The Mystery of VH-VQS
Looking at the CASA aircraft registry, VH-VQS, a Jetstar A320, was recently returned to Qantas Airways from its ALLCO leasing company;
ASIC Free Company Name Search There are five other A320's that are now owned by Qantas and operated by Jetstar, but they appear to be the newest A320's and hence one is inclined to believe that a leasing company just hasn't been set up for them yet. But VQS is a funny one. It is not the oldest A320 in the fleet, and since the older ones are all still owned by leasing company's one wonders why this one has suddenly been transferred to QF. I don't believe it is due for heavy maintenance, but if it is then a few theories about cost transference might suddenly gain some momentum. And if the other five really are being owned by QF, some other questions might be asked about who is paying the costs for them as well. Does anyone know? |
Joyce was asked that specific question about those newly bought aircraft, (bought by Qantas) at a meeting at the Melbourne airport Hilotn late last year.
He maintained these A320's were leased to JQ from QF and the full lease charges were being financed by JQ. I don't believe a thing this treacherous individual says. Investigations are ongoing. |
Yeah, I've been asking the same thing for a while now.
1. Why does QF own aircraft that it doesn't even operate? How does this improve QF mainline's bottom line? 2. As an aircraft lessor, isn't the idea to make a profit from the lessee, to cover things like unforeseen maintenance, the risk of owning an aircraft etc. So theoretically, QF should be making a profit from JQ. If JQ really wanted to minimise their costs, wouldn't they just own the aircraft themselves? 3. Alternatively, if owning aircraft doesn't fit the JQ business model, wouldn't JQ minimise costs by leasing from a company that specialises in leasing aircraft, rather than QF which does it minimally and on an ad hoc basis? |
1. Why does QF own aircraft that it doesn't even operate? How does this improve QF mainline's bottom line? 2. As an aircraft lessor, isn't the idea to make a profit from the lessee, to cover things like unforeseen maintenance, the risk of owning an aircraft etc. So theoretically, QF should be making a profit from JQ. If JQ really wanted to minimise their costs, wouldn't they just own the aircraft themselves? 3. Alternatively, if owning aircraft doesn't fit the JQ business model, wouldn't JQ minimise costs by leasing from a company that specialises in leasing aircraft, rather than QF which does it minimally and on an ad hoc basis? |
SWH:
Most LCCs lease their aircraft, some have a 100% leased fleet. Airlines, especially LCCs have generally good cash flows, that is good for paying for leases. If they used their cash for buying aircraft, they would not be able to expand as quickly. The rotten and artificial trick that QF management might be playing is to buy the aircraft with Qantas equity dollars (ie expensive money) and then lease the aircraft to Jetstar at "market rates" (ie at rates based on cheap debt) - and of course Jetstar bears no risk does it? There is no way Qantas is going to foreclose on its lovechild if it doesn't pay its lease payment on time. To put it another way, Jetstar is entitled to pay "market rates" for its leased aircraft if it is leasing from a Third party at "arms length" and with no recourse to, or guarantee from, Qantas. If, on the other hand, Qantas is enmeshed in the Jetstar lease, then QF is entitled to demand a premium (above market rate) return from Jetstar. |
You could probably liken this situation to America and its Federal Reserve Bank.
America gov asks the bank for money to pay for everything, the bank says sure here you go have as much as you want. Pressing print on the machine and out the money comes. Of course the Federal Reserve never expects America to actually pay the money back even at the 0.00% interest rate, which is a strange phenomenon for a bank why would it lend money to a party without expectation of getting it back and on infinite terms. Unless of course there's more to it then just a simplistic commercial relationship with other factors in the mix... |
VH-VQS Airbus A320
Civil Aviation Safety Authority - Home The following 59 aircraft match your search criteria. Note: A record on the Civil Aircraft Register does not constitute proof of ownership for either the certificate of registration holder or property interest holders. Sorry I am not a bean counter, but suspect ownership arrangements can be adjusted to suite the owners and it's subsidiaries with some form of paperwork. Aircraft model A320-232 currently registered in Australia The above link is the leasing structure for some of J*s fleet. For me very confusing. For example, for the life of me, Wombat leasing in Brisbane, very hard to find any details about this company. Aircraft owned by WOMBAT 3668 LEASING PTY LTD currently registered in Australia |
What about the A320 operated by Jetstar but owned by "Jessica Leasing Ltd" .... Jessica Leasing Ltd's address is in Dublin, Rep of Ireland.
Does AJ moonlight as Jessica when he's back in Dublin? |
Originally Posted by TIMA9X
For example, for the life of me, Wombat leasing in Brisbane, very hard to find any details about this company.
INTERNATIONAL LEASE FINANCE CORP - FORM 8-K - EX-1.1 - August 12, 2010 |
Thanks for that Hempy, so why don't they not just call it ILFC?
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They would get a better return than keeping money in the bank, the same reason why banks buy aircraft and lease them to airlines, the returns are good. Also QF being a large Airbus customer, it would get significant discounts that Jetstar and some other leasing companies would not be able to achieve. Maintenance costs would be paid by Jetstar, and they would also need to pay whatever costs associated with getting it back to "almost" zero hours, i.e. a calculation of the percentage used out of a heavy check or significant engine maintenance. Lease terms in these sort of cases normally run for 12 years. Most LCCs lease their aircraft, some have a 100% leased fleet. Airlines, especially LCCs have generally good cash flows, that is good for paying for leases. If they used their cash for buying aircraft, they would not be able to expand as quickly. |
Originally Posted by Sunfish
And when there is a downturn, and the lease payments cannot be made, the LCC airline implodes very quickly. Borrowed money is cheap, but the payments must be made - or else. Equity is expensive, but there is no risk attached.
If the airline does close up, the Lessee has paid a deposit with the lease company to pay for the reconversion of the aircraft to another airlines requirements.
Originally Posted by Nose wheel first
Jessica Leasing Ltd's address is in Dublin, Rep of Ireland.
Originally Posted by TIMA9X
Thanks for that Hempy, so why don't they not just call it ILFC?
Originally Posted by 'holic
Firstly, JQ get the same discounts as QF, otherwise what would be the advantage of being part of the group?
Originally Posted by 'holic
Also, what you have stated is a pretty good argument for JQ owning their aircraft as opposed to leasing them
Originally Posted by 'holic
This would be correct if it was a finance lease. JQ lease the aircraft under an operating lease, which means the lessor pays for maintenance, depreciation etc.
"Maintenance. Lessee, at its own cost and expense, shall service, repair, maintain and overhaul, test or cause the same to be done to the Aircraft during the term of this Agreement (i) to keep the Aircraft in good operating condition and appearance and (ii) to keep the Aircraft in such operating condition as may be necessary to enable the airworthiness certification of the Aircraft to be maintained in good standing at all times under all applicable governmental rules and regulations. Lessee shall maintain all records, logs and other materials required by the Borg or the Intergalactic Alien Council to be maintained in respect to the Aircraft and shall promptly furnish to Owner, upon Owner's request, such information as may be required to enable Owner to file any reports required to be filed with any governmental authority because of Owner's interest in the Aircraft. Owner shall not be under any liability or obligation in any manner to provide service, maintenance, repairs, or parts for the Aircraft."
Originally Posted by 'holic
But once again, the point of my second question was wouldn't JQ's bottom line be better if they owned the aircraft?
Originally Posted by 'holic
I fail to see how the current leasing arrangements, if kosher, can possibly increase JQ's profits.
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My question, internally, can Q group change the status of ownership/leasing arrangements cost structures assigned to it's fleet making one airline look better than the other ones in the group? Corporate accounting is appallingly flexible - one can choose what costs/incomes are allocated to various entities/accounts, and at what rates. (There are accounting standards but these are pretty flexible.) That kind of accounting is entirely legitimate and provides an easy means to produce almost any desired outcome (as long as no dollars get lost along the track). One sets up multiple legal entities (J*, operating companies, frequent flier companies, leasing companies, ...) and report on them separately - now you can choose to report whatever you want. It's the complete opposite to what the public assume accounting is about - and it's perfectly legal by accounting :ugh: |
The first 3 A320 Jet* put into service, JQL, JQG and JQX are own by SALE the next 20 VQZ thru VQG were all Qantas group owned. Exactly how and what company I not privy to. Some aircraft had lease plate attached to the cockpit wall that read they were leased to Jetstar by VH-VQ* PTY LTD ,which are presumably QF shelf companies for leasing. Lost track and interest of the remaining aircraft, but my best guess would be they are all QF group owned.
Why lease from the mother ship? So it makes it easier for the bean counters to make their figure read what ever they want. Jet* makes too much money, QF charge higher lease fees, - QF make too money they lower the lease fees. Jet* get into trouble with the regulator or falls out of favour with joe public, just shut up shop, pay out lease penalties all over - no assests easy liquidation. Regulator or Government or Union gets to hard to deal with move to ASIA - no assests in Aust. EVERYTHING is leased. |
Perhaps there are links between person(s) inside QF and some aircraft leasing companies ?
Just a mere thought. |
Thanks for the reply drpixie and Bright Spark, much appreciated, helps me to understand more.
I found this very interesting, Why lease from the mother ship? So it makes it easier for the bean counters to make their figure read what ever they want. Jet* makes too much money, QF charge higher lease fees, - QF make too money they lower the lease fees. Perhaps there are links between person(s) inside QF and some aircraft leasing companies ? http://www.aph.gov.au/senate/Committ...ions/sub06.pdf The vast bulk of Jetstar’s facilities to support its operations are and will continue to be based in Australia. Jetstar currently employs more than 1,600 people, with the overwhelming majority based in Australia. Earlier this month, a new $29 million A320 maintenance facility was opened at Newcastle – an investment that will create additional skilled jobs and apprenticeship opportunities. In addition, Jetstar’s long haul expansion will see the workforce grow further with the introduction of its widebody long-haul international fleet. It is important to the success of both Qantas and Jetstar that they continue to work closely to maximise the Group’s financial performance and market shares. To this end, Qantas and Jetstar are codesharing on each other’s international services to leverage brand and distribution systems and optimise market penetration. The airlines operate on distinct routes to avoid “cannibalisation” of yields. The concerns expressed by Senator Fielding in the Second Reading Speech of “Jetstar being sold off to overseas buyers” are unfounded and run counter to the Qantas Group’s strategy of retaining and growing the complementary Qantas and Jetstar businesses. The prospect of the highly successful Jetstar lower cost operating model competing directly with Qantas in Australian domestic and international markets would clearly be an outcome that any owner of Qantas would be highly unlikely to pursue.Qantas would be happy to answer any questions the Committee may have at its public hearings on 13 March 2007. Qantas Airways Limited 9 March 2007 Contact Details: Brett Johnson David Hawes General Counsel GGM Government & International Relations email: [email protected] Email: [email protected] I find this document interesting to read again, it appears the goal posts have moved somewhat since 2007. I now fully understand one thing, hard to trust a word that comes out of Q head office at Mascot, that's for sure.:rolleyes: |
To work it out why lease the asset out, versus owning it.
From QAN annual report, "operating segments do not report borrowings as these are managed centrally (mainline)... Further if one thinks about the depreciation these assets attract, it makes more sense for the parent to absorb the write down. A quick check of QAN annual report shows where the assets all live, it isn't in J*...Wonder what the profit would actually look like if they had to absorb depreciation? |
Another two A320 have been added to the register as being owned by QF and leased by JQ for a total of 8.
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Excuse me if someone has already mentioned this but with creative accounting anything is almost possible. I have seen the following done on several occassions with seperate compnies with a common ownership.
Company No.1 is very profitable and paying too much Tax. Company No.2 Is a loss maker and not only pays no tax but also can acumualte tax losses which can be used to offset future profits. Company 1. buys new equipment and pays costs and lease write offs to minimise their profits and hence pays a lower tax rate. They then lease them to company 2. for a minimal ammount so that company can produce a profit for which it pays little or no tax and can also use accrued write offs to keep their tax bill to a minimum. Simple little trick that simple little Irishmen use???????? := |
from last year
Another two A320 have been added to the register as being owned by QF and leased by JQ for a total of 8. for the record..... I believe AJ & Co hoped this story would go away.... it's a sleeper and I believe the media will raise it again in 2012.. many questions still unanswered/avoided by Q management. :rolleyes: If you want to look back at all the drama last year, a media playlist has been created here..... Qantas Dispute & Grounding 2011 - YouTube . |
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