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Qantas Announcement: 28 AUG 14

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Qantas Announcement: 28 AUG 14

Old 27th Aug 2014, 23:38
  #41 (permalink)  
 
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The average Joe will only hear " 2.8 Billion lost" and think "blood in the water".
Just shows the average joe knows nothing about accounting

The 2.4B comes from the split of QFI into a separate CGU, some of those costs come from the 90's when the dollar was high compared to the US.

The $646m loss is the important number

As far as fleet changes go, -2 A332, -2 738 (1 QFD and 1 JC). I take it this is after the additional -738's and 332's are delivered
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Old 27th Aug 2014, 23:43
  #42 (permalink)  
 
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But that is hardly a revelation? The average joe being ignorant of accounting nuances? I guess that a charm offensive should begin any minute reassuring the hoi poloi that their reservations and advance purchases are safe.

I know I shall be issuing hollow promises to my family this evening, so I had better catch up on the QF talking points today...
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Old 27th Aug 2014, 23:52
  #43 (permalink)  
 
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Thumbs up

Apparently everything is on track and as per the grand plan. So carry on regardless chaps.
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Old 27th Aug 2014, 23:53
  #44 (permalink)  
 
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I guess it's similar to the media reporting a go around as "Passenger aircraft seconds from disaster as it avoids deadly runway collision by mere metres"
And that doesn't deter the public from flying

The cash position went from +2.4B at the half year to +3B now
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Old 27th Aug 2014, 23:58
  #45 (permalink)  
 
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The cash position went from +2.4B at the half year to +3B now
If you have the time can you please explain how that has happened and what exactly it means? I have no accounting experience whatsoever and struggle a bit with this sort of announcement. That said, I think I understand the write down that has occurred.
To me it does look like they are separating International out and positioning it for sale.
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Old 28th Aug 2014, 00:07
  #46 (permalink)  
 
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As Murray Walker once said when Nigel blew a tyre in ADL when attempting to get back to the pits.... "Spin Spin Spin!!"

I mean really, kiddies selling home made lemonade from a roadside stall can do better...

An absolute disgrace....

Clearly the plan is to make it a 'virtual' airline...
No aircraft, fuel, staff, terminals, unions etc etc...
Just buy code share tix as and when you need them on a seasonally adjusted basis and add a margin...

In the meantime, ruin the lives and careers of dedicated folk who give 110% to try and keep it in the air...

Grrr
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Old 28th Aug 2014, 00:07
  #47 (permalink)  
 
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Boy Steve were you off the mark.
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Old 28th Aug 2014, 00:09
  #48 (permalink)  
Keg

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Thumbs up

Decks are clear. Transformation on track and returning to profitability next FY- ie already. QSA is being revised and may yet be revised further. My money's on China Southern being the cash coming in and then that means fleet investment and so on.

Overall I reckon its a genius strategy given they still have a narrative to belt the various unions over the head with in upcoming EA negotiations.

I'd rate Qantas now as a 'buy'- at least for the medium to long term. It'll be pretty volatile over the next day or so.
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Old 28th Aug 2014, 00:12
  #49 (permalink)  
 
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Underlying loss is less than I or the market predicted. This 2.8B is just a fantasy figure to make them look good next year. This is a clear signal that Alan Joyce is here to stay.
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Old 28th Aug 2014, 00:21
  #50 (permalink)  
 
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Boy Steve were you off the mark.
Yeah it was actually better than he predicted - 780 mill prediction as opposed to 646 mill underlying loss.

With cash in the bank and the new Int'l entity, it definitely has the "come and look at me overseas players" song sheet about it
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Old 28th Aug 2014, 00:26
  #51 (permalink)  
 
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Obviously a Medium/Long hold strategy would be the only option, but at what price would you look at QAN and say pull the trigger?...

I'm just watching it for my own intrigue, but what do the investors think? Im looking at this with the knowledge of basic Accounting and Investment subjects done at Uni before I changed courses.

And as ElZincho said, how can you go from $2.6b back to profit in 6 months from the following:

QANTAS OUTLOOK
The Group expects a return to an Underlying Profit Before Tax in the first half of FY15, subject to factors outside its control.

This is based on the following expectations:
  • A target of $300 million of Qantas Transformation benefits to be realised in the first half.
  • A stabilising operating environment, as market capacity growth subsides.
  • First half fuel costs in line with the first half of FY14.
  • The repeal of the carbon tax.
  • Reduced depreciation costs compared with the first half of FY14.
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Old 28th Aug 2014, 00:34
  #52 (permalink)  
 
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Share market up 6%
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Old 28th Aug 2014, 00:34
  #53 (permalink)  
 
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Send AJ to Long Bay

When will these muppets get back to the basics..

How about just running the airline as it stands right now..
Clearly the biggest issue is fuel and wrong aircraft..

Enough of this accountant BS… Thats the problem so fix it.

They have the money there to go and purchase aircraft. Yes in their current state is not ideal as cost of servicing debt has now increased. But delaying fixing the basic elements of running the airline just festers the cancer within. Instead of spending money on f#wit accountants and lawyers on how to spilt international into two entity's so we can undermine our own current international to further the rot all for the sake of some airline overseas who thinks they will make a quick buck… (prob will cause their terms will stitch QF who will have no choice as we "need" the money… resonates EK deal)

You have the product, you have the right staff, you have the infrastructure. Spend the money on them. Spend other money lobbying those politicians and pressure them profusely to protect our skies (open skies rewards no one except the public and long term will be a constant cycle of death especially in Aus where certain costs are higher than other countries) and demand the pollies hold to account the other crims/corporations who run the airports of Aus..

Then we may see the playing field levelled back in everyones favour…

These accounting tactics just further my hatred for that irish smoker and his mates.. Run the airline. put the calculator and formulas away FFS
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Old 28th Aug 2014, 00:34
  #54 (permalink)  
 
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A write down of assets now is only possibly due to over-valuing of assets in the previous financials. Asset write downs should in theory reflect their true value at each reporting point. $A has been where it is or higher for a while.

The value of a company's assets is part of the value of a business. So an increase in cash position, while the value of your assets has declined by more than a $billion is still a big loss. No point having $1000 more in the bank if the value of your house declines by 25%. However it is spun as "clearing the decks", the value of QANTAS is now $2.8 less than it was.

Heard Geoffrey Thomas on ABC this morning saying that he believes it is brilliant management strategy, and in particular Alan Joyce is a brilliant manager. His selective answering of questions was incredible...he is paid by QANTAS? Certainly seems to be their spokesman.
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Old 28th Aug 2014, 00:41
  #55 (permalink)  
 
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Heard Geoffrey Thomas on ABC this morning saying that he believes
Just remember there is absolutely nothing credible in anything Geoffrey Thomas says...
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Old 28th Aug 2014, 01:01
  #56 (permalink)  
 
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Rural and Regional Affairs and Transport References Committee 14/03/2014

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.
QANTAS GROUP FINANCIAL RESULTS ALAN JOYCE OPENING REMARKS SYDNEY, 28 AUGUST 2014
Fleet Write-down
The decision to create a separate holding structure and entity for Qantas International has triggered an accounting requirement to test the value of Qantas International assets on a stand-alone basis.

The international fleet was purchased when the value of the Australian dollar averaged 68 cents against the US dollar, and in the case of the B747s, 57 cents.

Today the Australian dollar is trading at 93 cents.
The value of these aircraft on our books has therefore been written down by $2.6 billion to their current market value.

As a result future Qantas International depreciation expenses will be lower by around $200 million per year.

Importantly, this is a non-cash charge – a book write-down to the carrying value of aircraft that Qantas has no intention to sell, and will retain in its fleet.

It will have no impact on the economics of the business or change cash flow forecasts.
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Old 28th Aug 2014, 01:05
  #57 (permalink)  
 
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Yes but he is part of the Qantas Angel's and this morning I had the unfortunate experience of coming across his spin on both 7 and 2.


He is the go to man for media which says it all really. He did however struggle to justify his assertion it was in turn around mode, clearly the briefing he got was not complete or there is only so much you can absorb on a cross continent flight up the front.
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Old 28th Aug 2014, 01:06
  #58 (permalink)  
 
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Well said Biggles84...... back to the basics and the KISS principle!!!


McHale.
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Old 28th Aug 2014, 01:19
  #59 (permalink)  
 
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So is the aviation expert a Qantas angel?
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Old 28th Aug 2014, 01:19
  #60 (permalink)  
 
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QF up 8% + on the ASX at 11am from yesterdays close.
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