500m, Westbrook to $500m. If say there is a $100m loan from Qantas to Westbrook - is the split $600/400, or is there something else.)
And to think they were given a profitable domestic airline for free and they want tax payers funds!
Who is going to buy Jetstar Asia? Two minutes of Forensic work will prove it is a disaster and they would surely do their own thing. Investors are getting a bit smarter than they used to be and will not be conned like the Australian ones were. What a waste of money and effort when Qantas management should have building up the main business that makes money, and don't say it doesn't! Side deals, when revealed will be not a good look. Mr Choo's agreement between Qantas and himself is all the Royal Commission will need. As I said this will get messy.
(b) at the date of this statement having regard to the financial support given by Newstar Investment Holdings Pte.Ltd.,there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.
This is from the 2012 Jetstar Asia report
This is from the 2012 Jetstar Asia report
"Rumour big announcement tomorrow from Joyce. "
Then I found Qantas Cruises
No Cookies | Herald Sun
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Note also that Jetstar Asia's results are published as part of the Qantas Group results, together with Jetstar International. In Qantas' 2013 financial statements, they include Jetstar Asia's fleet as part of the Group, but not Jetstar Japan or Jetstar Pacific.
http://www.qantas.com.au/infodetail/...alReport13.pdf
Under "Investments accounted for using the equity method" in Page 30, I do not see any references to Newstar or Jetstar Asia. There are explicit references to Jetstar Hong Kong, Jetstar Japan and Jetstar Pacific (33%, 33%, 30% holding)
International Financial Reporting Standards (IFRS) would be a bit heavy to place here, and I'm no accounting expert myself. So let's settle on Wiki for what
"accounting by equity method" means
Equity method - Wikipedia, the free encyclopedia
In theory, Newstar should have be accounted for in this section as Qantas holds 49%. The fact that they were not accounted for here could be:
1. Qantas failed to disclose (highly unlikely - their auditors would catch on)
2. They effectively own less than 20% (highly unlikely)
3. They effectively own more than 50%, even if on paper they own 49%. (Most likely the case)
IFRS allows for a company to be deemed a subsidiary even if the parent owns less than half of the company's voting rights, as in the link below
https://inform.pwc.com/inform2/show?...4136749&tid=15
Qantas does not need to disclose the "statutes", "agreements" or voting arrangements of Newstar so we will never know what these agreements entail.
I may be wrong, but the evidence suggests that Jetstar Asia functions as a subsidiary of Qantas, while respecting the letter of the law in Singapore.
http://www.qantas.com.au/infodetail/...alReport13.pdf
Under "Investments accounted for using the equity method" in Page 30, I do not see any references to Newstar or Jetstar Asia. There are explicit references to Jetstar Hong Kong, Jetstar Japan and Jetstar Pacific (33%, 33%, 30% holding)
International Financial Reporting Standards (IFRS) would be a bit heavy to place here, and I'm no accounting expert myself. So let's settle on Wiki for what
"accounting by equity method" means
Equity method - Wikipedia, the free encyclopedia
Equity accounting is usually applied where the entity holds 20–50% of voting stock, since this implies significant influence on the decisions of the associate by the holding company. Equity accounting may also be appropriate where the holding falls outside this range and may be inappropriate for some entities within this range depending on the nature of the actual relationship between the investor and investee. The ownership of more than 50% of voting stock creates a subsidiary. Its financial statements consolidate into the parent's. The ownership of less than 20% creates an investment position carried at historic book or fair market value (if available for sale or held for trading) in the investor's balance sheet.
1. Qantas failed to disclose (highly unlikely - their auditors would catch on)
2. They effectively own less than 20% (highly unlikely)
3. They effectively own more than 50%, even if on paper they own 49%. (Most likely the case)
IFRS allows for a company to be deemed a subsidiary even if the parent owns less than half of the company's voting rights, as in the link below
https://inform.pwc.com/inform2/show?...4136749&tid=15
2.7 Control is presumed to exist when the parent owns, directly or indirectly, more than half of the entity's voting power, unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control. The standard also sets out the following circumstances where control exists when the parent owns half or less of the entity's voting power. These circumstances are where it has:
Power over more than half of the voting rights by virtue of an agreement with other investors.
Power to govern the entity's financial and operating policies under a statute or an agreement.
Power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body.
Power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
Power over more than half of the voting rights by virtue of an agreement with other investors.
Power to govern the entity's financial and operating policies under a statute or an agreement.
Power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body.
Power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
I may be wrong, but the evidence suggests that Jetstar Asia functions as a subsidiary of Qantas, while respecting the letter of the law in Singapore.
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If these side deals re JQ Asia do exist (and I repeat if they exist), then perhaps SP that is an issue to be pursued. It was side deals that were used to hide the true purpose and nature of financing arrangements in HIH/FAI that brought a number of Execs to the gates of the cells. If these side deals are not disclosed and they impact the accounting treatment then the issue of financial statement misrepresentation arises.
This will all depend on the facts that exist in all the documents.
This will all depend on the facts that exist in all the documents.
