Qantas 2005 Annual Report Download - page 95

93
Qantas Annual Report 2005
~Notes to the Financial Statements~
for the year ended 30 June 2005
26. Contingent liabilities
Details of contingent liabilities arising outside the normal course of business, where the probability of future payments is not considered
remote, are set out below. The Directors are of the opinion that provisions are not required in respect of these matters, as it is not
probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
Qantas Group Qantas
2005
$M
2004
$M
2005
$M
2004
$M
Guarantees and letters of comfort to support operating
lease commitments and other arrangements entered into
with other parties by controlled entities 22.5 24.2 ––
Guarantees and letters of comfort to support leveraged
and operating lease commitments to other parties on behalf
of associates 0.1 11.1 0.1 11.0
General guarantees in the normal course of business 122.4 126.6 122.4 126.6
Contingent liabilities relating to current and threatened litigation 17.0 10.6 15.9 9.6
162.0 172.5 138.4 147.2
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 $186.2 million (2004: $214.1 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. In certain circumstances, including the insolvency of major
international banks, the Qantas Group may be required to make 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 pre-determined 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 GAINS/LOSSES – BACK-TO-BACK HEDGES
Where long-term borrowings are held in foreign currencies in which Qantas derives surplus net revenue, 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 2005,
total unrealised exchange gains on hedges of net revenue designated to service long-term debt were $228.4 million (2004: $19.2 million
losses).
27. Superannuation commitments
The Qantas Group maintains two superannuation Plans covering Australian-based employees. The Qantas Group also maintains a number
of superannuation and retirement Plans for local staff in overseas countries. Plan trustees, who are appointed by Qantas, are indemnified
by the Qantas Group against actions, claims and demands arising from their lawful administration of the superannuation Plans.
The superannuation plans for Australian-based current and former employees of Qantas (including employees of certain controlled
entities) provide accumulation benefits, defined benefits or a combination of both. Qantas is committed to making contributions to the
superannuation plans, after allowing for employee contributions. In addition, the Qantas Group is required to provide a minimum level of
contributions under the Australian Superannuation Guarantee legislation.
The various Plans were last actuarially assessed as detailed in the table on the following page. The actuarial valuations confirmed that the
value of the assets of the Plans were sufficient to meet all anticipated liabilities including vested benefits.