Qantas Airways Limited · ASX:QAN
Qantas Airways — H1 2022 Earnings Presentation
66 slides from Qantas Airways's earnings presentation, Feb 24, 2022
Slide 1: Qantas Group HY22 Investor Presentations
24 February 2022 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group HY22 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group HY22 Investor Presentation; and • Qantas Group HY22 Investor P
Slide 2: 1H22 Results Presentation
1H22 Results Presentation Qantas Airways Limited 24 February 2022 ASX: QAN US OTC: QABSY
Slide 3: 1H22 overview
1H22 overview Operating Results • 1H22 Underlying EBITDA1 of ($245)m, Underlying Loss Before Tax (ULBT)2 of ($1,277)m, Statutory Loss Before Tax of ($622)m, impacted by — COVID-19 border closures and lockdowns, Group capacity at 18% of pre-COVID levels3 — Net gain on sale of $649m4 from disposal of
Slide 4: Recovery Plan progress
Recovery Plan progress Preserving liquidity - 2020 Restructuring and restart - 2021 Accelerating our recovery - 2022 • Acted swiftly to safely hibernate the business, • Successful restart of operations in a highly dynamic environment • Well-positioned as demand returns cut costs and preserve liquidi
Slide 5: Network and workforce management
Network and workforce management • Dynamic approach to domestic and international schedules required given Group Domestic Capacity Profile highly fluid demand environment – threefold increase in schedule changes (Monthly domestic capacity as a percentage of FY194) compared to pre-COVID1 120% Return
Slide 6: Recovery Plan benefits delivered $840m program to date, on track for $1b by FY23
Recovery Plan benefits delivered $840m program to date, on track for $1b by FY23 $1b in Recovery Plan Benefits Additional Transformation • $840m of recovery benefits delivered to date • Program includes cost initiatives only • Parallel focus on incremental • On target to deliver $1b by FY23 • >98% o
Slide 7: Supporting customers through a changing travel landscape
Supporting customers through a changing travel landscape • Record high Net Promotor Scores across all brands and most trusted airline in the region1 — Customers’ travel intentions for the next 12 months remains high – Domestic 96% and International 64%2 • Domestic Dual Brand strategy remains strong
Slide 8: Recovery Plan scorecard
Recovery Plan scorecard TARGET KEY AREA OF FOCUS METRICS TIMEFRAME AS AT 31 DECEMBER 2021 Restructuring cost benefits of $0.6b in FY21, $0.8b by FY22, $1.0b by FY23 FY23 Achieved $840m of cost benefits program to date Cost savings Increased target to at least 8,500 exits Group Unit Cost (ex-fuel and
Slide 9: ESG overview and commitments
ESG overview and commitments Environmental Social Governance Our Planet Our People Our Governance • The Group is strongly committed to building business • After supporting employees to gain secondary • The Board has ultimate responsibility for overseeing resilience to manage the significant physical
Slide 10: Recent environmental developments and what's ahead for 2022
Recent environmental developments and what’s ahead for 2022 August 2021 March 2022 April – June 2022 September 2022 • The Group appointed a Chief • The Group will release a sustainability • Further details will be provided on a • The Group will release a sustainability Sustainability Officer as part
Slide 11: Financial Performance
Financial Performance
Slide 12: 1H22 Key Group financial metrics
1H22 Key Group financial metrics Profit metrics Balance Sheet and Cash Flow metrics Other statistics (v 1H19) ($245)m $137m $4.3b (82%) Underlying EBITDA loss Operating cash flow Total liquidity ASKs5 ($1,129)m ($369)m $5.5b (89%) Underlying EBIT1 loss Net Capital Expenditure3, excluding Net Debt RP
Slide 13: 1H22 Profit Bridge compared to 1H19
1H22 Profit Bridge compared to 1H19 775 Manpower cost benefit $ 345 m 45 (50) 99 Other cost benefits $ 51 m (1,277) 497 Restructuring benefits 1 $ 396 m (6,493) 1,159 Selling & Marketing $ 355 m 841 Property $ 57 m Computer & Communication $ 32 m Capacity Hire $ 70 m Other $ (17) m 1,489 Other Expen
Slide 14: 1H22 movement in cash position
1H22 movement in cash position Net Free Cash Flow $552m (339) 112 (180) 2,705 754 Predominantly aircraft capitalised Predominantly (123) maintenance lease liability repayments 2,221 505 (245) Predominantly RRIA1 30 Jun 21 Underlying EBITDA Net working capital Interest Land Sale Investing Cash Net De
Slide 15: Segment Results
Segment Results
Slide 16: Qantas Domestic
Qantas Domestic • Prolonged lockdowns and border restrictions impacting Underlying EBITDA Pre-COVID 1H22 1H21 1H19 — Continued focus on cash positive flying, with 91% of flights cash positive1 — Costs impacted by 1Q22 stranded costs, unwind of COVID relief measures and restart Revenue $M 1,127 1,003
Slide 17: Qantas International (including Freight)
Qantas International (including Freight) • Record Freight profit1 supported by record international yields and continued growth in e- Pre-COVID 1H22 1H21 commerce 1H19 — International freighter yields remain strong (particularly CN-US2 and US-AU3) due to US Revenue $M 1,317 722 3,693 port constraint
Slide 18: Jetstar Group
Jetstar Group • ($243)m Underlying EBITDA loss driven by weakening leisure demand, partly offset by Pre-COVID 1H22 1H21 reduction in costs 1H19 — Demand impacted by Delta, Omicron, border restrictions and competitive pressures Revenue8 $M 394 384 2,048 — Cost reductions due to cost variabilisation a
Slide 19: Qantas Loyalty
Qantas Loyalty • Group cash contribution >$0.5b of gross receipts1 in 1H22; 2% growth in Underlying EBIT2 Pre-COVID 1H22 1H21 1H19 • Portfolio strategy delivering first half earnings growth — ~35% share of credit card spend maintained as spend on Qantas Points Earning Credit Revenue10 $M 485 438 809
Slide 20: Financial Framework
Financial Framework
Slide 21: Financial Framework will continue to guide our capital decisions
Financial Framework will continue to guide our capital decisions 1 2 3 Maintaining an optimal capital structure ROIC2 > WACC3 Disciplined allocation of capital through the cycle Minimise cost of capital by targeting Grow invested capital with disciplined a Net Debt range of $4.4b to $5.5b1 Deliver R
Slide 22: Maintaining an optimal capital structure
Maintaining an optimal capital structure Capital structure and liquidity Debt maturity profile as at 31 December 2021 ($M)1 • Net Debt2 at $5.5b, prioritising debt reduction • Total liquidity of $4.3b including $2.7b cash3 and committed undrawn facilities of $1.6b maturing in FY23 and FY24 • Unencum
Slide 23: Robust fuel and FX risk management
Robust fuel and FX risk management 1H22 fuel cost Fuel consumption (M’bbls) -74% • 1H22 fuel cost of $0.5b, down $1.5b compared to pre-COVID1 largely due to a 74% reduction in fuel consumption 16.4 Looking ahead 8.6 4.2 • FY22 fuel cost currently expected to be materially lower than pre-COVID2 but h
Slide 24: Operating cash flow and EBITDA trend
Operating cash flow and EBITDA trend Statutory EBITDA ($M)1 • Statutory EBITDA1 of $0.1b (excluding impairments and gain on sale of land in Mascot) for the 12 months to December 2021 Pre-COVID 3,244 3,376 3,376 • Operating cash flow of $0.6b for the 12 months to December 2021 — 1H22 operating cash f
Slide 25: Disciplined capital allocation
Disciplined capital allocation 1 Prioritise Balance Sheet strength — FY22: Target Net Debt1 within range — FY23 onwards: Target bottom half of Net Debt1 range Net Debt1 ($B) 1H22 return to 2 Invest to drive sustainable earnings growth and returns > WACC2 Target range1 held constant dynamic Net Debt1
Slide 26: Fleet strategic priorities
Fleet strategic priorities • Selection of Airbus as preferred supplier for Qantas Domestic narrow-body fleet renewal Right aircraft • Commencing delivery of aircraft in FY23 deferred due to pandemic Right route — Delivery of 3 x 787-9s and 2 x A321neos — Additional 7 non-deferred A321neos • A380s ri
Slide 27: Project Winton update
Project Winton update Overview • Airbus selected as preferred supplier for Domestic narrow-body renewal – First 40 aircraft includes 20 x A321XLR and 20 x A220 – Further 94 aircraft over 10+ years from FY24 • Once finalised, will be largest order in Australian aviation history, total delivery of 299
Slide 28: Outlook
Outlook
Slide 29: Group Domestic
Group Domestic FY22 Outlook Competitive Positioning • Group outlook assumes all state borders open, with Western Australia (WA) • Expect ~70% domestic market share once all border restrictions are lifted, delayed from 1 February 2022 to 3 March 2022 supported by dual brand, network breadth and frequ
Slide 30: Group International (including Freight)
Group International (including Freight) FY22 Outlook Competitive Positioning • Omicron has impacted border re-opening plans for a number of countries • Australia’s only long-haul premium and low cost international airlines with resulting in reduced Group International capacity extensive transformati
Slide 31: International bookings environment
International bookings environment Market characteristics • Moving past Omicron caseload peaks Group International Weekly Intakes2 As % of dollar intakes versus 2YP (2019) • Low border entry requirements Large Open Markets • Broad mix of VFR1, leisure and business flows Includes UK, USA, Canada, Sou
Slide 32: Qantas Loyalty
Qantas Loyalty FY22 Outlook Competitive Positioning • Travel related businesses continue to be affected by domestic and • Loyalty remains committed to its target of $500-600m Underlying EBIT by international border limitations FY24 — Rebound in earnings expected to lead travel industry recovery — Ex
Slide 33: FY22 Group Outlook
FY22 Group Outlook • Current operating expectations — Omicron impact on 2H22 Underlying EBITDA estimated at approximately $650m after mitigations — In addition, operating expenses for 2H22 expected to include approximately $180m of inefficiencies and ramp up costs — Continuing to manage the business
Slide 34: Integrated Portfolio is well-positioned for continued recovery
Integrated Portfolio is well-positioned for continued recovery Group Domestic1 airlines are well-positioned to benefit from the recovery in domestic travel and changing competitive environment; market share ~70%; significant unit cost reduction post restructuring Australia’s most valued Loyalty busi
Slide 35: Looking forward, we remain committed to the FY24 targets
Looking forward, we remain committed to the FY24 targets Qantas Jetstar Qantas Jetstar International Qantas Loyalty Domestic Domestic International Relative competitive Stable earnings growth Relative margin advantage Relative margin advantage Lowest cost position advantage Targeting EBIT margin1 ~1
Slide 36: Disclaimer
Disclaimer This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 24 February 2022, unless otherwise stated. Th
Slide 37: 1H22 Results Supplementary Presentation
1H22 Results Supplementary Presentation Qantas Airways Limited 24 February 2022 ASX: QAN US OTC: QABSY
Slide 38: Group Performance
Group Performance
Slide 39: 1H22 Key Group financial metrics
1H22 Key Group financial metrics Pre-COVID 1H22 1H21 Comments vs 1H19 1H1911 Underlying (Loss)/Profit Before Tax1 ($M) (1,277) (1,009) 775 Reduced flying, fixed costs, depreciation and COVID-19 lockdowns Underlying Earnings per Share2 (c) (49.6) (39.6) 31.3 Statutory (Loss)/Profit Before Tax ($M) (6
Slide 40: Underlying Income Statement summary
Underlying Income Statement summary Pre-COVID $M 1H22 1H21 Comments vs 1H19 1H192 Net passenger revenue 1,534 1,298 8,027 Movement largely in line with movement in passengers carried Increase driven by e-commerce trends and international belly space Net freight revenue 920 613 525 availability Other
Slide 41: Items not included in Underlying LBT
Items not included in Underlying LBT $M 1H22 Comments Redundancies incurred as part of the Recovery Plan not previously provided Recovery Plan restructuring costs (12) for in FY20 as well as other restructuring costs Reversal of impairment of assets and related costs 18 Largely the partial reversal
Slide 42: Reconciliation to Underlying (Loss)/Profit Before Tax
Reconciliation to Underlying (Loss)/Profit Before Tax $M 1H22 Pre-COVID 1H192 Statutory Items not included Underlying1 Statutory Items not included Underlying1 in Underlying in Underlying Net passenger revenue 1,534 - 1,534 8,027 – 8,027 Net freight revenue 920 - 920 525 – 525 Other revenue 620 - 62
Slide 43: Revenue detail – compared to Pre-COVID/1H19
Revenue detail – compared to Pre-COVID/1H19 Net passenger revenue down 81% Revenue ($B) • Group capacity declined by 82% due to COVID related border restrictions and community lockdowns -67% • Group Unit Revenue decreased 6% 9.2 – Group Domestic1 Unit Revenue decreased 33% – Group International2 Uni
Slide 44: Expenditure detail – compared to Pre-COVID/1H19
Expenditure detail – compared to Pre-COVID/1H19 Fuel down 76% Expenditure2 ($B) • Reduced consumption due to COVID related travel restrictions -49% • Lower AUD jet fuel prices 8.3 Manpower and staff-related down 39% • Decreased due to rightsizing and restructuring as part of the Recovery Plan progra
Slide 45: Impact of adoption of IFRIC Agenda Decision on Cloud Computing Arrangements
Impact of adoption of IFRIC Agenda Decision on Cloud Computing Arrangements • The adoption of IFRIC Agenda Decision on Cloud Computing Arrangements requires restatement of • The Group’s previous accounting policy had been to 1H21 and FY21 capitalise costs related to Cloud Computing Arrangements in l
Slide 46: IFRIC Agenda Decision – Restatement of Balance Sheet and Income Statement 1H21 and FY21
IFRIC Agenda Decision – Restatement of Balance Sheet and Income Statement 1H21 and FY21 Restated Consolidated Balance Sheet FY21 Impact of FY21 • Upon adoption, FY21 and 1H21 have been restated $M Reported Adoption Restated • FY21 intangible assets were reduced by $104m (recognised through Intangibl
Slide 47: Cash flow
Cash flow $M 1H22 1H21 • Operating cash flow of $137m driven by Operating cash flows 137 (861) — Underlying EBITDA loss of ($245)m Investing cash flows 415 (514) — Favourable net working capital and other movements (predominately RRIA2) of $505m Net free cash flow1 552 (1,375) — Net interest paid of
Slide 48: Revenue Received In Advance (RRIA)
Revenue Received In Advance (RRIA) Total Revenue Received in Advance ($B) • Future RRIA rebuild will be a result of capacity on sale, 5.9 6.0 load factors and average fares 5.8 0.3 5.4 0.3 0.3 5.0 4.9 0.3 • ~35% of pre-COVID1 held bookings rebuilt as at 31 0.2 0.2 1.4 December 2021 1.2 3.2 2.9 1.6 1
Slide 49: Invested Capital calculation
Invested Capital calculation As at 31 Dec As at 30 Jun As at 31 Dec $M 2021 20213 20203 Receivables (current and non-current) 895 633 735 • Aircraft financed via leases are Inventories adjusted as if they were owned, i.e. all 286 279 296 AASB16 accounting recognition and Other assets (current and no
Slide 50: Return on Invested Capital (ROIC) calculation
Return on Invested Capital (ROIC) calculation 12 mths to 12 mths to $M Dec 21 Dec 205 Underlying EBIT (1,739) (1,368) Add back: Lease depreciation under AASB 16 339 400 Less: Notional depreciation1 (106) (107) Less: Cash expenses for non-aircraft leases (224) (202) ROIC EBIT (1,730) (1,277) As at As
Slide 51: 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 average Invested Capital of $6.1b, optimal Net Debt range is $4.4b to $5.5b Dec 21 Jun 21 Dec 20 $B $B $B Invested Capital 6.1 6.6 7.5 Average Invested Capital for trailing 12 months 1
Slide 52: Net Debt and liquidity position
Net Debt and liquidity position As at As at $M Change4 31 Dec 21 30 Jun 21 Current interest-bearing liabilities on 952 969 17 Balance Sheet • Net Debt decreased by $0.4b for the 6 months to December 2021 Non-current interest-bearing liabilities 6,037 5,861 (176) on Balance Sheet — Borrowing activity
Slide 53: Net Debt movement consistent with Financial Framework
Net Debt movement consistent with Financial Framework $M 1H22 1H21 • The Financial Framework considers aircraft leases as part of Net Debt Opening Net Debt (5,890) (4,734) — Aircraft leases are initially recognised in Net Debt at fair value Net cash from operating activities 137 (861) — Principal po
Slide 54: Unit Cost breakdown
Unit Cost breakdown c/ASK 1H22 Total Unit Cost1 17.86 Excluding: Fuel (3.51) Impact of changes in the discount rate and other actuarial assumptions 0.22 Share of net (loss) of investments accounted for under the equity method (0.35) Ex-Fuel Unit Cost2 14.22 Excluding: Depreciation (6.06) Impairment
Slide 55: 1H22 Australian Government COVID-19 packages
1H22 Australian Government COVID-19 packages COVID-19 aviation industry support packages $M 1H22 • Federal Government support was provided chiefly in response to border closures Retaining Domestic Airline Capability (RDAC) 29 • Support tapered towards the end of 1H22 and will wind down in 2H22 as In
Slide 56: Group Fleet as at 31 December 2021
Group Fleet as at 31 December 2021 Aircraft Type 1H22 FY21 Change • Group fleet5 of 309 aircraft as at 31 December 2021 A380-8001 10 12 (2) • Movements in 1H22 include A330-200 18 18 - A330-300 10 10 - — Two A380-800s no longer returning to service 737-800 75 75 - — One A320-200 transferred from Jet
Slide 57: Supplementary Segment Information
Supplementary Segment Information
Slide 58: 1H22 Group and Group Domestic Traffic Statistics vs Pre-COVID
1H22 Group and Group Domestic Traffic Statistics vs Pre-COVID 1Q22 Pre-COVID Change (%) 2Q22 Pre-COVID Change (%) 1H22 Pre-COVID Change (%) 1Q19 2Q19 1H19 Qantas Group Operations Passengers carried (‘000) 2,153 14,103 (85) 3,253 14,397 (77) 5,406 28,500 (81) Revenue Passenger Kilometres (m) 2,790 32
Slide 59: 1H22 Group International Traffic Statistics vs Pre-COVID
1H22 Group International Traffic Statistics vs Pre-COVID 1Q22 Pre-COVID Change (%) 2Q22 Pre-COVID Change (%) 1H22 Pre-COVID Change (%) 1Q19 2Q19 1H19 Qantas International Passengers carried (‘000) 28 2,184 (99) 91 2,244 (96) 119 4,428 (97) Revenue Passenger Kilometres (m) 69 14,911 (100) 703 15,133
Slide 60: 1H22 Group and Group Domestic Traffic Statistics vs 1H21
1H22 Group and Group Domestic Traffic Statistics vs 1H21 1Q22 1Q21 Change (%) 2Q22 2Q21 Change (%) 1H22 1H21 Change (%) Qantas Group Operations Passengers carried (‘000) 2,153 1,647 31 3,253 3,268 (0) 5,406 4,915 10 Revenue Passenger Kilometres (m) 2,790 1,816 54 4,313 3,752 15 7,103 5,568 28 Availa
Slide 61: 1H22 Group International Traffic Statistics vs 1H21
1H22 Group International Traffic Statistics vs 1H21 1Q22 1Q21 Change (%) 2Q22 2Q21 Change (%) 1H22 1H21 Change (%) Qantas International Passengers carried (‘000) 28 - >100% 91 3 >100% 119 3 >100% Revenue Passenger Kilometres (m) 69 2 >100% 703 6 >100% 772 8 >100% Available Seat Kilometres (m) 154 2
Slide 62: Jetstar Group as at December 2021
Jetstar Group as at 31 December 2021 Jetstar Branded Airlines Ownership1 Launch Aircraft2 51 x A320s/A321s ❶ Jetstar Australia 100% 2004 2 x 787-8 9 x 787-8s ❷ Jetstar International 100% 2006 1 x A320 ❸ Jetstar New Zealand3 100% 2009 5 x A320s ❹ Jetstar Asia (Singapore) 49% 2004 13 x A320s ❺ Jetstar
Slide 63: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 2% growth1 in Qantas Frequent Flyer membership; 9% growth1 in QBR2 membership with >345,000 SME members3 • >600 program partners4 across Qantas Frequent Flyer and Qantas Business Rewards • Financi
Slide 64: Accounting for points – a lifecycle overview
Accounting for points – a lifecycle overview Qantas Loyalty generates a gross margin on both Gross margin is only generated on ‘external points’ Issuance and Redemption activity (unique compared to other airline loyalty programs) (Not to scale and for illustrative purposes only) Pre-COVID activity a
Slide 65: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for passengers, multiplied by the Net free cash flow – Net cash from operating activities less net cash used in investing activities number of kilometres flown (excluding aircraft lease refinancing) Block Hours – The time bet
Slide 66: Disclaimer
Disclaimer 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 24 February 2022, unless otherwise stated. Th