Qantas announced a $671 million pre-tax profit for the 30 June year – but $104 million of it doesn’t exist.

That’s the $104 million in liquidated damages that Airbus is supposed to have paid to Qantas for the A380 being delayed, but Airbus hadn’t paid any compensation when the Roo’s books were ruled off on 30 June. It probably still hasn’t.

The compensation figure has been bothering Crikey air traffic control ever since it was announced, but we finally have some answers – answers that inevitably raise other questions.

Our suspicion was that it would be extremely unusual and most unlikely for Airbus to be paying out such a large amount in cash compensation for the delay. The industry norm has tended to be compensation in the form of discounts on the final price or deals on short-term leases to fill the capacity gap.

And then there was the curious wording of the profit announcement – “Profit before tax included… the recognition of $104 million in liquidated damages from Airbus due to the delayed delivery of the A380”.

Our suspicions have been confirmed by Qantas. It turns out “recognition” indeed does not mean “payment”.

“We were required to report the compensation under current accounting standards and this was subject to independent audit,” a Qantas spokesman told Crikey.

The new international accounting standards are strange animals and we’re not the Qantas auditors, but our commonsense opinion has to be that counting that $104 million as profit is ridiculous. You might expect it of Alan Bond at his peak.

In the real world, it’s a reduction in a future cost that has no bearing on the 2005-06 financial year. To be consistent, Qantas should have charged in FY05/06 the full price of planes it has ordered but won’t pay for until they’re delivered in a couple of years’ time.

At this point, an unkind and cynical soul might wonder if bottom line profit forms any part of executives’ KPIs for calculating bonuses. If it did, money would have been received on false pretences.

One of Qantas’s strengths is the organisation’s ability to put the best possible spin on events. While the $104 million compensation “profit” was treated as a one-off, it still helped ease the burden of a sharp fall in last year’s operating result. Maybe that’s why no-one at Qantas went out of their way to explain it didn’t exist.