Qantas Write Down

Qantas released Annual Report 2014 on 28th August 2014,in which the $2.6 billion non-cash writedown of the Qantas International fleet is described. This writedown was required by accounting standards after our decision to create a new holding structure and corporate entity for Qantas International (Qantas annual report 2014). On the same day, Qantas Group CFO Gareth Evans and CEO Alan Joyce attended annual results press conference and announced that this massive writedown will increase the potential for future external investment and create long-term options for Qantas international to participate in partnership and consolidation opportunities. Qantas said the full year loss was $2.8 billion including an impairment non-cash charge of $2.56 billion on the carrying value of Qantas’s international operations. Also, there were write-downs due to the restructure of its fleet ($394 million), redundancies, restructuring and other transformation costs ($428 million).

How the market reacts to the news is almost demonstrated by share prices. Qantas shares closed at $1.38, up more than 7% today after the airline posted a record $2.8 billion statutory loss but a better than expected underlying pre-tax result. The surprised share price could be affected by various reasons. Such as the carrying value of aircraft fleet will be more reflective of the current market value of the fleet and future depreciation expense will decrease nearly $200 million per year due to non-cash writrdown. Hence, it is beneficial to subsequent profits.

CEO Alan Joyce said the airline expected to return to underlying profitability in the first half of this financial year, barring external shocks. Investors welcomed booking writedowns on its aircraft fleet, which paves the way for more foreign direct investment.

References

Qantas Annual Report 2014 Retrieved from

 http://qantas2014.reportonline.com.au

Jordan, C. (2014, August 28). Qantas posts $2.8 billion full year net loss. Australian Aviation, Retrieved from

http://australianaviation.com.au/2014/08/qantas-posts-2-843-billion-full-year-net-loss/

Paul, C. (2014, August 28). Qantas Shares Rose 7% After It Booked A Record $2.8 Billion Loss. Business Insider , Retrieved from

http://www.businessinsider.com.au/qantas-posts-statutory-loss-of-2-8-billion-2014-8

Qantas Group Financial Result Media Releases, Retrieved Aug 28,2014,from

http://www.qantasnewsroom.com.au/media-releases/qantas-group-financial-result

Appendix

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