Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2019 Earnings Presentation
32 slides from Qantas Airways's earnings presentation, Aug 22, 2019
Slide 1: Qantas Airways Limited FY19 Results
Qantas Airways Limited FY19 Results 22 August 2019 ASX:QAN US OTC:QABSY
Slide 2: FY19 Highlights
FY19 Highlights Revenue strength offset fuel cost increases • FY19 Underlying Profit Before Tax (PBT)1 $1,302m, Statutory PBT $1,265m • Statutory EPS 55 cps, Underlying EPS2 56 cps • Continued strong Group Return on Invested Capital (ROIC) of 18.4%3, all segments delivering ROIC > WACC4 • Record5 Qa
Slide 3: Integrated Portfolio Provides a Stable Earnings Base
Integrated Portfolio Provides a Stable Earnings Base Maximising leading Dual Brand Domestic position through network Operating Segment EBIT4 ($M) leadership and customer focused investments 2,000 Group Group Domestic1 Underlying EBIT of $1,034m supported by International $ 1,600 Group Group proactiv
Slide 4: FY19 Key Group Financial Metrics
FY19 Key Group Financial Metrics Underlying PBT1 EPS3 12 Month ROIC% Cash Flow $1,302m Underlying 56c $2,807m Down $263m2 Down 11%2 Operating cash flow, Down $606m (Fuel costs up $614m) 18.4% > WACC4 Statutory PBT Statutory 55c $1,244m $1,265m Flat Net free cash flow5, Down $198m Unit Revenue6 Ex-fu
Slide 5: FY19 Profit Bridge
FY19 Profit Bridge Underlying Profit Before Tax ($M) 670 1,565 76 Net (80) Freight Revenue (154) 1,392 (10) (90) 1,302 Ticketed (614) 594 Passenger (250) 265 Revenue2 Non-cash Fuel efficiency benefits4 $ 38m Net Revenue benefits5 $ 149m Non-fuel cost reduction $ 265m Transformation benefits $ 452m F
Slide 6: Operating Cash Flow Trend
Operating Cash Flow Trend Statutory EBITDA ($M)1 Operating Cash Flow ($M) 1H 2H 1,734 1,679 1,531 1,553 2,867 3,062 3,115 1,373 1,446 1,254 2,752 1,173 FY16 FY17 FY18 FY19 2 FY16 FY17 FY18 FY19 • Stable Statutory EBITDA1; Quality of earnings remains strong • Recommenced the payment of Australian com
Slide 7: Maximising Leading Dual Brand Domestic Position
Maximising Leading Dual Brand Domestic Position Dual Brand strategy at the core of the Group’s portfolio strength Group Domestic Unit Revenue Growth4 >$1b Group Domestic1 Underlying EBIT of $1,034m in FY19 Market Capacity Growth 5 Group Domestic Unit Revenue growth 6.8% 4.4% 0.7% 0.0% 0.1% 0.0% 4.1%
Slide 8: Building a Resilient Qantas International
Building a Resilient Qantas International Airline Group Operating Margin3 Underlying EBIT in FY19 down $113m1 as increased revenue partially $285m offset increases in costs. Fleet and network transition building resilience 10.9% Japan Airlines 11.5% Increase in Unit Revenue compared to FY182, fleet
Slide 9: Segment Results
Segment Results Yacantas GROUP
Slide 10: Qantas Domestic
Qantas Domestic • Underlying EBIT of $740m, Unit Revenue up 5.0%1 in FY19 FY18 FY19 VLY %1 (Restated) – More than offset fuel cost increases Revenue $M 6,106 5,945 2.7 – Partially offset FX impacts on non-fuel costs – Market capacity in line with demand Underlying EBIT $M 740 765 (3.3) – Grew share
Slide 11: Qantas International
Qantas International1 • Strong Unit Revenue growth of 6.4%2 more than offset fuel cost increase FY18 FY19 VLY %2 (Restated) – Second half earnings improvement as competitor capacity reduced Revenue $M 7,425 6,925 7.2 • Unable to fully offset other cost increases including – FX on non-fuel costs Unde
Slide 12: Jetstar Group
Jetstar Group • Record Jetstar Group Revenue FY18 FY19 VLY %1 (Restated) – Domestic Unit Revenue up 2.7%1, Ancillary revenue per passenger up 12% Revenue9 $M 3,961 3,795 4.4 – Jetstar International2 Unit Revenue up 6.0%1 – Revenue increase more than offset higher fuel costs Underlying EBIT $M 370 45
Slide 13: Qantas Loyalty
Qantas Loyalty • Record1 Underlying EBIT result up 8.4% FY18 FY19 VLY %7 (Restated) ‒ Returning to double digit profit growth in the second half Revenue $M 1,654 1,519 8.9 • Record Revenue ‒ Record number of points earned from Financial Services products, with Underlying EBIT $M 374 345 8.4 Qantas P
Slide 14: Financial Framework
Financial Framework Yacantas GROUP
Slide 15: Financial Framework Aligned with Shareholder Objectives
Financial Framework Aligned with Shareholder Objectives 1. Maintaining an Optimal 2. ROIC > WACC2 3. Disciplined Allocation Capital Structure Through the Cycle of Capital Minimise cost of capital by Deliver ROIC > 10%3 Grow invested capital with targeting a net debt range of through the cycle discip
Slide 16: Maintaining an Optimal Capital Structure
Maintaining an Optimal Capital Structure Leverage and liquidity Optimal capital structure Debt Maturity Profile as at 30 June 2019 ($M)6 • Net debt1 at $4.7b, below the bottom of the target range – Provides significant financial flexibility • Extended tenor and diversified funding – 10 and 12 years
Slide 17: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle Protecting ROIC through the disciplined hedging program • FY19 fuel cost of $3.85b FY20 Fuel Cost Outlook (A$B) ‒ Effective hedging program contained FY19 fuel cost increase to 3.90 3.85 Worst: 4.084 $614m or 19%1 3.23 3.23 Expected: 3.952 3.04 • Opportunistica
Slide 18: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle Transformation continues to deliver Achieved $452m Transformation benefits in FY191 with 23% of FY20 pipeline in delivery phase2 $265m • Operational Efficiency • Customer Experience cost – Enhanced online and airport check-in technology benefits – Group efficie
Slide 19: Disciplined Capital Allocation
Disciplined Capital Allocation Disciplined capital expenditure • Net capital expenditure1 of $1.6b in FY19, excluding aircraft operating lease refinancing – Three 787-9 Dreamliners delivered – Reconfiguration and refresh programs for A320/A321, A380 and Turboprop aircraft – Lounge upgrades – Continu
Slide 20: Disciplined Capital Allocation
Disciplined Capital Allocation Shareholder distributions • Completed on-market share buy-back of $305m in 2H19 Shares on Issue (M) ~32% Reduction3 – 3.4% of issued capital purchased in 2H19 at an average price of $5.53 – Reduced issued capital by ~6.7% in FY19 at an average price of $5.63 – 28.5%1 r
Slide 21: Building Long-Term Shareholder Value
Building Long-Term Shareholder Value
Slide 22: Recognising and Responding to Emerging Global Forces
Recognising and Responding to Emerging Global Forces The long-term context OUR ONGOING COMMITMENT TO SAFETY, ENVIRONMENT AND COMMUNITY 22
Slide 23: Balanced Scorecard to Measure Success to FY20
Balanced Scorecard to Measure Success to FY20 On track to meet near term targets TARGET METRICS TIMEFRAME PROGRESS TO DATE ROIC > WACC1 FY18 – FY20 FY19 ROIC > WACC1 for all operating segments Segment ACHIEVING OUR TARGETS Performance Qantas Loyalty targeting EBIT CAGR2 7-10% FY22 On track for $500-
Slide 24: Focus on People, Culture and Leadership
Focus on People, Culture and Leadership • Investing in our people – Announced $1,250 staff travel bonus for around 25,000 employees – Rewarding non-executive employees with over $340m in bonuses for the past five years1 – 2019 Randstad Award for most attractive place to work in Australia – Developin
Slide 25: Environment
Environment Leading on sustainable aviation as we move to carbon neutral growth • Continued to grow the world’s largest offsetting program − Fly Carbon Neutral is the largest offset program of any airline − A customer offsets their flight every 59 seconds − Developing world-first carbon neutral prod
Slide 26: Acting Responsibly
Acting Responsibly In FY19 the Qantas Group has made significant gains in maintaining high operational standards, acting responsibly and being transparent Our No.1 Priority – Safety Community Risk management starts with the safety of our Supporting communities and engaging our people customers and e
Slide 27: Project Sunrise Update
Project Sunrise Update • Best and Final Offers received from Boeing and Airbus; detailed evaluation progressing • Discussions continuing with regulators to adjust existing crew operating limits • Challenge remains to negotiate productivity flexibility with pilots, discussions ongoing • High-level de
Slide 28: Outlook
Outlook Yacantas GROUP
Slide 29: 1H20 Outlook
1H20 Outlook Domestic and international operating environment • Demand is mixed in the Domestic market – Qantas Corporate market is flat (Resources sector is strong, offsetting weakness in other sectors), Qantas growing market share – SME market growth moderating but Qantas market share continues to
Slide 30: FY20 Group Outlook
FY20 Group Outlook • Current Group operating expectations: – FY20 fuel cost is expected to be ~A$3.95b1 – Combined impact of the sale of airport domestic terminals is expected to reduce earnings by $100m, including $70m non-cash – FY20 underlying depreciation and amortisation expense expected to be
Slide 31: Questions?
Questions? Yacantas GROUP
Slide 32: Disclaimer & ASIC Guidance
Disclaimer & 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 22 August 2019, unless otherw