Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2008 Earnings Presentation
28 slides from Qantas Airways's earnings presentation, Aug 21, 2008
Slide 1: 2007/08 Full Year Results Investor Briefing: Highlights of Result
For personal use only 2007/08 Full Year Results Investor Briefing Highlights of Result • Profit before tax up 46% to $1,408 million – Up 36% on the reported result • Margin improvement • $3 billion of Sustainable Future Benefits achieved • Well advanced on segmentation strategy • Attractive dividend
Slide 2: Key Drivers
Key Drivers For personal use only • Strong first three quarters for all businesses • Favourable revenue environment • Fourth quarter challenges – fuel, capacity, slowing economy • Proactively addressing those issues Fuel Hedging and FX benefits helped offset sharp rise in fuel prices Into-plane fuel
Slide 3: Segment Profit Before Tax
Segment Profit Before Tax PBT For personal use only Increase/ Increase/ 2008 2007 Year Ended 30 June (Decrease) (Decrease) $m $m $m % Qantas Flying Brands 935.3 769.1 166.2 21.6 Qantas Freight Enterprises 63.7 64.9 (1.2) (1.8) Qantas Frequent Flyer 233.9 210.6 23.3 11.1 Jetstar Flying Brands ** 115.
Slide 4: Strategic Priorities
Strategic Priorities For personal use only • Progressing business segmentation • Further leveraging Qantas Frequent Flyer • Capital management Qantas • Strong improvement in international operations • Growth on key routes – domestic, regional and international • One of top 3 airlines in the world –
Slide 5: Jetstar and Two Brand Strategy – Domestic and Regional
Jetstar For personal use only • Cost leadership • Focusing on profitable growth • One of top 3 low cost airlines in the world – 2008 Skytrax • Revenue diversification - ancillary streams Two Brand Strategy – Domestic and Regional • Domestic Group market share 66.3% • Adapting brand mix to optimise r
Slide 6: Two Brand Strategy - International and Asia
Two Brand Strategy - International For personal use only • Rationalisation of flying to protect profitability • Transition of leisure routes to Jetstar • Growth in select markets • Market capacity growth in line with long term trend Two Brand Strategy - Asia • Jetstar Asia – profitable April 2007 to
Slide 7: Product and Service
Product and Service Over the past five years: For personal use only • An average $2 billion a year on new aircraft • Around $120 million a year on new product • $275 million a year on average on staff training • More than $300 million on engineering facilities + $120 million committed Product and Se
Slide 8: Sustainable Future Program
Sustainable Future Program $3 billion target achieved $3,058m For personal use only $747m $2,311m $753m $1,558m $501m $1,057m $545m $512m 2003/04 2004/05 2005/06 2006/07 2007/08 Restructuring Costs $182m $221m $118m Sustainable Future Program • Targeting $1.5 billion of additional benefits over next
Slide 9: Jetset Travelworld and Loyalty
Jetset Travelworld For personal use only • Qantas Holidays-QBT/Jetset merger completed last month • Enhanced retail and wholesale network offering • Three leading brands diversified across leisure/corporate travel • Strengthening online capability Loyalty • EBIT up 0.2% at $128 million (reflects cla
Slide 10: Loyalty and Qantas Frequent Flyer
Loyalty • Successful introduction of Qantas Frequent Flyer program enhancements For personal use only • July 2008 redemptions +24.3% over July 2007 • Higher member interest / engagement • Focus on direct earn opportunities Qantas Frequent Flyer • Ongoing consideration of partial Initial Public Offer
Slide 11: Qantas Freight Enterprises and People
Qantas Freight Enterprises For personal use only • Air Freight $10 million PBT improvement • Working to address cost pressures in domestic express JVs • Tougher operating environment emerging • Continuing to monitor growth opportunities People • EBAs covering 40% of workforce agreed in 2007/08 • Key
Slide 12: Capital Management
Capital Management For personal use only • Net cash held $2.6 billion • Commitment to maintain investment grade credit rating • Reinstatement of DRP to optimise flexibility • While rewarding shareholders Capital Management • Reducing non-essential non-aircraft capital expenditure • Still financing a
Slide 13: Outlook
Outlook For personal use only • Although fuel prices have eased over the past month, they have not declined to levels that will sustain the current level of profitability, and fuel and economic conditions remain uncertain. • However, assuming no further deterioration in economic conditions, Qantas e
Slide 14: Supplementary Information: Group Highlights
For personal use only 2007/08 Full Year Results Supplementary Information Group Highlights Year Ended Year Ended Variance Variance 30 June 08 30 June 07 Fav/(Unfav) Fav/(Unfav) $m $m $m % Revenue $m 16,192 15,060 1,132 7.5 Operating Expenditure $m 12,948 12,252 696 5.7 EBIT $m 1,362 976 385 39.6 Pro
Slide 15: Revenue
Revenue $bn Net passenger revenue 18.0 7.5% $16.19 up 6.2% For personal use only 16.0 $15.06 Net freight revenue 14.0 up 5.0% 12.0 Tours and travel revenue 10.0 down 3.8% 8.0 Contract work revenue 6.0 up 4.4% 4.0 Revenue from other 2.0 sources up 34.3% 0.0 FY07 FY08 5.0% RPKs (m) 97,622 102,466 Note
Slide 16: Revenue and Expenditure
Revenue – Net freight revenue up 5.0% – Recognition of full year DPEX revenue and favourable movement in air cargo For personal use only revenue from higher yields – Tours and travel revenue down 3.8% versus prior year – Passenger numbers down 3.1% – FX unfavourable $21 million – Other income up 34.
Slide 17: Expenditure
Expenditure − Operating expenditure up 5.7% − Manpower and staff related costs up 6.0% For personal use only – Increase in wages under EBAs – Capacity growth up 4.0% driving increased activity costs – Restructuring costs captured as part of the Sustainable Future Program (SFP) offset by SFP Benefits
Slide 18: Expenditure
Expenditure – Property costs down 1.2% For personal use only – Price increases and additional charges attributable to Hanger 96 in Sydney (due to A380 modifications) – Favourable variance for accounting for lease provisions in the prior year. – Computer and communications up 19.7% (25.5% net of capi
Slide 19: Expenditure, Group Unit Cost and SFP Performance
Expenditure – Depreciation and amortisation costs up 7.8% For personal use only – Accelerated depreciation and asset write-downs of $165 million – Net finance income improved $56m – Higher interest received and additional capitalised interest on aircraft progress payments – Net FX movements of $239
Slide 20: Yield and Segment Profit Before Tax
Yield – Total yield (Qantas, QantasLink and Jetstar) excluding exchange for the current period increased by 3.3% when compared with the same period last For personal use only year – Total domestic yield (Qantas, QantasLink and Jetstar) excluding exchange for the current period decreased by 1.0% when
Slide 21: Qantas Flying Operations and Jetstar Brands
Qantas Flying Operations • Includes Qantas Mainline and PBT $ million QantasLink and other subsidaries For personal use only 1,000 • PBT up $166m or 21.6% to $935m • Passenger Revenue up $305m or 2.9% 750 • RPKs down 0.2% 500 • ASKs down 1.3% 935 767 • Seat factor up 0.9% points to 81.4% 250 • Yield
Slide 22: Qantas Frequent Flyer Business Model
Qantas Frequent Flyer* Business Model For personal use only Buy Earn Partner Earn Partners products or services EARN $ Earn points Members FF Program Redeem points $ REDEEM Awards Awards Suppliers *The Loyalty segment has been renamed Qantas Frequent Flyer Qantas Frequent Flyer – Full year segment r
Slide 23: Qantas Frequent Flyer Segment Result
Qantas Frequent Flyer Segment Result A$M Year end 30 June 2007 2008 For personal use only Income Statement • Revenue driven by redemption rate Total Segment Revenue 836 849 EBITDA 128 128 Depreciation 0 (0) • EBIT up 0.2% (reflects Classic Awards redemptions and relaunch costs) EBIT 128 128 Interest
Slide 24: Qantas Frequent Flyer Accounting and Cashflow Profile
Qantas Frequent Flyer Accounting and Cashflow Profile Under accounting standards, revenue from the issue of points cannot be recognised until the points are redeemed – consequently, current year profits are not an accurate measure For personal use only of underlying cashflows Issuance of Point Redem
Slide 25: Qantas Freight Enterprises and Corporate Cost Centre
Qantas Freight Enterprises – Qantas Freight Enterprises reported PBT of $64 million, a reduction of $1 million or 1.8% on the prior year result of $65 million. For personal use only – Air Freight contributed a $10 million PBT improvement compared to the prior year. This is due to targeted yield init
Slide 26: Qantas Holidays and Qantas Catering Group
Qantas Holidays – PBT of $42 million for year, down 7.8% compared to prior year. For personal use only – Gross profit increased by 3.0%, largely attributable to favourable margins as a result of the strong Australian dollar. – Offsetting stronger gross profit was investment spending developing on-li
Slide 27: Equity Accounted Investments; Balance Sheet and Cash Flow
Equity Accounted Investments Contribution to Net Profit Year Ended Year Ended Movement For personal use only 30 June 2008 30 June 2007 Inc/(Dec) $m $m $m Air Pacific Limited 8.7 0.7 8.0 Fiji Resorts 0.9 12.6 (11.7) Travel Software Solutions (2.6) (1.0) (2.2) Australian Air Express 8.8 15.5 (6.7) Hal
Slide 28: Aircraft In Service and Fuel Expenditure
Aircraft In Service As at As at Aircraft Type In (Out) 30 Jun 2007 30 Jun 2008 Qantas For personal use only B747-300 4 4 B747-400 24 24 B747-400ER 6 6 B767-300ER 29 29 B737-300 6 (1) 5 B737-400 21 21 B737-800NG 33 2 35 A330-200 4 4 A330-300 10 10 Total Mainline Fleet 133 6 (1) 138 Jetstar A320-200 2