2020 FY Results

[RAM]

Plenty of other analysts. Under 1% down share price move suggesting this was mostly expected.
I don't think anyone cares about the number with this result.

The value is in the future which is based on how quickly things recover

Most fund managers (who own the bulk of the shares) are either passive (hold the shares relative to their proportion in the index) or closet-indexers who vary their holding +/- 1/20th to 1/50th of the index weight. Lots of info about that you can see online.

Lots of credit rating companies are very interested in this result, as are Q staff, Q lenders and thousands of consultants rubbing their hands with glee. There is blood in the water now.

Q has been as 'clever' with the financial management as ever. Trouble is the "emperor's new clothes" are beginning to come under scrutiiny. Remember Q broke the law by refusing cash refunds for flights it cancelled. If you or I did that then we would be prosecuted, yet nothing happens with Q other than the ACCC made them send out an email which even the ACCC declared to be 'insufficient' & 'vague'.

I am often wrong, but within 2 to 3 weeks I suspect a couple of well-known funds in the world of forensic shorting will be very active in Q shares. Especially when it was revealed that Airbus bought back 6 of Lufthansa's A380 in April 2019 on a deferred basis. Deferred to be returned POST-A380 production ceasing. Now that's become public - values of A380 will be hard to be in anyone's books much above zero.

It seems that Lufthansa had a clause in its deal with Airbus to return them earlier (originally contracted timeframe returning over late 2022 to early 2023. Are there any other side deals with Airbus to take back Airlines A380s? One thing is for sure - Q does not have such a deal. Perhaps BA does? After all they were very late to the A380 party!

The lack of A380 parts sales either new from Airbus or from the attempted 'parting out' of the first 2 SIA A380s returned in 2017 complicates matters even more. Say Q has a contract to buy 78 A380 engines ending in 2042 for example - that would be an off-balance sheet liability that should now go on-balance sheet as it will never be used in the 'normal course of business'. Nothing about any off-balance sheet liabilities in yesterday's details.

Only informative as to where the share price was versus the subscription price on the day the offer closed.
The $1.4bn insto offer had plenty of demand.

As above, most instos buy to maintain a company's proportion in the index.

The failure of the retail offer was a failure. The price they were to pay was at a 2.5% discount to the price Q traded in the 5 prior business days before it ended in early August - around 50 cents below what the instos paid as it turned out -$3.18 vs $3.65.

Obviously the longer it goes the greater the impact. QF can still raise more money from shareholders if it needs to

Q's ability to raise more equity is now much diminished. Just like politicians - no company CEO tells the unvarnished truth (OK perhaps there've been one or two out of millions).

AJ has turned Q into a private equity-like stripped carcass. Sold off all the jewels BUT QFF.

AJ has entered into long term leases with all airports in Australia at terms that saw the owners of the airports HAPPY to pay $1 billion or so to end their existing leases 1.5 to 4 years early in order to enter these new leases.

Does anybody think that the new leases will cost Q more or less? That increases Q's cash burn which yesterday's news is even worse than I estimated in my post a fews days back - and that was $300m per week over the period since February btw.

Remember Q shut down QFF redemptions for gift cards before VA did back in March(? I think it was). That's a better signal about Q's true underlying state than anything else.

That Q refused to do refunds but forced customers to take travel credits is also a good datapoint.

Then that Q is still 'going slow' on processing the cash refunds that the ACCC ordered Q to formally offer is another good datapoint.

Perhaps people should be questioning how Q could possibly be writing down the A380s etc by so much GIVEN that Q wrote down the International fleet by an even larger amount back in 2014. After all Q bought them for below 50% of list price didn't they?

For example: How can a 20+ year old B747-400 be valued at over 40% of '1999 list price' when it's value was supposedly nearly written off in 2014? Worth trawling up the Q ASX filings from then.

I must be missing something...

Anyone read 'The Magic Pudding'?

 

[jakeseven7]

Most fund managers (who own the bulk of the shares) are either passive (hold the shares relative to their proportion in the index) or closet-indexers who vary their holding +/- 1/20th to 1/50th of the index weight. Lots of info about that you can see online.

Lots of credit rating companies are very interested in this result, as are Q staff, Q lenders and thousands of consultants rubbing their hands with glee. There is blood in the water now.

Q has been as 'clever' with the financial management as ever. Trouble is the "emperor's new clothes" are beginning to come under scrutiiny. Remember Q broke the law by refusing cash refunds for flights it cancelled. If you or I did that then we would be prosecuted, yet nothing happens with Q other than the ACCC made them send out an email which even the ACCC declared to be 'insufficient' & 'vague'.

I am often wrong, but within 2 to 3 weeks I suspect a couple of well-known funds in the world of forensic shorting will be very active in Q shares. Especially when it was revealed that Airbus bought back 6 of Lufthansa's A380 in April 2019 on a deferred basis. Deferred to be returned POST-A380 production ceasing. Now that's become public - values of A380 will be hard to be in anyone's books much above zero.

The lack of A380 parts sales either new from Airbus or from the attempted 'parting out' of the first 2 SIA A380s returned in 2017 complicates matters even more. Say Q has a contract to buy 78 A380 engines ending in 2042 for example - that would be an off-balance sheet liability that should now go on-balance sheet as it will never be used in the 'normal course of business'. Nothing about any off-balance sheet liabilities in yesterday's details.



As above, most instos buy to maintain a company's proportion in the index.

The failure of the retail offer was a failure. The price they were to pay was at a discount to the price Q traded at in the 5 prior business days it ended in early August - around 50 cents below what the instos paid as it turned out.



Q's ability to raise more share holders funds is now much diminished. Just like politicians - no company CEO tells the unvarnished truth (OK perhaps there've been one or two out of millions).

AJ has turned Q into a private equity-like stripped carcass. Sold off all the jewels BUT QFF.

AJ has entered into long term leases with all airports in Australia at terms that saw the airport HAPPY to pay $1 billion or so to end their existing leases 1.5 to 4 years early in order to enter these new leases. Does anybody think that the new leases will cost Q more or less?

Remember Q shut down QFF redemptions for gift cards before VA did back in March(? I think it was). That's a better signal about Q's true underlying state than anything else.

That Q refused to do refunds but forced customers to take travel credits is also a good datapoint.

Then that Q is still 'going slow' on processing the cash refunds that the ACCC ordered Q to formally offer is another good datapoint.

Perhaps people should be questioning how Q could possibly be writing down the A380s etc by so much GIVEN that Q wrote down the International fleet by an even larger amount back in 2014. After all Q bought them for below 50% of list price didn't they?

For example: How can a 20+ year old B747-400 be valued at over 40% of '1999 list price' when it's value was supposedly nearly written off in 2014? Worth trawling up the Q ASX filings from then.

I must be missing something...

Anyone read 'The Magic Pudding'?

Are you Juddles reincarnated?
(Actually a half serious question!)

 

[Melburnian1]

..I must be missing something...

Anyone read 'The Magic Pudding'?

Thank you for agreeing with me that the capital raising (from 'mum and dad' shareholders) was a failure. Less than $72 million raised when the target was $500m doesn't engender confidence.

For many private investors, the workings of the 'instos' can be hard to fathom but shorting can be a real threat.

Few CEOs like to get on the 'wrong side' of the 'instos.'

If only two-thirds of what you say is correct, QF is in real trouble financially.

I wonder if any fund managers ever read these sorts of blogs?

 

[moa999]

I don't disagree that only raising $72m was a failure but it was too be expected with where the share price ended in the 5-days to close on 5-Aug.

Mum and Dads get a free option in most of these rights issues (or SPPs). If the option is in the money (ie. Share price above fixed price) then there is lots of demand. If it's not then it's a lot lower..

You could have purchased shares for $3.15 on 3/8 versus ultimate issue price (2.5% discount to VWAP of $3.18).

Got any references for the $1bn paid to end a lease early? Or the 747s at 40% ?

 

[RAM]

Are you Juddles reincarnated?
(Actually a half serious question!)

Not that I know of.....

 

[CaptJCool]

https://investor.qantas.com/DownloadFile.axd?file=/Report/ComNews/20200820/02269004.pdf

For mine, these two screenshots tell the underlying picture...

$2 billion of fares in flight credit, forward bookings collapsed and clearly significant refunds since at 30/6/19, this figure was
$3.167 billion
$2.8 billion of FF points yet to be redeemed

JobKeeper $267 million
Aviation package - surprises me it’s only $36 millio.
Notice some cash ex Singapore AND New Zealand
There’s also $130 million sitting in the ATO s instalments paid in advance that on these figures will be refunded




The assets impairment write-downs are the big ticket reason why this headline result occurred, it’s a legitimate accounting principle but really muddies the water ...

 

[dajop]

Aviation package - surprises me it’s only $36 millio.

I think Rex made the strong point when they were arguing for more assistance for regional services (which they, QF, VA etc were all granted), that the original assistance package - which consisted of waiving fees/charges, etc as per your screen shot, was of very little value if there weren't services running, as there are very few fees if no flights!

 

[MEL_Traveller]

@RAM... i think qantas was very careful in the way it worded all of its voucher/credit emails. I don’t think any of them actually said ‘no refund allowed’.... they were all meticulously crafted to say *you* could cancel your flight without penalty. They were silent on the refund issue. And they didn’t actually cancel flights until the last minute. Technically before that it was a voluntary cancellation by the passenger.

Was that misleading? I reckon yes. QF says it wasn’t.

$2 billion in fares in credit.... that’s a lot of interest saved. I wish qantas would come out of this a bit more ‘non status’ friendly.

 

[RAM]

@RAM...
$2 billion in fares in credit.... that’s a lot of interest saved. I wish qantas would come out of this a bit more ‘non status’ friendly.

Given the widely publicised delays for Q actually refunding people's fares & holidays - I would suspect that upwards of $1bn of the $2bn will end up being paid out as cash. Remember they've cancelled many more months of international flights post 30 June than they had before hand.

Q only started contacting passengers about refunds in late June. The ACCC then complained that the Q letter was not clear about customers' rights and needed to be fixed. Did not leave much time to get refunds for cash recorded (long delays trying to contact anyone). Q says any 'requests recorded by 30 June' were taken out of revenue received in advance & shown elsewhere.

 

[aus_flyer]

Hindsight is a wonderful thing - but looking back, the long-running Qantas share buyback (at well over $5 per share) was a spectacularly poor decision.

If only we had a crystal ball...

 

[BD1959]

So - the big question - given all the doom-and-gloom above on QF's financial position: should we be cashing in our QFF points??

Regards,

BD

 

[mviy]

So - the big question - given all the doom-and-gloom above on QF's financial position: should we be cashing in our QFF points??

Currently I'm not pessimistic enough to do that, but if it gets to that point and I can still use the points I know what I'd want to spend them on.

 

[torks]

Hindsight is a wonderful thing - but looking back, the long-running Qantas share buyback (at well over $5 per share) was a spectacularly poor decision.

If only we had a crystal ball...

Spectacularly good if you were a shareholder which sold.

 

[sxc]

Currently I'm not pessimistic enough to do that, but if it gets to that point and I can still use the points I know what I'd want to spend them on.

What would you spend them on?

 

[RAM]

I could well be missing something very obvious about Q - 'wood for the trees'.

Here's my view fwiw....

Hindsight is a wonderful thing - but looking back, the long-running Qantas share buyback (at well over $5 per share) was a spectacularly poor decision.

If only we had a crystal ball...

I'll lend you mine - they're not that expensive to buy but don't come with a user's manual which explains a lot . Not as much fun as a lightening globe though!

As an industry - global airlines have never made a coughulative profit (as a whole) since the industry began nearly 120 years ago. The suppliers have & still do.

Aviation is almost as beloved as the resources sector historically - the share prices follow the business cycle beautifully. For resources China mucked up that easy money making trade in the early 2000s unfortunately for over 20 large hedge funds that were behind the times.

You may have heard of one of the WW2 slogans; "Loose lips sink ships!"

Several bottles of red wine, properly administered at long Friday lunches have a near guaranteed lip loosening/boasting impact especially if you play dumb/naive. I always knew the one managerial accounting lecture on dysfunctional behaviour would come in useful!

Think of Q as if it was taken over by private equity a couple of times, first by James Strong and then the second time by Alan Joyce. Actually it is three times as the mgmt before it was privatised set about ensuring the Australian Govt paid to lock in about the first 12 years of profits (remuneration targets). Q was virtually floated with one of the youngest fleets in the world for a reason (which was not how it was presented to the Govt).

One of Australia's favourite investment banks, who may have been involved in the whole float/not to float scoping study, presented to the CEO & a select group how they could GUARANTEE a growing profit stream for 10 to 15 years - thereby guaranteeing they'd meet but not exceed the targets Q required to earn the execs maximum remuneration.

Not being humanitarians, of course there was a not so small fee for setting this up as well as a trail commission earnt by this investment bank.

The deal

it is not often any company goes from public to private AND has renewable capital stock. Most privatisations involve either a 'service' business (eg: CBA, CSL) or one with long term already built fixed assets such as power stations, telephone wires & substations, transmission grids, pipelines, dams, water desalination plants, etc.

A Govt owned airline is a hybrid = part service company but with a massive component of regularly replaced (vs a 150yr dam) fixed assets.

A tax paying company gains a cash flow benefit from depreciation (tax saving), a non-taxpaying one (say pre-float Qantas) does not. So there is an arbitrage available, which is what Q took advantage of. The estimated 'benefit' aka profit stream from this arbitrage was greater than the entire float proceeds - I was told by a very 'happy' knowledgeable person, perhaps the most knowledgeable person about the structure (his term for it).

<< NOTE: AJ said the write down has no cash impact. It does, just not in 2019/20. It saves cash due to the tax credit for the losses - so future profits will not require any tax paid to the tax man for some time. Odd, though, as in one lunch 6 or 7 years ago a Q rep waxed lyrically about the positive cash flow impact due to the write down of the plane valuations in 2011 >>​

Back to normal transmission...

The structure used a variation of what another investment bank had discovered/implemented when Australian Govt bond rates got very high for 10 year bonds in the 1970s, very early 1980s - this allowed them to defer tax payments on their annual profits for 10 years at a time.

Back to Q. Always being a 1 + 1 = 2 pedant. I check to verify. So I asked a broker to make photocopies of all Q's pre-float filings & then went through them. Sure enough all the locations through which he told me how the arbitrage was implemented were there in the Q subsidiary listing - Grand Caymans, Bermuda, Guernsey amongst others (memory failing me ).

Also what was interesting were the august Australian institutions on the other side who also gained massive tax benefits (yes it was a REAL magic pudding for all but the Australian Govt). One of which that is in the news for all the wrong reasons & is now a mere shadow of its former self. About a year later I happened to be sitting next to the person at this institution at a long Friday broker's lunch. You may have guessed - this was not by chance. See I did not fully understand exactly how much the other side of the deal made/worked.

He also liked red wine, some in the market had nicknamed him 'RedBeard'. His glass was never less than half full that lunch!

___________________________________​

Think of what Q has done as if it has been sold from one private equity group to another (three times). Asset stripping, paying out all available cash, tax effective transactions, running a near zero franking credit balance, revaluing assets up to generate 'notional' profits (say buying a plane at $44 and then revaluing it over a couple of years to $100 say) to pad the BS.

I don't disagree that only raising $72m was a failure but it was too be expected with where the share price ended in the 5-days to close on 5-Aug.

Mum and Dads get a free option in most of these rights issues (or SPPs). If the option is in the money (ie. Share price above fixed price) then there is lots of demand. If it's not then it's a lot lower..

You could have purchased shares for $3.15 on 3/8 versus ultimate issue price (2.5% discount to VWAP of $3.18).

On the whole, the true so-called 'm&ds' send the money in as soon as they get the documents.

This is what has happened, so I've been told, with pretty much ALL the other capital raisings in Australia since April 2020. This time for Q, only a small amount came in reportedly which is why Q extended the deadline by 2 weeks from the 3rd week of July to first week of August - before much of the new bad news hit.

Got any references for the $1bn paid to end a lease early? Or the 747s at 40% ?

About Q's planes - I created a mammoth post back when Q grounded their fleet in 2011 & wrote off an amount that just did not pass the smell test.

So, having a little spare time I created a spreadsheet covering every plane Q had used since 12 months pre-float. Traced each frame back to when it left the respective factories, through its ownership chain, flying hours, cycles - the works. Then I cross-referenced this data to Q's annual reports especially the depreciation charges, asset revaluation reserves, write-backs etc.

Next I took looked at the write down which was against the international fleet. Many of those planes were over 15 years old, yet to arrive at the written down amount you could not get to it by applying either straight-line or declining balance depreciation (according to the Accounting Standards). So I turned the process around, knowing the ending point & written down amount (as per financial statements) as well as the intervening P&L accounts.

Contacted someone who should have known about it to set up a lunch & ... his response was, "You don't bite the hand that feeds you."

The leases - Not one lease but a number starting from in 2015 - Sydney, Melbourne & Brisbane long term leases cashed out for close to $1bn in total, coincidentally just happened to provide the requisite franking credits to enable the tax-effective share buybacks to proceed. The first cashing-in with less than 4 years left on the lease coincidentally preceded the first share buyback.

I provided links to details on each of these in the capital raising thread. The latest (Melbourne) cashing in happened just a few weeks prior to 30 June 2019 & looks to have resulted in around $105m in franking credits. Q's franking credit balance as at 30 June 2019 was just $8m. It also needed franking credits for its next dividend payment. Bare cupboard without cashing in on the lease - which appears to have been the last realisable major value that Q has other than QFF. Remember this for later if you persevere with this thesis post....

If you take out these one-off profits - then Q's P&L would look very different aka its operating or recurring profits IMHO. You can only raid the cupboard so many times before say the CEO retires & leaves the mess to whoever takes over. The can is only able to be kicked down the road so far. So if over 20-25 years you've exhausted all tax arbitrages set up, raided the stored value, then an opportunity comes to reset some of it due to those EVIL unions (2011 grounding & write-off) - the 'devil made me do it defence', what CEO & Board wouldn't leap at the chance?

This time its CV that's the devil BUT without cash flow then perhaps this reset will finally reveal the emperor's new clothes in all their lacking glory if my figuring is correct?

After all who saw Covid 19 coming? AJ was originally due to leave in early 2020 but was persuaded to stay on until 2022 (back in early 2019).

Recurring profits
If you adjust the earnings per share for the 38% decrease in outstanding shares as at 30 June 2019 then the adjusted operating eps looks very different.

If you earnt 100 cents per share (after 38% of outstanding shares have been bought back - the eps has been leveraged by 1.61 times). What would EPS have been if the number of shares had not changed (so assume no buybacks etc) = 100 / 1.61 = 62 cents per share. And what if 1/5th of that came from cashing in a long term lease less than 2 years (Melbourne perhaps?) before it was due to finish = 50 cents per share.

50 cents per share looks very different to 100 cents per share does it not? There's nothing illegal buying back your shares nor selling off everything with value (Hey isn't that the 'Australian' thing to do? Just ask the State & Federal Govts!).

The cashing in of the long term leases are not the only one-offs to boost earnings btw.

Now imagine what the airline side of Q's operating or recurring earnings look like if you take out the consistent earnings from QFF? Sure QFF is still around but then again Why did Q shut/limit QFF redemptions for other than flights BEFORE Virgin acted to limit redemptions/transfers with VFF around April 2nd?

Qantas limits number of items Frequent Flyers can redeem at ...
mozo.com.au › credit-cards › articles › qantas-limits-nu...
Mar 20, 2020 - Qantas limits number of items Frequent Flyers can redeem at online rewards store. Grocery shops aren't the only places having to put restrictions in place as Qantas announced today that it would be limiting the number of products Frequent Flyer members can buy on its online store to 2 items per day.

This is not something I haven't found any real comment nor analysis about - have you?

If AJ was so confident about Q having perhaps the industry's best starting position globally (he said on Bloomberg TV a couple of days back) then why did he shut down QFF when as far as I can find - no other airline in the world had done so at that time? Certainly a smart move to stop cash flow bleeding out but is it the sign of a truly 'strong' balance sheet? I don't think so, to me it would suggest that the Q mgmt team were already concerned about their cash situation.

Or I could be wrong!


Right in theory broke in practice (Ritbip)

A number of people dislike my failing memory, indeed some count among my best friends.

One, I did not know, John Spalvins was certain that global share markets were crazy (yes corporate raider who understood true valuations & cash flows) so in early 1986 he declared publicly he thought so & shorted a large number of Australian share futures. Quarter after quarter he lost tens of millions but he was sure it was coming. In the end he called it quits after he'd lost over $100m (I think it was). When did he finally fold? Early October 1986, just over a year early. Got front page of the AFR at the time, "Spalvins admits defeat." In October 87 he was asked about what if... His reply; "Being too early is no different to being wrong!" << Now one of my favourite sayings >>

Another, a self-made billionaire, came so close to being heralded globally as the most successful investor since Warren Buffett's start. I came in to work one day to hear & find him actually banging his head against a (plasterboard) partition - he was livid with himself. It was October 20th 1987. We'd been running an arbitrage in the Australian share market since February 1986. When one of the major investment consultants (who coincidentally I found out about) in the industry 'sold', a number of other fund managers, copies of our entire portfolio holdings - the arbitrage reversed massively. So we duly reversed our position but those 'less than ethical' competitors did not understand how the arbitrage worked. I had discovered what was going on within several months of the listings being illegally sold - and we stopped supplying monthly portfolio listings other than quarterly with a 3 month delay - when we were challenged by the Wholesale Consultants, our company head explained exactly why without naming which consultant we had definitive proof of (I'd been given a copy of one of his faxes together with the signed coversheet).

We still outperformed, especially in the October 1987 crash.

Now this friend, who managed a number of specific funds, was so certain in late June 1987 that the crash was imminent he decided to TRIPLE the arbitrage. He'd either lose the cost of implementing it (paying put option premiums) or be a legend. So he spent the money for his funds, and bought the 'liquid' contract - the Sept 87 share price index futures' options (as did all our funds) - but he bought 3x the ratio. As the expiry loomed without the crash happening, he declared he was trying to be too much of a smart____ by thinking he could predict the timing & wouldn't be so greedy & took the loss, only rolled 1x the ratio into the Dec 87 expiry.

If, he'd persevered (the cost had actually come down by around 35%) then on October 20th 1987 = his Australian share funds would have been up 49% vs the market down around 30% on opening. He'd taken the trouble to calculate it! So not quite Ritbip...

Another friend always likes looking into companies around the world 'that just do not smell right'. He regularly made large amounts for where he worked (such as on Enron) until he met his bete noir - the US Housing bubble. He was roughly two years ahead of his time & lost huge amounts (including of his own money - duly approved by the legal officer to ensure no inside trading etc etc) shorting US homebuilders.

After 15 months of losing through maintaining the same position - he finally admitted defeat and it was agreed that the position size would be cut 75% in the first instance. Four months later..... Ritbip.

 

[jakeseven7]

So - the big question - given all the doom-and-gloom above on QF's financial position: should we be cashing in our QFF points??

Regards,

BD

Nope as QF will be saved by the government even if it got to that which I don’t think it actually will....

The border closures are starting to stink, families split up, businesses devastated and NSW has shown us the playbook on how you can manage Coronavirus and not run around in circles slamming things shut all the time. The population is going to turn and travel (domestic) is going to be forced open is my prediction and probably before Xmas which will throw a lifeline to QF and also Bain/VA2.

 

[moa999]

Write-off of aircraft values is purely a timing benefit.
Yes you get a loss this year and carry forward losses,
But in future years you've got less depreciation so higher profits (assuming the aircraft continue to fly like in normal times).
It's also pretty hard to prove to an auditor.

On the leases - Qantas has actually sold the physical terminals in a number of cities. They owned the building, airport operator controlled the land under the 99-year lease
Eg. Melbourne in 2019 - Qantas sells its domestic terminal at Melbourne Airport for $355 million - Australian Aviation

 

[antycbr]

Nope as QF will be saved by the government even if it got to that which I don’t think it actually will....

The border closures are starting to stink, families split up, businesses devastated and NSW has shown us the playbook on how you can manage Coronavirus and not run around in circles slamming things shut all the time. The population is going to turn and travel (domestic) is going to be forced open is my prediction and probably before Xmas which will throw a lifeline to QF and also Bain/VA2.

Fixing the borders will be done before a government bailout of QF is considered as the government has boxed itself in with its announcements about market solutions for VA.


The Fed Gov is already pushing for states with closed borders to make payments into the aviation support being provided. Small steps to force a connection between decisions and the cost of those decisions by the states.

 

[cove]

Choosing 2020 to write down aircraft meant that some profits reported in previous years could now be deemed as overstated. Large bonuses were paid when the A380 fleet were already known to be spare parts value only.

 

[RAM]

Write-off of aircraft values is purely a timing benefit.
Yes you get a loss this year and carry forward losses,
But in future years you've got less depreciation so higher profits (assuming the aircraft continue to fly like in normal times).
It's also pretty hard to prove to an auditor.

Cash flow is all about timing.

Depreciation is apportioned over an asset's useful life. Some airlines have very creative ways of determining the useful life and its value.

Some may pay 44% of the list price (can be worked out BTW by looking at the monthly balance of payments releases from the ABS which I used to do back in the 1980s) and then re-value it to 100% of list price over a period.

So as an airline may say an airframe has a 30, 40 even 50 yr life then the depn is limited to an avg of 2- 3.33% pa (even with declining balance after a few years the cash flow benefit is gone).

However if I can write it off today with 20+ years remaining on its theoretical life and use it to ZERO my otherwise tax to be paid today on the earnings of say my loyalty scheme - then I gain an IMMEDIATE cash flow benefit to the extent I zero the tax on say $340m of QFF earnings. Tax effective financial management & helps preserve bleeding cash.

Auditors

In the very early 1980s (so close to 40 years ago) accounting firms (auditors) were forced to re-tender for the audit of a company roughly every 3 years. Every win would be at a lower amount/year than the win three years earlier - and this was at a time of still high inflation (both wages & CPI).

So (which continues to this day) external auditors would prepare their working papers (which show the corresponding figures for the previous financial year) by copying the previous year's working papers' column 2 to become this year's column 1. As a vacation employee who lucked into working partly for the national office (saw all the tenders & how they were priced) & then worked out at multi-national company audits - I got a somewhat unique insight.

So I thought I'd check & see how long this 'copy the exact items we looked (supposedly at random) last year again this year'.

There were only the past 9 years on-site. Yes, you guessed it, the exact same items were looked at in 1972/73 as in 1981/82. Literally no random checking = unlikely to detect any fraud or other issues.

So as I worked a little faster than the permanent audit staff - I'd add something at random & dig up in that company's records the equivalent figure for the prior year.

Long story short - every audit I found something seriously wrong (with just 9 months of university completed). One error turned out to be systemic world-wide & saw that company delisted from the NYSE & caused big issues with the Dow Jones index being calculated for several months.

It does not even take a company with smart senior management to get things past auditors - the constant cost cutting for decades has already seemingly reduced the value of external auditing. Just looking a this weekend's SMH article (relevant to Q over mention of temp change to insolvency laws).

Mr Howell said, in his view, it was "a blatant abuse" of new insolvency laws, which enabled directors and their associates to obstruct liquidators' work.

'Nothing adds up': Sydney tycoon’s mystery $200m confounds ex-liquidator

On the leases - Qantas has actually sold the physical terminals in a number of cities. They owned the building, airport operator controlled the land under the 99-year lease
Eg. Melbourne in 2019 - Qantas sells its domestic terminal at Melbourne Airport for $355 million - Australian Aviation

You may not have read the article, you linked to, closely.

Especially this component:

In August 2015, Sydney Airport paid Qantas $535 million to buy back the airline’s lease over Terminal 3 at Mascot four years before the 30-year lease was due to expire.

The deal included Qantas retaining priority usage to Terminal 3 through to 30 June 2025.

And in February 2014, Brisbane Airport paid Qantas $112 million to purchase the lease over the northern end of the domestic terminal. The 31-year lease was due to expire at the end of calendar 2018.

Q did not own the buildings etc, there is also mention about Q 'as a long term renter of the Melbourne Terminal' in one of the links I provided earlier. If you look in the note to the accounts in past Q Annual Reports then you'll see all this spelt out.