Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2023 Earnings Presentation
60 slides from Qantas Airways's earnings presentation, Aug 24, 2023
Slide 1: Qantas Group FY23 Investor Presentations
24 August 2023 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group FY23 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group FY23 Investor Presentation; and • Qantas Group FY23 Investor Pre
Slide 2: FY23 Results Presentation
F Y 2 3 R E S U LT S P R E S E N TAT I O N Qantas Airways Limited 24 August 2023 ASX: QAN US OTC: QABSY
Slide 3: Disclaimer
Disclaimer Summary information This Presentation is unaudited. Notwithstanding this, the No representation or warranty, express or implied, is made as to This Presentation contains summary information about Qantas Presentation contains disclosures which are extracted or derived the fairness, accurac
Slide 4: FY23 result highlights
FY23 result highlights FY23 result driven by strong travel demand Continued improvement in operations, investing $2,465m and completion of $1b Recovery Plan for our customers and rewarding our people FY23 Underlying Profit Before Tax (PBT) • Qantas Domestic and International achieved FY24 EBIT • Qan
Slide 5: FY23 performance demonstrates portfolio strength
FY23 performance demonstrates portfolio strength • Dual brands at the core of the Group’s domestic position with leadership position across all key travel segments Portfolio Segment EBIT ($B) • Group Domestic Operating Margin of 16%, delivered through cost transformation Group Domestic and network o
Slide 6: Travel intentions have remained consistently strong
Travel intentions have remained consistently strong 1 Intent to travel remains significantly above pre-COVID levels1 3 QFF net spend intentions in the next 6 months4 International travel 31% 2x more plan to fly domestically in the next 12 months Domestic travel 26% +80% plan to fly internationally i
Slide 7: Fares and costs moderating with restoration of capacity
Fares and costs moderating with restoration of capacity Average Domestic and International fares1 Unit Cost (C/ASK) ex. fuel and depreciation -11% -22% Transitionary costs 6.2 -11% -12% 4.9 Indicative only, -17% 4.6 not to scale 4.5 QAD JQD QAI JQI2 2Q23 4Q23 FY20 FY22 FY23 FY24 • Passenger fares co
Slide 8: Leading domestic on-time performance whilst restoring capacity
Leading domestic on-time performance whilst restoring capacity Qantas Domestic NPS returning to pre-COVID levels Most reliable major domestic airline1 Industry #1 • 11 out of last 12 months with the best OTP hibernation in FY23 • Lowest cancellation rate in FY23 Average pre-COVID 72% Qantas Domestic
Slide 9: Sharing the benefits of recovery with all our stakeholders
Sharing the benefits of recovery with all our stakeholders Customers People Shareholders and lenders • Multi-year investments for integrated physical and • $340m3 of benefits in recovery boost payments • Three-year Recovery Plan complete, delivering digital customer experience across both Qantas and
Slide 10: New fleet technology driving long-term structural advantage and future earnings
New fleet technology driving long-term structural advantage and future earnings Group fleet strategy secured New widebody commitments (further details in media release) • Optimal time for widebody fleet renewal Existing Group narrowbody fleet renewal programs – A330/A380s retiring at the end of thei
Slide 11: ESG: The Group's progress on our sustainability priorities
ESG: The Group’s progress on our sustainability priorities Investor Day takeaways Further progress Today’s announcement • Launched $400m Qantas Climate Fund to • Significant policy progress with the Australian • Partnering with Airbus and Boeing to deliver on our accelerate progress against targets
Slide 12: Financial Performance
FINANCIAL PERFORMANCE QANTAS GROUP
Slide 13: FY23 Key Group financial metrics
FY23 Key Group financial metrics Profit Metrics Balance Sheet and Cash Flow metrics Key statistics (vs FY22) $2,465m $5.09b +132% Underlying profit before tax Operating cash flow ASKs $1,744m $2.67b +184% Statutory profit after tax Net Capital Expenditure RPKs 96c $2.89b (target $3.7b - $4.6b) +30%
Slide 14: FY23 Profit bridge compared to FY22
FY23 Profit bridge compared to FY22 $m FY22 FY23 ASKs (m) 50,633 +132% 117,258 (583) 318 Selling & Marketing $ (406) m Capacity Hire $ (216) m (2,707) Technology and Digital $ (89) m Property $ (7) m Other $ (161) m (1,237) Other Expense Increase $ (879) m (1,681) 10,972 (879) 2,465 39 82 (1,859) FY
Slide 15: FY23 movement in cash position
FY23 movement in cash position $m Net Free Cash Flow $2,460m (123) 763 Predominantly RRIA (2,625) 4,445 Predominantly (843) aircraft payments and capitalised (1,000) maintenance 3,343 (789) 3,171 30 Jun 22 Underlying EBITDA Net Working Capital Interest Investing Net of Debt Share buy-backs Other Fin
Slide 16: Segment Results
a XNI r oa‘ SEGMENT 1666666 6 & 6 : R E S U LT S AIRBUS A320 Z ° , —_ YACANTAS cROUP
Slide 17: Qantas Domestic
Qantas Domestic Transformed domestic business delivering step-change in earnings FY23 FY22 Change • Underlying EBIT of $1,270m delivered in FY23, achieving 18% Domestic EBIT margin target Revenue $M 6,980 3,448 >100% • 2H23 capacity 99% of pre-COVID levels (1H23 93%) Underlying EBIT $M 1,270 (765) >
Slide 18: Qantas International (including Freight)
Qantas International (including Freight) Continued restoration of International capacity driving earnings growth FY23 FY22 Change • 12% Operating Margin, above FY24 target of 8%, given strength of revenue environment Revenue $M 7,749 3,706 >100% • 2H23 capacity 72% of pre-COVID levels (1H23 58%) Und
Slide 19: Jetstar Group
Jetstar Group Jetstar’s Australian domestic network delivered $255m Underlying EBIT, 2H23 $125m FY23 FY22 Change • 11% Operating Margin, well positioned to achieve 15% FY24 margin target, given seasonality Revenue1 $M 4,235 1,440 >100% • 2H23 capacity 100% of pre-COVID3 levels (1H23 94%)3 Underlying
Slide 20: Qantas Loyalty
Qantas Loyalty Extending customer loyalty beyond flying FY23 FY22 Change • >$1.0b new bookings3 in FY23 across Hotels, Holidays and Tours; up 90% vs FY22 following the Revenue $M 2,189 1,334 +64% expansion of the Qantas Holidays brand and substantially increasing redemption value to members Underlyi
Slide 21: Financial Framework
FINANCIAL FRAMEWORK QANTAS GROUP
Slide 22: Financial Framework drives ongoing discipline and governance
Financial Framework drives ongoing discipline and governance 1 Maintain optimal capital structure 2 ROIC > WACC through the cycle 3 Disciplined allocation of capital Net Debt $B Return on Invested Capital % Surplus Capital Uses $B 4.9 3.6 3.7 3.1 2.9 3.0 3.0 23% 20% 21% 2.6 1.0 19% 2.0 2.1 1.0 5.6 5
Slide 23: Maintaining an optimal capital structure
Maintaining an optimal capital structure Total liquidity sources >$10B Liquidity • Total sources of liquidity >$10b comprised of $3.2b cash2, $1.2b committed undrawn facilities3 and >$5.6b4 unencumbered asset base — Unencumbered assets include ~$4.1b of unencumbered aircraft ~$3.2B cash ~$1.2B commi
Slide 24: Robust financial risk management
Robust financial risk management Operational Fuel and FX Capital Expenditure FX – Hedging of USD Fleet Payments • FY23 fuel cost at $4.6b • Hedging remains consistent with long term approach to risk management — Hedging strategy provided time to implement operational — Preference for options to allo
Slide 25: Disciplined capital allocation to optimise shareholder value
Disciplined capital allocation to optimise shareholder value Structural improvements to earnings will sustain higher levels Future capital allocation to prioritise fleet investments of fleet investment and ongoing shareholder distributions and shareholder distributions FY24 FY25+ • Allocating $0.3b
Slide 26: New aircraft deliveries and fleet flexibility
New aircraft deliveries and fleet flexibility New aircraft deliveries1 As outlined at Investor Day, new fleet technology driving long-term advantage FY24 FY25 FY26 • New fleet capability unlocks new markets, including expanded point-to-point routes (through redeployment of existing fleet and improve
Slide 27: Outlook
OUTLOOK QANTAS GROUP
Slide 28: Outlook
Outlook Portfolio outlook Group financial outlook • The Group is seeing strong trading into 1H24 with the Dual Brand strategy and • 1H24 fuel cost expected to be $2.6b3 at current fuel prices Loyalty membership base uniquely positioning the Group to navigate macro- inclusive of hedging economic cond
Slide 29: Outlook: Guidance Tables
Outlook Guidance Tables Capacity Guidance1 1Q24 2Q24 3Q24 4Q24 1H24 2H24 FY24 (as a % of pre-COVID) Group Domestic 104% 103% 104% 102% 103% 103% 103% Qantas Domestic 101% 99% 99% 99% 100% 99% 99% Jetstar Domestic 109% 111% 112% 110% 110% 111% 110% Group International (ex. JSA) 86% 92% 98% 103% 89% 1
Slide 30: Qantas Group Investment Case – Investor Day 2023
Qantas Group Investment Case – Investor Day 2023 KEY BUSINESS TAKEAWAYS Strong customer value Qantas and Jetstar fleet renewal proposition to deliver unlocks new opportunities and Qantas & Jetstar Domestic against target segments extends competitive advantage EBIT margin target FY24+ 18% 15% Afforda
Slide 31: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for Net Capital Expenditure (Net Capex) – Net expenditure of investing RRIA – Revenue Received in Advance passengers, multiplied by the number of kilometres flown cash flows included in the Consolidated Cash Flow Statement an
Slide 32: FY23 Results Supplementary Presentation
FY23 RESULTS SUPPLEMENTARY PRESENTATION Qantas Airways Limited 24 August 2023 ASX: QAN US OTC: QABSY
Slide 33: Disclaimer
Disclaimer Summary information This Presentation is unaudited. Notwithstanding this, the No representation or warranty, express or implied, is made as to the This Presentation contains summary information about Qantas and Presentation contains disclosures which are extracted or derived fairness, acc
Slide 34: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available Net Capital Expenditure (Net Capex) – Net expenditure of RRP – Recovery and Retention plan for passengers, multiplied by the number of kilometres flown investing cash flows included in the Consolidated Cash Flow SAF – Sustain
Slide 35: Group Performance
GROUP PERFORMANCE WAcantas croup
Slide 36: FY23 Key Group Financial Metrics
FY23 Key Group Financial Metrics FY23 FY22 Profit metrics • FY23 Underlying Profit Before Tax (PBT) in top half of Revenue $M 19,815 9,108 guidance range Underlying Profit/(Loss) Before Tax1 $M 2,465 (1,859) • FY23 result driven by strong travel demand and completion of $1b Recovery Plan Statutory P
Slide 37: FY23 Key Group Operating Metrics
FY23 Key Group Operating Metrics Pre-COVID FY23 FY22 Change (%) Change (%) FY19 Unit Revenue (RASK)1 c/ASK 12.29 9.48 29.6% 8.85 38.9% Total Unit Cost1 c/ASK 10.19 13.16 (22.6) % 7.97 27.9 % Unit Cost (ex-Fuel and depreciation)1 c/ASK 4.88 6.24 (21.8) % 4.31 13.2% Available Seat Kilometres (ASK) M 1
Slide 38: Reconciliation to Underlying Profit/(Loss) Before Tax
Reconciliation to Underlying Profit/(Loss) Before Tax $M FY23 FY22 Statutory Items not included Underlying Statutory Items not included Underlying in Underlying in Underlying Net passenger revenue 16,923 – 16,923 5,951 – 5,951 Net freight revenue 1,380 – 1,380 1,963 – 1,963 Other revenue 1,512 – 1,5
Slide 39: Group Unit Revenue and Unit Cost (c/ASK)
Group Unit Revenue and Unit Cost (c/ASK) RASK FY23 CASK FY23 Net passenger revenue $M 16,923 Underlying (Profit)/Loss Before Tax $M (2,465) Excluding Other passenger revenue $M (2,513) Excluding Ticketed passenger revenue $M 14,410 A Ticketed Passenger Revenue $M 14,410 C Net expenditure $M 11,945 L
Slide 40: Ongoing transformation discipline
Ongoing transformation discipline Clear Pipeline of Value Targeting >$300m cost and revenue transformation in FY24 through initiatives already underway Creation for FY25+ FY24 Focus FY25+ Focus • Fleet renewal: ◦ 3 x A321s and 2 x A330 deliveries to Qantas Freight ◦ 7 x A321LR deliveries to Jetstar
Slide 41: Financial Framework
FINANCIAL FRAMEWORK WAcantas croup
Slide 42: Return on Invested Capital (ROIC) Calculation
Return on Invested Capital (ROIC) Calculation $M FY23 FY22 • ROIC EBIT is derived by adjusting Underlying EBIT Underlying EBIT 2,682 (1,558) to exclude AASB 16 lease depreciation and includes notional depreciation for leased aircraft as if they Add back: Lease depreciation under AASB 16 320 336 were
Slide 43: Balance Sheet Summary under Financial Framework
Balance Sheet Summary under Financial Framework As at 30 Jun As at 30 Jun $M 2023 2022 • Invested Capital is defined as Net Assets adjusted for Net Assets 10 (190) the following: Less: Cash and cash equivalents (3,171) (3,343) – Exclusion of Cash and cash equivalents and Interest-bearing liabilities
Slide 44: Net Debt Target Range
Net Debt Target Range • Net Debt target range = 2.0x — 2.5x EBITDA where ROIC = 10% • At average Invested Capital of $2.6b, optimal Net Debt range is $3.7b to $4.6b Jun 23 Drivers of Net Debt Range $B Invested Capital Avg Invested Capital for trailing 12 months 2.6 Invested Capital will rebuild with
Slide 45: Net Debt and Liquidity Position
Net Debt and Liquidity Position As at 30 As at 30 $M Change2 Jun 2023 Jun 2022 Net Debt decreased by $1.1b for the 12 months to June 2023 Current interest-bearing liabilities on – Borrowing activity for the period included Balance Sheet 799 669 (130) Non-current interest-bearing liabilities ◦ $1.0b
Slide 46: Net Debt movement under the Financial Framework
Net Debt movement under the Financial Framework $M FY23 FY22 The Financial Framework considers aircraft leases as part of Net Opening Net Debt (3,937) (5,890) Debt – Aircraft leases are initially recognised in Net Debt at fair value Net cash from operating activities 5,085 2,670 Less: Net lease prin
Slide 47: Financial risk management framework
Financial risk management framework Hedging Program Principles of Financial Risk Management • Principles of financial risk management Reducing cash flow volatility in the short term through – Manage net cash flow impacts disciplined hedging program to allow for implementation of operational levers –
Slide 48: New aircraft deliveries and fleet flexibility
New aircraft deliveries and fleet flexibility New aircraft deliveries1 FY24 FY25 FY26 FY29 A350-1000ULR 3 12 (Project Sunrise) A350-1000LR 8 Qantas 787-9/-10 1 5 A321neo-XLR 3 9 20 Qlink2 A220-300 3 4 11 29 Freight3 A321F 3 2 3 9 A321neo-XLR 3 15 Jetstar A321neo-LR 7 7 1 23 A320neo4 5 12 Total commi
Slide 49: Supplementary Segment Information
SUPPLEMENTARY SEGMENT INFORMATION
Slide 50: Qantas Domestic and International Overview
Qantas Domestic and International Overview Qantas Domestic Qantas International • Full service offering targeting business purpose and premium leisure sectors • Globally recognised long haul carrier targeting high demand business and premium leisure segments into USA, Europe and South East Asia – Ma
Slide 51: Jetstar Group Overview
Jetstar Group Overview Jetstar Domestic Jetstar International5 Jetstar in Asia and New Zealand • Targeting industry-leading LCC1 15% EBIT margin for • Targeting 10-12% EBIT Margin in FY24 and beyond Jetstar Japan FY24 and beyond • Jetstar Japan is the #1 domestic LCC1 at Tokyo’s • Strong profitabili
Slide 52: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • Contributing >$2b towards the Group Cash Flow1 for FY23; delivering long term value to the Qantas Group • 8% growth2 in Qantas Frequent Flyer membership to 15.2m members; 19% growth2 in QBR member
Slide 53: 2H23 Group and Group Domestic Traffic Statistics vs Pre-COVID
2H23 Group and Group Domestic Traffic Statistics vs Pre-COVID Pre-COVID Pre-COVID Pre-COVID 3Q23 Change (%) 4Q23 Change (%) 2H23 Change (%) 3Q19 4Q19 2H19 Total Qantas Group Operations Passengers Carried ‘000 11,270 13,670 (18) 11,780 13,643 (14) 23,050 27,313 (16) Revenue Passenger Kilometers M 24,
Slide 54: 2H23 Group International Traffic Statistics vs Pre-COVID
2H23 Group International Traffic Statistics vs Pre-COVID Pre-COVID Pre-COVID Pre-COVID 3Q23 Change (%) 4Q23 Change (%) 2H23 Change (%) 3Q19 4Q19 2H19 Group International Available Seat Kilometres M 17,269 24,742 (30) 19,023 24,087 (21) 36,292 48,829 (26) Group International Unit Revenue Change % 47
Slide 55: 2H23 Group and Group Domestic Traffic Statistics vs 2H22
2H23 Group and Group Domestic Traffic Statistics vs 2H22 3Q23 3Q22 Change (%) 4Q23 4Q22 Change (%) 2H23 2H22 Change (%) Total Qantas Group Operations Passengers Carried ‘000 11,270 5,772 95 11,780 10,079 17 23,050 15,851 45 Revenue Passenger Kilometers M 24,348 8,902 >100 26,023 18,358 42 50,371 27,
Slide 56: 2H23 Group International Traffic Statistics vs 2H22
2H23 Group International Traffic Statistics vs 2H22 3Q23 3Q22 Change (%) 4Q23 4Q22 Change (%) 2H23 2H22 Change (%) Group International Available Seat Kilometres M 17,269 4,944 >100 19,023 10,163 87 36,292 15,107 >100 Group International Unit Revenue Change % 47 5 20 Qantas International Passengers C
Slide 57: Qantas Domestic
Qantas Domestic1 FY23 FY FY22 Variance% 1H23 1H 1H22 Variance% 2H23 2H 2H22 Variance% Revenue $M 6,980 3,448 >100 3,634 1,127 >100 3,346 2,321 44 Underlying EBIT $M 1,270 (765) >100 785 (613) >100 485 (152) >100 Operating Margin % 18.2 <0 N/A 21.6 <0 N/A 14.5 <0 N/A ASKs M 32,513 21,233 53 16,171 7,
Slide 58: Qantas International and Freight
Qantas International and Freight1 FY23 FY FY22 Variance% 1H23 1H 1H22 Variance% 2H23 2H 2H22 Variance% Revenue $M 7,749 3,706 >100 3,802 1,317 >100 3,947 2,389 65 Underlying EBIT $M 906 (238) >100 464 (238) >100 442 — — Operating Margin % 11.7 <0 N/A 12.2 <0 N/A 11.2 <0 N/A ASKs M 45,187 12,187 >100
Slide 59: Jetstar Group
Jetstar Group1 FY23 FY FY22 Variance% 1H23 1H 1H22 Variance% 2H23 2H 2H22 Variance% Revenue $M 4,235 1,440 >100 2,096 394 >100 2,139 1,046 >100 Underlying EBIT $M 404 (796) >100 177 (417) >100 227 (379) >100 Operating Margin % 9.5 <0 N/A 8.4 <0 N/A 10.6 <0 N/A ASKs M 39,558 17,213 >100 18,863 4,584
Slide 60: Qantas Loyalty
Qantas Loyalty FY23 FY FY22 Variance% 1H23 1H 1H22 Variance% 2H23 2H 2H22 Variance% Revenue1 $M 2,189 1,334 64 1,027 485 >100 1,162 849 37 Underlying EBIT $M 451 292 54 220 127 73 231 165 40 Operating Margin % 20.6 21.9 (1.3ppts) 21.4 26.2 (4.8ppts) 19.9 19.4 0.5ppts QFF Members2 M 15.2 14.1 8 14.7