2002 Qantas Annual Report
2002 Qantas Annual Report
2002 Qantas Annual Report
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notes to the financial statements continued<br />
for the year ended 30 June <strong>2002</strong><br />
10. Contingent liabilities<br />
Related parties<br />
<strong>Qantas</strong> Group<br />
<strong>2002</strong> 2001<br />
$M $M<br />
Guarantees and letters of comfort to support operating lease commitments<br />
and other arrangements entered into with other parties by controlled entities 24.8 24.4<br />
Guarantees and letters of comfort to support leveraged and operating lease<br />
commitments to other parties on behalf of associated companies 0.1 0.1<br />
Other parties<br />
24.9 24.5<br />
General guarantees in the normal course of business 134.2 137.1<br />
Contingent liabilities relating to current and threatened litigation 49.8 36.0<br />
Terminal fuel facilities<br />
184.0 173.1<br />
208.9 197.6<br />
The <strong>Qantas</strong> Group, together with other airlines, has entered into various agreements in order to facilitate the funding and<br />
installation of jet turbine fuel hydrant systems and terminal equipment facilities at Los Angeles and Hawaii airports. The airlines<br />
have jointly and severally agreed to repay any unpaid balance (including interest) of the loans totalling $294.1 million<br />
(2001: $315.9 million) in the event the agreements are terminated prior to expiry of the loans.<br />
Aircraft financing<br />
As part of the financing arrangements for the acquisition of aircraft, the <strong>Qantas</strong> Group has provided certain guarantees<br />
and indemnities to various lenders and equity participants in leveraged lease transactions. Only in exceptional circumstances,<br />
including the insolvency of major international banks, will the <strong>Qantas</strong> Group be required to make any payments under<br />
these guarantees. The <strong>Qantas</strong> Group has guaranteed that the lessors will receive all of the funds due to them under the<br />
lease arrangements.<br />
<strong>Qantas</strong> and certain controlled entities have entered into asset value underwriting arrangements with lenders under certain<br />
aircraft secured financings. These arrangements protect the value of the aircraft security to the lenders to a predetermined<br />
level. This is reflected by the balance of aircraft security deposits held with certain financial institutions.<br />
The <strong>Qantas</strong> Group has provided standard tax indemnities to the equity investors in certain leveraged leases. The indemnities<br />
effectively guarantee the after tax rate of return of the investors and the <strong>Qantas</strong> Group may be subject to additional financing<br />
costs on future lease payments if certain assumptions made at the time of entering the transactions, including assumptions as<br />
to the rate of income tax, subsequently become invalid.<br />
Unrealised losses – back-to-back hedges<br />
Where long-term foreign currency borrowings have been denominated in surplus net revenue currencies, offsetting forward<br />
foreign exchange contracts have been used to match the cash flows arising under the borrowings with the expected revenue<br />
surpluses used to hedge the borrowings. To the extent a gain or loss is incurred, this is deferred until the net revenue is<br />
realised. As at 30 June <strong>2002</strong>, total unrealised exchange losses on hedges of net revenue designated to service long-term debt<br />
were $206.2 million (2001: $329.6 million).<br />
p<br />
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<strong>2002</strong> QANTAS ANNUAL REPORT