Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Day (May 2017)
129 slides from Qantas Airways's investor day presentation, May 5, 2017
Slide 1: Qantas Investor Day Presentation 2017
5 May 2017 For personal use only Companies Announcement Office Australian Securities Exchange 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Qantas Investor Day Presentation 2017 Attached is the Presentation to be given at the Qantas Investor Day today. Yours faithfully Andrew Finch Company Secreta
Slide 2: Investor Day 5 May 2017
For personal use only 5 MAY 2017 ASX: QAN US OTC: QABSY
Slide 3: Positioning the Qantas Group for Growth and Sustainable Returns
For personal use only New Group Image Positioning the Qantas Group for Growth and Sustainable Returns Alan Joyce, CEO Qantas Group
Slide 4: The Long-term Outlook for Global Passenger Growth Remains Robust
QANTAS GROUP OVERVIEW The Long-term Outlook for Global Passenger Growth Remains Robust Global airline profit1 in 2017 and 20-year passenger2 forecasts For personal use only Europe Middle East North America 2017 profit: $5.6b 2017 profit: $0.3b 2017 profit: $18.1b Passenger Growth: Passenger Growth:
Slide 5: The Qantas Group has Unique Competitive Advantages
QANTAS GROUP OVERVIEW The Qantas Group has Unique Competitive Advantages that Set Us Apart For personal use only $ Dual Brand Strategy to Structurally Advantaged Innovative Loyalty Positioned in Asia with Reputation for Operational Segment and Grow Markets Domestic Position Business with Valuable Pr
Slide 6: Providing a More Stable Earnings Base and Supporting Growth
QANTAS GROUP OVERVIEW Providing a More Stable Earnings Base and Supporting Growth For personal use only Group Earnings Profile1 Two highest-margin carriers operating in Australia Group International2 Generating >80% of domestic profit pool from <2/3 capacity share $ Continued Loyalty earnings growth
Slide 7: Having Come Through Transformation, the Group is in a Position of Strength
QANTAS GROUP OVERVIEW Having Come Through Qantas Transformation, the Group is in a Position of Strength For personal use only Return on Invested Capital of >20% (12 months to 31 Dec 2016) All segments delivering ROIC >10% Group Operating Margin2 On track to deliver $2.1b Transformation Program 12% 1
Slide 8: Recognising and Responding to Emerging Global Forces
QANTAS GROUP OVERVIEW Recognising and Responding to Emerging Global Forces will Ensure Qantas Continues to Maximise Opportunity and Mitigate Risk For personal use only New Centres of Customer Rapid Digitisation and Shifting Customer and Resource Constraints Demand and Geopolitical Disruption from Bi
Slide 9: Emerging Global Forces and Clear Strategic Priorities to FY20
QANTAS GROUP OVERVIEW Recognising and Responding to Emerging Global Forces Will Ensure Qantas Continues to Maximise Opportunity and Mitigate Risk For personal use only Understanding the Long-term Context New Centres of Shifting Customer Customer Demand Rapid Digitisation and Resource Constraints and
Slide 10: Safety is Always Our First Priority
QANTAS GROUP OVERVIEW Safety is Always Our First Priority For personal use only Committed to the ongoing safety and security of our operations • ‘World’s Safest Airline’ 4 years running1 • Encouraging our people to report risk through ‘Just Culture’ Continued focus on improving the safety and wellbe
Slide 11: Trust in the Qantas Brand is a Key Differentiator
QANTAS GROUP OVERVIEW Trust in the Qantas Brand is a Key Differentiator For personal use only Qantas has the highest level of trust compared to other major sectors in Australia1 Leads on almost all drivers of trust including: • Having a brand that is ‘well known and respected’ • For being ‘transpare
Slide 12: Maximising our Leading Domestic Position
QANTAS GROUP OVERVIEW Maximising our Leading Domestic Position FY18-FY20 For personal use only Domestic Market Capacity Peaked in FY141 Group Domestic Airlines targeting ROIC >10% through FY20 10% 90000 • Maintaining margin advantage to competitors 7.5% 89500 8% 89000 88500 • Holding corporate marke
Slide 13: Building a Resilient and Sustainable Qantas International
QANTAS GROUP OVERVIEW Building a Resilient and Sustainable Qantas International FY18-FY20 For personal use only Qantas International targeting ROIC >10% through FY20 • Realising cost and revenue benefit from 787-9 entry • Retiring older 747 fleet as 787-9s arrive • Growing capacity to Asia • Increas
Slide 14: Aligning Jetstar with Asia's Growth
QANTAS GROUP OVERVIEW Aligning Jetstar with Asia’s Growth FY18-FY20 For personal use only Jetstar International (AU-based) targeting ROIC >10% through FY20 • Leveraging 787-8 to grow point-to-point leisure markets in Asia • Feeding traffic between Jetstar Group airlines across Asia Pacific Jetstar a
Slide 15: Diversification and Growth at Qantas Loyalty
QANTAS GROUP OVERVIEW Diversification and Growth at Qantas Loyalty FY18-FY22 For personal use only Qantas Loyalty targeting 7-10% CAGR1 in earnings2 Qantas Loyalty EBIT2 ($M) through FY22: $500m - $600m2 7-10% CAGR New • Growing core Qantas Frequent Flyer and Business Businesses Rewards with member
Slide 16: Culture of Transformation for Ongoing Benefits Through FY20
QANTAS GROUP OVERVIEW We Will Continue to Embed a Culture of Transformation for Ongoing Benefits Through FY20 For personal use only Technology Supplier Targeting $400m gross annual benefits Utilisation + Group Initiatives to more than offset expected annual cost inflation of ~$250m Continuous Improv
Slide 17: We Will Continue to Invest in Our People
QANTAS GROUP OVERVIEW We Will Continue to Invest in Our People, Our Greatest Strength For personal use only Engagement Diversity Leadership and Talent • Top 10 companies to work for in • 35% of senior roles held by women • Investment in development and Australia1 training, across-Group careers • Enh
Slide 18: Balanced Scorecard to Measure Success to FY20
QANTAS GROUP OVERVIEW Balanced Scorecard to Measure Success to FY20 For personal use only Qantas Jetstar Qantas Jetstar Qantas Loyalty Domestic Domestic International International Stable earnings growth Relative margin advantage Relative margin advantage Relative competitive advantage Lowest cost p
Slide 19: Disciplined Application of Financial Framework
For personal use only Disciplined Application of Financial Framework Tino La Spina, Qantas Group CFO
Slide 20: Financial Framework Aligned with Shareholder Objectives
FINANCE Financial Framework Aligned with Shareholder Objectives For personal use only Maintaining an Optimal ROIC > WACC1 Disciplined Allocation 1. Capital Structure 2. Through the Cycle 3. of Capital Lowest cost of capital Deliver ROIC > 10%2 Grow invested capital with disciplined investment,
Slide 21: Maintaining an Optimal Capital Structure
FINANCE Maintaining an Optimal Capital Structure Lowest cost of capital For personal use only 1 Maintaining an Optimal Capital Structure Leverage and Liquidity 2 ROIC > WACC Funding Strategy 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 20
Slide 22: Maintaining an Optimal Capital Structure: Net Debt Target Range
FINANCE Maintaining an Optimal Capital Structure For personal use only • Net Debt Target Range = 2.0x – 2.5x ROIC EBITDAR where EBITDAR achieves a fixed 10% ROIC • At current Invested Capital of ~$9b, optimal net debt range is $4.8b to $6.0b • Targeting net debt to be within the range on a forward l
Slide 23: Leverage and Liquidity
FINANCE Maintaining an Optimal Capital Structure Leverage and liquidity For personal use only Optimal capital structure (net debt $4.8b - $6.0b) • Ensures access to diverse funding sources Debt Maturity Profile2 $M as at 31 December 2016 • Maintain no financial covenants Right-sized unsecured • Exte
Slide 24: Cost of Capital
FINANCE Maintaining an Optimal Capital Structure Cost of capital For personal use only Cost of net debt1 is reducing: Cost of Capital Curve 12% 11% 6.2% 5.6% 10% 9% Optimal FY15 FY17F Capital Structure 8% Further opportunities: 7% • Continue to optimise liquidity to minimise cost of Investment grade
Slide 25: FY18 Funding Strategy
FINANCE Maintaining an Optimal Capital Structure FY18 funding strategy For personal use only Reduce Reduce Optimise Lowers cost unencumbered surplus cash refinancing risk aircraft pool of capital Buy-out maturing operating leases where appropriate Extend operating leases where appropriate
Slide 26: Delivering ROIC > WACC
FINANCE Delivering ROIC > WACC For personal use only 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC Return on Invested Capital 3 Disciplined Allocation of Capital Risk Management 4 Total Shareholder Return Performance 25
Slide 27: Resilient Portfolio of Businesses all Returning ROIC > WACC
FINANCE Delivering ROIC > WACC Resilient portfolio of businesses all returning ROIC > WACC For personal use only Qantas Jetstar Qantas Jetstar Qantas Loyalty Domestic Domestic International International Stable earnings growth Relative margin advantage Relative margin advantage Relative competitive
Slide 28: Delivering ROIC > WACC Through the Cycle: Hedging
FINANCE Delivering ROIC > WACC Through the Cycle Reducing ROIC volatility through disciplined hedging program For personal use only Indicative Fuel and Foreign Currency Exposure Reducing Volatility of Earnings / Cash Flow Foreign Gross SHORT TERM TIME Currency Other Currency USD Net Receipts Receipt
Slide 29: Fuel Cost Price Sensitivity
FINANCE Delivering ROIC > WACC Through the Cycle 1H18 fuel cost - Price sensitivity (fuel and FX correlated) For personal use only 1,750 1,728 1,680 Hedging strategy designed to: 1,653 • Cap worst case 1H18 Fuel Cost (A$m)1 • Allow participation to falling prices 1,610 1,540 1H18 worst case total fu
Slide 30: Disciplined Allocation of Capital
FINANCE Disciplined Allocation of Capital For personal use only 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 29
Slide 31: Capital Allocation Framework Maximises Shareholder Value
FINANCE Disciplined Allocation of Capital Capital allocation framework maximises shareholder value For personal use only Capital allocation prioritised to: Capital Allocation Priorities • Debt reduction (where required) >$6.0B $6.0B $4.8B <$4.8B to achieve optimal capital structure Greater returns t
Slide 32: Fleet – Flexibility Maintained
FINANCE Disciplined Allocation of Capital Fleet – Flexibility maintained For personal use only Regional Competitor Fleet Ages2 Fleet Age1 as at December 2016 VARA3 ~15 years Alliance ~24 years REX ~23 years Qantas International Qantas Jetstar Qantas Domestic average fleet age of 10.5 Domestic averag
Slide 33: Total Shareholder Return Performance
FINANCE Total Shareholder Return Performance For personal use only 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 32
Slide 34: Total Shareholder Return Performance
FINANCE Total Shareholder Return Performance For personal use only • $1.63b in capital management since October 2015 Qantas Relative TSR Performance –Returned > $250m in dividends to shareholders Commencement of Transformation –Issued capital decreased by 17.7% since 100 October 2015 at an average c
Slide 35: Externally Recognised Financial Framework
Externally Recognised Financial Framework For personal use only S&P Global Ratings – 24 August 2016 “Underpinning the credit rating is the airline's prudent financial policy framework that we view favorably against Australian corporate and global industry peers. In our opinion, this framework approp
Slide 36: Transformation and Innovation
For personal use only Transformation and Innovation Rob Marcolina, Group Executive Strategy, Transformation and IT
Slide 37: Transformation and Innovation
TRANSFORMATION Transformation and Innovation For personal use only Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 36
Slide 38: Transformation Program Principles
TRANSFORMATION Transformation Program Principles For personal use only Set the bar high (targets and timeline) Focus on the ‘how’ versus the ‘what’ Link to the bottom line Centralise program management Embed a cost-conscious culture Bring our people along the journey Improve customer proposition 37
Slide 39: Transformation Program Scorecard
TRANSFORMATION Transformation Program Scorecard For personal use only TARGET METRICS TIMEFRAME PROGRESS TO DATE $2b Benefits, extended to $2.1b FY17 $2.0b benefits realised Accelerated >10% Cost Group Ex-fuel expenditure reduction1 Ex-fuel expenditure down by 10%2 Transformation Benefits 5,000 FTE r
Slide 40: Transformation Program Major Outcomes
TRANSFORMATION Transformation Program Major Outcomes Example structural changes made during Transformation Program For personal use only • Heavy base maintenance consolidation (3 into 1) Transformation Benefits Categories1 • Contact centres consolidation (4 contact centres into 2) 13% 19% • 717 Oper
Slide 41: Transformation Going Forward
TRANSFORMATION Transformation Going Forward FY18-FY20 targeting average annual gross benefit of $400m, offset by ~$250M in cost For personal use only base inflation, to ensure Qantas remains competitive Owned Business Unit ownership, centrally supported Shared Working together towards a common goal
Slide 42: Ongoing Transformation Themes
TRANSFORMATION Ongoing Transformation Themes For personal use only Continuous Technology Supplier Utilisation Indirect Costs Group Initiatives Improvement ~$100m ~$75m ~$75m ~$75m ~$25m ~$50m • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead • Consolid
Slide 43: FY18 Transformation Status
TRANSFORMATION FY18 Transformation Status For personal use only Well Positioned to Achieve FY18 Target FY18 Key Initiatives • 787-9 fleet introduction • Group travel website for Asian Development • Fuel Burn Program markets Development Development • Operations centre optimisation • Freight Air Lease
Slide 44: Transformation Summary
TRANSFORMATION Transformation Summary For personal use only Continue to drive competitive margin Strong pipeline of initiatives and funnel of ideas Embedded process and culture 43
Slide 45: Transformation and Innovation
TRANSFORMATION Transformation and Innovation For personal use only Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 44
Slide 46: Innovation - it all began with AVRO
Avro Pic to be provided For personal use only Innovation - it all began with AVRO 45
Slide 47: Qantas has a Long History of Innovation
INNOVATION Qantas has a Long History of Innovation Successfully executing across multiple horizons For personal use only Core Innovation Adjacent Innovation Disruptive Innovation Inflatable life rafts Business class 46
Slide 48: Innovation will Continue to be Important to Competitive Advantage
INNOVATION Innovation will Continue to be Important to Drive Long-term Competitive Advantage For personal use only Core Adjacent and Disruptive Next-gen aircraft and Personalised service “Smart” operations Market and business model product and experience extensions • Flight planning futures • A320ne
Slide 49: Internal and External Sources of Innovation
INNOVATION Both Internal and External Sources of Innovation will be Leveraged, while Making Investments in Key Enablers For personal use only Internal Innovation External Innovation APPROACH Build Partner Co-Develop Invest Buy Leverage internal capability Accelerate growth efforts Leverage external
Slide 50: The AVRO Accelerator
INNOVATION A Key Pillar of the External Innovation Strategy is the AVRO Accelerator1 For personal use only Objectives Themes Potential Outcomes • Access early insights into key trends and • Platform to attract promising early-stage emerging technologies technology businesses • Extension of R&D effor
Slide 51: Transformation and Innovation
TRANSFORMATION Transformation and Innovation For personal use only Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 50
Slide 52: Brand and Marketing as a Competitive Advantage
For personal use only Brand and Marketing as a Competitive Advantage Olivia Wirth, Group Executive Brand, Marketing and Corporate Affairs
Slide 53: Group Multi-brand Structure
BRAND AND MARKETING Group Multi-brand Structure Targeted to diverse customer segments and marketplace For personal use only Australia New Zealand Singapore Vietnam Japan Premium business and 11.7 million members Price sensitive segment leisure travel segment 52
Slide 54: Placing the Customer at the Centre of our Thinking
BRAND AND MARKETING Placing the Customer at the Centre of our Thinking Breadth and depth of data and insights are a key competitive advantage For personal use only Web, mobile and social Customer flying behaviour media interactions Frequent Flyer Profiles 30 years of data history 8m visits per week
Slide 55: Net Promoter Score Global Benchmarking
BRAND AND MARKETING Net Promoter Score Global Benchmarking Methodology For personal use only What is NPS? DETRACTORS PASSIVES PROMOTERS • NPS or Net Promoter Score is a global brand benchmarking model of customer advocacy • It is embedded into operations of Qantas and Jetstar • Enables continuous fe
Slide 56: A New Look for The Spirit of Australia
BRAND AND MARKETING A New Look for The Spirit of Australia A new era for Qantas For personal use only 1944 - 1947 1947 - 1968 1968 - 1984 1984 - 2007 2007 Today 55
Slide 57: Evolving and Cohesive Brand Campaign
BRAND AND MARKETING Evolving and Cohesive Brand Campaign Reconnecting with Australians For personal use only • ‘Feels like Home’ brand campaign launched in November 2014, with follow up campaigns in 2015 and 2017 • Customer insights led proposition to re-connect emotionally with Australians • Campai
Slide 58: Consistency in Qantas Brand Message Maintained
BRAND AND MARKETING Consistency in Qantas Brand Message Maintained Successful ‘Home’ and ’Belonging’ emotional connection continues For personal use only 57
Slide 59: Brand is What You Do, Not Just What You Say
BRAND AND MARKETING But Brand is What You Do, Not Just What You Say ‘Qantas did, not just said’ For personal use only Customers People Community and Partnerships • Launched fast, free inflight Wi-Fi, • Top 10 companies to work for in Australia1 • Continued extensive support across including new part
Slide 60: Digital and Data Marketing Capabilities are Transformed
BRAND AND MARKETING Digital and Data Marketing Capabilities are Transformed Enabling personalised communications and customer experiences For personal use only Integrated data and digital offering • Cross channel co-ordination and personalisation across digital ecosystem • More than 70% of Qantas’ m
Slide 61: Jetstar Brand Leadership, Clarity and Consistency
BRAND AND MARKETING Jetstar Brand Leadership, Clarity and Consistency Maintaining our leadership low cost carrier position For personal use only Over 200 million passengers since launch1 • An Australian brand leading the way across Asia-Pacific • The market leader on price perception • Brand strengt
Slide 62: One Brand, Local Market
BRAND AND MARKETING One Brand, Local Market For personal use only 61
Slide 63: Jetstar Brand Preference and Positive Perceptions
BRAND AND MARKETING Jetstar Brand Preference and Positive Perceptions Jetstar maintaining strong position in low-cost market For personal use only Flyer attitudes and perceptions YTD 20172 Australia Australia April 20172 #1 Most preferred LCC1 in Australia for domestic and international 79% Leading
Slide 64: Qantas Experience and Perceptions Continue to be Strong
BRAND AND MARKETING Qantas Experience and Perceptions Continue to be Strong Investing and focusing on our customers and brand For personal use only Flyer attitudes and perceptions YTD 2017 Mar 20171 Iconic Brand Domestic 96% Perceive Qantas as an iconic +64% Perceived best Business Australian compan
Slide 65: Qantas is in a Unique Position as a Big Business in Australia
BRAND AND MARKETING Qantas is in a Unique Position as a ‘Big Business’ in Australia Trust in Brand is a key competitive advantage For personal use only Q. Thinking about: Qantas Airways. How do you feel they perform on each of the following attributes? Please give a rating where ‘1’ means you think
Slide 66: Brand and Marketing Summary
BRAND AND MARKETING Summary For personal use only • Number one preferred premium airline brand and low fare brand in Australia1 • Data and Digital transformation to drive engagement and revenue uplift • Customer insights driving strategy across Insert picture that product and marketing represents th
Slide 67: Qantas Loyalty: Innovation Led Growth
For personal use only Qantas Loyalty Innovation Led Growth Lesley Grant, Qantas Loyalty CEO
Slide 68: The Evolution of Our Airline Loyalty Program
QANTAS LOYALTY The Evolution of Our Airline Loyalty Program For personal use only a lifestyle brand and Qantas airline loyalty program rewarding members across Loyalty multiple categories and touchpoints 67
Slide 69: Qantas Loyalty is More than just Qantas Frequent Flyer
QANTAS LOYALTY Qantas Loyalty is More than just Qantas Frequent Flyer It is one of the world’s most diverse airline loyalty businesses For personal use only Qantas Loyalty Business White Qantas Loyalty Opportunities Label Credit Card Life Partners Health Travel Financial Services Retail Rewards - Ma
Slide 70: Qantas Loyalty has Advantaged Assets and Capabilities
QANTAS LOYALTY Qantas Loyalty has Advantaged Assets and Capabilities that are Unique Amongst Australian Companies For personal use only • 11.7M members 50% of Australian households1 • Trusted brand • 147K+ SMEs • Advocacy 30pts premium over competitors5 Members Brand • Proven ability to stretch acro
Slide 71: Qantas Loyalty's Coalition Program
QANTAS LOYALTY Qantas Loyalty’s Coalition Program For personal use only • >120 billion points earned by members last year • ~8,000 products on the Qantas Store • Partnerships with all 4 major banks 220+ Coalition partners • 35% of credit card spend in Australia is Qantas Mall on Qantas co-branded cr
Slide 72: External Points Sales
QANTAS LOYALTY External Points Sales Influencing customer behaviour, driving commercial outcomes for partners For personal use only Core Points Sales – Generates Points Margin Margin is Only Generated on ‘External Points’ (Unique to other airline loyalty programs) Internal ~40% Price = cost Qantas,
Slide 73: Coalition Effect is a Key Growth Driver
QANTAS LOYALTY ‘Coalition Effect’ is a Key Growth Driver – Providing a Multiplier Benefit For personal use only Breadth of program engagement multiplies points on offer Generating an uplift in partner earn Number of Level of Number of loyalty Use of loyalty members members’ participants affiliated p
Slide 74: Growing the Coalition through Personalisation and Engagement
QANTAS LOYALTY Growing the Coalition through Personalisation and Active Member Engagement For personal use only • Qantas Frequent Flyer: Australian population growth + evolve offer for underpenetrated segments Member growth • Qantas Business Rewards: SME penetration including partner focus • Simplif
Slide 75: New Businesses to Grow and Strengthen Qantas Loyalty
QANTAS LOYALTY New Businesses to Grow and Strengthen Qantas Loyalty – Core Criteria For personal use only New Businesses Financial Health and Services Wellness • Market attractiveness • Latent disruption potential • Relative applicability of Qantas Loyalty’s assets and capabilities Data and Retail M
Slide 76: Financial Services is Adapting to Market Changes
QANTAS LOYALTY Financial Services is Adapting to Market Changes With growth beyond regulatory impact For personal use only Qantas co-branded credit cards Interchange reset impacting short term growth, • Partnerships with all four major Australian banks but new offers to maintain growth beyond regula
Slide 77: Financial Services – White Label Credit Card
QANTAS LOYALTY Financial Services – Introducing Qantas Loyalty’s Next Venture: White Label Credit Card For personal use only Rewarding for our members • Uncapped earning potential • Special Qantas travel benefits • Innovative app to track your money Qantas white label Platinum credit card • Customer
Slide 78: Health and Wellness – Qantas Assure
QANTAS LOYALTY Health and Wellness – Qantas Assure Innovation in the insurance market For personal use only Strategy Business Model Points costs Share of Brand Contribution Insurance Marketing and Sales Costs Premiums Operating costs (Breakeven in June 2017) Insights Digital Rewards Wellness Program
Slide 79: Data and Marketing
QANTAS LOYALTY Data and Marketing – One of the Most Valuable Data Sets in Australia, with Advanced Analytics Capability For personal use only Holistic Data Sets and Unique Abilities Business Model Media LEAD INDICATOR Services Partnerships Revenue OF PURCHASE INTENT DEMOGRAPHICS and Web, content, so
Slide 80: Qantas Loyalty – Strategically Positioned for Growth
QANTAS LOYALTY Qantas Loyalty – Strategically Positioned for Growth For personal use only Qantas Loyalty will continue to innovate Qantas Loyalty EBIT2 ($M) and diversify for stable, non-cyclical $500m - $600m2 earnings growth through the cycle 7% - 10% CAGR1 New Businesses Integral to achieving thi
Slide 81: Continuing to Win in the Australian Domestic Market
For personal use only Continuing to Win in the Australian Domestic Market Andrew David, Qantas Domestic CEO
Slide 82: Delivering a Sustainable Competitive Advantage in the Domestic Market
QANTAS DOMESTIC Delivering a Sustainable Competitive Advantage in the Domestic Market For personal use only • Flexibility to move capacity and adjust gauge across domestic and international networks • Established corporate customer relationships • Improved proposition to SME customers • Record and i
Slide 83: Strategy Focused on Margin Advantage
QANTAS DOMESTIC Strategy Focused on Margin Advantage Five strategic pillars For personal use only Rigorous and proactive capacity management Qantas Domestic Margin1 Advantage Leadership in corporate, SME and premium leisure markets 8.2pts 1H16 Relentless drive for cost efficiency 1H17 12.9% 12.7% Co
Slide 84: Rigorous and Proactive Capacity Management
QANTAS DOMESTIC Rigorous and Proactive Capacity Management Mitigating resource exposure and pursuing opportunity For personal use only Mitigating Resource Market Exposure Maximising East Coast1 Opportunity Passenger Revenue Decline ($M) Passenger Revenue Improvement ($M) FY16 v FY15 (55) FY15 v FY14
Slide 85: Using Fleet Flexibility to Optimise Utilisation
QANTAS DOMESTIC Rigorous and Proactive Capacity Management Using fleet flexibility to optimise utilisation For personal use only 737 and A330 redeployed internationally A330-200 / 271 seats F100 / 100 seats Q300 Q400 / 74 seats redeployed 737-800 / 174 seats to Jetstar NZ 737 Q300, Q200 / 36-50 seat
Slide 86: Maintaining Network and Schedule Advantage
QANTAS DOMESTIC Rigorous and Proactive Capacity Management For personal use only 42% more peak hour capacity1 47% more capacity on 34% more Melbourne – frequencies1 Sydney2 43% more departures from capital city ports2 Maintaining network and schedule advantage supports revenue premium 1. Qantas Dome
Slide 87: Leadership in Corporate, SME and Premium Leisure
QANTAS DOMESTIC Leadership in Corporate, SME and Premium Leisure Reinforcing our position in our three target segments For personal use only Improving corporate position ~$2 billion • Maintaining and growing corporate share Corporate market1 • Offering the right product and services at the right tim
Slide 88: Launch of Qantas Business Rewards
QANTAS DOMESTIC Leadership in Corporate, SME and Premium Leisure Launch of Qantas Business Rewards For personal use only Qantas Points for Business from the first flight Since launch in February 2017 More rewards the • 14% increase in businesses more you fly with three levels of using the program be
Slide 89: Relentless Drive for Cost Efficiency
QANTAS DOMESTIC Relentless Drive for Cost Efficiency Evolving the Qantas Domestic transformation levers For personal use only Technology Supplier Utilisation Continuous Indirect Costs Improvement • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead Contin
Slide 90: Continued Investment in Customer Experience
QANTAS DOMESTIC Continued Investment in Customer Experience Combining product and service with technology For personal use only Lounges and Onboard Digital and Personalisation Disruption Management Onboard Wi-Fi • Brisbane Business Lounge Making it easy for customers • Industry-first system design •
Slide 91: Achieving Record Customer Advocacy
QANTAS DOMESTIC Continued Investment in Customer Experience Achieving record1 customer advocacy For personal use only Qantas Domestic NPS2 vs Competitor Network and Schedule Qantas Domestic Competitor +34pts compared to Product and Service competitor in March 17 On Time Performance Disruption Manage
Slide 92: Engaging Our People: Brisbane Heavy Maintenance
QANTAS DOMESTIC Engaging Our People for Continuous Improvement Case example: Brisbane heavy maintenance For personal use only Key Transformation Principles Touch time increased from 33% to 45% Build Community from Within Heavy maintenance completed in 5.6 weeks Build Leadership Capability (one week
Slide 93: Sustaining Margin Advantage to Deliver Superior ROIC
QANTAS DOMESTIC Sustaining Margin Advantage to Deliver Superior ROIC Performance For personal use only Strong foundation for Qantas Domestic Qantas Increasing Margin Advantage1 25% • 14% Unit Revenue premium to competitor1 22% • Closed the cost gap to competitor to 3%1 20% 18% 18% • Record levels of
Slide 94: Building a Sustainable Competitive Advantage from Our Home Market
For personal use only Building a Sustainable Competitive Advantage from Our Home Market Gareth Evans, Qantas International and Freight CEO
Slide 95: Continued Delivery Against Clearly Defined Strategy
QANTAS INTERNATIONAL Continued Delivery Against Clearly Defined Strategy For personal use only 1 Unwavering commitment to meeting our customers’ needs 2 A fit and competitive business through Transformation Building a sustainable competitive advantage 3 from our home market 4 Targeting ROIC > 10% 94
Slide 96: Building a More Resilient and Sustainable Qantas International
QANTAS INTERNATIONAL Building a More Resilient and Sustainable Qantas International For personal use only A business in need A fit and competitive of transformation Qantas International • High cost base vs peers • >$800m in Transformation benefits • Over-exposed to challenged markets • Capacity redi
Slide 97: A Fit and Competitive Business with Unwavering Customer Focus
QANTAS INTERNATIONAL A Fit and Competitive Business with an Unwavering Customer Focus For personal use only Unit Cost (ex Fuel)4 -12% > $1b EBIT1 Forecast to be delivered +30% Revenue Contribution through from FY15 - FY17 from partners2 strategic partnerships 2014 2017 36% Capacity Focused on high -
Slide 98: An Improved Competitive Position
QANTAS INTERNATIONAL An Improved Competitive Position For personal use only • Established revenue premium to competitors out of Australia Qantas International Margin Performance is Strong Against Key Competitors in Asia3 –Strong Loyalty proposition –Iconic brand with rejuvenated customer offering –N
Slide 99: Ongoing Transformation Themes
QANTAS INTERNATIONAL Ongoing Transformation Themes For personal use only Continuous Technology Supplier Utilisation Indirect Costs Improvement • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead Continue and rationalise • Spend monitoring • Dual brand pr
Slide 100: Building a Sustainable Competitive Advantage from our Home Market
QANTAS INTERNATIONAL Building a Sustainable Competitive Advantage from our Home Market For personal use only Fleet Renewal Network and Grow with Asia Strategic Airline Own the High-Yield Hub1 Evolution Partnerships Customer 1. Perth hub commences March 2018. 99
Slide 101: Fleet Renewal: Cost Efficiency and Premium Configuration of 787-9
QANTAS INTERNATIONAL Fleet Renewal: Cost Efficiency, Smaller Gauge and Premium Configuration of 787-9 Drives Margin Improvement For personal use only Cost Efficiency1 Revenue Optimisation 787-9 provides significant margin improvement ~20% saving Increased mix of premium seats2 in fuel consumption co
Slide 102: Fleet Renewal: Next Generation Aircraft Drives Earnings Stability
QANTAS INTERNATIONAL Fleet Renewal: Next Generation Aircraft Drives Earnings Stability For personal use only Current Widebody Aircraft ASK1 Mix 787-9 MEL-LAX December 2017 First 4 787-9 PER-LHR March 2018 32% Twin engine 747 Quad engine - Retire 747 x 2 68% A380 2 x A380 for growth to Asia + and sea
Slide 103: Network and Hub Evolution: East and West Coast Hubs
QANTAS INTERNATIONAL Network and Hub Evolution: Unique East and West Coast Hubs For personal use only Increased capacity to high-growth Asia markets • Delivers seasonal A380 capacity growth Premium product to LAX Gateway • Same aircraft service from Perth to US • Improved product to premium, growing
Slide 104: Network and Hub Evolution: Repositioned Capacity
QANTAS INTERNATIONAL Network and Hub Evolution: Qantas International has Repositioned Capacity in Response to Shifting Global Traffic Flows For personal use only UK1 Asia1 N. America Other2 -15pts +10pts +4pts +1pt FY12 Qantas FY18 (4 x 787-9)3 International Capacity 28% 40% 36% 11% 32% 10% 30% 13%
Slide 105: Growing with Asia: Direct Services to Business Hubs
QANTAS INTERNATIONAL Growing with Asia: Increasing Qantas Direct Services to Major Business Hubs in Asia For personal use only PEK TYO Daily services from Sydney, Melbourne and Brisbane into major PVG business hubs of Singapore, Hong Kong and Tokyo HKG BKK MNL New Beijing service linking Australia t
Slide 106: Growing with Asia: Capitalise on Australia China Growth
QANTAS INTERNATIONAL Growing with Asia: Three-pronged Strategy to Capitalise on Australia China Growth For personal use only 4 3.2m 26% China Southern codeshare PEK 20 Cathay Group markets cities beyond beyond Hong Kong NKG China inbound visitors of total inbound visitor Guangzhou PVG to Australia i
Slide 107: Strategic Airline Partnerships: Growth of Codeshare Partners
QANTAS INTERNATIONAL Strategic Airline Partnerships: Growth of Codeshare Partners for Efficient Expansion and Support of Qantas-operated Services For personal use only Two-way Billings Growth6 110 54 68 2013-2016 codeshare codeshare codeshare destinations destinations destinations in the in EMEA2 in
Slide 108: Growth of Cornerstone Emirates Alliance
QANTAS INTERNATIONAL Strategic Airline Partnerships: Growth of Cornerstone Emirates Alliance For personal use only Qantas-Emirates Alliance Passengers (m) 2.2m • Partnership passengers, +104%1 +104% 114% • Increase in total partnership billings to >$1b2 2.2 1.1 134% • Growth in Frequent Flyer flight
Slide 109: Revenue Growth Supported by Increased Partner Contribution
QANTAS INTERNATIONAL Strategic Airline Partnerships: Revenue Growth Supported by Increased Partner Contribution For personal use only Qantas Revenue Associated with Airline Partners ($B)1 Partner Airlines growing as an important distribution channel for Qantas +30% • 35%2 increase in partner sales o
Slide 110: Owning the High Yield Customer
QANTAS INTERNATIONAL Owning the High Yield Customer: Continued Investment to Maintain Record Customer Advocacy For personal use only Technology-enabled Innovative Onboard Global Lounge Program Award-winning Service Journeys Product Qantas continues to be recognised in leading global airline awards 1
Slide 111: Owning the High Yield Customer: Record Customer Advocacy
QANTAS INTERNATIONAL Owning the High Yield Customer: Record Customer Advocacy For personal use only Qantas International NPS1 Overall Flight Experience Network and Schedule +23pts Product and Service compared to January 2012 Frequent Flyer Program Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 1. Net Pro
Slide 112: Qantas International Summary
QANTAS INTERNATIONAL Summary For personal use only Qantas International has addressed its competitive disadvantages • Transformation of cost base and operating model • Network redesign to advantaged markets • Partnerships with leading global airlines • Consistent customer experience Building a susta
Slide 113: A Profitable and Winning Model for Growth
For personal use only A Profitable and Winning Model for Growth Jayne Hrdlicka, Jetstar Group CEO
Slide 114: The Jetstar Group Model to Drive Sustainable Competitive Advantage
JETSTAR GROUP The Jetstar Group Model to Drive Sustainable Competitive Advantage For personal use only Cost Discipline • Robust, proprietary Jetstar LCC model Ancillary Network • Delivers both customer service and low cost Innovation Strength • Over twelve years of experience delivering safe operati
Slide 115: Strong, Independent Jetstar-branded Airlines
JETSTAR GROUP Strong, Independent Jetstar-branded Airlines For personal use only Australia • Commercial and operational decisions driven by local CEO and Board International New Zealand • The right local, strategic shareholders for each market Jetstar • Combination of Jetstar and local partners’ sca
Slide 116: Substantial Jetstar Footprint Throughout Asia Pacific
JETSTAR GROUP Substantial Jetstar Footprint Throughout Asia Pacific For personal use only 200M+ passengers since inception 82 destinations 16 countries 177 routes 129 aircraft 51% aircraft in Asia and New Zealand Note. Relates to the combination of Jetstar Airways, Jetstar Asia, Jetstar Pacific and
Slide 117: Maximising Jetstar's Leading LCC Position in Australia
JETSTAR GROUP Maximising Jetstar’s Leading LCC Position in Australia For personal use only Jetstar Holds a Significant Margin Advantage1 Strong Sustainable Advantages Clear brand and customer leadership 13pts 15% Network depth and breadth 14% Dual brand sophistication 6% 2% Network agility – making
Slide 118: Extending Successful Model for Jetstar in New Zealand
JETSTAR GROUP Extending Successful Model for Jetstar in New Zealand For personal use only • Compelling brand position, providing choice and accessibility –Strong network serving leisure and business customers –Largest direct Government contract in Jetstar history –Successful launch of product for sm
Slide 119: Jetstar International Delivering Record Results
JETSTAR GROUP Jetstar International Delivering Record Results1 For personal use only Strong Sustainable Advantages Jetstar Group Flies Where Australians Want to Travel Brand and point-of-sale strength Australia Outbound – outbound leisure Top 10 Destinations2 1 New Zealand 8 6 Brand strength in key
Slide 120: Jetstar in Asia: Profitable and Delivering Growth
JETSTAR GROUP Jetstar in Asia: Profitable and Delivering Continued Significant Growth For personal use only • Jetstar Singapore supporting over 25 Interline and 5 codeshare partnerships • Jetstar Japan continuing to grow and develop the “low fares” segment and expanding international network • Jetst
Slide 121: Jetstar Group Airlines Benefitting from Surging China Tourism
JETSTAR GROUP Jetstar Group Airlines Benefitting from Surging China Tourism For personal use only • Jetstar Group airlines strategically well positioned China Outbound: Top 10 Destinations in Asia Pacific1 –High growth potential in underserved market Bubble size represents Chinese 1M segments Outbou
Slide 122: Jetstar Japan Well Placed to Capture Growth
JETSTAR GROUP As Largest Domestic LCC, Jetstar Japan is Well Placed to Capture Growth and Could Ultimately be Larger than Jetstar Australia For personal use only • Japan is the third largest aviation market in the world1 Market share: Japan Domestic –Stable, profitable domestic market LCC 7% Other –
Slide 123: Relentless Focus on Driving Continuous Cost Reduction
JETSTAR GROUP Relentless Focus on Driving Continuous Cost Reduction D ¥ $ For personal use only • Continuous cost reduction program has contributed $300M+ over three years • Focused investment in technology delivering improved customer experience and lower cost –Aircraft: 787-8s and A320neos –Digita
Slide 124: Digital Transformation and Innovative Partnerships
JETSTAR GROUP Digital Transformation and Innovative Partnerships Enabling Customer Experience and Revenue Growth For personal use only Digital transformation upgrading customer experience • New Jetstar.com is up to 4 x faster than our competitors’ sites1 • 60% of our customers use digital check-in o
Slide 125: Jetstar: a Winning and Profitable Model
JETSTAR GROUP Jetstar: a Winning and Profitable Model with Significant Growth Potential For personal use only Strong foundation for Jetstar Group • Highest margins in market1, driving continuous performance improvement • Key markets, well placed strategically • Digital and data innovation enhancing
Slide 126: CEO Summary
For personal use only New Group Image CEO Summary Alan Joyce, CEO Qantas Group
Slide 127: The Qantas Group is Strongly Positioned for Growth and Sustainable Returns
CEO SUMMARY The Qantas Group is Strongly Positioned for Growth and Sustainable Returns For personal use only • Structurally advantaged position in growing Domestic profit pool • Restructured Qantas International delivering ROIC > 10% • Continued momentum of Jetstar Group across Asia Pacific • Qantas
Slide 128: A Balanced Scorecard to Measure Success to FY20
CEO SUMMARY A Balanced Scorecard to Measure Success to FY20 For personal use only Group Return on Invested Capital to exceed 10% Sustainable returns to shareholders 127
Slide 129: Disclaimer and ASIC Guidance
Disclaimer and ASIC Guidance For personal use only This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). An investment in Qantas shares is subject to investment and other known and unknown risks, some of which are beyond the control of the Qantas Group, includi