Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Day (December 2011)
120 slides from Qantas Airways's investor day presentation, Dec 12, 2011
Slide 1: Qantas Airways Limited 2011 Strategy Day
QANTAS AIRWAYS LIMITED 2011 STRATEGY DAY 12 December 2011
Slide 2: Agenda
Agenda TIME PRESENTATION SPEAKER 8.30am CEO Address Alan Joyce 8:45am Integrated Group Strategy Jayne Hrdlicka 8:55am Leading Domestic Business Jayne Hrdlicka 9:05am Qantas Domestic Rob Gurney 9:20am Qantas Frequent Flyer Simon Hickey 9:35am Jetstar Domestic Bruce Buchanan 9:50am Freight Rob Gurney
Slide 3: CEO Address
CEO Address Alan Joyce Chief Executive Officer 4
Slide 4: Qantas Group Vision
Qantas Group Vision To be one of Australia’s great businesses and among the world’s great Airline Groups Deliver sustainable returns to shareholders This will be made possible by the combination of: • Safety, always our first priority • The best loyalty program in the world, driving even deeper • Lo
Slide 5: Depth of experience to lead change
Depth of experience to lead change Alan Joyce Gareth Evans Bruce Buchanan Chief Executive Officer Chief Financial Officer Group Chief Executive Officer, Jetstar Qantas, Jetstar, Qantas, Caltex, Jetstar, Ansett, Aer Lingus KPMG Boston Consulting Group Lesley Grant Rob Gurney Simon Hickey Group Execut
Slide 6: Focusing on our key stakeholders has never been more important
Focusing on our key stakeholders has never been more important • Sustainable and attractive returns SHAREHOLDERS • Profitable growth • Prudent capital allocation • Sustainability and risk management CUSTOMERS • World leading product offering • Optimal networks • Customer service excellence • Innovat
Slide 7: Qantas Group at a glance
Qantas Group at a glance • Premium full-service airline targeting business and premium leisure travellers • Unrivalled domestic network • Service key international markets UK, US and Asia • Low cost carrier focused on price sensitive leisure travellers • Extensive domestic leisure network • Focused
Slide 8: Integrated Group Strategy
Integrated Group Strategy Jayne Hrdlicka Group Executive Strategy and Technology 9
Slide 9: Underlying themes will influence performance and outlook
A number of underlying themes will influence performance and outlook and will shape our future MACRO- • Different regions growing at ECONOMIC different rates • Sustained high oil prices • Economic uncertainty • Strong Australian dollar COMPETITION INTERNATIONAL DOMESTIC • Government-backed • Maturin
Slide 10: Asia Pacific to lead in world traffic by 2030
Asia Pacific to lead in world traffic by 2030 WORLD TRAFFIC BY AIRLINE DOMICILE (RPK BILLIONS) % of 2010 20-year % of 2030 world RPK growth world RPK Asia Pacific 2010 TRAFFIC 2010-2030 TRAFFIC 28% 5.7% 33% Europe 27% 4.0% 23% North America 27% 3.3% 20% Middle East 20-year world annual 7% 7.4% 11% t
Slide 11: Positioned within the high growth region
Positioned within the high growth region, focused on reshaping our portfolio to capture the growth 10-YEAR AVERAGE ANNUAL RPK GROWTH FROM/TO/WITHIN THE PACIFIC REGION (2010 – 2020) PRC 6.2% NORTH AMERICA 5.0% JAPAN 4.0% MIDDLE EAST 8.3% ASIA INDIAN SUB 5.7% 5.6% AFRICA 6.0% LATIN AMERICA 8.3% DOMEST
Slide 12: Qantas Group Strategy
Qantas Group Strategy DELIVER SUSTAINABLE RETURNS TO SHAREHOLDERS Safety is always our first priority Building on our strong domestic business: Profitably building Deepening Growing Transforming Growing on 65% market FFP1 member our portfolio Qantas Jetstar share through and partner of related Inter
Slide 13: Valuable group of integrated businesses
Valuable group of integrated businesses Scale benefits VALUE Synergies INHERENT IN Flexibility THE GROUP Diversification VALUE 14
Slide 14: Safety is always our first priority
Safety is always our first priority and is at the heart of everything we do World leading integrated management system Proactive engagement with regulatory and industry bodies Group-wide Business Resilience framework and culture Safety priority and capability proven 15
Slide 15: Qantas Group strategy rests on brands, customers and people
Qantas Group strategy rests on the strength of our brands, the loyalty of our customers and the passion of our people… to deliver sustainable returns to shareholders 16
Slide 16: The evolution of our great brands
The evolution of our great brands 17
Slide 17: The commitment to our customers
The commitment to our customers 18
Slide 18: Stabilised industrial relations environment
Stabilised industrial relations environment QANTAS CUSTOMERS CAN BOOK WITH ABSOLUTE CONFIDENCE AND CERTAINTY • Recent industrial dispute to be settled by industrial umpire (Fair Work Australia) – Three unions involved – ALAEA1, AIPA2 and TWU3 – Represents 18% of workforce • Qantas has a total of 48
Slide 19: Staff engagement: where we stand today
Staff engagement: Where we stand today Qantas Group Average score for engagement1 score Australian 2011 organisations 70% 82% Lower scores in some areas e.g. pilots & engineers Improving engagement is a key focus at all levels of management 1. Towers Watson Engagement Measure 20
Slide 20: We are engaging our people
Build on the inherent passion our people have for our brand We are engaging our people… • Building • Delegating • Involving • Setting clear strong engagement our people targets and metrics leaders initiatives in problem for line managers solving to implement engagement plans 21
Slide 21: Progress against strategic objectives to date
Qantas Group: Progress against strategic objectives to date PILLARS OBJECTIVES PROGRESS ACHIEVEMENTS • Retained 65% market share Building on our strong domestic business Profitably building • No.1 and 2 most profitable domestic airlines in FY11 on 65% market Maintain profit-maximising 65% • Increase
Slide 22: Measures of Success
Qantas Group: 5 Year Measures of Success PILLARS METRICS CURRENT TARGET RETURNS RETURNS Building on our strong domestic business • Maintain profit-maximising 65% market share Profitably building • NPS: QA - relative NPS differential > 10%; ROIC Continue to ROIC on 65% market > strongly exceed > shar
Slide 23: Leading Domestic Business
Leading Domestic Business 24
Slide 24: Strong position in the maturing domestic market
Qantas Group holds a strong position in the maturing domestic market MARKET STEADY STATE COMPETITION FOR INTRODUCTION MATURING DYNAMICS DUOPOLY MARKET SHARE OF LCCS MARKET 8.0% 7.0% 4.5% ~4.0% 3.6% 3.0% 3.0% ~3.0% GDP1 Market Capacity2 DECADE 1981-1990 1991-2000 2001-2010 2011-2020 OUR HISTORY COMPE
Slide 25: Group Domestic: Vision and Strategy
Group Domestic: 5 Year Vision and Strategy THE CLEAR CHOICE FOR TRAVEL, LOYALTY AND RELATED SERVICES Safety is always our first priority Strong Customer Operational Profit multi-brand experience and excellence maximising model engagement and innovation 65% market leadership share Passionate teams, h
Slide 26: Domestic travellers have very different needs
Domestic travellers have very different needs and values; understanding this market is more important than ever There are three distinct …with each segment’s contribution behavioural segments… varying across market dimensions… Ave. Rev/PAX (Rank) Business C 4 Business B Business A 2 There are three
Slide 27: Multi-brand model designed to give customers the experience they desire
Our multi-brand model is designed to give customers the experience they desire… HIGH BUSINESS PRICE DRIVEN LEISURE PRICE DRIVEN PRICE SENSITIVITY BUSINESS MAKE IT EASY LEISURE MAKE IT EASY LOW BUSINESS COMFORT SEEKERS LEISURE COMFORT SEEKERS BUSINESS LEISURE TRAVEL PURPOSE 28
Slide 28: Powerful domestic brand franchise underpins Group's success
…With each brand playing a very specific role Powerful domestic brand franchise underpins Group’s success The clear choice Building The clear choice for business and the world’s for price sensitive premium leisure best loyalty travellers travellers business 29
Slide 29: Operational excellence and innovation while reducing cost differential
Operational excellence and innovation while reducing the cost differential UNIT COST QANTAS Differential COMPETITOR 30
Slide 30: Why 65% for our flying market share?
Why 65% for our flying market share? It drives maximum value for shareholders… Revenue share % Benefits are driven by distribution, 100 High capacity share = scale, network and superior revenue share relative frequency 65% is the optimum 80 leading to position on the ‘S’ curve maximum profitability
Slide 31: Committed to maintaining 65% market share
…and we are committed to maintaining 65% market share in the future Premium Market Forecast Growth ~ GDP Leisure Market Forecast Growth > GDP 120 70% 65% 60% 100 50% 80 ASKs 40% Qantas (Billions) Group 60 Market 30% Share (%) 40 20% 20 10% 0 0% FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Slide 32: Qantas Domestic
Qantas Domestic Rob Gurney Group Executive Qantas Airlines Commercial 33
Slide 33: Qantas Domestic: Where are we today?
Qantas Domestic: Where are we today? QANTAS MAINLINE LARGEST DOMESTIC NETWORK • Largest domestic airline ̶ Operating ~2,450 flights/week ̶ 17m passengers annually1 ̶ Fleet of 81 aircraft QANTASLINK • Largest regional airline ̶ Operating ~2,000 flights/week ̶ 5m passengers annually1 ̶ Fleet of 57 air
Slide 34: Qantas Domestic: Vision and Strategy
Qantas Domestic: 5 Year Vision and Strategy THE CLEAR CHOICE FOR BUSINESS AND PREMIUM LEISURE TRAVELLERS Safety is always our first priority Superior Iconic and Corporate and Infrastructure Operational customer contemporary SME strength to excellence and experience and brand relationship grow with o
Slide 35: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Superior customer experience • Leading NPS and engagement • Superior employee engagement Leverage iconic and • Leading Domestic brand equity score contemporary brand Leverage Corporate and SME • Maintain and build Corporate and SME accounts rel
Slide 36: World's best domestic travel experience today
We start with the world’s best domestic travel experience today… • Unsurpassed domestic experience for business and premium leisure travellers • Most advanced check-in technology • Superior lounges ̶ Exclusive Chairman’s Lounge • Premium dining and beverage offering • Recognition and rewards for our
Slide 37: Excellent experience to all customers, all of the time
… and we aspire to deliver an excellent experience to all of our customers, all of the time Consistent end Empowering Pioneering Engagement Consistently to end look and our people to technology through exceptional feel do a great job innovation multi-channels experience for high value customers WE W
Slide 38: …and in the air
…and in the air Our vision for the domestic in-flight experience • Continue to set the standard for premium cabin experience — Award winning service — Best dining experience in the air — Leadership in In Flight Entertainment 39
Slide 39: Our brand vision
Our brand vision: “To be the world’s leading premium airline brand” Significant underlying emotional support of our brand Customers want to see us succeed on the world stage We will continue to evolve our brand throughout 2012 and beyond 40
Slide 40: Corporate Dealing Model a key competitive advantage
Our Corporate Dealing Model will continue to be a key competitive advantage BENEFITS FOR THE CUSTOMER BENEFITS FOR THE AIRLINE • Optimised savings and flexibility • Expenditure and share commitments • Broad ranging benefits across domestic & international networks • Greater certainty and stability i
Slide 41: The leading airline for regional Australia
The leading airline for regional Australia • Largest regional fleet and network with capacity growing at 9.1% CAGR1 • Profitable operations underpinned by Q400 expansion • Regional Qantas Club Lounge network • Faster, Smarter Check-in rolled out to 16 regional destinations 1. ASKs over five years to
Slide 42: Uniquely positioned to grow with our customers
We are uniquely positioned to grow with our customers… • Resource sector is experiencing unprecedented levels of investment • Projects committed or under construction are valued at $115bn1 in QLD and $186bn2 in WA • Resource companies are seeking larger aircraft with national capability to meet labo
Slide 43: Well placed to capitalise on the resource boom
…and well placed to capitalise on the resource boom QantasLink Network Aviation ASK 5.0 70 4.5 65 4.0 60 (billion ASKs) Fleet Units 3.5 55 3.0 50 2.5 45 2.0 40 FY06 FY07 FY08 FY09 FY10 FY11 FY12 > 44
Slide 44: Operational excellence is critical to customer promise
Operational excellence is critical to delivering our customer promise and a competitive cost position • Setting the benchmark for On-Time Performance and operational reliability • Market leading technology to deliver efficient rostering • Motivate and enable our people to deliver operational excelle
Slide 45: Finalising B738 fleet renewal, focus on wide body
Finalising B738 fleet renewal, focus turning to wide body fleet roll-over NARROW-BODY AIRCRAFT WIDE-BODY AIRCRAFT • B738 fleet renewal is almost complete • Existing Jetstar A330 aircraft to replace B767 2005 2011 20162 2021 2005 20111 2016 2021 B737-800 27 55 c70 c100 B767 24 23 - - B737-400 21 14 -
Slide 46: Qantas Frequent Flyer
Qantas Frequent Flyer Simon Hickey Chief Executive Officer Qantas Frequent Flyer 47
Slide 47: Why are we in the Loyalty business?
Why are we in the Loyalty business? To enhance member engagement and shareholder value WE ARE HERE Grow along the Loyalty Value Chain Segmented Member Strategies Segmentation Relaunch Direct Earn Create Coalition Coalition Expansion IN COMPLETE COMPLETE COMPLETE COMPLETE COMPLETE PROGRESS AIM: Provi
Slide 48: Qantas Frequent Flyer: Where are we today?
Qantas Frequent Flyer: Where are we today? COALITION LOYALTY PROGRAM RELATED BUSINESSES • Australia’s largest and most engaging loyalty • Largest loyalty operator in Australia – program operates over 100 loyalty programs • 8 million+ members – more than 50% • Scalable marketing and analytics platfor
Slide 49: The coalition engagement model
The coalition engagement model BEHAVIOURAL OUTCOMES World Valued Customer Improved acquisition retention leading member partner proposition Increased share of Improved profile wallet margin • Simple • Innovation and technology • Reach • Achievable • Communication channels • Breadth • Desirable • Lev
Slide 50: Qantas Frequent Flyer: Vision and Strategy
Qantas Frequent Flyer: 5 Year Vision and Strategy BUILDING THE WORLD’S BEST LOYALTY BUSINESS Safety is always our first priority Market leading Superior member insights and World leading Operational experience and communication partner network excellence engagement channels Passionate teams, highly
Slide 51: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Maintain superior member experience and • 10 million QFF members engagement • Industry leading NPS1 Leverage market leading insights and • Multiple segmentation and engagement initiatives communication channels in place • Market leading multi-c
Slide 52: Drive deeper engagement with Frequent Flyers
We continue to drive deeper engagement with Frequent Flyers • Deepest consumer knowledge in the market • Significant Qantas program enhancements launched based on behavioural insights ‒ Improved tier and cabin benefits to encourage and reward positive airline behaviour ‒ New level of recognition for
Slide 53: A better program, experience and business
We maintain superior member experience and engagement… COMPETITIVE ADVANTAGES More ways to earn and redeem points More destinations/better network • Over 500 partners to earn points • Qantas and over 30 partner airlines and • 1,000+ destinations to fly to using points their affiliates • 2,500 produc
Slide 54: Leveraging market leading insights and communication channels
… by leveraging market leading insights and communication channels Deepest consumer knowledge in the market • PlatinumOne Segmented strategies driving • Auto rewards personalised engagement • epiQure by Qantas Frequent Flyer Innovation around earning and redeeming options online Multi channel strate
Slide 55: Extend our world leading partner network
We continue to extend our world leading partner network… SELECTION OF EXISTING PARTNERS NEW/EXCLUSIVE PARTNERS Due in 2012: Malaysia Airlines Kingfisher Air Berlin 56
Slide 56: Complete end-to-end loyalty infrastructure
...and work to complete our end-to-end loyalty infrastructure to drive operational excellence The combination of QFF and Wishlist extends our capabilities COMPONENTS OF QUALITY CONSUMER LOYALTY SOLUTIONS Operational expertise across STRATEGY AND PROGRAMME MANAGEMENT end-to-end loyalty business NEW C
Slide 57: Structured for growth in new markets
We are now structured for growth in new markets Wishlist acquisition: a strategic enabler broadening our loyalty service offerings CAPABILITY: Proven capability in multiple EXPERIENCE: Operating over loyalty program solutions and in online 100 loyalty programs + OPPORTUNITIES • Online retail • Retai
Slide 58: Jetstar Domestic
Jetstar Domestic Bruce Buchanan Group Chief Executive Officer Jetstar 59
Slide 59: Jetstar Domestic: Where are we today?
Jetstar Domestic: Where are we today? • Australia’s 3rd largest airline • Low cost carrier focused on price sensitive leisure travellers • 52 million passengers carried domestically since 2004 launch • Operates ~1,600 flights/week carrying 10m passengers annually • 36 A320/A321s service 19 destinati
Slide 60: Jetstar Domestic: Business Model and Strategy
Jetstar Domestic: Business Model and Strategy THE CLEAR CHOICE FOR PRICE SENSITIVE TRAVELLERS Safety is always our first priority Lowest cost through Commitment to Strong brand with World-leading operational low fares high customer ancillary revenue excellence and leadership engagement innovation Pa
Slide 61: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Lowest cost through operational excellence • Lowest Domestic CASK1 and innovation • Leading aircraft utilisation • Benchmark TRIFR2 and LWCFR3 Commitment to low fares leadership • Leadership in ‘Price Competitiveness Index’ World-leading ancill
Slide 62: Continue to be the lowest cost airline in domestic market
We will continue to be the lowest cost airline in the domestic market… 1 1. Gross unit cost excluding fuel 63
Slide 63: Break new ground through innovative culture and technology
… and will break new ground through our innovative culture and cutting edge technology SMS BOARDING CALL CENTRE CHAT, NEW PAYMENT PASSES SKYPE METHODS INTEGRATION JETSTAR IMPROVED QFF NEW PRODUCTS MASTERCARD PROPOSITION E.G. IPAD 64
Slide 64: Commitment to being low fares leader
Unwavering commitment to being the low fares leader for price-sensitive travellers… 65
Slide 65: Ongoing market leadership in ancillary revenues
…and ongoing market leadership in ancillary revenues AVERAGE ANCILLARY REVENUE/PAX (AUD) Jetstar 28 EasyJet 19 Tiger 16 RyanAir 15 AirAsia 13 0 10 20 30 Source: Jetstar Oct 2011 YTD $/pax includes bag fees sold as bundle in JetSaver and JetFlex fares until May 2011, bag fees all sold separately afte
Slide 66: Leverage Jetstar's brand strength through new and traditional mediums
Further leverage Jetstar’s brand strength through new and traditional mediums • Website • Social Media • Press • Outdoor ads • TV • JetMail • Credit Cards 67
Slide 67: Growing our Portfolio of Related Business
Growing our Portfolio of Related Business 68
Slide 68: Leveraging core assets to drive growth of portfolio businesses
Leveraging core assets to drive growth of portfolio businesses Operate other OPERATE OTHER LOGISTICS ONLINE RETAIL LOYALTY Programs PROGRAMS Analytics ANALYTICS Travel TRAVEL Distribution DISTRIBUTION Loyalty 69
Slide 69: Freight
Growing our Portfolio of Related Businesses Freight Rob Gurney Group Executive Qantas Airlines Commercial 70
Slide 70: Qantas Freight: Where are we today?
Qantas Freight: Where are we today? NETWORK SUBSIDIARIES JOINT VENTURES Belly Space Express Freighters Australia Australian air Express • Qantas international • Freighter Aircraft Operator • Domestic air linehaul passenger flights • 4x B737F wet leased to AaE1 • Cargo terminal operations • Jetstar I
Slide 71: Qantas Freight: Vision and Strategy
Qantas Freight: 5 Year Vision and Strategy EXCELLENCE IN FREIGHT SERVICES Safety is always our first priority Lowest cost Leverage Capitalise and best service integrated freight Market leading on growth through network customer offering opportunities operational & relationships in Asia Pacific excel
Slide 72: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Leverage integrated freight network and • Qantas Freight to market all Qantas Group relationships freight capacity • Maintain and build key corporate accounts Market leading customer offering • Leading Customer Satisfaction Survey result Capita
Slide 73: Market leading domestic joint ventures
Market leading domestic joint ventures Reconfigure Joint Ventures to leverage strengths of two leading express freight brands Star Track Express - retail focused air and road express Australian air Express - wholesale domestic line haul and cargo terminal operations 74
Slide 74: Leverage regional growth opportunities in Asia
Leverage regional growth opportunities via the Group’s network expansion in Asia GROWTH IN ASIA • Leverage established position in China • Utilise attractive freight traffic rights • Continue to respond to evolving market dynamics e.g. shifting manufacturing trends to western China COMPETITIVELY POS
Slide 75: Session 1: Q&A
Session 1: Q&A Noawras
Slide 76: Transforming Qantas International
Transforming Qantas International Lyell Strambi Group Executive Qantas Airlines Operations 77
Slide 77: Qantas International: Where are we today?
Qantas International: Where are we today? • Qantas International business is important to the Qantas Group ̶ Enhances Group’s strong domestic business ̶ Provides important business network solution for corporate customers ̶ Supports margin premium ̶ Integral to loyalty offering • However given the s
Slide 78: The business needs transformation
The business needs transformation Europe China N America Japan NE Asia SE Asia S Africa America Aus STRUCTURALLY CHALLENGED STRUCTURALLY SOUND • Extremely high levels of competition • Comparable cost base to competitors ̶ Rise of Middle Eastern carriers • Competitive product offering ̶ Government sp
Slide 79: Qantas International: Vision and Strategy
Qantas International: 5 Year Vision and Strategy Pillar 2 THE CLEAR CHOICE FOR PREMIUM LONG HAUL TRAVEL Safety is always our first priority Superior customer Underlying Strengthen Strengthen experience business Network Asia transformation Strong multi-brand model Passionate teams, highly engaged 80
Slide 80: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Superior customer experience • Leading International NPS • Superior employee engagement Underlying business • Improvement in unit cost transformation • Leading International aircraft availability and OTP1 • Industry leading TRIFR2 and LWCFR3 St
Slide 81: Clear financial objectives have been defined
Clear financial objectives have been defined SHORT TERM LONG TERM RETURN SUSTAINABLY EXCEED OBJECTIVES QANTAS INTERNATIONAL COST OF CAPITAL FOR TO PROFITABILITY QANTAS AIRLINE SEGMENT1 • Reduce losses of Qantas International • Profitably grow earnings of International business then improve profitabi
Slide 82: Delivering consistently exceptional customer experiences
Delivering consistently exceptional customer experiences is critical to our success FLEET MODERNISATION GROUND PRODUCT MODERNISATION SERVICE CULTURE PROGRAM 83
Slide 83: Dedicated efficiency and cost transformation programs
Dedicated efficiency and cost transformation programs will accelerate, closing the cost base gap $750 $500 $m Target $250 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 NEXT PHASE OF TRANSFORMATION INITIATIVES WILL BE MORE COMPLEX, BUT WILL DELIVER GREATER BENEFITS 84
Slide 84: Fleet transformation
Fleet transformation: Efficiency, superior margin premium, enhanced customer experience ~80% OF QUAD ENGINE AIRCRAFT - AWARD WINNING A380 PRODUCT BY MID 2013 • Unit cost advantage: ̶ A380 v B747 ~8% ̶ B787-9 v B763 ~15% • Reconfiguration of A380s & 9 x B747s has commenced, increasing revenue product
Slide 85: Hub transformation: Airport terminal consolidation project
Hub transformation: Airport terminal consolidation project BENEFITS CUSTOMER OPERATIONAL REVENUE OTHER BENEFITS Increased product EFFICIENCIES Reduction in Minimum Underpins Sydney as differentiation and Connection Times (MCT) Qantas’ main hub, seamless end-to-end and new revenue supports the custom
Slide 86: Business model transformation
Business model transformation Industrial Relations environment stabilised with key work groups Modernising our business practices Engaging our people in the change agenda 87
Slide 87: A clearly superior international network
A clearly superior international network • Optimising the existing Qantas network • Using alliances to bolster and expand reach • Asia - supplementing the network to grow with our customers 88
Slide 88: Build on extensive global network leveraging partnerships
We will continue to build on our extensive global network - leveraging key partnerships STRENGTHENING MAXIMISING CREATING EXISTING oneworld NEW PARTNERSHIPS BENEFITS ALLIANCES NEW ALLIANCES Greater QFF Extended network Improved customer Lower invested earn/burn reach offering capital opportunities 8
Slide 89: Deepening and broadening alliances
We are deepening and broadening alliances • Qantas A380 services from Australia to London, connecting through Singapore as a premium hub to Europe • Bangkok and Hong Kong to London will leverage partner network adjacency • Qantas to retain ownership of slots at Heathrow and lease to BA • Commencing
Slide 90: Airline partnership evolution curve
Airline partnership evolution curve Depth of Integration Commercial Value • Market Entry EQUITY PARTNERSHIPS • Portfolio Growth 4 • Risk Sharing • Deep Commercial Collaboration JOINT BUSINESS Multilateral JBA • Enhanced Customer AGREEMENTS (JBA) e.g. AA-BA-IB Transatlantic JBA Proposition 3 • Networ
Slide 91: Strengthening our position in Asia is critical
Strengthening our position in Asia is critical RATIONALE • Qantas International is an end-of-the-line carrier ̶ Destination and frequency disadvantage ̶ Market share has declined from 39% to 14% over last decade • An Asian hub is required to be competitive ̶ Fastest growing aviation market in the wo
Slide 92: Qantas International: Progress against strategic objectives
Qantas International: Progress against strategic objectives to date Initial phase of transformation plan announced August 2011 PILLARS PROGRESS ACHIEVEMENTS TO DATE • Implemented international Faster, Smarter Check-in at key trans-Tasman ports Superior Customer • Extended A380 network to HKG Experie
Slide 93: Jetstar: Growing in Asia
Jetstar: Growing in Asia Bruce Buchanan Group Chief Executive Officer Jetstar 94
Slide 94: Asia Pacific significant growth forecast
Asia Pacific – significant growth forecast for target market GLOBAL MIDDLE CLASS IN 2009 AND PREDICTION IN 2030 Source: IATA, data taken from OECD, Standard Chartered Research 95
Slide 95: Asia Pacific largest and fastest growing aviation region
Asia Pacific is the largest and fastest growing region in the world aviation market • Asia Pacific LCC sector growing at 33% CAGR, but LCC GROWTH RATE 2001-2011 still under penetrated • LCC profit pool to grow to A$13bn by 2020 5% MAJOR GROWTH OPPORTUNITY FOR LCCS IN ASIA PACIFIC: UK LCC SHARE OF TO
Slide 96: Jetstar in Asia: Where are we today?
Jetstar in Asia: Where are we today? • Jetstar is one of the fastest growing airlines in the Asia Pacific region ‒ Operations based across two continents and four countries ‒ Servicing 17 countries, 57 destinations ‒ Combined operating fleet of 78 aircraft1 ‒ 3,000 flights per week and growing • Jet
Slide 97: Jetstar in Asia: Business Model and Strategy
Jetstar in Asia: Business Model and Strategy THE LEADING LOW COST CARRIER IN ASIA Safety is always our first priority Lowest cost in Operational Strong brand with World-leading every market we excellence high customer ancillary revenue serve and innovation engagement Manage global and local prioriti
Slide 98: KPIs: What does success look like?
KPIs: What does success look like? PILLARS KEY MEASURES Lowest cost in every market we serve • Lowest CASK in each region Operational excellence and innovation • Leading international aircraft utilisation • Benchmark TRIFR1 and LWCFR2 World-leading ancillary revenue • Industry leading ancillary reve
Slide 99: Jetstar sources of competitive advantage
Jetstar sources of competitive advantage Consistent Jetstar Group scale customer experience Integrated Pan World class Asian network ancillary revenues Competitive Advantage Consistently low Highly recognised fares brand Operational Can do culture efficiency 100
Slide 100: Expanding Jetstar's footprint in Asia
Expanding Jetstar’s footprint in Asia: Leverage capital-efficient franchise operating model Considered and prudent approach to growth and expansion China: growing presence in Japan Japan: strengthening LCC global economy competitive environment • Linking China to Asia via • Set to launch Jetstar Gre
Slide 101: Franchise model underpins scalable growth
Franchise model underpins scalable growth Brand, Revenue Generation, Scale QF joint capacity & network management AUSTRALIA & NEW NEW ASIA PACIFIC ZEALAND INTERNATIONAL JAPAN OPPORTUNITIES (SINGAPORE) (VIETNAM) (DOMESTIC) 102
Slide 102: Building on Jetstar's strong brand locally
Further building on Jetstar’s strong brand which already resonates at a local level 103
Slide 103: Growing Jetstar in Japan
Growing Jetstar in Japan • Japanese domestic market ‒ World’s 10th largest population: 127 million people ‒ Four of the world’s top ten routes by seats ‒ Large market with low LCC penetration ‒ Dominated by ANA (54%) & JAL Group (34%) ‒ Significant opportunity to stimulate demand with low fares • Je
Slide 104: Critical success factors in place for Japan
Critical success factors in place for Japan • Proven experience operating LCCs in high labour cost markets True cost leadership • Leveraging Jetstar Group supply and service contracts Dual-brand strategy • Anti-trust immunity granted by Japanese Fair Trade Authority with Japan Airlines • Only LCC wi
Slide 105: Session 2: Q&A
Session 2: Q&A Noawras
Slide 106: Group: Fleet Strategy
Group: Fleet Strategy Gareth Evans Chief Financial Officer 107
Slide 107: Virtuous cycle of fleet investment
Virtuous cycle of fleet investment builds long term shareholder value CUSTOMER IMPROVING SATISFACTION YIELDS ENVIRONMENTAL OPERATIONAL CREDENTIALS EFFICIENCY COST REDUCTIONS 108
Slide 108: Improved operational efficiency driven by fleet simplification
Improved operational efficiency driven by fleet simplification… 2011 - 7 Fleet Types 2021 - 5 Fleet Types INTERNATIONAL A380 A380 INTERNATIONAL B747 A330 A330 DOMESTIC B767 B737-800 DOMESTIC B737-400 B737-800 B787 JETSTAR A320 A330 JETSTAR A320 Additional B787 Allocation TBD - based on return measur
Slide 109: Modern, sustainable fleet
… combined with a modern, sustainable fleet 1 • Jetstar 4.3 years versus average Low Cost Carrier 5.0 years 1 • Qantas Airlines 9.6 years versus average Full Service Carriers 10.5 years 15 12 9 9.6 YEARS 8.3 6 4.3 3 0 Ryanair Emirates Qantas Group Cathay Pacific Easyjet Lufthansa Air New Zealand JAL
Slide 110: Fleet renewal drives superior economics
Fleet renewal drives superior economics AVIATION FUEL CONSUMPTION REDUCTION IN FUEL CONSUMPTION 1 39.0 ~ 20% 38.5 ~ 15% 38.0 '000 Litres per ASK 37.5 Delivery of first 3 A380s 37.0 ~ 10% 36.5 36.0 35.5 35.0 FY06 FY07 FY08 FY09 FY10 FY11 A380 A320neo B787 REDUCTION IN UNIT COST 1 ~15% ~8% ~8% A380 A3
Slide 111: Disciplined investment in growth markets
Disciplined investment in growth markets FLEET PROFILE – EXISTING1 & GROWTH No. of BUILDING ON OUR INTERNATIONAL GROW JETSTAR Aircraft STRONG DOMESTIC OPERATIONS IN ASIA BUSINESS QANTAS 2 153 58 – EXISTING Jetstar Asia 16 38 23 JETSTAR Jetstar International Jetstar 7 Pacific off balance sheet 27% ec
Slide 112: Flexible fleet plan for all market demand scenarios
Flexible fleet plan prepared for all market demand scenarios • Fleet is the major component of asset base and invested capital FLEX UP • Group’s fleet plan includes significant flexibility to scale up or down to meet market demand Capacity ‒ Contractual cancellation rights ‒ Up to 95 narrow-body air
Slide 113: Group: Funding Strategy
Group: Funding Strategy Gareth Evans Chief Financial Officer 114
Slide 114: One of the only airlines with an Investment Grade Credit Rating
Qantas is one of the only airlines with an Investment Grade Credit Rating (IGCR) IMPROVED ACCESS REDUCED COST OF TO DEBT DEBT INVESTMENT GRADE CREDIT RATING IMPROVED IMPROVED DEBT LIQUIDITY TERMS • Competitive advantage over peers, particularly in more difficult funding markets • Enables investment
Slide 115: Status of funding markets
Status of funding markets • European uncertainty is impacting availability of bank debt ‒ Banks focusing on companies with stronger credit profiles • Qantas bank funding historically sourced from a diverse range of local and offshore institutions • Qantas retains access to a broad geographic spread
Slide 116: Strong balance sheet with robust capital management framework
Strong balance sheet with robust framework for capital management • Cash reserves exceeding $3.3bn plus $300m Standby Debt Facility1 • $845m unsecured syndicated loan tranches maturing in April 2014 and April 2015 • Mandated funding in place for FY12 aircraft deliveries including 2 x A380, 10 x B737
Slide 117: Summary
Summary Alan Joyce Chief Executive Officer 118
Slide 118: Measures of Success
Qantas Group: 5 Year Measures of Success PILLARS METRICS CURRENT TARGET RETURNS RETURNS Building on our strong domestic business • Maintain profit-maximising 65% market share Profitably building • NPS: QA - relative NPS differential > 10%; ROIC Continue to ROIC on 65% market > strongly exceed > shar
Slide 119: Summary
Summary • Group of businesses with significant value ‒ Majority of businesses are strong – evolving, building and growing ‒ One underperforming business – transforming Qantas International ‒ New opportunities leveraging existing operations – growing Jetstar in Asia • Clear vision and strategic objec
Slide 120: Q&A
Q&A Noawras