Qantas to split international operations

written by australianaviation.com.au | August 28, 2014
Qantas is splitting off its international operations, and has written down the value of its international aircraft fleet. (Rob Finlayon)
Qantas is splitting off its international operations, and has written down the value of its international aircraft fleet. (Rob Finlayon)

Qantas says it will conduct a structural separation of the Flying Kangaroo’s domestic and international arms to increase the potential for future investment.

The proposed new structure was announced at the airline group’s full year results presentation on Thursday, which showed a full year statutory net loss of $2.8 billion in 2013/14.

The full year result was impacted by huge writedowns on the carrying value of its international fleet.

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Qantas chief executive Alan Joyce says creating a new company for Qantas International was prompted by federal parliament’s recent changes to the Qantas Sale Act.

“As a consequence of this decision, we have decided to decrease a new holding structure and corporate entity for Qantas International,” Joyce said in prepared remarks.

“This will have no impact on the day-to-day operations, network or staffing at Qantas International.

“However, this increases the value for future investment.

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“It will create the long-term option for Qantas International to participate in partnership opportunities in the international aviation market, with a view to achieving further efficiencies and improved returns to shareholders.”

As a result of the changes that went through parliament, restrictions that prevented one single airline owning more than 25 per cent of Qantas stock, and the 35 per cent limit on total foreign airline ownership were lifted.

However, the 49 per cent foreign ownership cap remained.

Qantas said the decision to split Qantas International triggered an accounting requirement to test the value of the international assets, in particular the Boeing 747-400 and Airbus 380s aircraft, on a stand-alone basis.

Joyce said Qantas’s international fleet was purchased at an average Australian dollar value of 68 US cents, compared with 93 US cents currently.

“The value of these aircraft on our books has therefore been written down by $2.6 billion to their current market value,” Joyce said.

“As a result future Qantas International depreciation expenses will be lower by around $200 million per year.”

Qantas International reported an underlying earnings before interest and tax loss of $497 million in the 12 months to June 30 2014, compared with a $246 loss in the prior year.

“The reduction was primarily due to the continuation of market capacity oversupply, led by competitor airlines in Asia and the Middle East, and unfavourable fuel cost from foreign exchange movements,” Qantas said in its full year results statement to the Australian Securities Exchange.

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8 Comments

  • aussie0000

    says:

    Sold Qauntas shares 20 years ago. No interest in this airline. Regretted I had to fly LS to MLB recently, at a ridiculous price. Will gladly continue to support the airlines servicing Adelaide for my international flights.

  • Ben S

    says:

    It is quite incredible that our so called national carrier doesn’t service ADL or PER with its own heavy metal….

  • Dee

    says:

    Wrong bet QF, just means more Senior Management where not needed, or maybe Board Members “Jobs for Mates”
    Type scenario .

  • Philip

    says:

    I just wonder if anyone at Qantas International is aware that there is a city in Australia called Adelaide

  • Darrell

    says:

    Well, I’m not from Adelaide, I’m from Brisbane. So I’m not concerned about QF not servicing Adelaide.

  • John

    says:

    Well may they split the International operations off, but it is interesting to note, that. Qantas domestic, the former Australan Airlines, has been profitable every year since the merger, including this financial year!

  • John Reid

    says:

    Adelaide (and Canberra) lack of service surely costs Qantas customers, but the trouble is that the only heavy metal they have – with Dubai range – is too heavy for the traffic offering. Others have commented in the past that lack of 777s to complement the A380s was a mistake – and now the 787 options are pushed back to 2017. QF should buy some 777s from EK (who have a ton of newer 777s on order) and restore direct o/s services to Adelaide, and institute them from Canberra, which while small is highly mobile.

  • Stu Bee

    says:

    I like your thinking John Reid.

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