Qantas Airways Limited · ASX:QAN
Qantas Airways — H1 2004/05 Earnings Presentation
24 slides from Qantas Airways's earnings presentation, Feb 17, 2005
Slide 1: 2004/05 Interim Results
2004/05 Interim Results Presentation to Investors 17 February 2005 NOANTAS Highlights Six months to Six months to — increase/ December December (decrease) 2004 2003 % Sales and operating revenue $m 6,431.0 5,801.8 10.8 Expenditure $m __(5,759.4) (5,200.3) 10.8 EBIT. $m 671.6 601.5 11.7 Net borrowing
Slide 2: Strategy
Strategy e¢ To return the Qantas Group to a position where it generates a positive spread to its cost of capital by — Securing a competitive advantage in our major business segments and markets, by participating in profitable growth opportunities and investing in product and customer service — Growi
Slide 3: Strategy - Qantas International
Strategy - Qantas International e Profitably grow route network — New aircraft deliveries ~ Five A330-300 aircraft since December 2003 — New services introduced ~ Sydney to Mumbai ~ Sydney to London via Hong Kong ~ Perth to London via Singapore ~ Sydney to Shanghai — Positive contribution from all r
Slide 4: Strategy - Australian Airlines
Strategy - Australian Airlines « Maintain a profitable presence in international leisure markets — High quality, lower cost offering ~ Cost base 25 to 30 per cent lower than Qantas — New services introduced ~ Cairns to Sapporo, from November 2004 to March 2005 ~ Perth to Bali — Evaluation of new mar
Slide 5: Strategy - Jetstar Asia and Qantas Domestic
Strategy - Jetstar Asia Participate in growing Intra-Asia travel market — Qantas has contributed $23.5 million to date — New aircraft deliveries ~ Four A320-200 aircraft — New services introduced ~ Singapore to Hong Kong ~ Singapore to Taipei ~ Singapore to Pattaya — Other air traffic rights awarded
Slide 6: Strategy - Jetstar and QantasLink
Strategy - Jetstar ° Compete profitably in price sensitive leisure markets — Performance to December 2004 was ahead of expectations ~ Total expenditure cost per ASK of 8.49 cents ~ Remains on track to meet or exceed its total expenditure cost per ASK targets — 8.25 cents per ASK for 2004/05 — 7.8 ce
Slide 7: Strategy - Non-Flying Businesses
Strategy - Non-Flying Businesses « Qantas Freight — Dedicated freighter services ~ Three B747 freighters operate 19 one-way services To and from destinations in Asia, the US, Europe, India and South Africa — Star Track Express and Australian air Express Recorded improved resuits during six months to
Slide 8: Strategy - Flight Catering; Sustainable Future Program
Strategy - Non-Flying Businesses « Qantas Flight Catering — Focus on meeting competition from other airline caterers ~ Loss of QantasLink B717-200 contract ~ Loss of Cathay Pacific business in Melbourne and Brisbane — Continue to achieve permanent unit cost efficiencies under the Sustainable Future
Slide 9: Sustainable Future Program
Sustainable Future Program e Delivering results — Net expenditure cost per ASK down 4 per cent, excluding benefit of foreign exchange movements — Continue to target achievement of $500 million in initiatives in both 2004/05 and 2005/06 — Review of processes and activities — Expand program to co-ordi
Slide 10: Capital Management
Capital Management e Maintain investment grade credit rating — Gearing, including operating leases and hedges, improved from 49 per cent at June 2004 to 48 per cent at December 2004 — Operating cashflows of $1 billion — Capital expenditure totalled $1.1 billion ~ Provided capacity growth ~ Allowed r
Slide 11: Capital Management; Liberalisation of Aviation Markets
Capital Management e Confidence in ability to internally fund future growth and reinvestment while reducing gearing — By growing future cashflow so that it exceeds capital expenditure — Continued operation of Dividend Reinvestment Plan — Careful management of capital expenditure — No plans to raise
Slide 12: Outlook
Outlook e Taking the issues mentioned into account, together with current booking and cost profiles, and provided current trading conditions do not deteriorate, we stili believe we can improve on our 2003/04 resuit in 2004/05 and provide an outcome broadly in line with market expectations hoawras 20
Slide 13: 2004/05 Interim Results Supplementary Information
2004/05 Interim Results Supplementary Information NOANTAS Highlights Six months to Six months to — increase/ December December (decrease) 2004 2003 % Sales and operating revenue $m 6,431.0 §,801.8 10.8 Expenditure $m (5,759.4) (5,200.3) 10.8 EBIT. $m 671.6 601.5 11.7 Net borrowing costs $m (70.3) (7
Slide 14: Revenue
Revenue Sbn eS Net passenger revenue 50 up 7.9% aun Net freigh et freight revenue 8.0 i up 32.0% Tours and travel sales 40 pa4% =q Contract work revenue 2.0 oo down 5.5% 0.0 Revenue from other He Dec 2003 Dec 2004 sources up 50.9% | ae bheawras Revenue hoawras Sales and operating revenue up 10.8% (u
Slide 15: Revenue; Expenditure
Revenue — Tours and travel sales up 8.4% (up 9.1% excluding exchange} ~ Growth of 36.5% in outbound passenger numbers — Contract work revenue down 5.5% (down 5.4% excluding exchange ~ Lower heavy and engine maintenance for third party airlines - Decrease in Qantas Defence Services revenue offset by
Slide 16: Expenditure
Expenditure « Expenditure excluding net borrowing costs up 10.8% (up 12.5% excluding exchange) — Manpower and staff related costs up 11.8% (up 11.9% excluding exchange) ~ Group ASKs up 13.3% ~ Average FTEs up 5.2% - 3% increase in wage rates under current EBAs ~ Partial provision for executive and s
Slide 17: Expenditure
Expenditure — Depreciation and amortisation costs up 2.4% (up 2.4% excluding exchange) ~ New aircraft between June and December 2003 (2 x B747-400ER, 2 x A330-300, 3 x B737-800) ~ New aircraft between January and June 2004 (1 x A330-300) ~ New aircraft between July and December 2004 (4 x A330-300, 3
Slide 18: Expenditure
Expenditure — Capacity hire costs up 0.7% (up 2.8% excluding exchange) ~ Wetease of three 8747-400 freighters (from February and September 2004) ~ Offset by the return of five wet-leased QantasLink BAe146 aircraft and three B737-300 aircraft — Non-cancellable operating lease rentals up 10.0% (up 12.
Slide 19: Expenditure; Business Transformation - Segmentation
Expenditure — Other costs down 22.5% (down 19.1% excluding exchange) ~ Lower contract work materials costs in line with decrease in contract work revenue — Net expenditure cost per ASK down 5.8% (4.0% excluding exchange) — Net impact of foreign exchange movements on statement of financial performanc
Slide 20: International - Qantas and Australian Airlines
Qantas and Australian Airlines International - $m 250 5 $229.0m $200.1m 200 + EBIT of $229.0m, or 34.1% of Group EBIT 460 4 EBIT of $207.7m pre-segmentation RPKs up 8.1% 100 5 ASKs up 14.2% Seat factor down 4.2% pts to 75.1% 50 Yield excluding exchange increased by 3.6% ya o 3 Dec 2003 Dec 2004 bod
Slide 21: International - Australian Airlines; Domestic
International - Australian Airlines $m 10 5 $8.5m 84 EBIT of $8.5m, or 1.3% of Group EBIT 64 EBIT of $11.1m pre-segmentation RPKs up 24.3% 44 $3.4m ASKs up 19.7% Seat factor up 2.7% pts 24 to 72.0% Yield excluding exchange increased #% 0 by 3.7% 41 Dec 2003 Dec 2004 x heawras Domestic - Qantas, Qant
Slide 22: Domestic - Qantas and QantasLink
Domestic - Qantas $m 400 - $341.9m 380 4 EBIT of $341.9m, or 51.0% of Group 300 5 $270.98m EBIT 260 + EBIT of $318.0m pre-segmentation 200 4 RPKs down 2.6% 460 4 ASKs down 2.4% Seat factor down 0.2% pts to 81.2% 400 4 Yield excluding exchange decreased by 604 1.3% , ie ° : Dec 2003 Dec 2004 x heawra
Slide 23: Domestic - Jetstar; Other Subsidiaries
Domestic - Jetstar $m 20 5 $19.0m 154 40 4 51 0 T Dec 2603 Dec 2004 bheawras + EBIT of $19.0m, or 2.8% of Group EBIT « RPKs of 1,907m « ASKs of 2,619m « Seat factor of 72.8% Other Subsidiaries December 2004 Pre- December 2004 segmentation December 2003 (Sm} ($m} (Sm) Gantas Holidays 27.1 31.7 24.6 Q
Slide 24: Balance Sheet and Cashflow
Balance Sheet and Cashflow Increase/ December December {decrease} 2004 2003 % Capital expenditure $m 1,149.8 1,046.8 9.8 Capitalised interest $m 33.0 24.2 36.4 Operating cashflow $m 1,023.4 966.6 6.9 Net debt * $m §,628.2 5,599.4 0.5 Total equity ** $m 6,161.9 §,587.6 10.3 Leverage * % 48 50 (2} pts