QF pessimistic on its financial outlook

[Melburnian1]

Long suffering QF shareholders - for whom dividends are just a memory (last one was in 2009) - might not be quite gnashing their teeth, but while they might give full marks for disclosure, they would be entitled to feel disappointed about these sentiments today from LC (Chairman) and AJ (CEO):

Qantas expecting more economic turbulence - Yahoo!7

Some of the more frequent posters on AFF have suggested that QF's international division is 'turning the corner' after two years of high, although reducing in 2012-13, losses.

Here is the full text of AJ's address:

http://www.asx.com.au/asxpdf/20131018/pdf/42k3xm59hlxhdr.pdf

while here is LC's:

http://www.asx.com.au/asxpdf/20131018/pdf/42k3xkfs9bybqg.pdf

There is no overt mention of job losses, but one could read that into the pessimistic speeches with the mention of 'low' consumer confidence and weak business traveller demand for flights.

Not a great outlook.

Will AJ faces pressure from institutional shareholders to resign, given the continual failure to make anything resembling a reasonable return on the billions invested in the business? QF faces much competition, and some other airlines are claimed to have advantages that QF may not enjoy, but eventually the institutions tend to run out of patience.

 

[eastwest101]

Long suffering QF shareholders - for whom dividends are just a memory (last one was in 2009) - might not be quite gnashing their teeth, but while they might give full marks for disclosure, they would be entitled to feel disappointed about these sentiments today from LC (Chairman) and AJ (CEO):

Lots of predictable moaning about the price of jet fuel there:



Here is a graph - that story is getting a bit old and tired in my opinion.....

Maybe there should be a drinking game at the QF AGM - every time someone mentions competition or the price of fuel then everyone has to empty their glass....

 

[cove]

I had hoped to get there but it is Sydney tomorrow instead.
Qantas needs to drop out of operating like a Government department.

 

[Melburnian1]

Here's 'The Age'/ 'SMH' (Fairfax) take on today's meeting:

Qantas flags sagging returns from fares

 

[clifford]

I had hoped to get there but it is Sydney tomorrow instead.
Qantas needs to drop out of operating like a Government department.

QF just needs to enter the real world of airline competition. How can it be that a QF award costs much more than a JQ purchased ticket?

When (if) they stop this nonsense they may become a little bit more profitable. Until then I won't waste a cent of my money buying a QF ticket. Am I alone in expressing these sentiments?

 

[jetlagger]

Qantas is still a great airline & a successful company.. Just think they are well overdue for new leadership.

 

[Melburnian1]

jetlagger, 'success' contains many elements. For instance, QF, VA and other Australian airlines carry millions of passengers safely - so that's a 'success' (although it should be the 'norm').

However, for shareholders, profit after tax is a major indicator of 'success', because without that there are no dividends. On that, QF and VA are failures, however much each might proffer that 'recovery is just around the corner' (which QF has not today).

Different industries, but would shareholders in Wesfarmers or Woolworths accept years of no dividends? I think not.

 

[jetlagger]

jetlagger, 'success' contains many elements. For instance, QF, VA and other Australian airlines carry millions of passengers safely - so that's a 'success' (although it should be the 'norm').

However, for shareholders, profit after tax is a major indicator of 'success', because without that there are no dividends. On that, QF and VA are failures, however much each might proffer that 'recovery is just around the corner' (which QF has not today).

Well yes, though more important to remember the transpired figures of this case in point can easily be distorted & also misinterpreted.
Debatable of course, without prejudice

 

[cove]

If the carbon tax does get repealed then Qantas will save about $200 million I believe.
Then if they get international to do better than break even it will be up to domestic ,frequent flyer and JetStar to stay profitable.
Having your biggest competitor losing 2 million a week is not helpful for Qantas.

 

[Supersonic Swinger]

QF just needs to enter the real world of airline competition. How can it be that a QF award costs much more than a JQ purchased ticket?

When (if) they stop this nonsense they may become a little bit more profitable. Until then I won't waste a cent of my money buying a QF ticket. Am I alone in expressing these sentiments?

I'll keep buying QF tickets when the pricing of the ticket and routing is right for what I need to travel. Status still has its advantages.

But given how devalued Qantas Points have become, with redemption options (other than the rare as hen's teeth Classic Awards and MASAs) effectively valuing each point at 0.8 cents, I'm no longer chasing points, and credit card spend is going elsewhere (let alone wasting money on an annual fee for a credit card which only earns you QF points!).

 

[cove]

I had been thinking that Supersonic Swinger but I am heading to Adelaide tomorrow on MASA because I could. Just don't give up now that a big portion of the market has given up. We can share the MASAs together.

 

[Supersonic Swinger]

cove I'll still take advantage of MASA when I can, I just won't be contributing any credit card spend towards them. Until other airlines devalue their program to the level of Qantas, I get much more bang for my credit card buck by warehousing spend in SPG and then transferring to one of the 27 airline options there.

 

[Melburnian1]

Analysts are rarely 100 per cent correct, but here some are now predicting that QF will incur a full year loss:

No Cookies | Herald Sun

Not a good outlook for QF. The predictions come despite a profitable frequent flyer division.

How major competitor VA's turns out will be interesting because on the one hand it has recently suggested that yields have improved (although AFF member markis10 may caution that this is never the full story re financial performance) but on the other hand if consumer sentiment does not improve (both leisure and business) and VA does not steal significant market share from QF or reduce capacity (or both), last financial year's net loss of $98 million may rise.

 

[kamchatsky]

Looks like a great excuse for QF to cut off most if not all QFi flights, and replace all of them with Jetstar.

 

[dk4]

...this is never the full story re financial performance...

The most important aspect of business finances in Australia is liquidity.

You will note that QAN goes to significant pains, in its result's documents, to point out its liquid position (with strong cash reserves). In Australia, your business becomes insolvent when you don't have the liquidity to pay your bills = game over red rover.

Virgin Australia, as discussed in another thread, would seem to be sailing very close to the wind on this issue. Three of VAs largest investors were recently forced to announce that they had made an unsecured line of credit available to VAH should it require the funds.

Bottom line, a business might not make a profit for year after year but remain viable, however the moment it can't pay (or renegotiate terms on) its bills, it becomes insolvent which leads to bankruptcy.

 

[Fruitcake]

Virgin Australia, as discussed in another thread, would seem to be sailing very close to the wind on this issue. Three of VAs largest investors were recently forced to announce that they had made an unsecured line of credit available to VAH should it require the funds.

That line of credit, however, hasn't been drawn on yet - the more interesting financing story for VA of late was their issue of a fleet-backed securitisation note a couple of weeks ago:

Virgin prices airline-backed notes | Business Spectator

http://www.asx.com.au/asxpdf/20131008/pdf/42jwfxlnhzjvyz.pdf

RPT- Asset managers load up on aircraft-backed bonds | Reuters

It is absolutely true that QF's liquidity is its greatest asset - it can burn cash for so much longer than any domestic competitor could ever hope to that no-one will ever dare set up a proper capacity war.

 

[Melburnian1]

It will be interesting to see if when QF announces its 2013-14 results in September 2014 whether the net loss is $1 billion as some are forecasting.

Am I correct that such a figure would be AFTER depreciation of assets?