Qantas Equity $1.9B Raising and Announcements June 2020

[Vic]

These people are a very small percentage of those who normally travel interstate.

There is also a very large FIFO workforce.

 

[jakeseven7]

I think you're agreeing with me, everything you've raised are due to factors other than the border being closed. The fact that Gladys is discouraging travel supports my view that such travel is an option for business despite border closures.

Having had numerous zooms for the last 3 months (at least 2 per week), they suck the sweat off a dead man's .... To quote Good Morning Vietnam.
There is already a backlash against zoom, I'd expect the use to decline to a more reasonable level, once travel is possible again

Politicians are spinning a lot of stuff, 24/7 so unless she makes it an actual requirement, she can release her soundbites to get herself on the news every night as much as she likes, until it is an actual formal guidance, people will continue to travel.

 

[eastwest101]

My nephew is a specialist crane electrician who usually flies all over the country and the Asia Pacific at short notice to fix cranes so that construction can continue. There are not very many electricians in the country who know how to fix cranes. I am just mentioning this as one example of the people who are maintaining and fixing infrastructure to keep the economy running.

Thats a localized but good example of "essential" workers who still have to travel around the country and whose jobs are more important than some colonial era straight lines that were drawn on a map over 100 years ago.

Think about the specialist technicians that have to monitor and maintain the electricity grid, coal/gas/solar/wind/hydro power stations, telecomunications infrastructure, data server farms, if you like having clean drinking water on tap, or the power coming on when you flick the switch, or don't fancy your sewage plant breaking down or a nearby gas pipeline/oil refinery blowing up and you like having a banking and payments system that allows business and personal transactions then you can bet that there is some sort of necessary work that must happen to maintain these services, once you start removing these services you pretty quickly find out from the public whether they are essential or not. Same goes for some of the actuall essential services that Federal and State Governments provide i.e .law & order/police, healthcare, defence etc Each of these many fields have experts who are not necessarily located in every state all the time.

But in the longer term, the use of the phrase "essential worker" may be expanded to include anyone in the private sector who still has a job. We shall see.

Anyway - back on topic - oh I just thought of another essential service, Airline training and check pilots and associated engineers to maintain aircraft and some specialists such as avionics engineers, bit hard to operate even a reduced airline schedule without any licenced pilots or airworthy aircraft.

 

[Melburnian1]

Politicians are spinning a lot of stuff, 24/7 so unless she makes it an actual requirement, she can release her soundbites to get herself on the news every night as much as she likes, until it is an actual formal guidance, people will continue to travel.

Don't you need to insert 'in fewer than pre-coronavirus numbers' at the end?

While not a large sample, I have friends who were to visit Melbourne from Sydney in a week. They've deferred the trip until September as the lady of the household, who is around 40, thought it 'too much of a risk' to visit Victoria at this time.

Politicians' words (choice of phrases) have an effect. If not, we would see toilet paper purchasing spikes less often or never.

 

[Melburnian1]

A brief excerpt from 'The Australian' (online) on Monday 29 June 2020 in the afternoon:

------------------
Aussie flying intentions sharply lower: JPM

A JP Morgan-commissioned survey of 500 Australians across age, gender and employment status has found nearly 50 per cent expect to fly less, both domestically and internationally after restrictions ease, and 68 per cent will not fly internationally without a vaccine.

“A driving holiday or staying at home were preferred to flying domestically or internationally for the next vacation,” says JPM Australia’s head of research, Jason Steed.

“We see these results as negative for air travel...

 

[RAM]

There is also a very large FIFO workforce.

That statement's reminds me of the line from 'Crocodile Dundee' - 'Watch out he's got a knife', 'That's not a knife - this' a knife'.

Delving into the much under-appreciated (now free to use) resource - The Australian Bureau of Statistics - suggests that Australia-wide the total number of FIFO workers (across all industries not just resources) is around 40,000.

In the bigger scheme - 40,000 is a a rounding error in the total number of people employed in Australia (around 13 million) or approx 0.3%, and as a proportion of actual people flying would still make up less than 1% or so.

Just for interest sake - more people work(ed?) in real estate (not construction of, maintenance, cleaning) letting/sales/management than in the mining industry as of the 2016 census.

The 'Golden Goose' of FIFO mining workers is slowly being killed off with the rapid expansion of what in reality are 'drone' trucks & rail locomotives controlled from a central location up to thousands of km away. The decrease in human workers on major mining projects has accelerated since 2016 especially with Rio.

Q knows this & has noticeably not mentioned anything about FIFO in its earnings releases nor Annual Reports for quite some time. A profitable niche possibly but I'm not sure what value you'd get if you tried to hive off such an operation.

Given the retirement of the B747s and 99% probability that at least 6 of the 12 A380s will never fly passengers for Q again - it does prompt the question whether Q will decide to really take a knife to the number of aircraft types it operates as well as a number of routes. Q's despite the self-proclamations & media re-prints - has a massive corporate overhead which was somewhat revealed with roughly 1/4, of the 6,000 staff to go, come from 'overhead' non-aircraft related (so not maintenance, engineering, customer service agents) - so HR, IT, Marketing, social media management (not CSA though), superannuation, legal, Govt relations....

The (alleged) Chinese curse continues - 'May you live in interesting times'

 

[RAM]

RAM today is nothing like the early 80's,1987 or the recession we had to have.It is much worse. Even worse than the stagflation of the 70s.
Today is really Unprecedented in my lifetime and I was born in 1946 and first began investing in the sharemarket in the late 60s.

For people living in a number of Asian Countries during the Asian crisis - things were much worse. The IMF & World Bank basicly enforced 'poverty-line or below' conditions on their respective Govts or they'd provide no loans. Mortality rates surged (but never rated a mention in the media, nor IMF nor World Bank). One Asian country (who I forget the name of) showed the IMF et al their middle finger and after 3 quarters of mild downturn powered ahead to have GDP around 15% higher than the rest of the Asian countries 'advised' by IMF & Wordl Bank.

Japan example - The Japanese economy was effectively bankrupted in the 1990s. Residential, commercial, industrial & retail property prices plummeted. That's why Japanese Banks virtually ceased to operate at more than 10-15% of their pre-1991 levels internationally. Japan economically imploded. Look up the book 'Money Politics' to get a good understanding of how Japan really operated.

Most property markets around the world are NOT like Australia. Japan, for example, had a 65% capital gains tax on property sales of any type wheterh a house, unit to 60 storey office building. Keating took advantage of the Japanese Property Bubble to sell (tax-free) the Australian Embassy & tiny plot of land it was on - for around $250m I think it was.

Japanese property prices (across the board) shot up in a vacuum from 1986 to late 1989. In late 1989 Greater Tokyo property was worth more (according to valuations) than the entire Continental US property combined.

This saw many Japanese companies valued as an asset play (their property holdings - many industrial companies had workers dormitories next to their factories, a model adopted in China's modernisation). The Nikkei went from under 8,000 to nearly 40,000 driven mostly by this. Japanese banks lent 30x their equity base to the property development +/or acquisition sectors over this time. October 1987 put a stop to the party in the rest of the world but Japan carried on a little longer.

As property prices plateaued and then started declining (MASSIVE loss of face to sell a property at a loss vs valuation in Japan as Post-1945 it had never happened). So only non-Japanese companies started to sell out - not one Japanese company (see Money Politics again). In fact in an attempt to support the market, the valuations, and the massive exposure of the banks - Japan Inc stepped up to buy probably the first 100 or so major sales, then one ratings agency issued a credit warning...

Japan did not have real estate agents, selling a house to buy a bigger one (or unit) did not happen for 2 reasons - 65% capital gains tax & house' only lasted 25-35yrs before they literally fell down (bamboo glued construction). Propety developers (building highrise) would buy 4 or 5 houses, consolidate the plot & in many cases as part of selling the units off the plan, would buy the falling down houses (& may have got an exemption to the capital gains tax). Sales dried up & they were close to going under. So the Govt launched a nationwide campaign (in 1993 or so) promoting 'buy property for your grandchildren' & introduced legislation to allow 120yr mortgages, that necame known as Grandfather loans. Many families did not own their unit/home they rented and with the Govt saying this was a once-in-a-lifetime opportunity - it was estimated that this pulled in nearly 17% of the Japanese population to buy with a 2-3% deposit. Once this surge in demand was past - residential prices started falling again. Wiping out their deposits, & around 40% of private Japanese savings. Then prices fell another 20%...

Suicide rates spiked, as Japan restructured & jobs for life began to disappear - enough lost their jobs to impact on confidence. Yet now the family had a debt much greater than the value of the unit. Extended families drew down on their savings to make the mortgage repayments and the thing snowballed. In nominal terms Japanese residential property prices are at early to mid 1980s levels - up to 75% below where they were bought. Yet Japense Banks were given an exemption by IMF et al - and don't have to write the carrying values in their books as long as the mortgages remain serviced. Loss of face sees the servicing mostly continue but it has seen consumption spending contract,

The Japanese economy has effectively not grown for 30 years, had zero interest rates for approaching 30 years & if interest rates increase by 1% then over 80% of Govt spending would be required to pay the interest on Govt debt. In 1990 Japan was the world's 2nd largest economy. Now that's China.

So, things might be tough in Austraia & some overseas countries but nothing like that faced by those listed above. In Australia's case actually, since we run an annual tourism deficit of $20bn+, with Australians heading offshore spending $65bn or so (from Scomo's announcement) - the closing of borders will see Australian GDP increase! Gotta love economics.

No comfort for Q though.

Q's Shareholder Purchase Plan booklets should be received by email from today and allow a shareholder with just 1 (or more) share(s) to purchase $30,000 worth. Technically Q says they are looking to raise $500m which would be achieved if around 16,700 shareholders bought the full amount. Given the uncertainty who knows, but if more than 16,700 individuals are feeling lucky then Q can raise much more.

Confession - oops...

I heard a radio report that Q had accepted all over-subscriptions by instos and raised $4bn. Turns out that report was wrong (& I mentioned it in an AFF thread). What they shoudl have reported was total bids were close to $4bn. Q could not accept them as the $1.36bn saw the max number of shares allowed to be issued (25% of total outstanding prior to raising).

I'll go stand in the corner now

 

[Melburnian1]

...Q has a near 'free pass' for the Shareholder Purchase Plan going out tomorrow. If someone really wanted to then they can buy up to $30,000 worth of new shares even if they only currently owned 1 at the cut-off date...

The SPP conditions give QF the absolute right at its discretion to increase the size of this part of its capital raising, or to scale back applications on a pro-rata basis.

With the recent National Australia Bank SPP, it was originally to raise $500 million, but directors raised it to $1.25 billion. There was still scaling back of applications after the offer closed, but even if you only held one share and had applied for say $2500 (the minimum amount on offer) worth, you would have received $2490 worth (which was from memory 171 new shares).

I don't know what QAN (its stock code) will do. At present the offer (at A$3.65 a share) is a relatively small discount to the ASX market price as I write of A$3.80, but investors are still 'in the money.' I assume the offer will be oversubscribed.

These standalone SPPs have received heavy criticism from Terry McCrann of 'The Herald Sun', 'The Australian' et al, and other financial commentators on the basis that to avoid small shareholders seeing their holdings 'diluted' by the typically far larger placements to institutions (a separate QF process already concluded), companies should offer all shareholders an 'entitlements issue' and also the SPP.

 

[drron]

But RAM the Japanese problems for the 2 of us has meant we are able to travel there more often and stay longer.Over 50 trips to Japan ,nearly all in the last 20 years.

 

[cove]

I downloaded the SPP form and I am thinking about it.
Hindsight tells us the A380s should have been written down more. I sent a question about this for an AGM and never received a response. That was the year AJ scored a big bonus. I should have asked the question at the AGM as we were there waiting for an answer that never came.

 

[moa999]

Hindsight tells us the A380s should have been written down more

What do you think the writedown should have been?
Stated number was $1.25-1.4bn.

My rough guess is Qantas purchase price of the 12 A380s is $3.5-4.0bn. they are roughly halfway thru life so carrying value $1.7-2.0bn

This writedown would take it to $300-600m

 

[cove]

Because the A380 was not designed to carry freight I felt their value needed to be far lower but I failed to get an answer at that AGM.When SQ handed back their 10 year old planes some time back there was no resale achieved so spare parts value was all that was possible. The 747 and 777 were able to operate as freighters.
i think $600 million was what the 12 were worth about two and a half years ago.

 

[AustraliaPoochie]

And didn't they do a buy back, or put out feelers about it, over the past 18/24 months ago?
Think I will put off buying QFF shares this time.

 

[Kendall Roy]

QF6001 (QFA6001) Qantas Flight Tracking and History - FlightAware

Track Qantas (QF) #6001 flight from Sydney to Brisbane

flightaware.com

One down, many more to follow

 

[OATEK]

QF6001 (QFA6001) Qantas Flight Tracking and History - FlightAware

Track Qantas (QF) #6001 flight from Sydney to Brisbane

flightaware.com

One down, many more to follow

VH-OQE

 

[oz_mark]

And didn't they do a buy back, or put out feelers about it, over the past 18/24 months ago?
Think I will put off buying QFF shares this time.

It's done a few buybacks over the last few years, although it did cancel one earlier this year.

 

[RAM]

To put today's announcements in context.

Do you remember what the price put on JUST the VFF scheme was last November?

It was $2 billion.

How much is Bain effectively now valuing ALL of VA for? Including all owned planes, systems etc etc & VFF scheme?

It is a bit like the 1980s Demtel adverts, 'Not only do you get this set of steak knives for $39.95 but you get an entire airline as well.'

Airlines pretty much (globally) make as much as if not more from their loyalty schemes than flying. If you look at a rolling 5 year period then that is the case for nearly all major airlines overseas except in a few cases such as EzyJet & RyanAir. In most cases the loyalty scheme (gold mines) were the only profitable parts.

Having an airline to associate with the loyalty scheme is a bit of a necessary evil unfortunately - so unless your view (even I am not this pessimistic) is that State borders will become permanently reinstated & controlled then Bain will buy & run VA II through until 2025 or so. Vaccine or no vaccine.

BTW - has anyone noticed how Alan Joyce has been muzzled for a few weeks now?

Given that Q is possibly 'trading while insolvent' due to recent falls in aircraft value (possibly requiring cash collateral) then perhaps he has become a monk?

A couple of his own statements have painted him into a very small corner - with perhaps another write-off coming shortly (pre-Dec half) that could place them in breach of many loan covenants. Cash burn is far worse as % of fleet for Q than VA even with latest closures announced, & looking at SIA's results - seem worse than SIA's operation which is pretty much 100% international only. Or I could be wrong.

A betting person may suggest we'll see a further increase in intra-state flights like VA did in Qld some weeks back.

FIFO operations were dealt a blow (in WA) by a BHP worker who lied & did not quarantine but went straight to work in a mine when finally located by police.

If you have not had a look at how many flights are involved each day in WA (B737s included) - have a look on Flightradar24 (search for it) & zero in on WA.

 

[ja1]

Q has (virtually) no assets left to use as security for any further loans & security on existing loans is below the outstanding loan balances in many cases (aka borrowers will be seeking more security at a time when nothing left in the barrel to scrape).

Isn't Q's last (unsecured/unpledged) asset its FF program ? It has no aviation assets left that haven't been securitized now.

 

[jakeseven7]

say good bye to the business have to say to me it was one of the best j class flying around. so really when International flights start to fly they will lease some 787 as the 777 are being withdrawn. sad in a way but prob be the cheapest way instead of storing them for the long term.

Maybe in the medium turn we will see a subfleet of 737 put in a lie flat J seat....

But with the positioning between Jetstar and Qantas continually flagged, it may be a false hope.

I guess their longest flight now would only be a few hours anyway, so their old recliners are probably ok for purpose.

 

[ja1]

Given that Q is possibly 'trading while insolvent' due to recent falls in aircraft value (possibly requiring cash collateral) then perhaps he has become a monk?

That's a big call to make and one that seems both untrue and not quoting any actual references.

Aircraft value isn't directly linked to operating cash flow and the ability to pay debt 'as and when they become due'.

I'm more of a VA customer/fan than a QAN one but it doesn't seem right to make statements above which seem to be about FUD than facts.