There is a reason VA had to account for all those liabilities - they went into Voluntary Administration.
At which point by contract they become immediately payable.
Just doing a like for like comparison. I'm not so sure Q can be described as conservative as far as any of their asset valuations go - with the 11+yr old A380s valued at over $50m each on a disposal basis. As there has not been a single sale of a used A380 ever, & the ones SIA returned to the lessor as soon as they reached 10 yrs of age were sent to part out & scrap but from reports have generated almost zero value in used parts sales. Emirates has announced they're retiring some currently.
QFF appears to have zero assets and a $2,800+m liability - as far as the Annual Report details. There is no asset 'held' specifically to offset that liability - Q makes that clear when it states that all its cash & short term assets are available as liquidity.
Q is months behind in paying out the 6,000+ redundancies that were due to be fully completed by Sept 30th. Credible reports of Q staff who agreed to Voluntary Redundancy & were accepted by Q in July have still not received their payout (all up $600m or more to go out). AFFers continue to report not receiving their cash refunds from flights cancelled in April that were booked directly with Q, realised & soon to be called losses on fuel hedging (mainly) of over $500m is due to be paid out, all in addition to the weekly operational cash burn.
In an operating airline it's in the future, and will be offset by future revenue and profit, (and in the case of finance leases you will fully own the asset). And you aren't recognising those either.
Same for future Capex.
Under the newish accounting standards, the finance or operating leases have been brought on balance sheet but tellingly - Q did not writedown the value of nearly 300 of their aircraft by $1. Now the leases have fixed payments throughout their term and Q takes the risk on the underlying aircraft value. That's despite Q officially announcing that they expect around 100 planes will be grounded for the entire financial year, with some (the A380s) for up to 3 or more years.
All these planes are generating losses for Q not profits, through storage costs, ongoing maintenance, lease or other financing costs etc. Q recently mentioned that QI accounts for $800m of depreciation per annum.
Q also has property leases for around 2,000,000 sqm of space globally, with roughly 90% on airport. That weekly, fortnightly, monthly cash drain continues regardless of not flying. Q has already been trying to sublet approx 40% of their 47,000 sqm leased Sydney HQ space that is only a couple of years into a long term lease.
There is no guarantee that Q will survive long enough to start making a profit on international flying again.
Personally in a large company that's been around for a while I don't tend to focus on net equity.
Accounting isn't perfect and it's conservative by nature (eg. Things like historical cost) and it doesn't handle asset light businesses well.
Eg. If you stripped QFF out it probably has zero Net Equity. It's a notional Cash/Investment asset (though in QFs case it's pooled and not in a trust), offset by a Deferred Revenue liability (the points outstanding). Yet even on this revised Velocity valuation, we know QFF is worth billions - you just can't see it in the balance sheet.
And if someone acquired QFF there would probably be a large Goodwill entry.. bamm asset created out of magic.
Hmm, well known companies can provide false sense of security.
How many Top 50 Australian listed companies had to be bailed out or went bankrupt, not just into voluntary administration, every economic downturn? One or two of is it up to 15 or 16?
Since the 1980s, the figure is closer to 15 or 16. Then add in State Govt or unlisted 'well known names'. Heard of AMP?
Woolworths, Fairfax, Bell Resources, Bell Group, Ariadne, Qintex, FAI, HIH, GIO, Bond Corporation, Optus, OneTel, Network Ten, BankWest, State Bank Vic, Estate Mortgage, State Bank SA, Dick Smith . BTW Woolworths & Fairfax were in the late 80s early 90s. Add in a number of property developers, shopping centre groups, real estate chains, all listed stock brokers at one point of time. Even "Official Money Market dealers" with the RBA as lender of last resort.
If a company cannot generate the cash to cover its liabilities as & when they fall due then it fails. Q is not only failing to generate cash, it is rapidly burning through what cash it has. Does that explain why it issued a $500m unsecured bond in July/August with a 5.50% coupon (cost) when 'good companies' can borrow cash at below 0.70% in Australia currently?
With
the value of VFF being called into question & people wondering what they should do with their points etc - that makes the viability of Q very relevant. Q would have have had no choice but to go into administration (not voluntary) if the June 26th equity raising had failed however nowhere did Q reveal to the market that they expected to have negative shareholders funds by June 30th given the writedowns they were required to make - or at least I cannot find any sign of this relevant disclosure.
That raising & the failed retail offer in July/August merely provided some breathing space - not solved the problem.
Zero or negative shareholder funds normally provides lenders the right to demand repayment of their loans, in some cases they have no choice (such as bond issues).
With Q's cash burn continuing at a minimum of $40m/week (last figure Q mentioned as a target to reach) - that would wipe out Q's remaining equity by around late December/early January. Remember that Q had received over $500m from various Govts through to June 30th, and received more since then - and still it is likely to exhaust all its $1.4bn of June & August equity raised.
That is in approximately two months.
As Q's QFF scheme appears not cash-backed - then the idea of seeking to build QFF points in preference to VFF points appears a bad choice.
Of course I can be completely wrong - but the numbers suggest otherwise.
