Slide 1: Qantas Airways Limited FY16 Results
Qantas Airways Limited FY16 Results 24 August 2016 ASX: QAN US OTC: QABSY
Slide 2: A Transformed Qantas Group, Sustainable Performance
A Transformed Qantas Group, Sustainable Performance • Delivering against our strategy in FY16 to maximise long-term shareholder value − Group Domestic EBIT1 up 30% with enhanced dual brand coordination − Building a resilient Qantas International; 4% ex-fuel unit cost reduction2 − Diversification of
Slide 3: Record Result Achieved in Mixed Global Trading Conditions
Record Result Achieved in Mixed Global Trading Conditions • FY16 Domestic environment stable in non-resources sectors Passing on portion of fuel price benefit in pricing − Lower AUD, inbound tourism supporting domestic traffic growth − Resources-related traffic and revenue down compared to FY15 2% U
Slide 4: FY16 Key Group Financial Metrics
FY16 Key Group Financial Metrics Underlying PBT1 ROIC2 EPS3 Cash Flow $2.8b Operating cash flow $1,532m 22.7% 49.4c Up $557m on FY15 Up 6.5pts on FY15 Up 24c on FY15 $1.7b Net free cash flow4 Unit Revenue5 Total Unit Cost6 Ex-fuel Unit Cost7 Traffic/Capacity Growth ASKs8 +5% -2% -6% -3% RPKs9 +6% 1.
Slide 5: FY16 Profit Bridge
FY16 Profit Bridge Underlying Profit Before Tax ($M) 234 357 235 400 198 94 103 1,532 664 975 Fuel efficiency benefits1 $51m Non-fuel cost reduction $400m ▲ Loyalty earnings Net revenue benefits2 $106m ▲ Jetstar associates earnings Transformation Benefits $557m ▼ Discount rate (non cash)3 ▼ Freight
Slide 6: Segment Results
Segment Results Noawras
Slide 7: Integrated Group Portfolio Weighted to Domestic Australia
Integrated Group Portfolio Weighted to Domestic Australia Domestic Australia Airlines International Airlines • Leading network, product and brand • Diversified revenue mix through full position in concentrated market FY16 Operating Segment EBIT2 service and low fares brands • Dual brand coordination
Slide 8: Qantas Domestic
Qantas Domestic • Record EBIT1 of $578m FY16 FY15 VLY %11 – Strong cost control with ex-fuel unit cost2 improvement of 1% Revenue $M 5,710 5,828 (2.0) – Revenue decreased 2% with capacity reduction of 1%, tougher Underlying EBIT $M 578 480 20 2H16 trading environment and resources downturn Operating
Slide 9: Qantas International
Qantas International • Record EBIT1 of $512m FY16 FY15 VLY % – Revenue rose 5% with improved seat factor on higher capacity Revenue $M 5,750 5,467 5.2 – 2H16 unit revenue2 decreased 5% amid competitive market Underlying EBIT $M 512 267 92 pricing resulting in full year unit revenue decrease of 1% Op
Slide 10: Jetstar Group
Jetstar Group • Record EBIT1 of $452 million FY16 FY15 VLY % – Jetstar Domestic EBIT1 up 62% to $242m, leveraging brand & Revenue6 $M 3,636 3,464 5.0 network advantage Underlying EBIT $M 452 230 97 – Strong Jetstar International profit1 with B787-8 efficiencies and growth in core Asia-Pacific market
Slide 11: Qantas Loyalty
Qantas Loyalty • Record EBIT1 of $346m FY16 FY15 VLY % – Revenue up 7%; strong margins2 maintained Revenue $M 1,454 1,362 6.7 – 3.8% growth in QFF3 co-branded credit cards, outpacing industry4 Underlying EBIT $M 346 315 9.8 – Continued growth of core QFF coalition Operating Margin2 % 23.8 23.1 0.7pt
Slide 12: Qantas Freight
Qantas Freight • EBIT1 of $64m FY16 FY15 VLY % – Earnings decline in line with guidance at FY15 Revenue $M (8.0) 982 1,067 – Revenue performance reflecting flat cargo demand against a Underlying EBIT $M 64 114 (44) 6% global freight capacity increase 2 Operating Margin3 % 6.5 10.7 (4.2)pts – Conclus
Slide 13: Financial Framework
Financial Framework Noawras
Slide 14: 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 15: Maintaining an Optimal Capital Structure
Maintaining an Optimal Capital Structure OPTIMAL CAPITAL STRUCTURE • Financial framework targets optimal capital structure Surplus Capital No Surplus • Target net debt1 range between $4.8b and $6.0b Capital – Based on current invested capital of ~$9b Increased – FY16 net debt $5.6b distributions, De
Slide 16: Maintaining an Optimal Capital Structure
Maintaining an Optimal Capital Structure Strong capital position Net Debt Profile FY12 to FY16 ($B)4 8 ̶ Minimal refinancing risk 7 ̶ Diverse funding sources 6 ̶ No financial covenants 5 Investment grade credit rating 4 Short term liquidity in excess of requirements FY12 FY13 FY14 FY15 FY16 –
Slide 17: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle • ROIC of 22.7% up from 16.2% in FY15 $M FY16 FY15 – Above threshold of ROIC > 10% Underlying PBT 1,532 975 – Invested capital lower with disciplined capex Add back: Underlying net finance costs 219 258 • All segments continue to deliver ROIC > WACC Add back: N
Slide 18: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle Continued delivery of business transformation Qantas Transformation program increased to $2.1b by FY17 Qantas Transformation Pipeline ($M) – Remaining benefit of $450m to be achieved in FY17 Development • Qantas Transformation has significantly altered the cost
Slide 19: Delivering ROIC >10% Through the Cycle: Hedging
Delivering ROIC >10% Through the Cycle Protecting ROIC through disciplined hedging program Hedging & Fuel Cost Outlook1 (A$B) Inclusive of Option Premium A$3.9b • FY17 fuel cost forecast includes increased consumption relative to FY16 • High level of protection in place for FY17 A$3.2b worst case –
Slide 20: Disciplined Capital Allocation
Disciplined Capital Allocation FY16 Sources and Uses Cash in excess of liquidity requirements used to refinance (including off balance sheet leases) 29 maturing operating lease aircraft4 • Reduced gross debt and cost of carry, minimal impact Reduction in cash Refinancing of to net debt5 balance oper
Slide 21: Resumption of Dividends
Resumption of Dividends • Fully franked final dividend of 7 cents per share declared Shareholder Distributions and Issued Shares ‒ $134m dividend payment, record date 8 September 2016, payment date 12 October 2016 $505m (6.1%) • Share buy-back of up to $366 million announced Capital return Aug Reduc
Slide 22: Building Long-Term Shareholder Value
Building Long-Term Shareholder Value
Slide 23: Recognising and Responding to Emerging Global Forces
Recognising and Responding to Emerging Global Forces The long-term context New Centres Rapid Shifting Resource of Customer Digitisation & Customer & Constraints & Demand & the Rise of Workforce Climate Geopolitical Big Data Preferences Change Influence Clear Strategic Priorities Building a Resilient
Slide 24: Maximising Leading Dual Brand Domestic Position
Maximising Leading Dual Brand Domestic Position Dual brand strategy at the core of group portfolio strength $820 Group domestic underlying EBIT1 in FY16, an million increase of 30% compared to FY15 Both Qantas and Jetstar retain a significant margin advantage over their respective competitors3 FY15
Slide 25: Building a Resilient & Sustainable Qantas International
Building a Resilient & Sustainable Qantas International Restructured cost base, network and customer offering $1 turnaround in EBIT1 in two years, underpinned Legacy cost base addressed through Transformation by 17% ex-fuel unit cost reduction since FY122 including retirement of 15 x B747-400 since
Slide 26: Growing Qantas International Efficiently with Partnerships
Growing Qantas International Efficiently with Partnerships Three cornerstone alliances in place Established partnership with Emirates delivering synergies 2 x daily Australia to London Qantas services supplemented by unrivalled Qantas International, Qantas Domestic and Emirates network offering to E
Slide 27: Aligning Qantas & Jetstar with Asia's Growth
Aligning Qantas & Jetstar with Asia’s Growth Positioning the Group for success in the fastest growing passenger market 1 Qantas International meeting rising premium demand to/from Asia Increased capacity4 into Asia • >75% of total capacity growth in FY16 and FY17 deployed to Asia 2 17% FY15 • Japan:
Slide 28: Investing in Customer and Brand
Investing in Customer and Brand Targeted investment in customer experience Refresh of A330 and B737 fleet • All 10 x international A330-300 reconfigurations completed • 15 x A330-200 reconfigurations completed1 • 54 x B737 reconfigurations completed1 Major lounge upgrade program • New flagship inter
Slide 29: Investing in Customer and Brand
Investing in Customer and Brand Strong customer and brand metrics Qantas’ Safety Reputation Qantas Domestic Net Promoter Score 98% 98% of Australian flyers believe Qantas +5 Percentage Qantas Domestic’s Net Promoter Score has increased 5 percentage is a really safe airline to fly with1 Points points
Slide 30: Investing in Data and Digital Innovation
Investing in Data and Digital Innovation Continued investment to enhance customer experience and grow revenue Qantas.com and Jetstar.com re-platforming • New capability to personalise website and offers according to customer preferences • Improved booking flows to assist customer ease of use, drive
Slide 31: Diversification and Growth at Qantas Loyalty
Diversification and Growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 25% growth in load1, $2b loaded since launch2 • ~15% market share3, highest share of a non- banking institution4 Health insurance that rewards, launched March 2016 • Revenue growth of 50%5 • Innov
Slide 32: People, Culture & Leadership
People, Culture & Leadership Engaging and developing our people for long-term success Qantas Group engagement at a record 79%, +4pts since 2015 Engagement up across all areas of the Group Health • Improvement in key workplace health and safety metrics Qantas Group Engagement & Safety • Mental health
Slide 33: Energy and Emissions
Energy and Emissions Making real, measurable change wherever our footprint extends Future Planet Offset Program • Innovative offset partnership for customers and business partners • World’s largest airline offset program – 14% growth in FY16 • Supporting economic development of indigenous communitie
Slide 34: Outlook
Outlook
Slide 35: 1H17 Outlook – Domestic & International Operating Environment
1H17 Outlook – Domestic & International Operating Environment • 1H17 planned Group capacity growth of 2-3%, driven by increased aircraft utilisation – Group Domestic capacity expected to be flat to a decrease of 1% – Group International capacity expected to increase by ~4% • Planning for mixed domes
Slide 36: FY17 Group Outlook
FY17 Group Outlook • Current Group operating expectations: – FY17 underlying fuel cost expected to be no more than $3.2b1, $3.1b2 at current forward AUD prices – FY17 depreciation and amortisation expense expected to be ~$150m higher than FY16 – FY17 lease expense expected to be ~$100m lower than FY
Slide 37: Questions?
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Slide 38: 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 24 August 2016, unless otherw