Qantas' Grand Theft Aero finale
A $55 million provision hints at Covid flight credits settlement.
Qantas' first-half result delivered on Thursday morning was widely described by the Australian media as a "record profit", though of course that is true only on an "underlying" basis. On a statutory basis, it was actually lower than Qantas' profit for the previous December half ($1.31 billion versus $1.32 billion).
The delta between Qantas' statutory profit and "record" underlying profit in 1H26 is a full $149 million of exclusions, taking us back to the bad old days of Mascot bunker accounting when the company's chief financial officer was … *checks notes*… Vanessa Hudson!
I devoted a whole chapter in The Chairman's Lounge – entitled "Reality on an Underlying Basis" – to the airline's aggressive financial reporting in the lead up to, and during, the pandemic. As I wrote there:
Underlying or 'adjusted' profit is whatever management would like it to be. It is a magical number, a stranger to International Financial Reporting Standards, and is arrived at by excluding from a company's legal profit any major items of expenditure that the company deems 'one-off', 'non-recurring', 'significant', 'extraordinary', 'abnormal', 'exceptional' or just plain inconvenient. The former prime minister John Howard might have regarded them as 'non-core'. The cricketing equivalent would be if David Warner could exclude from his batting average every Test series he ever played outside Australia, in which case 57.85 would be his underlying batting average. Warner was Sir Garfield Sobers on an underlying basis.
In its accounts, Qantas defines excluded costs as those falling "outside the ordinary course of business" and yet in financial 2020, Qantas excluded tens of millions of dollars in "discretionary bonuses to non-executive employees" for the fifth year in a row.
Qantas also excluded transformation costs of $91 million in 2015, $183 million in 2016, $142 million in 2017, $162 million in 2018, $218 million in 2019 and $161 million in 2020. As I wondered in The Chairman's Lounge, "When a restructuring program was eternal, how was it outside the company's 'underlying' performance?"
