Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2020 Earnings Presentation
60 slides from Qantas Airways's earnings presentation, Aug 20, 2020
Slide 1: Qantas Group FY20 Results Investor Presentations
20 August 2020 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group FY20 Results Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group FY20 Results Investor Presentation; and • Qantas Group F
Slide 2: FY20 Results Presentation
Qantas Airways Limited FY20 Results Presentation 20 August 2020 ASX: QAN US OTC: QABSY
Slide 3: FY20 overview
FY20 overview Swift action taken to mitigate impacts of COVID-19 on cash flow and profitability • Underlying Profit Before Tax (PBT)1 of $124m, Statutory Loss Before Tax of $2.7b including $2.8b of one-off charges (mostly non-cash) – Strong first half performance2 followed by $4.0b decline in Group
Slide 4: Strong foundation to respond to COVID-19 pandemic and launch recovery plan
Strong foundation to respond to COVID-19 pandemic and launch recovery plan Building the strong foundation Preserving liquidity Pathway to recovery FY15 – 1H20 2H20 FY21 – FY23 • Strong customer advocacy; leading airline • Acted swiftly to safely hibernate the • Entering with a strong financial posit
Slide 5: Three-year recovery plan estimated phasing of $15b cost savings
Three-year recovery plan estimated phasing of $15b cost savings Estimated phasing of expected short-term and long-term cost savings ($B) 1 2 Restructuring benefits Right sizing Activity linked Activity based fuel savings 8.2 3.0 4.1 2.9 1.7 2.7 0.8 1.3 0.3 1.7 0.8 1.0 0.1 1.0 0.6 0.8 FY21 FY22 FY23
Slide 6: FY21 right sizing and restructuring initiatives
FY21 right sizing and restructuring initiatives FY21 Right sizing initiatives On track FY21 Restructuring initiatives On track Total estimated cost savings ($B) • Manpower • Manpower Restructuring Right sizing – Stand down, leave burn and leave – Securing productivity and flexibility 2.3 without pay
Slide 7: Well positioned for recovery
Well positioned for recovery Operating Segment EBIT4 Group Domestic1 airlines highly leveraged to the recovery in domestic demand and changing competitive environment $2.2b Australia’s most valued Loyalty business which delivered a record first half Underlying EBIT result and has a clear $1.8b pathw
Slide 8: Recovery plan progress
TRANSFORMATION Recovery plan progress TARGET KEY AREA OF FOCUS METRICS TIMEFRAME As at end August 2020 Restructuring benefits of $0.6b in FY21, $0.8b in FY22, $1b by FY23 FY23 On track to achieve FY21 target Cost Savings 6,000 FTE reduction FY21 On track Group Unit Cost (ex-fuel and depreciation) 10
Slide 9: Looking forward, we remain committed to the FY24 targets
Looking forward, we remain committed to the FY24 targets Qantas Jetstar Qantas Jetstar International Qantas Loyalty Domestic Domestic International Relative competitive Stable earnings growth Relative margin advantage Relative margin advantage Lowest cost position advantage Targeting EBIT margin ~18
Slide 10: Financial performance
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Slide 11: FY20 key Group financial metrics
FY20 key Group financial metrics Profit Metrics Balance Sheet Metrics Traffic Statistics $124m $1,083m $1,571m +1.5% Underlying PBT1 Operating cash flow Net capital expenditure2 Unit Revenue6 1H 1H $8,055m/$6,028m +11% 2H 2H Average Invested Capital/Invested Total Unit Cost7 775 771 551 Capital as a
Slide 12: Unit Cost breakdown
Unit Cost breakdown FY19 Group Unit Cost FY20 VLY %3 (Restated) Total Unit Cost1 8.87 7.97 (11) Excluding: Fuel (2.59) (2.54) Change in FX rates – 0.05 Impact of changes in the discount rate and other actuarial assumptions (0.01) (0.06) Share of net profit/(loss) of investments accounted for under t
Slide 13: FY20 profit bridge
FY20 profit bridge COVID-19 Net Impact in 2H20 = ($1,224m) 1,326 (4) (363) 3Q20 124 88 (62) 274 829 (3,604) 4Q20 677 963 (3,967) FY19 Underlying 1H Underlying 2H Total Revenue 2H Fuel 2H Manpower 2H Aircraft 2H Other3 Discount rate 2H Depreciation FY20 PBT1 PBT variance2 and staff related Operating
Slide 14: Items not included in Underlying PBT
Items not included in Underlying PBT FY19 $M FY20 Comments (Restated) 3 Refer to Note 2B of the Preliminary Final Report for the Transformation costs and discretionary bonuses to non- 191 254 Financial Year ended 30 June 2020 for details of the executive employees Items Outside Underlying. Recovery
Slide 15: Movement in cash position
Movement in cash position Financing Cash Outflows Investing Cash Outflows Operating Cash Outflows ($634m1, ~$24m per week) ($309m, ~$12m per week) ($392m, ~$15m per week) 3,520 (455) Receivables Amortising (179) Debt 1,360 repayment Including (309) 432 Revenue FX hedge 1,750 ($205m) and Aircraft and
Slide 16: Net debt and liquidity position
Net debt and liquidity position $M FY20 FY19 VLY $M5 • 2H20 new borrowings of $1.75b debt secured against 11 x (Restated)4 787-9 and 8 x A320 aircraft Current interest-bearing liabilities on 868 610 258 • Repayment of $375m secured amortising debt balance sheet Non-current interest-bearing liabiliti
Slide 17: Segment Results
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Slide 18: Qantas Domestic
Qantas Domestic • Profitable despite the impact of government imposed travel restrictions FY19 FY20 VLY % (Restated) 5 — Near record 1H20 performance more than offset 2H20 Underlying EBIT; 2H20 profitable at EBITDA level Revenue $M 4,672 6,098 (23) — Charter operations for the resources sector are p
Slide 19: Qantas International and Freight
Qantas International and Freight • Qantas International passenger operations moved into losses as a result of FY19 FY20 VLY % international border closures (Restated) 6 • Record freight performance1 through increased air freight demand and increased Revenue $M 6,077 7,420 (18) international freight
Slide 20: Jetstar Group
Jetstar Group • Jetstar Australia and New Zealand businesses, were profitable despite the profound FY19 FY20 VLY % impact of travel restrictions due to COVID-19 and $33m impact of industrial action1 (Restated) 7 Revenue6 $M 3,006 3,961 (24) — 4Q20 Ticketed Passenger Revenue declined2 99% — 4Q20 net
Slide 21: Qantas Loyalty
Qantas Loyalty • Qantas Loyalty providing diversification of earnings for the Qantas Group FY19 FY20 VLY % (Restated) 7 — Record first half Underlying EBIT up1 12% Revenue5 $M 1,224 1,654 (26) — 2H20 revenue from points sales to external partners and other external revenue down 13% Underlying EBIT $
Slide 22: Financial Framework
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Slide 23: Financial Framework supports decision making to maximise long-term shareholder value through the cycle
Financial Framework supports decision making to maximise long-term shareholder value through the cycle 1 2 3 Maintaining an optimal capital structure ROIC > WACC2 through the cycle Disciplined allocation of capital Minimise cost of capital by targeting a net debt range of Grow invested capital with
Slide 24: Maintaining an optimal capital structure
Maintaining an optimal capital structure Capital structure as at 30 June 2020 Debt maturity profile as at 30 June 2020 ($M)1 • Net debt2 at $4.7b, towards the bottom of the target range • Cash3 $3.5b, $1.0b undrawn facilities • Unencumbered asset base ~$2.5b4, including 46% of the 500 Group fleet5,
Slide 25: Robust fuel and FX risk management
Robust fuel and FX risk management • FY20 fuel cost was 100% hedged Fuel Cost2 (A$B) FY20 decline driven by reduced flying and lower — Provided significant protection in 1H20 3.85 fuel consumption in 4Q20 3.23 3.04 3.23 2.90 — Material reduction in flying in 4Q20 (due to government imposed travel re
Slide 26: Disciplined capital allocation
Disciplined capital allocation Capital Expenditure ($B) Shareholder Capital Movements ($B) Disciplined capital expenditure -0.4 +2.9 • Net capital expenditure1 of $1.3b in 1H20, -0.8 • 2H20 net capital expenditure reduced to $309m, saving ~$0.4b — Deferred delivery of A321neos and 787-9 to meet the
Slide 27: Fleet strategic priorities – minimise capital expenditure
Fleet strategic priorities – minimise capital expenditure Qantas Group fleet strategy Current priorities Right size • 12 x A380s in long term storage Right aircraft • Brought forward retirement of all 747s from the end of 2020 Right route • Jetstar Asia fleet reduced by five through one lease return
Slide 28: Looking ahead
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Slide 29: Australian Domestic market
Australian Domestic market Group Domestic operating environment Group Domestic ASKs (% of FY19) • Demand trends have improved from the low point in 4Q20 32.0% Actual1 Planned2 • July capacity increased to 19%, from planned level of 17% 19.0% ~20.0% despite the border closures during the month 17.0%
Slide 30: Group International and Freight
Group International and Freight Freight operating environment International operating environment • Domestic freight market • International border closures and quarantine restrictions remain in place – Domestic demand expected to remain strong due to growth in e- commerce; growing customer base incl
Slide 31: Customers are key to the recovery
Customers are key to the recovery • Intention to fly remains high1 – 95% of Qantas Frequent Flyers intend to fly domestically or internationally in the next 12 months, once border restrictions are lifted – 87% of Jetstar customers intend to travel domestically in the next 12 months – Leisure and vis
Slide 32: Q and A
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Slide 33: Disclaimer and ASIC Guidance
Disclaimer and ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 20 August 2020, unless othe
Slide 34: FY20 Results Supplementary Presentation
Qantas Airways Limited FY20 Results Supplementary Presentation 20 August 2020 ASX: QAN US OTC: QABSY
Slide 35: FY20 Key Group financial metrics
FY20 Key Group financial metrics FY19 FY20 VLY % 11 Comments (Restated)10 Underlying Profit Before Tax1 ($M) 124 1,326 (91) Decline in profitability due to the impact of COVID-19 in 2H20 Underlying Earnings per Share2 (c) 5.9 57.3 (90) Based on weighted average shares on issue through FY20 Statutory
Slide 36: Underlying Income Statement summary
Underlying Income Statement summary FY19 $M FY20 VLY % 3 Comments (Restated)2 Net passenger revenue 12,183 15,696 (22) 4Q20 capacity declined ~100% Net freight revenue 1,045 971 7.6 Strong freight demand in 2H20 Other revenue 1,029 1,299 (21) Includes decline in Loyalty revenue in 4Q20 Total Revenue
Slide 37: Reconciliation to Underlying PBT
Reconciliation to Underlying PBT $M FY20 FY19 (Restated)2 Statutory Other items not included Underlying1 Statutory Other items not included Underlying1 in Underlying PBT in Underlying PBT Net passenger revenue 12,183 - 12,183 15,696 – 15,696 Net freight revenue 1,045 - 1,045 971 – 971 Other revenue
Slide 38: Revenue detail
Revenue detail Net passenger revenue down 22% • ASKs down 26% due to the impact of travel restrictions associated with COVID-19 Revenue ($B) – Group Domestic1 ASKs decreased 25% – Group International2 ASKs decreased 27% -21% – Excludes charter flights 18.0 • Group Unit Revenue increased 1.5% – Group
Slide 39: Expenditure detail
Expenditure detail Fuel down 25% • Impact of reduced consumption due to reduced activity related to COVID-19 travel Expenditure 1 ($B) restrictions -15% • Lower AUD jet fuel prices driven primarily by lower USD prices which offset FX impacts 16.4 • Fuel efficiency initiatives 13.9 Manpower and staff
Slide 40: Cash flow (Statutory)
Cash flow (Statutory) FY19 • Significant drop in operating cash flow due to the impact of $M FY20 (Restated)2 travel restrictions and border closures due to COVID-19 Operating cash flows 1,083 3,164 • Investing cash flows skewed to first half Investing cash flows (1,571) (1,563) • Financing cash flo
Slide 41: Invested Capital calculation
Invested Capital calculation FY193 $M FY20 Comments (Restated) Receivables (current and non-current) 646 1,178 Collection of receivables and slower rebuild due to COVID-19 Inventories 306 364 Other assets (current and non-current) 562 680 Investments accounted for under the equity method 59 217 Due
Slide 42: ROIC calculation
ROIC calculation FY19 $M FY20 (Restated)1 Underlying PBT 124 1,326 Add back: Underlying net finance costs 271 282 Add back: Lease depreciation under AASB 16 402 351 Less: Notional depreciation2 (108) (114) Less: Cash expenses for non-aircraft leases (225) (187) ROIC EBIT 464 1,658 FY19 $M FY20 (Rest
Slide 43: Net debt target range
Net debt target range • Net debt target range = 2.0x – 2.5x ROIC EBITDA where EBITDA achieves a fixed 10% ROIC • At current Invested Capital of $6.0b, optimal net debt range is $4.5b to $5.6b • Targeting net debt to be within the range on a forward looking basis $b Invested Capital 6.0 Invested Capi
Slide 44: Net debt movement consistent with Financial Framework
Net debt movement consistent with Financial Framework FY19 • The Financial Framework considers aircraft leases as part of $M FY20 (Restated)1 net debt Opening Net Debt (4,710) (4,903) — Aircraft leases are recognised in net debt at fair value Net cash from operating activities 1,083 3,164 Less: Leas
Slide 45: FY20 Australian Government COVID-19 packages
FY20 Australian Government COVID-19 packages The Coronavirus and government border restrictions had a $4.0 billion impact on the Group’s revenue for FY20. Qantas Domestic, Qantas International, Qantas Freight and Jetstar provided services for vital passenger and freight services during the pandemic,
Slide 46: Fleet as at 30 June 2020
Fleet as at 30 June 2020 Aircraft Type FY20 FY19 Change • Group fleet7 of 314 aircraft as at 30 June 2020 A380-800 12 12 – 747-4001 – 1 (1) • Movements in FY20 include: 747-400ER 4 6 (2) — Addition of three 787-9 A330-200 18 18 – A330-300 10 10 – — Disposal of one 747-400 737-800NG 75 75 – 787-92 11
Slide 47: Supplementary Segment Information
Supplementary Segment Information
Slide 48: 2H20 Group and Group Domestic Traffic Statistics
2H20 Group and Group Domestic Traffic Statistics 3Q20 3Q19 Change (%) 4Q20 4Q19 Change (%) 2H20 2H19 Change (%) Qantas Group Operations Passengers carried (‘000) 11,353 13,670 (17) 246 13,643 (98) 11,599 27,313 (58) Revenue Passenger Kilometres (m) 26,350 31,290 (16) 240 31,244 (99) 26,590 62,534 (5
Slide 49: 2H20 Group International Traffic Statistics
2H20 Group International Traffic Statistics 3Q20 3Q19 Change (%) 4Q20 4Q19 Change (%) 2H20 2H19 Change (%) Qantas International Passengers carried (‘000) 1,840 2,224 (17) 1 2,170 (100) 1,841 4,394 (58) Revenue Passenger Kilometres (m) 12,522 15,008 (17) 0 14,756 (100) 12,522 29,764 (58) Available Se
Slide 50: Qantas Domestic
Qantas Domestic1 FY19 1H19 1H 2H19 2H FY20 VLY % 1H20 2H20 (Restated) (Restated) Variance% (Restated) Variance% Revenue $M 4,672 6,098 (23) 3,218 3,230 (0.4) 1,454 2,868 (49) Underlying EBIT $M 173 778 (78) 465 478 (2.7) (292) 300 (>100) Operating Margin % 3.7 12.8 (9.1pts) 14.4 14.8 (0.4pts) (20.1)
Slide 51: Qantas International and Freight
Qantas International and Freight1 FY19 1H19 1H 2H19 2H FY20 VLY % 1H20 2H20 (Restated) (Restated) Variance% (Restated) Variance% Revenue $M 6,077 7,420 (18) 3,843 3,693 +4.1 2,234 3,727 (40) Underlying EBIT $M 56 323 (83) 122 119 +2.5 (66) 204 (>100) Operating Margin % 0.9 4.4 (3.5pts) 3.2 3.2 - (3.
Slide 52: Jetstar Group
Jetstar Group1 FY19 1H19 1H 2H19 2H FY20 VLY % 1H20 2H20 (Restated) (Restated) Variance% (Restated) Variance% Revenue $M 3,006 3,961 (24) 2,120 2,048 +3.5 886 1,913 (54) Underlying EBIT $M (26) 400 (>100) 220 253 (13.0) (246) 147 (>100) Operating Margin % (0.9) 10.1 (11.0pts) 10.4 12.4 (2.0pts) (27.
Slide 53: Jetstar Group as at June 2020
Jetstar Group as at 30 June 2020 6 Business Ownership1 Launch Aircraft2 5 ❶Jetstar Australia 100% 2004 49 x A320s/A321s ❷Jetstar International 100% 2006 11 x 787-8s ❸Jetstar New Zealand3 100% 2009 9 x A320s ❹Jetstar Asia (Singapore) 49% 2004 18 x A320s ❺Jetstar Japan 33% 2012 25 x A320s 4 ❻Jetstar P
Slide 54: Jetstar in Asia
Jetstar in Asia1 • Jetstar continues to evolve its presence in Asia in response to the impact of COVID-19 — All airlines moved into losses • Jetstar Japan focused on maintaining strong domestic position, reducing costs and maintaining flexibility to adapt to the impact of COVID-19 — Resumed most dom
Slide 55: Qantas Loyalty
Qantas Loyalty1 FY19 1H19 2H19 FY20 VLY % 1H20 V1H19% 2H20 V2H19% (Restated) (Restated) (Restated) Revenue $M 1,224 1,654 (26) 872 809 +7.8 352 845 (58) Underlying EBIT $M 341 376 (9.3) 196 175 +12 145 201 (28) Operating Margin % 27.9 22.7 +5.2pts 22.5 21.6 +0.9pts 41.2 23.8 17.4pts QFF Members M 13
Slide 56: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 4% growth1 in Qantas Frequent Flyer membership; ~20% growth in QBR2 membership with >300,000 SME members3 • >550 Coalition Partners4; 20 new Qantas Business Rewards partners onboarded • BP / Qanta
Slide 57: Margin is only generated on 'external points sales'
Margin is only generated on ‘external points sales’ Core points sales – generates pointsmargin Margin is only generated on ‘externalpoints’ (unique compared to other airline loyalty programs) Creating value for ourpartners ~40% Internal Qantas,Jetstar • Customeracquisition Price =cost • Customerrete
Slide 58: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for passengers, Net Working capital – Net total of the following items disclosed in the Group’s Consolidated multiplied by the number of kilometres flown Balance Sheet: receivables, inventories and other assets reduced by pay
Slide 59: Disclaimer and ASIC Guidance
Disclaimer and ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 20 August 2020, unless othe
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