Realised today that a flight cancelled in mid July hadn't been refunded. Simple PER-DRW return booked directly with QF. Ie, as simple as it can be. Called up and said it would be processed today, no arguments or anything. In my mind, this is clearly a ploy by QF to not refund until followed up in order to help with their cash flow situation. Totally unacceptable IMHO.
Q's cash position looks to be terminal.
If anyone was only offered Q travel credits etc IMHO should call Q and demand a full cash refund as per the ACCC web site (see link below). Given Q still seems to be delaying payments 10+ weeks - then applying today suggests your money will only be repaid in early 2021 if Q does not go into administration before then. Unfortunately that event does appear likely.
Q appears not to have enough cash & credit lines to:
- Pay cash refunds on the $2+bn of flights cancelled through to March 28th 2021 (only officially cancelled in early October covering Oct 25th to 2021 despite Q removing them from their schedule in early July).
- Pay out the staff redundancies (announced to date around $580m in redundancy costs) plus their accumulated annual & long service leave entitlements. Remember those redundancies were predicated on international flying resuming in early 2021.
- Cover the approx $2,800m of QFF liabilities as of 30.6.20
- Cover the $40m+/week operating cash burn (which increased as of Sept 28th with JobKeeper's decrease looking to have increased cash burn by between $4 to 10m/week.
If Q had not done the $1.36bn institutional issue on June 26th, 2020 then they would have had
negative Net Tangible Assets as of June 30th 2020 their Preliminary Final Report revealed without drawing attention to it (ceteris paribus). See Pg 3 of August 20th announcement to the stock exchange. That is even before refunding $2bn+ of tickets sold for flights that will never leave.
Net Tangible assets per ordinary share as at 30.6.20 = $0.17c
Institutional raising of cash per ordinary share as at 26.6.20 = $0.89c
So the position ex-raising would have been
negative Net Tangible Assets of $0.72c per ordinary share = Not a good look. I do not recall any mention of this made before or during the Institutional capital raising nor the subsequent retail offering in July 2020.
Is this the reason all or even some of the A380s were not permanently retired as Q's NTA would have gone negative? Similarly in an intriguing move Q shifted 3 B747s to 'Assets held for sale' earlier in 2019/20 yet their value dropped less than $8m per plane. This left Q showing 4 B747-400/400ERs in active service & apparently at full freight (not written down) as at June 30th.
They were all then 'permanently retired' post June 30th. All 12 A380s remained on the B/S although they were written down by just over $1bn which included write down of spares (& simulators?). Not much of a market for A380 simulators (unless AFFers club together perhaps.....
who wants a trolley when you can have a real flight simulator?)
If Q had gone ahead with the 2nd dividend payment - it would have gone close to negative NTA per ordinary share despite raising the $1.36bn. It was reported that the decision to not pay the 2nd dividend was only made in late June 2020 btw! Two guesses.
Q's around 2,000,000 sqm of leased property space (approx 90% on airport) worldwide (around 47,000 sq m = Mascot head office space) remains a massive cash burn that does not appear to be factored into the discussed $40m/week cash burn.
Even more surprising/amazing, worth of Ripley's Believe it or not, was 'Unavailed passenger revenue' aka tickets sold but not yet flown. Since Q had not formally cancelled its international flights despite removing them from the booking engine through to early 2021 - customers could not claim a refund. So with 100% of international flights grounded & around 70%+ domestic flights grounded - Q had $2,031m in tickets outstanding in 2020 vs a restated $3,167m in 2019. However, there was more than that, Q re-classified "
where customers have made refund claims by 30 June 2020 these are no longer classified as unavailed passenger revenue and are reported as payables in the Consolidated Balance Sheet".
Meanwhile as Q only started (not completed) contacting passengers to say they were indeed entitled to full cash refunds after all (regardless of ticket bought) in mid June - then given the 8-10+ week delay in getting paid out - it is fair to say that this re-classification may be as much as $1bn.
The ACCC says it is pleased Qantas has begun contacting its customers to tell them they are entitled to a refund for domestic or international flights cancelled or suspended due to COVID-19 travel restrictions.
www.accc.gov.au
Some on AFF have been discussing that this 'full cash refund' is restricted to only certain tickets under Q's T&Cs. The ACCC disagrees and states that ALL tickets are eligible for full cash refund.
Qantas’ terms and conditions state that customers with fares booked on any of its domestic and international flights are entitled to have their fare refunded if Qantas makes a significant change to their flight, and Qantas cannot offer another booking which is acceptable to the customer.
The ACCC was concerned that Qantas’ communications to customers between 17 March 2020 and 31 May 2020 did not adequately inform them of their right to receive a refund.
In some cases, the ACCC considers Qantas’ emails may have encouraged these customers to cancel bookings themselves in order to receive a credit when many would have been eligible for a refund.
“We want to ensure that customers are aware that when Qantas suspends or cancels flights due to travel restrictions and fails to provide them with an acceptable alternative flight, they are entitled to a refund,” ACCC Chair Rod Sims said.
....
“From our perspective, from the outset, Qantas did not communicate clearly with customers about their rights and, in a large number of cases, simply omitted they were entitled to a refund,” Mr Sims said.
That seems to be pretty definitive. The key point being the 'acceptable to the passenger' and as Sims says "an acceptable alternative flight". Point of reference Q kept changing a JetStar flight (non-refundable ticket) time for both legs about 8 years ago - I received a full cash refund as new times were not acceptable despite being same day (changed from early am arrival & late pm departure on return to late pm arrival and early am departure).
So as JB747 said many months back, not even Q will survive this without a Govt bailout. It does make me wonder whether a shareholder class action is in the offing over both the Institutional and Retail share raising? After all both were completed before the NTA position was somewhat revealed.
Then around July 13th; "
Qantas have officially removed international flight bookings – bar New Zealand – from their website until March 28, 2021."
However Q did not officially cancel the flights - ostensibly not entitling customers to a refund under their interpretation. Then last week Q 'began' cancelling all international flights (ex NZ?) through to 28 March 2021. Which means there's around 5 months more bookings available for full cash refunds.
As the Fed Govt painted itself into a corner by refusing to provide a bailout to VA - I would not wait around with a Q travel credit but would demand a full cash refund especially if it was from an international ticket.
Unlike VA where around 80% or so of its business was domestic, Q has a much larger international millstone (its International fleet) which makes up much more than half by value of its fleet. Certainly there will/would be buyers of the domestic operations but I doubt there would be a single private buyer of the International Passenger business given the forecast global excess capacity through to 2024/25.
The QFF business is great BUT it was shown owing $2,817m as at 30.6.20 up from $2,462 the prevous year.
Added to the potential ticket cash refunds then Q has only around 1/2 the cash & equivalents required (including the much vaunted $1bn undrawn bank line of credit). Remember that Q shut down redemptions some time before VA did the same with VFF earlier this year.
Q has other demands for its dwindling cash balances.
15 weeks into the current financial year, without including ticket cash refunds made - the operating cash burn is likely to have been $700m+ or more. To put this in perspective this is more than half of what was raised back on June 26th in the Institutional raising. Add in the already announced redundancy costs (around $580m) plus their associated accumulated annual leave, long service leave entitlements (& superannuation) - Q's outlook is troubled.
BTW in its restatement of its B/S - a new $1,332m of lease liabilities appeared as of 30 June 2019 that previously were not on B/S (P43 of August release) with a value of $1,448m appearing as 'right of use' assets most likely airframes et al. Now curiously the figure shown on P17 is different - a typo/mistake perhaps?
One thing for certain - no airframes have the same value as they did 16 months ago, nor were they the same value as of 30 June 2020 vs 30 June 2019 (valuations published by recognised airframe valuation companies decreased massively) yet the value on Q's B/S increased as at 30 June 2020 adjusted for the partial write-down of A380s and $23m on 3 of their 7 B747s - Q did not appear to write down any other planes.
In 2018/19 Q wrote back the value of its shareholding in Hello World Travel as its share price had risen. In 2019/20 its share price fell lower than it had been recognised at in 2017/18 yet Q does not seem to have written that down either - nor commented on why it didn't whereas it detailed why it wrote it up previously in the 2018/19 Annual Report.
I suppose if Q had made additional write-downs then its NTA could have been negative.
October 11th will mark the first fortnight of the reduced JobKeeper payments - which could increase Q's cash burn by up to $4m/week if staff don't decide to draw down on Annual leave or long service leave instead. If they do in any numbers then that could at worst case increase cash burn by >$10m/week.
However earlier Q did suggest that the majority of the redundancies would be processed before September 30th.
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The longer the international border closure continues then the more parlous the outlook for Q becomes. At best I'd say
it is 50/50 whether Q remains an international carrier.
Travel bubbles (such as to NZ) do not lend themselves to making big profits especially as all the international carriers who have not bailed on flying into/out of Australia could reasonably lay claim to being entitled to operate through to NZ ahead of Q having an entitlement.
So whilst we will be flying again internationally one day, whether it could be on a plane with a kangaroo on its tail is uncertain. So there's unlikely to be any point holding onto thousands in Q flight credits if you want to use them for international travel.
