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Will Qantas enter Administration?

p--and--t

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Any critisism of Joyce is wholly justified.
Qantas has become - under his direction - the worst customer service organisation in Australia. Ever tried calling them? Ever tried emailing them? Ever tried filling out ridiculous online complaint forms that are then completely ignored. Still waiting 70+ days for refunds promised in 21 - yes. Tired of sullen, unsmiling cabin staff - yes. Hours spent every week managing and claiming missing shopping & partners points - then waiting 24 weeks, yes 24 weeks for them to be honoured - yes.
I recently cancelled 6 paid American Airlines flights and received full refunds in 6 to 10 days, no problems. AA are experiencing the same if not more issues than Qantas.
Qantas are deliberately using Covid as an excuse to hire less & serve us less and with Virgin down it's only gunna get worse......
Yes I justifiably htae Joyce.
Qantas is still solvent, not in administration, and still flying, and still the biggest airline in Australasia and still has >84% seat occupancy on most routes and 100 yo this year.

Guess YMMV

If Covid is just an excuse, I guess its a mere coincidence that more than 10 airlines have failed this year so far, and most if not all majors have run to their respective governments for bailout except QF. (QF has only said, publicly at least, if the gov is handing out money to VA then only fair to give then some too). BTW: AA received a bailout to continue operating
 
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Greg555

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Qantas is still solvent, not in administration, and still flying, and still the biggest airline in Australasia and still has >84% seat occupancy on most routes and 100 yo this year.

Guess YMMV

If Covid is just an excuse, I guess its a mere coincidence that more than 10 airlines have failed this year so far, and most if not all majors have run to their respective governments for bailout except QF. (QF has only said, publicly at least, if the gov is handing out money to VA then only fair to give then some too). BTW: AA received a bailout to continue operating
Still the worst customer service org in Oz - regardless of how much a fanboy one might be...
I collect the points & take their free seats but always fly a different airline - Cathay, FIJi, Japan, Latam et al.
 

p--and--t

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Still the worst customer service org in Oz - regardless of how much a fanboy one might be...
I collect the points & take their free seats but always fly a different airline - Cathay, FIJi, Japan, Latam et al.
So you use the airline benefits because you get free benefits from the airline but you hate them, hmmmm :rolleyes:

As they say, haters will hate!

BTW: Its always unwise to assume (e.g. ridiculous fan boy comment)
 
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TheInsider

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Still the worst customer service org in Oz - regardless of how much a fanboy one might be...
I collect the points & take their free seats but always fly a different airline - Cathay, FIJi, Japan, Latam et al.
It's actually and factually not. Qantas has a quite high and consistent NPS.
Yes there are arguments for and against a NPS, but still remains very high and consistent.

If you are having this constant negative attitude towards staff, no wonder why they aren't smiling at you on board.

Also if you are spending hours every week trying to chase up missing points from shopping partners, maybe it's you who is doing something wrong, or your purchasing system needs a bit of a clean out. Qantas Mall basically runs the same way Cash Rewards does, tracking your cookies and other files, maybe clean them out.
 
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mannej

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I have never not had online mall points not post, however I agree the period to post has blown out. However IMHO you can blame those gaming the loopholes (I.e purchase, wait until the points post and then refund the goods) for this.
 

Melburnian1

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Qantas is still solvent, not in administration, and still flying, and still the biggest airline in Australasia and still has >84% seat occupancy on most routes and 100 yo this year...
It didn't have >84 per cent seat occupancy in April (and presumably not in May) 2020.
 

Melburnian1

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The new CEO of Cobham is a good friend of mine. From his perspective this was a good way forward so it seems that both sides are happy.
If QF can afford to make changes like this during COVID-19, why can't it 'afford' to pay bills on time that are due to some or all of the airports at which it leases space?

And it also deferred its shareholder dividend (c.$200 million) to September 2020.

Thankfully the companies in which I have shares largely treat their shareholders better.
 

p--and--t

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The sharemarket looks forwards not to the past so while what seat occupancy was previously is helpful in calculating whether an entity was doing well in most of 2019-20, it is of little assistance in the 'changed world' from mid to late March.
I would doubt there is an airline in the world that has encouraging figures to release to the share market since mid March.
 

RAM

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Qantas is still solvent, not in administration, and still flying, and still the biggest airline in Australasia and still has >84% seat occupancy on most routes and 100 yo this year.

Guess YMMV

If Covid is just an excuse, I guess its a mere coincidence that more than 10 airlines have failed this year so far, and most if not all majors have run to their respective governments for bailout except QF. (QF has only said, publicly at least, if the gov is handing out money to VA then only fair to give then some too). BTW: AA received a bailout to continue operating
I'm not so sure it is actually in such a good way. More than 60% of their fleet is grounded by number, and by value its >80%. Q has massive staff entitlements to pay out when it starts laying staff off - by law it has to offer redundancies (2 weeks pay per year of service) plus accrued leave & other entitlements such as long service.

If the normal experience (pre-CV) is anything to go by would clear out between $480-960m of cash based on the numbers being thrown around. Remember JobKeeper is set to end by September which should save Q around $1,179m in wages while staff 'only' earn $345m from JobKeeper on which they're required to pay tax. The cash saving per employee per week is approx $2,564 for Q - or viewed as a pre-tax figure $1,814 for employees an unsustainable impact on employees' cash flow. Remember mortgage deferrals (compounding interest over the period in lieu of repayments) is due to end in July when all the banks are (required) to assess the ability of households to service the debt ongoing.

2018/19 wages bill was $77m/wk for its 30,000+ employees.

Stood down staff of 20,000+ at $750/wk = $15,000,000/wk paid for Q by the tax payer vs $51m/wk cost to Q (based on 2018/19 wages bill). Suggesting that of the aimed for cash burn of $40m/wk by end June, around $26m is the wages bill for the remaining 10,000+ staff.

JobKeeper = Q cash flow savings of $220m/month!

Current liabilities PLUS its off-balance sheet current liabilities look to be several times what its current assets & off-BS current assets (close to zero of these oddly enough) - technically that is an unhealthy financial position.

Q seems to have a history (pre-Joyce) and under Joyce of carrying planes at a higher value than their purchase cost (less depn) & closer to list price and then a few little pieces of enhanced accounting later (which may be perfectly legal but I cannot see the accounting standards that they come under) seems to help profits stay remarkably stable in certain components. Of course I may be wrong.

Q's history of enhancements dates back to pre-float days such as when it arbitraged the Australian Taxpayer to reduce the cost of its virtually full fleet replacement, one report I saw calculated this cost the Australian Taxpayer more than received from the subsequent float! Isn't leverage great.

Personally in 2018/19 I would not have valued a 9+ yr old A380 at around say AUD 400m when there are near new A380s with under 250 flying hours on sale for under AUD 200m. 12 x 400m = $4.8bn

Given the sweeping announcements of permanently retiring all their A380s (Air France under 6yrs old, etc) or bringing forward retirements, or in Emirates case seeking to cancel the last 3 new ones they signed up for in 2018/19 - Q would appear to be carrying them on their balance sheet at 2 to 3x their best case market or disposal value. Given Joyce recently went on record stating that the 6 yet-to be refurbished A380s may not return to service - this makes the end of financial year very interesting.

Qantas' EPS adjusted for share buybacks (over 30% of shares outstanding since 2014) has been falling. The latest buy-back of just under 80m shares occured Nov 2019 at a cost of just over AUD 440m. In 2018/19 the buyback cost was $1bn.

It is often a warning sign when a company cashes out a lease with only a year or two left in them. Q did just that with monetising its leases on the Sydney & Melbourne terminals. Looking through Q's cash flow statements - nearly all this cash was used to fund more share buy backs. They also wrote-back the lost value on their investment in Helloworld Travel (in the 2018/19 financial year). It's current valuation will likely require an even greater write-down this financial year.

Q does not have enough cash nor liquid securities to refund even the bulk let alone all of its international bookings which may explain why Q moved to restrict redemptions/refunds of QFF points BEFORE VFF did.

Examining Q in the same way as the $7bn liability figure for VA is arrived at shows Q, on a similar basis, in a bad way.

The size of earnings received in advance (seats, holidays, accomodation, car hire etc sold & funds received) added to the value of their aircraft leases (think of it as leasing a unit for 10 yrs paying $1,000/wk + penalties for non-performance, so 10 x $1,000 x 52 = $520,000) is not pretty. The approx AUD 1.6+bn of new loans secured against some (10 x 787-9s) of their 'owned' planes was a good signal.

The list price of the B787-9 is around USD 290m at 0.65 that's AUD 446m, so to borrow AUD 1.6bn they pledged as security AUD $4.46bn (list price), AUD $2.14bn (likely purchase price). Or 36% of list price & 75% of likely purchase price - doesn't leave much room for the secondary market price falls before the lenders are way under-secured.

Looking back, Q raised AUD 350m in October 2017 with a novel rotating security pool that they could virtually substitute any aircraft type (A320, A330, B737, B787 etc) in their fleet as security - except both the A380 & B747. For added protection - the planes could not be used as part security for any other purpose.

"The loan is the first of a series under a loan facility program set up by the Australian airline, which reported near-record profits in the year to June.

The security for each loan includes a pool of Qantas planes that have not been pledged as collateral, including Airbus SE A320 family and Boeing Co 737 narrowbodies as well as A330 and 787 widebodies, a term sheet of the deal reviewed by Reuters shows
."

Before the last AUD 550m raised in early May 2020 against 3 B787-9s, Q had 2.7bn of unencumbered value in planes - was that all accounted for by the A380s perhaps? From what is can be worked out from various public sources - that seems less than the 2018/19 carrying value of A380s. So don't expect any announcement of permanently retiring those 6 A380s in 2020 - Q cannot afford the required write-downs.

Given the security given for the AUD 1.6bn above with no write-downs in carrying values, that suggests Q only has room to raise just less than AUD 1bn secured against the remaining planes owned (as at 2018/19 carrying values). That is if anyopne would lend against what model the unencumbered planes are.

The AUD 550m May raising was thought (by industry analysts) to just about cover Q's cash burn for May & June - with Q 's stated aim of cutting cash burn to AUD 40m/wk or around AUD 180m/month.

If they're successful in cutting the cash burn then at best they're covered to November if everything goes their way, they don't have to retrench staff, JobKeeper is extended, they can find lenders willing to take the remaining unencumbered planes as security AND international flying does not rebound massively (let alone the small matter of the borders re-opened).

Given VA should have been sorted out by then with aircraft lessors & secured lenders taking significant losses as well as receiving back a large number of aircraft - it could get exciting for Q. I'd expect Q to be looking to raise some more cash early next week if I was AJ. Trouble is, from my count, all of their most securitisable aircraft (B787-9s) are accounted for.

The secondary market value for all aircraft has fallen substantially since March with one of the specialist aircraft valuers formally advising of falls across aircraft types for commercial jets of between 17% to 23% at the end of April. Q cited that valuer in their 2018/19 Annual Report. Since then two of the three largest South American airlines filed for Chapter 11, and Delta in a rush to avoid any legal actions despite having a clause in its agreement to buy 20% of Latam & other related transactions letting it off at no cost if Latam filed for Chapter 11 before late 2020 - Delta is paying Latam USD 60m as a goodwill gesture for not going through with buying 4 of the earliest A350s (over-weight low-perfomance first builds).

I'd hate to be the Audit Partner signing off the 2019/20 accounts given the court cases flowing out of OneTel, HIH, etc.

Just how long, facing the current international border restrictions, can Q remain a going concern? Not much longer IMHO but I could be wrong.
 

p--and--t

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I'm not so sure it is actually in such a good way. More than 60% of their fleet is grounded by number, and by value its >80%. Q has massive staff entitlements to pay out when it starts laying staff off - by law it has to offer redundancies (2 weeks pay per year of service) plus accrued leave & other entitlements such as long service.

If the normal experience (pre-CV) is anything to go by would clear out between $480-960m of cash based on the numbers being thrown around. Remember JobKeeper is set to end by September which should save Q around $1,179m in wages while staff 'only' earn $345m from JobKeeper on which they're required to pay tax. The cash saving per employee per week is approx $2,564 for Q - or viewed as a pre-tax figure $1,814 for employees an unsustainable impact on employees' cash flow. Remember mortgage deferrals (compounding interest over the period in lieu of repayments) is due to end in July when all the banks are (required) to assess the ability of households to service the debt ongoing.

2018/19 wages bill was $77m/wk for its 30,000+ employees.

Stood down staff of 20,000+ at $750/wk = $15,000,000/wk paid for Q by the tax payer vs $51m/wk cost to Q (based on 2018/19 wages bill). Suggesting that of the aimed for cash burn of $40m/wk by end June, around $26m is the wages bill for the remaining 10,000+ staff.

JobKeeper = Q cash flow savings of $220m/month!

Current liabilities PLUS its off-balance sheet current liabilities look to be several times what its current assets & off-BS current assets (close to zero of these oddly enough) - technically that is an unhealthy financial position.

Q seems to have a history (pre-Joyce) and under Joyce of carrying planes at a higher value than their purchase cost (less depn) & closer to list price and then a few little pieces of enhanced accounting later (which may be perfectly legal but I cannot see the accounting standards that they come under) seems to help profits stay remarkably stable in certain components. Of course I may be wrong.

Q's history of enhancements dates back to pre-float days such as when it arbitraged the Australian Taxpayer to reduce the cost of its virtually full fleet replacement, one report I saw calculated this cost the Australian Taxpayer more than received from the subsequent float! Isn't leverage great.

Personally in 2018/19 I would not have valued a 9+ yr old A380 at around say AUD 400m when there are near new A380s with under 250 flying hours on sale for under AUD 200m. 12 x 400m = $4.8bn

Given the sweeping announcements of permanently retiring all their A380s (Air France under 6yrs old, etc) or bringing forward retirements, or in Emirates case seeking to cancel the last 3 new ones they signed up for in 2018/19 - Q would appear to be carrying them on their balance sheet at 2 to 3x their best case market or disposal value. Given Joyce recently went on record stating that the 6 yet-to be refurbished A380s may not return to service - this makes the end of financial year very interesting.

Qantas' EPS adjusted for share buybacks (over 30% of shares outstanding since 2014) has been falling. The latest buy-back of just under 80m shares occured Nov 2019 at a cost of just over AUD 440m. In 2018/19 the buyback cost was $1bn.

It is often a warning sign when a company cashes out a lease with only a year or two left in them. Q did just that with monetising its leases on the Sydney & Melbourne terminals. Looking through Q's cash flow statements - nearly all this cash was used to fund more share buy backs. They also wrote-back the lost value on their investment in Helloworld Travel (in the 2018/19 financial year). It's current valuation will likely require an even greater write-down this financial year.

Q does not have enough cash nor liquid securities to refund even the bulk let alone all of its international bookings which may explain why Q moved to restrict redemptions/refunds of QFF points BEFORE VFF did.

Examining Q in the same way as the $7bn liability figure for VA is arrived at shows Q, on a similar basis, in a bad way.

The size of earnings received in advance (seats, holidays, accomodation, car hire etc sold & funds received) added to the value of their aircraft leases (think of it as leasing a unit for 10 yrs paying $1,000/wk + penalties for non-performance, so 10 x $1,000 x 52 = $520,000) is not pretty. The approx AUD 1.6+bn of new loans secured against some (10 x 787-9s) of their 'owned' planes was a good signal.

The list price of the B787-9 is around USD 290m at 0.65 that's AUD 446m, so to borrow AUD 1.6bn they pledged as security AUD $4.46bn (list price), AUD $2.14bn (likely purchase price). Or 36% of list price & 75% of likely purchase price - doesn't leave much room for the secondary market price falls before the lenders are way under-secured.

Looking back, Q raised AUD 350m in October 2017 with a novel rotating security pool that they could virtually substitute any aircraft type (A320, A330, B737, B787 etc) in their fleet as security - except both the A380 & B747. For added protection - the planes could not be used as part security for any other purpose.

"The loan is the first of a series under a loan facility program set up by the Australian airline, which reported near-record profits in the year to June.

The security for each loan includes a pool of Qantas planes that have not been pledged as collateral, including Airbus SE A320 family and Boeing Co 737 narrowbodies as well as A330 and 787 widebodies, a term sheet of the deal reviewed by Reuters shows
."

Before the last AUD 550m raised in early May 2020 against 3 B787-9s, Q had 2.7bn of unencumbered value in planes - was that all accounted for by the A380s perhaps? From what is can be worked out from various public sources - that seems less than the 2018/19 carrying value of A380s. So don't expect any announcement of permanently retiring those 6 A380s in 2020 - Q cannot afford the required write-downs.

Given the security given for the AUD 1.6bn above with no write-downs in carrying values, that suggests Q only has room to raise just less than AUD 1bn secured against the remaining planes owned (as at 2018/19 carrying values). That is if anyopne would lend against what model the unencumbered planes are.

The AUD 550m May raising was thought (by industry analysts) to just about cover Q's cash burn for May & June - with Q 's stated aim of cutting cash burn to AUD 40m/wk or around AUD 180m/month.

If they're successful in cutting the cash burn then at best they're covered to November if everything goes their way, they don't have to retrench staff, JobKeeper is extended, they can find lenders willing to take the remaining unencumbered planes as security AND international flying does not rebound massively (let alone the small matter of the borders re-opened).

Given VA should have been sorted out by then with aircraft lessors & secured lenders taking significant losses as well as receiving back a large number of aircraft - it could get exciting for Q. I'd expect Q to be looking to raise some more cash early next week if I was AJ. Trouble is, from my count, all of their most securitisable aircraft (B787-9s) are accounted for.

The secondary market value for all aircraft has fallen substantially since March with one of the specialist aircraft valuers formally advising of falls across aircraft types for commercial jets of between 17% to 23% at the end of April. Q cited that valuer in their 2018/19 Annual Report. Since then two of the three largest South American airlines filed for Chapter 11, and Delta in a rush to avoid any legal actions despite having a clause in its agreement to buy 20% of Latam & other related transactions letting it off at no cost if Latam filed for Chapter 11 before late 2020 - Delta is paying Latam USD 60m as a goodwill gesture for not going through with buying 4 of the earliest A350s (over-weight low-perfomance first builds).

I'd hate to be the Audit Partner signing off the 2019/20 accounts given the court cases flowing out of OneTel, HIH, etc.

Just how long, facing the current international border restrictions, can Q remain a going concern? Not much longer IMHO but I could be wrong.
Most of that is way above my knowledge level and outside my profession.

What I do know is AJ has stated on public record the latest borrowing was done in accordance with their planning to have enough cash without a bailout to survive until the end of 2021. If that statement is deliberately misleading, then the stock exchange and regulator might have something to say about that.
 

RAM

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Most of that is way above my knowledge level and outside my profession.

What I do know is AJ has stated on public record the latest borrowing was done in accordance with their planning to have enough cash without a bailout to survive until the end of 2021. If that statement is deliberately misleading, then the stock exchange and regulator might have something to say about that.
....and the statement was made in unprecedented times, it was my understanding at the time.....
 

RAM

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Now Qantas has said they might need to offer some $19 fares for say Mel-Syd to drive volumes much faster than otherwise due to depressed demand and make flights viable but would only do it if it was revenue positive. The ACCC now is seriously concerned?

The ACCC now seem to be focused on prices being held up higher than it is profitable for the airline to operate them and focusing on reducing competition to help a competitor.
A strange detail I saw in the 2018/19 Q Annual Report:

"We are investing $25 million to strengthen the Frequent Flyer program — including adding 1 million reward flights per year across Qantas, Jetstar and our partners."

Does this imply that after 'fees & charges' the cost of QFF seat redemptions is less than $25 on average! If so given it includes seats (back in the pre-CV days) to London, Dallas, Singapore etc, then a few $19 flights for MEL-SYD should not be an issue.

I wonder if anyone at the ACCC has Chairman's Club access?
 

travel_bug

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I wonder if anyone at the ACCC has Chairman's Club access?
Though of course not conflating CC with any less than objective behaviour, SMH article here from Jan 2019 states:
Qantas and Virgin Australia are spending hundreds of thousands of dollars a year feting watchdogs, public servants, and politicians and their families with complimentary memberships to private airline lounges, limousines and business and first-class flight upgrades.
The largesse has been accepted by hundreds of powerful figures including those in the judiciary, as well as regulators and federal departments that regulate the airlines.
More than two thirds of parliamentarians accept the travel freebies, as do senior officials from the Australian Securities and Investments Commission, Australian Competition and Consumer Commission, Department of Infrastructure and the Treasury.
It is incredible to think though that at least in the Public Service, top Senior Executive Service staff can accept such a gift, but those a low level working in a rural community who may have provided exemplary service can't accept anything as mundane as a cinema voucher under the gift restrictions.
 

RAM

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Now now, lets not start with the unfounded conspiracy theories and casting aspersions without fact.
Casting no aspersions just asking a question.

Given what I have seen in other public sector Depts/operations it is a valid question.

I hope the answer is that the ACCC has taken a decision to not accept any gifts/benefits etc from any group - public or private sector. But I don't know what the situation is. If the SMH article is to be believed then senior public servants at the ACCC do accept benefits = disappointing.
 
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MEL_Traveller

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It's actually and factually not. Qantas has a quite high and consistent NPS.
Yes there are arguments for and against a NPS, but still remains very high and consistent.

If you are having this constant negative attitude towards staff, no wonder why they aren't smiling at you on board.
I'm glad the high NPS scores provide comfort to those who need it. They don't to me, trying to get through to the call centre and waiting 2+ hours, pre-covid. Or when it's suggested a voucher is my only option rather than a refund. Or for those who discover the advertised flat bed is in name only on older A380s and 747s.

And who fills out the NPS survey? The 'majority' who demanded an end to hot breakfasts on flights into Australia? And the end to chauffeur services?

Qantas is an excellent safety record. They have excellent pilots. But they have not been an innovator since their introduction of business class in 1979.

As to the debate on government assistance... didn't QF also get assistance through the waiving of landing fees etc?
 

Melburnian1

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...As to the debate on government assistance... didn't QF also get assistance through the waiving of landing fees etc?
It and VA did, although VA made the point that since it was flying far less than pre-COVID-19, some of this Federal Government package was not flowing through to it.

I probably missed it but my recollection is QF didn't complain in the same way.
 

p--and--t

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It and VA did, although VA made the point that since it was flying far less than pre-COVID-19, some of this Federal Government package was not flowing through to it.

I probably missed it but my recollection is QF didn't complain in the same way.
And if I'm not mistaken that, not so large, largesse (when only 5% of flights are operating) included REX as well as VA and QF.
 

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