Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2021 Earnings Presentation
69 slides from Qantas Airways's earnings presentation, Aug 26, 2021
Slide 1: Qantas Group FY21 Investor Presentations
26 August 2021 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group FY21 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group FY21 Investor Presentation; and • Qantas Group FY21 Investor Pre
Slide 2: FY21 Results Presentation
Qantas Airways Limited FY21 Results Presentation 26 August 2021 ASX: QAN US OTC: QABSY
Slide 3: FY21 overview
FY21 overview Protecting the Balance Sheet and commencing the recovery • FY21 Underlying EBITDA1 of $410m, Underlying Loss Before Tax (ULBT)2 of ($1.8)b, Statutory Loss Before Tax of ($2.4)b, despite losing $12b of Total Revenue3 • Domestic airlines generated $233m of Underlying EBITDA in 2H21 despi
Slide 4: Recovery Plan ahead of schedule, Balance Sheet repair commenced
Recovery Plan ahead of schedule, Balance Sheet repair commenced Restructuring and Domestic ramp up and Preserving liquidity - 2H20 Domestic restart - FY21 International restart – FY22 • Acted swiftly to safely hibernate the • Delivered $650m of cost benefits in FY21, ahead • Recovery Plan activities
Slide 5: Agile management of domestic network addressing highly dynamic demand environment
Agile management of domestic network addressing highly dynamic demand environment 1 • Highly refined level of coordination between commercial planning Transformed and operations Group Domestic Capacity Profile scheduling • Rigorous daily capacity optimisation between Network and (Monthly domestic ca
Slide 6: Recovery Plan benefits exceeded the FY21 target, with $650m of structural cost benefits delivered
Recovery Plan benefits exceeded the FY21 target, with $650m of structural cost benefits delivered Ways of Working ~65%1 Digitalisation/Supplier ~35%1 Clear pathway to the $1b target by end of FY23 Improved workforce flexibility and Efficiencies across the business productivity • Streamlined and rest
Slide 7: Recovery Plan scorecard
Recovery Plan scorecard TARGET KEY AREA OF FOCUS METRICS TIMEFRAME AS AT 30 JUNE 2021 Restructuring cost benefits of $0.6b in FY21, $0.8b by FY22, $1.0b by FY23 FY23 Achieved $650m of cost benefits in FY21; Targeting $850m by FY22 Cost savings Increased target to at least 8,500 exits FY21 ~9,400 exi
Slide 8: ESG overview and proposition
ESG overview and proposition Environmental Social Governance Our Planet Our People Our Governance • Despite the impacts of COVID-19, the Group is • Operating cash positive flying across the Group • New Group Management Committee role – Chief strongly committed to building business resilience to airl
Slide 9: Environmental
FY21 Environmental progress ESG Focus Area Progress as at 30 June 2021 1 • First airline group to commit to capping net emissions1 and one of the first to commit to net zero emissions by 2050 • Aiming for 1.5 per cent average annual fuel efficiency improvements through fleet renewal and increased op
Slide 10: Financial performance
w 108 Financial performance
Slide 11: FY21 key Group financial metrics
FY21 key Group financial metrics Profit metrics Balance Sheet metrics Other statistics (v FY19) $410m ($386)m $3.8b (81%) Underlying EBITDA Statutory operating cash flow Total liquidity ASKs4 ($861)m 1H21 / $475m 2H21 ($1,525)m $5.9b (85%) Underlying EBIT1 loss Net Debt RPKs5 $693m ($1,826)m Net cap
Slide 12: FY21 Profit Bridge compared to FY19
FY21 Profit Bridge compared to FY19 Group Total Revenue Activity-based, rightsizing and decline $12.0b restructuring benefits $8.9b 1,326 Manpower cost benefit $ 483 m Other cost benefits $ 167 m 14 (13) 96 (152) Restructuring benefits $ 650 m 1,216 (1,826) 2,468 (11,930) Selling & Marketing $ 696 m
Slide 13: Items not included in Underlying LBT
Items not included in Underlying LBT $M FY21 Comments Redundancies incurred as part of the Recovery Plan not previously Recovery Plan restructuring costs 319 provided for in FY20 Including A380 fleet impairment due to fall in AUD market values and Impairment of assets and related costs 257 retiremen
Slide 14: 2H21 Movement in cash position
2H21 Movement in cash position Financing Cash Outflows Statutory Net Free Cash Flow ($652)m 1 $267m (837) 2,606 115 1,312 Term loan (557) Includes (208) redundancy and 2,221 restructuring costs, Includes aircraft Amortising secured refunds and debt repayment (210) deferred payables2 capitalised main
Slide 15: Net Debt and liquidity position
Net Debt and liquidity position As at 30 As at 30 • Net Debt increased by ($1.2)b for the 12 months to June 2021 $M VLY $M4 June 21 June 20 primarily driven by: Current interest-bearing liabilities on — Underlying operating cash flow of $2.4b 969 868 (101) balance sheet Non-current interest-bearing
Slide 16: Segment Results
w 108 Segment Results
Slide 17: Qantas Domestic
Qantas Domestic • Strong leisure-led recovery delivering a positive Underlying EBITDA Pre-COVID FY21 FY20 FY19 — Strong demand recovery in 4Q21 with capacity at 86% of Pre-COVID levels1 by May 2021; seat factor recovery to 64%2 Revenue $M 2,745 4,672 6,098 — Variabilisation of cost base underpinning
Slide 18: Qantas International (including Freight)
Qantas International (including Freight) • Record Freight profit1 supported by surging domestic e-commerce trends and strong Pre-COVID international yields FY21 FY20 FY19 — Freight providing a significant natural hedge to international passenger business, Revenue $M 1,598 6,077 7,420 materially cove
Slide 19: Jetstar Group
Jetstar Group • Achieved Underlying EBITDA profit1 driven by 2H21 domestic leisure strength, cost Pre-COVID FY21 FY20 variabilisation and $70m in recovery program benefits delivered FY19 — $145m AU Domestic Underlying EBITDA with $102m in second half as capacity Revenue6 $M 1,140 3,006 3,961 increas
Slide 20: Qantas Loyalty
Qantas Loyalty • Group cash contribution >$1b of gross receipts1 in FY21 Pre-COVID FY21 FY20 FY19 • Diversified portfolio strategy delivering second half earnings growth2 Revenue8 $M 984 1,224 1,654 — Spend on Qantas Points Earning Credit Cards returned to Pre-COVID levels3 in 4Q21; Maintaining ~35%
Slide 21: Financial Framework
w 108 Financial Framework
Slide 22: Financial Framework will continue to guide our capital decisions
Financial Framework will continue to guide our capital decisions 1 2 3 Maintaining an optimal capital structure ROIC2 > WACC3 Disciplined allocation of capital through the cycle Minimise cost of capital by targeting Grow invested capital with disciplined a Net Debt range of $4.5b to $5.6b1 Deliver R
Slide 23: Maintaining an optimal capital structure
Maintaining an optimal capital structure Capital structure and liquidity Debt maturity profile as at 30 June 2021 ($M)1 • Net Debt2 at $5.9b, prioritising debt reduction • Total liquidity of $3.8b including $2.2b cash3 and committed undrawn facilities of $1.6b maturing in FY23 and FY24 300 250 • Une
Slide 24: Historical operating cash flow trend
Historical operating cash flow trend Statutory EBITDA ($M)1 • Positive statutory EBITDA of $0.15b for FY21 Pre-COVID – Includes impact of $0.3b redundancies 3,108 3,334 3,431 • FY21 Statutory operating cash flow of ($386)m; 1,064 – FY21 underlying operating cash flow of $2.4b 149 FY17 FY18 FY19 FY20
Slide 25: Robust fuel and FX risk management
Robust fuel and FX risk management FY21 actual fuel cost and hedge accounting impacts Fuel cost ($B) • FY21 fuel cost of $0.8b, down $3.0b from FY19 through 74% reduction in -3.0 consumption and lower AUD jet fuel price; 2H21 fuel cost of $526m • Hedge accounting impact of $33m gain in FY21 relating
Slide 26: Disciplined capital allocation
Disciplined capital allocation Capital expenditure Shareholder Capital Movements ($B) ($B) Disciplined capital expenditure -0.4 +2.8 • Net capital expenditure1 of $693m in FY21, including capitalised maintenance on operational fleet and delivery of the first of three -0.9 A321-200P2F freighters • FY
Slide 27: Fleet strategic priorities
Fleet strategic priorities Qantas Group fleet strategy Recovery phase Right aircraft • Deferred delivery of 787-9s and A321neos to meet the Group's requirement Right route • A380s remain in storage • Reallocated 6 x A320s to QantasLink fleet to service intra Western Australia resources market • A330
Slide 28: Looking ahead
w& 108 Looking ahead
Slide 29: Vaccine supply and uptake suggests 80% threshold to be reached by December 2021
Vaccine supply and uptake suggests 80% threshold to be reached by December 2021 • Sufficient vaccine dosages available by early October to Potential Australia Vaccination Timing1 achieve 80% of eligible Australians vaccinated; supply ramping up from September 2021 100% • Based on current rate of upt
Slide 30: Uptake supports all domestic borders open by 1 December, gradual opening of international from mid December
Uptake supports all domestic borders open by 1 December, gradual opening of international from mid December Potential State Vaccination Timings 1 • National COVID-19 plan requires all states to Australia hit vaccination targets for restrictions to lift ACT • Based on current rates of vaccine uptake
Slide 31: Domestic market
Domestic market FY22 Outlook Competitive Positioning • Recent state lockdowns and associated border closures are expected to • Expecting to maintain ~70% domestic capacity share have a significant impact on 1H22 capacity • Extended competitive position for both domestic airlines • Recovery delayed b
Slide 32: International markets
International markets FY22 Outlook Competitive Positioning • International border closure and quarantine restrictions expected to ease • Australia’s only long-haul premium and low cost international airline with once 80% of eligible Australians are vaccinated extensive transformation improving relat
Slide 33: Freight and Loyalty
Freight and Loyalty Freight Loyalty • International belly space expected to be negligible through 1H22 • Continuing to deliver strong cash flow contribution and into 2H22 until international capacity stabilises • Travel related products continue to remain sensitive to border • Strong international f
Slide 34: Investing in customer, brand and digital
Investing in customer, brand and digital Giving customers confidence to book • Record high or near high Net Promotor Scores across all brands and most trusted airline in the region1 • Domestic Dual Brand strategy powerful with each airlines’ continued strength in targeted customer segments — Busines
Slide 35: Outlook
Outlook FY22 outlook The Group’s existing undrawn liquidity facilities, proactive approach to securing funding and the ongoing strong contributions from Qantas Freight, Qantas Loyalty and cash positive flying ensures it has sufficient liquidity for a range of recovery scenarios. Through our improved
Slide 36: Well-positioned for recovery
Well-positioned for recovery Group Domestic1 airlines are well-positioned to benefit from the Operating Segment Underlying EBITDA recovery in domestic travel and changing competitive environment; capacity share ~70%; significant unit cost reduction post $4.0b restructuring; FY21 Group Domestic Under
Slide 37: Looking forward, we remain committed to the FY24 targets
Looking forward, we remain committed to the FY24 targets Qantas Jetstar Qantas Jetstar International Qantas Loyalty Domestic Domestic International Relative competitive Stable earnings growth Relative margin advantage Relative margin advantage Lowest cost position advantage Targeting EBIT margin1 ~1
Slide 38: Disclaimer and ASIC Guidance
Disclaimer and ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 26 August 2021, unless othe
Slide 39: FY21 Results Supplementary Presentation
Qantas Airways Limited FY21 Results Supplementary Presentation 26 August 2021 ASX: QAN US OTC: QABSY
Slide 40: Group Performance
QANTAS Group Performance
Slide 41: FY21 key Group financial metrics
FY21 key Group financial metrics Pre-COVID FY21 FY20 Comments FY19 Underlying EBITDA profit could not offset the impact of depreciation Underlying (Loss)/Profit Before Tax1 ($M) (1,826) 124 1,326 and amortisation Underlying Earnings per Share2 (c) (71.3) 5.9 57.3 Statutory (Loss)/Profit Before Tax (
Slide 42: Underlying Income Statement summary
Underlying Income Statement summary Pre-COVID $M FY21 FY20 Comments FY19 Net passenger revenue 3,766 12,183 15,696 Reduction largely in line with decline in passengers carried Net freight revenue 1,316 1,045 971 Driven by e-commerce trends and restricted belly space availability Includes the impact
Slide 43: Reconciliation to Underlying (Loss)/Profit Before Tax
Reconciliation to Underlying (Loss)/Profit Before Tax $M FY21 Pre-COVID FY19 Statutory Items not incl’d in Underlying1 Statutory Items not incl’d in Underlying1 Underlying Underlying Net passenger revenue 3,766 - 3,766 15,696 – 15,696 Net freight revenue 1,316 - 1,316 971 – 971 Other revenue 852 - 8
Slide 44: Revenue detail – compared to Pre-COVID/FY19
Revenue detail – compared to Pre-COVID/FY19 Net passenger revenue down 76% • Group capacity declined by 81% due to COVID related border restrictions and community lockdowns Revenue ($B) • Group Unit Revenue increased 9.8% due to lower mix of international flying -67% – Group Domestic1 Unit Revenue d
Slide 45: Expenditure detail – compared to Pre-COVID/FY19
Expenditure detail – compared to Pre-COVID/FY19 Fuel down 78% • Reduced consumption due to COVID related travel restrictions Expenditure 1 ($B) • Lower AUD jet fuel prices -54% 16.4 Manpower and staff-related down 53% • Decreased due to rightsizing, restructuring as part of the recovery program and
Slide 46: Statutory Cash flow
Statutory Cash flow $M FY21 FY20 • Significant drop in operating cash flow driven by the impact of travel restrictions and border closures due to COVID-19 and one- Operating cash flows (386) 1,083 off cash outflows for restructuring, redundancies, refunds and deferred payables Investing cash flows (
Slide 47: Invested Capital calculation
Invested Capital calculation As at 30 June As at 30 June As at 30 June $M 2021 20204 2019 Receivables (current and non-current) 633 621 1,178 Inventories 279 306 364 Other assets (current and non-current) 856 562 680 Investments accounted for under the equity method 57 59 217 Property, plant and equ
Slide 48: ROIC calculation
ROIC calculation $M FY21 FY20 Underlying EBIT (1,525) 395 Add back: Lease depreciation under AASB 16 373 402 Less: Notional depreciation1 (105) (108) Less: Cash expenses for non-aircraft leases (199) (225) ROIC EBIT (1,456) 464 $M FY21 FY20 Net working capital2 (7,345) (8,191) Fixed assets3 11,694 1
Slide 49: Net Debt target range
Net Debt target range • During the recovery phase we will conservatively hold the target Net Debt range consistent with the position as at 30 June 2020 • Net Debt target range = 2.0x – 2.5x ROIC EBITDA where EBITDA achieves a fixed 10% ROIC • At Invested Capital of $6.0b as at 30 June 2020, optimal
Slide 50: Net Debt movement consistent with Financial Framework
Net Debt movement consistent with Financial Framework $M FY21 FY20 • The Financial Framework considers aircraft leases as part of Net Debt Opening Net Debt (4,734) (4,710) — Aircraft leases are initially recognised in Net Debt at fair Net cash from operating activities (386) 1,083 value Less: Net le
Slide 51: Unit Cost breakdown
Unit Cost breakdown c/ASK FY21 Total Unit Cost 1 15.94 Excluding: Fuel (2.84) Change in FX rates - Impact of changes in the discount rate and other actuarial assumptions 0.01 Share of net profit/(loss) of investments accounted for under the equity method (0.44) Ex-Fuel Unit Cost 2 12.67 Excluding: D
Slide 52: FY21 Australian Government COVID-19 packages
FY21 Australian Government COVID-19 packages COVID-19 and government border restrictions reduced the Group’s FY21 revenue by ~$12.0b1. Australian Government COVID-19 packages totalled $1.1b for FY21. Employee support measures Description 1H21 2H21 FY21 JobKeeper Economic wide support to employees $4
Slide 53: FY21 Australian Government COVID-19 packages continued
FY21 Australian Government COVID-19 packages continued JobKeeper Payment was intended to help keep more Australians in jobs and support businesses affected by the significant economic impact of COVID-19. On 21 July 2020, the government announced the extension of the JobKeeper payment to 28 March 202
Slide 54: Fleet as at 30 June 2021
Fleet as at 30 June 2021 Aircraft Type FY21 FY20 Change • Group fleet6 of 311 aircraft as at 30 June 2021 A380-8001 12 12 - A330-200 18 18 - • Movements in FY21 include: A330-300 10 10 - — Disposal of four 747-400ER completing the retirement of 737-800 75 75 - the 747 fleet 787-9 11 11 - 747-400ER2
Slide 55: Investment consistent with Financial Framework will support a sustainable fleet replacement program
Investment consistent with Financial Framework will support a sustainable fleet replacement program Qantas Group nominal retirement age ~ 20 years COVID impact Aircraft life Design Service Goal ~20 years Engine life (cycle driven) ~ 10 years Engine life (cycle driven) ~ 10 years up to 40 years Capit
Slide 56: Supplementary Segment Information
Supplementary Segment Information
Slide 57: 2H21 Group and Group Domestic Traffic Statistics vs Pre-COVID
2H21 Group and Group Domestic Traffic Statistics vs Pre-COVID 3Q21 Pre-COVID Change (%) 4Q21 Pre-COVID Change (%) 2H21 Pre-COVID Change (%) 3Q19 4Q19 2H19 Qantas Group Operations Passengers carried (‘000) 4,440 13,670 (68) 6,511 13,643 (52) 10,951 27,313 (60) Revenue Passenger Kilometres (m) 5,033 3
Slide 58: 2H21 Group International Traffic Statistics vs Pre-COVID
2H21 Group International Traffic Statistics vs Pre-COVID 3Q21 Pre-COVID Change (%) 4Q21 Pre-COVID Change (%) 2H21 Pre-COVID Change (%) 3Q19 4Q19 2H19 Qantas International Passengers carried (‘000) 9 2,224 (100) 109 2,170 (95) 118 4,394 (97) Revenue Passenger Kilometres (m) 16 15,008 (100) 250 14,756
Slide 59: 2H21 Group and Group Domestic Traffic Statistics vs 2H20
2H21 Group and Group Domestic Traffic Statistics vs 2H20 3Q21 3Q20 Change (%) 4Q21 4Q20 Change (%) 2H21 2H20 Change (%) Qantas Group Operations Passengers carried (‘000) 4,440 11,353 (61) 6,511 246 >100 10,951 11,599 (6) Revenue Passenger Kilometres (m) 5,033 26,350 (81) 7,956 240 >100 12,989 26,590
Slide 60: 2H21 Group International Traffic Statistics vs 2H20
2H21 Group International Traffic Statistics vs 2H20 3Q21 3Q20 Change (%) 4Q21 4Q20 Change (%) 2H21 2H20 Change (%) Qantas International Passengers carried (‘000) 9 1,840 (100) 109 1 >100 118 1,841 (94) Revenue Passenger Kilometres (m) 16 12,522 (100) 250 0 N/A 266 12,522 (98) Available Seat Kilometr
Slide 61: Qantas Domestic
Qantas Domestic1 FY 1H 2H FY21 FY19 1H21 1H19 2H21 2H19 Variance% Variance% Variance% Revenue $M 2,745 6,098 (55) 1,003 3,230 (69) 1,742 2,868 (39) Underlying EBITDA $M 159 1,503 (89) 28 857 (97) 131 646 (80) Underlying EBIT $M (590) 778 (>100) (337) 478 (>100) (253) 300 (>100) Operating Margin % <0
Slide 62: Qantas International and Freight
Qantas International and Freight1 FY 1H 2H FY21 FY19 1H21 1H19 2H21 2H19 Variance% Variance% Variance% Revenue $M 1,598 7,420 (78) 722 3,693 (80) 876 3,727 (76) Underlying EBITDA $M 117 1,045 (89) 55 477 (88) 62 568 (89) Underlying EBIT $M (575) 323 (>100) (291) 119 (>100) (284) 204 (>100) Operating
Slide 63: Jetstar Group
Jetstar Group1 FY 1H 2H FY21 FY19 1H21 1H19 2H21 2H19 Variance% Variance% Variance% Revenue $M 1,140 3,961 (71) 384 2,048 (81) 756 1,913 (60) Underlying EBITDA $M (129) 836 (>100) (98) 471 (>100) (31) 365 (>100) Underlying EBIT $M (550) 400 (>100) (328) 253 (>100) (222) 147 (>100) Operating Margin %
Slide 64: Jetstar Group as at 30 June 2021
Jetstar Group as at 30 June 2021 Jetstar Branded Airlines Ownership1 Launch Aircraft2 49 x A320/A321 ❶ Jetstar Australia 100% 2004 1 x 787-8 ❷ Jetstar International 100% 2006 10 x 787-8 ❸ Jetstar New Zealand3 100% 2009 5 x A320 ❹ Jetstar Asia (Singapore) 49% 2004 13 x A320 ❺ Jetstar Japan 33% 2012 2
Slide 65: Qantas Loyalty
Qantas Loyalty1 FY 1H 2H FY21 FY19 1H21 1H19 2H21 2H19 Variance% Variance% Variance% Revenue $M 984 1,654 (41) 438 809 (46) 546 845 (35) Underlying EBIT $M 272 376 (28) 125 175 (29) 147 201 (27) Operating Margin % 27.6 22.7 4.9pts 28.5 21.6 6.9pts 26.9 23.8 3.1pts QFF Members M 13.6 12.9 5 13.5 12.6
Slide 66: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 1% growth1 in Qantas Frequent Flyer membership; 7% growth1 in QBR2 membership with >330,000 SME members3 • >600 program partners4 across Qantas Frequent Flyer and Qantas Business Rewards • bp Aust
Slide 67: Accounting for points – a lifecycle overview
Accounting for points – a lifecycle overview Qantas Loyalty generates a gross margin on both Gross margin is only generated on ‘external points’ Issuance and Redemption activity (unique compared to other airline loyalty programs) (Not to scale and for illustrative purposes only) Pre-COVID activity a
Slide 68: Glossary
Glossary AAFRP – Australian Airline Financial Relief Package Net free cash flow – Net cash from operating activities less net cash used in investing activities (excluding aircraft lease refinancing) Available Seat Kilometres (ASK) – Total number of seats available for passengers, multiplied by the n
Slide 69: Disclaimer and ASIC Guidance
Disclaimer and 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 26 August 2021, unless othe