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'Qantas is in severe financial difficulty'
Tom Elliott has been sent a leaked document that appears to show the perilous state of Qantas' financial affairs.
The "damaging" internal memo, titled "Liquidity Challenge", details how the airline might be forced to sell its frequent flyer program to pay for a black hole in its budget.
The document, dated Wednesday May 7, also discusses funding being rationed to the airline and suggests that its burden of debt is too great. It also reveals the company is "concerned" its credit rating will be downgraded further.
Fairfax business columnist Liz Knight said she too believed the document was genuine and added Qantas has plans to sack pilots.
“It’s clearly a document written with minutes of a meeting with very senior Qantas executives, clearly, I would say, from someone who is advising them,” she said.
"I've learnt that by the end of the week, they will have offered the pilots a redundancy package ... they will be looking to get rid of ... up to several hundred pilots.
"There certainly are an excessive number of pilots on their books at the moment.
"Some of them have been on leave without pay because they just don't have the work to give them, others have been running down their long-service entitlements."
The Australian and International Pilots Association said it was aware of the process for voluntary redundancies which will be completed by the end of the week.
LISTEN IN FULL: Liz Knight speaks with Tom Elliott
Knight added it also appeared Qantas's frequent flyer program would be sold.
"It looks to me from this document like that's a little bit more, not so much of an 'if' as a 'when'," she said.
"And they talk about timing in this document - 'when will we do it?' and 'how long can we defer it?'.
"What you tend to do when you're a company in trouble and you're selling assets to get some money, you start to sell some of the easier stuff first and you put off, to the extent that you can, selling the jewels in the crown.
"And as we know, the frequent flyer program is enormously profitable, and one that they have said in the past they would prefer not to sell, but it looks like at this point, that is being actively considered rather than being put on the backburner."
Meanwhile, former Qantas chief economist Tony Webber said senior managers at the airline will be forced to resign after the full year financial results are released.
He said the loss was likely to rise to $500 million for the full financial year.
"If the results are as horrific as expected, there's just no possible way that the senior management and the board can hold their positions," he said.
The leaked memo questions whether Qantas management is at a "tipping point" and also appears to table the sale of its loyalty program.
"If this document is true - and I believe it to be true, it's only a few days old - Qantas is in severe financial difficulty," Tom Elliott said.
"The frequent flyer program is probably the one thing it has that is really worth a lot of money, that you could sell to someone else.
"I think there is a very strong likelihood that Qantas will sell its frequent flyer program.
"This document also talks about things like 'further credit downgrades'.
"And here's a really ominous sentence: the document talks about 'a jigsaw puzzle of issues' and then says 'when will management reach a tipping point?'
Speaking on 3AW Drive yesterday, Tom said his program has contacted Qantas to establish the veracity of the document.
In February, Qantas announced a six-month loss of $250 million and plans to shed 5000 jobs.
Qantas sent the following statement to 3AW Drive: "Qantas has been very upfront with the market and the community about the challenges it is facing.
"The suggestion that, effectively, 'It’s much worse than you think' is misleading and wrong.
"The concept of a 'liquidity challenge' seems to ignore the $2.4 billion Qantas has in the bank, not to mention a large number of unencumbered assets (ranging from airport terminals to aircraft). This has been noted by a number of analysts since February.
"We have an obligation to keep the market up to date with our position, and we did that as recently as last Thursday. This was widely reported.
"No decision has been made on Frequent Flyer, so any suggestion to the contrary is simply wrong."
LISTEN IN FULL: Liz Knight speaks with Tom Elliott