Value of Qantas air fleet in doubt

Discussion in 'Qantas Frequent Flyer Program' started by Yada Yada, Jul 10, 2006.

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  1. Yada Yada

    Yada Yada Established Member

    Dec 6, 2004
    I saw a report last week where Moody's outlook for Qantas was not good either (report here). Perhaps Geoff should think about retiring sooner rather than later. :eek:

  2. oz_mark

    oz_mark Enthusiast

    Jun 30, 2002
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    Qantas made a decision some years back to age its fleet. Seems this decision is coming back to bite them.
  3. NM


    Aug 27, 2004
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    Qantas had a book problem with some of its older 747s a few years back. The 747-SPs had a book value that was way ahead of the actual resale or scrap value of the aircraft due to the policy of slow depreciation rates that prevailed at the time these aircraft were purchased (probably a hang-over from the government ownership days I suspect).

    That meant that they really had to keep operating those aircraft in their fleet long after they would have liked to retire them. But retiring them would have meant the need to realise the value misalignment and take a significant hit on the bottom line.

    Qantas has committed to a significant fleet upgrade over the coming years, with several A380 and many 787 aircraft due to enter service. This will also mean the need to retire much of the 767 fleet and the remaining 747-300s. So if they have these 743s and 767s are similarly overvalued as the 747-SPs were, then they will need to take a bottom line hit when they are retired. However, its important to remember that Qantas has long had the policy of retaining their aircraft for a long usable life - typically more than 20 years. All of the 743s and 763s to be retired when the new aircraft arrive will have past that 20 year service mark. So it depends on how they have been depreciated over those 20 years and what residual values they expected them to have at their end of QF service.

    It will be interesting to see how they handle the aircraft disposal (physically and financially) when the time comes. I doubt they would have expected a significant residual value at the end of a 20 year service life, but strange things happened in finance departments 20 years ago. I don't think current fuel prices will be the cause of any required write-down when they retire existing aircraft. History reveals that any 20 year old aircraft has significantly higher operating costs than new aircraft and the same situation existed when they retired the Connies, 707s etc. So there is nothing new in the situation now. It just remains to be seen if QF accounted for this expected outcome any better with the later aircraft deliveries than they did with the 747-SPs.

    Of course another problem they had with the -SPs was that they were effectively orphans with no other commercial operators having the same config (-SP with RR engines). So their resale market was pretty much non-existent. But the 743s will be ideal candidates for freighter conversions. The 763s may be harder to sell since QF has been aligning their hours and cycles by using them on domestic services in recent years. I think we may see many of them go the way of some of the 762s as scrap in the desert.
  4. Anywhichway

    Anywhichway Newbie

    Apr 21, 2006
    Somewhere south
    Unfortunately, it will be the staff that will be penalised again if there is any impact on the bottom line.
    It will be a historic day if Geoff said he will take a 10% pay cut... As if that would happen.:cool:
  5. Yada Yada

    Yada Yada Established Member

    Dec 6, 2004
    Given the recent financial downgrade by Moodys and the pessimistic outlook, perhaps Geoff should be taking a pay cut!

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