Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2003 Earnings Presentation
22 slides from Qantas Airways's earnings presentation, Aug 21, 2003
Slide 1: 2002/03 Full Year Results
21/08/2003 2002/03 Full Year Results Presentation to Investors 21 August 2003 Geoff Dixon Chief Executive Officer NS oawra is Highlights Twelve Twelve Increase/ months to months to {decrease} June 2003 June 2002 % Sales and operating revenue*”” $m 11,374.9 10,9688 3.7 Expenditure*™ $m (10,807.9) (10
Slide 2: Structural Change to the Organisation
Structural Change to the Organisation « Establishment of at least eight stand-alone business segments, each with its own management and leadership « Each business will: — Have budgets and profit targets — Be required to produce targeted returns on assets Group h.eawras — Operate to optimise the perf
Slide 3: Structural Change and Business Improvement Program
Structural Change to the Organisation h.eawras Focus on accountability, collaboration and leadership Will aliow the Qantas Group to better manage constant change and drive current and future initiatives Qantas Catering has been selected as the pilot business segment Business Improvement - Sustainabl
Slide 4: Domestic
21/08/2003 Domestic « Convergence of operating costs with lower-cost competitor: — Labour productivity — Fleet efficiency — Retention of a superior business and distribution mix — Use of fare initiatives h.eawras Domestic « Retention of a superior business mix: — Return punctuality performance to pr
Slide 5: Domestic
Domestic h.eawras Retention of a superior business mix : — Investment in staff service training, new uniforms and the Cityflyer product — ‘Right-sizing’ of narrowbody business class — Higher quality meals and snacks delivered more cost efficiently — New domestic fare structure — New card offering wi
Slide 6: Domestic
Domestic h.eawras Improve labour productivity: — Wages increase of 3 per cent under current EBA Improved work practices ~ Achieved and forecast reductions in fost time injury frequency rates provides a saving of around $20 million Better rostering ~ Increase in domestic cabin crew block hours to pre
Slide 7: International
International h.eawras Continue selective investment in product Re-align flying to the correct product Reduce fleet complexity Air New Zealand British Airways Other alliance partners International Reanwras Maintain our premium service multi-cabin offering Continue selective investment in product: —
Slide 8: International
International « Re-align flying to the correct product: — Reconfiguration of eight B747-400 aircraft to two classes for Europe flying ~ Provides the equivatent of 1.3 additional B747-400 aircraft — Continued expansion of Australian Airlines into profitable leisure markets ~ Will operate five B767-30
Slide 9: International
International h.eawras Air New Zealand — Still in discussions with ACCC and NZCC — Expect final determinations by the end of September 2003 — Other avenues of appeal if necessary British Airways — Expect permission to continue our Joint Services Agreement will be granted Other alliance partners —- E
Slide 10: Summary and Outlook
Summary and Outlook A credible result, achieved in difficult operating conditions New domestic fare structure and return of inbound market has stabilised domestic yields International yields are recovering as the ‘SARS recovery’ fares leave the market International capacity is still 10 per cent belo
Slide 11: Supplementary Information: Revenue
2002/03 Full Year Results Supplementary Information Revenue (including exchange) $bn 12.0 Net passenger revenue up 3.1% Net freight revenue down 1.4% Tour and travel sales Up 3.2% Contract work revenue up 10.8% Revenue from other F 22 $11.4bn $11.0bn 18.0 8.0 6.0 4.0 2.0 0.0 : 2001402 2002/03 source
Slide 12: Revenue
Revenue (including exchange) « Sales and operating revenue up 3.7% — Net passenger revenue up 3.1%: ~ Group RPKs up 2.8% ~ Group yield per RPK down 1.7% including exchange — Net freight revenue down 1.4%: ~ Reduction in saleable freight capacity associated with a 3.4% fail in international ASKs ~ Pa
Slide 13: Expenditure
Expenditure (including exchange) $bn 12.0 4 10.0 4 8.0 4 60 5 40 4 20 4 0.0 - 2001/02 2002/03 lease rentals up 11.0% h.eawras $10.3bn Hi Manpower and staff related up 12.2% $10.8bn | vavable aircraft operating up 1% A Fuel and oil down 1.9% Depreciation and amortisation up 28.5% Tour and travel cost
Slide 14: Expenditure
Expenditure (including exchange) — Variable aircraft operating costs increased by 5.1%: ~ Higher airport and security charges ~ Higher ground handling charges and passenger expenses in line with 3.7% increase in Group ASKs — Fuel and oil costs down 1.9% ~ Increase of $209.2 million due to 15.8% incr
Slide 15: Expenditure
Expenditure (including exchange) - Capacity hire costs down 23.7% ~ Termination of post-Ansett wet-leases and conversion of wet- leases to short-term operating leases ~ Impulse aircraft leases reflected here in the prior year ~ Partially offset by higher codeshare costs, notably Lan Chile and Origin
Slide 16: International - including Australian Airlines
including Australian Airlines International - 2H $m 300 4 $(64.5)m EBIT of $206.9m, or 38.5% of Group u$206.9m EBIT 250 + $202.8m RPKs down 0.4%, ASKs up 0.4% 200 + Seat factor down 0.6% pts to 77.6% Yield excluding exchange increased 4 41H ae $261.4m by 2.0% 100 4 2H Only the Continental Europe, So
Slide 17: Domestic - including QantasLink
21/08/2003 Domestic - including QantasLink $m + EBIT of $223.0m, or 39.3% of Group 350 5 $340.7m EBIT + RPKs up 10.2%, ASKs up 11.4% oH 2H + Seat factor down 0.9% pts to 77.6% | $26.1m . . 250 $139.4m Sg223.0m ose exchange decreased + Reflects: ~ Sharp decline in international 1H oncarriage, which r
Slide 18: Domestic - QantasLink; Qantas Flight Catering
Domestic - QantasLink $m 605 $57.3m e EBIT up by 34.8% to 8 2H $57.3m $42.5m $19.5m a e RPKs down 1.1% 2H « ASKs down 3.0% 304 $21.3m 1H « Seat factor up 1.4% pts to 20 | $37.8m 72.1% 4H e Yield excluding exchange 04 $21.2m decreased by 4.7% . a 1 3 2004/02 2002/03 h.eawras Qantas Flight Catering $m
Slide 19: Qantas Holidays; Other Subsidiaries and Associates
Qantas Holidays $m $0 5 $43.6m $42.4m « EBIT up by 2.8% to $43.6m ao 2H « Reflects: 0 2H $24.3m ~ Negative impact of war and $25.5m SARS ~ Positive impact of demand 204 generating activities, such as ‘Spirit Escape’ sales and 404 1H 5193 Star Cruises 3m $16.9m ~ Positive impact of wide- % 6 , , rang
Slide 20: Balance Sheet and Cashflow
Other Subsidiaries - Other remaining subsidiaries and associates: ~ Combined EBIT of $7.2 million ~ Predominantly contributions by other financing vehicles that are whoily-controlled entities of Qantas — Prior year includes an $18.1 million cumulative equity accounting adjustment on initial recognit
Slide 21: Group Operational: Aircraft Fleet
21/08/2003 Group Operational Aircraft Fleet Increase/ June 2003, June 2002 _ (decrease) Boeing 747-400ER 4 - 4 Boeing 747-400 24 25 (1) Boeing 747-300 6 6 - Boeing 747-200 - 2 (2) Boeing 767-300ER 29 29 : Boeing 767-200ER 6 7 4) Boeing 737-800 18 9 9 Boeing 737-400 22 22 : Boeing 737-300 21* 17 4 Ai
Slide 22: Variances to Prior Year
Variances to Prior Year (excluding exchange) increase/ (decrease) Ye Expenditure 7.5 Manpower and staff related 12.4 Selling and marketing (8.5) Variable aircraft operating 7.2 Fuel and oil 6.1 Property 8.9 Computer and communication 5.9 Depreciation and amortisation 28.5 h.eawras 43 Variances to Pr