Issues in Qantas Airways

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1(a)
Under AASB 8[5] (2012), Qantas as a for-profit entity whose shares are traded on the ASX (Qantas 2013, p. 104) and who engages in aviation services, is required to report operating segments for which discrete financial information that is reviewed regularly by the chief operating decision maker (CODM) in deciding resource allocations and assessing performance is available. Shanahan (2011) contends Qantas has breached AASB 8 by not making international operations (IO) a separate operating segment because information on IO’s loss would have been reported internally and periodically reviewed by CODM as it largely instigated Qantas’s transformation initiatives. This internal information should be disclosed ‘to shareholders at an appropriate level of aggregation’ (Shanahan 2011) to ‘give real insight about a company’s performance’ (Shanahan 2011) and enable users to view Qantas ‘through the eyes of management’ (Parker 2007, p. 72).
Geographic segment disclosures enables users to observe risks, resource concentrations and ‘whether the performance of one business subsidised the performance or lack of performance of another’ (Harmer 2007). Relevantly, Australian Aviation (2011) claimed that Qantas was subsidising Jetstar while hurting its mainline operations through asset movements, EBIT for Qantas Frequent Flyer was 30% but under full brand (including international and domestic) only produced 0.6% return compared to Jetstar’s 6% and IO’s loss may have consumed some of the corporate/unallocated segment’s $123m (Creedy 2011), yet Qantas mainline had disproportionately higher staff (27,000 people) compared to Jetstar’s 3100 and Frequent Flyer’s 82 (O’Sullivan 2011).
Qantas merely stated IO’s $200m+ loss was an ‘unacceptable return’ ...

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...n 2014) added to increased political protest for disclosure. Further following a forensic accounting report from PPB Advisory, Australian and International Pilots Association questioned the vast discrepancies between redundancies and margins between Qantas’s segments (O’Sullivan 2011) and how corporate segment’s $123m loss was allocated, contending they incurred some of it (Creedy 2011), emphasising requests for greater visibility by interest groups and accounting advisory bodies. Similarly, taxpayers, Transport Workers Union and employees (Age 2014) demanded reviews of Qantas’s books and explanations of IO strategic priorities, redundancies and failed Jetstar Asia strategy (Pauka 2014), while Virgin threatens market share with improved performance (Grimson 2014) and consistent disclosure of both international and domestic segments (Virgin Australia 2013, p. 99).

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