Bob Stein ran his own online market analysis service that specialised

Bob Stein ran his own online market analysis service that specialised in advising clients about investment opportunities in international airline companies. He had a large clientele who paid premium fees to Bob for his monthly reports on the state of airline companies. His "Buy”, "Hold”, or "Don't Buy” recommendations on airline shares were particularly respected.

In August 2014, Bob was reading a newspaper report concerning Qantas. He was not too concerned about what he was reading, as it merely confirmed what he was expecting. Bob had been analysing Qantas' performance for a long time, comparing financial reports of every airline company and reading reports of the risks each airline faces. In terms of what was happening in the international airline industry, Bob considered that Qantas had only done what was expected of responsible management.
After reading the newspaper report, Bob contacted his subscribers and advised them to buy Qantas shares.
The following is a summarised report from Janda (2014) that sets out the story.
28 August 2014: Qantas shocks with $2.8bn full-year loss, analysts call for management spill
Qantas has shocked everyone with a record $2.84 billion headline loss, around three times as bad as expected.
It is a vicious negative turn from last financial year's wafer-thin $1 million profit.
However, excluding one-off costs and writedowns, Qantas posted an underlying loss before tax of $646 million, which compares favourably with analyst expectations of around $763 million in a survey of eight analysts by Bloomberg.
The underlying loss reflects the fact that the airline's poor performance is not solely due to writedowns, with its revenue falling 3 per cent to $15.35 billion last financial year, while the carrier also continues to bemoan rising fuel costs - up $253 million to $4.5 billion.
The big blow to the headline result was a $2.6 billion non-cash writedown of the value of the Qantas International fleet, as the company moves to split that unit into a new corporate entity that will be held by the main group.
Qantas says the writedown is largely due to the historic cost of aircraft purchased at a much lower Australian dollar exchange rate, and is an accounting writedown to the value of aircraft that the airline has no intention to sell.
The airline also incurred $428 million in redundancy and restructuring expenses, saying around half of its 5,000 planned redundancies have been implemented.
Qantas also booked non-cash costs related to early aircraft retirements of nearly $400 million.
The airline's chief executive, Alan Joyce, says Qantas has reached the bottom of its financial performance and he sees clearer skies ahead.
Investors seemed pleased with the upbeat outlook...pushing the airline's share price almost 6 per cent higher to $1.37 by 10:25am (AEST).


Janda, M 2014, 'Qantas shocks with $2.8bn loss; analysts call for management spill',, accessed March 30, 2015, from .
  1. Explain whether this report supports or disproves the efficient market hypothesis. (15 marks)
  2. Identify the measurement model used by Qantas for its writedown of the fleet. Explain why you identified that model and how it would have been applied. (15 marks

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