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.
