Qantas 2002 Annual Report Download - page 48

notes to the financial statements continued
for the year ended 30 June 2002
p46 2002 QANTAS ANNUAL REPORT
Qantas Group
2002 2001
$M $M
10. Contingent liabilities
Related parties
Guarantees and letters of comfort to support operating lease commitments
and other arrangements entered into with other parties by controlled entities 24.8 24.4
Guarantees and letters of comfort to support leveraged and operating lease
commitments to other parties on behalf of associated companies 0.1 0.1
24.9 24.5
Other parties
General guarantees in the normal course of business 134.2 137.1
Contingent liabilities relating to current and threatened litigation 49.8 36.0
184.0 173.1
208.9 197.6
Terminal fuel facilities
The Qantas Group, together with other airlines, has entered into various agreements in order to facilitate the funding and
installation of jet turbine fuel hydrant systems and terminal equipment facilities at Los Angeles and Hawaii airports. The airlines
have jointly and severally agreed to repay any unpaid balance (including interest) of the loans totalling $294.1 million
(2001: $315.9 million) in the event the agreements are terminated prior to expiry of the loans.
Aircraft financing
As part of the financing arrangements for the acquisition of aircraft, the Qantas Group has provided certain guarantees
and indemnities to various lenders and equity participants in leveraged lease transactions. Only in exceptional circumstances,
including the insolvency of major international banks, will the Qantas Group be required to make any payments under
these guarantees. The Qantas Group has guaranteed that the lessors will receive all of the funds due to them under the
lease arrangements.
Qantas and certain controlled entities have entered into asset value underwriting arrangements with lenders under certain
aircraft secured financings. These arrangements protect the value of the aircraft security to the lenders to a predetermined
level. This is reflected by the balance of aircraft security deposits held with certain financial institutions.
The Qantas Group has provided standard tax indemnities to the equity investors in certain leveraged leases. The indemnities
effectively guarantee the after tax rate of return of the investors and the Qantas Group may be subject to additional financing
costs on future lease payments if certain assumptions made at the time of entering the transactions, including assumptions as
to the rate of income tax, subsequently become invalid.
Unrealised losses – back-to-back hedges
Where long-term foreign currency borrowings have been denominated in surplus net revenue currencies, offsetting forward
foreign exchange contracts have been used to match the cash flows arising under the borrowings with the expected revenue
surpluses used to hedge the borrowings. To the extent a gain or loss is incurred, this is deferred until the net revenue is
realised. As at 30 June 2002, total unrealised exchange losses on hedges of net revenue designated to service long-term debt
were $206.2 million (2001: $329.6 million).
notes to the financial statements continued
for the year ended 30 June 2002