Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Day (May 2017)
128 slides from Qantas Airways's investor day presentation, May 5, 2017
Slide 1: Qantas Investor Day 5 May 2017
5 MAY 2017 ASX: QAN US OTC: QABSY
Slide 2: Positioning the Qantas Group for Growth and Sustainable Returns
New Group Image Positioning the Qantas Group for Growth and Sustainable Returns Alan Joyce, CEO Qantas Group
Slide 3: The Long-term Outlook for Global Passenger Growth Remains Robust
QANTAS GROUP OVERVIEW The Long-term Outlook for Global Passenger Growth Remains Robust Global airline profit1 in 2017 and 20-year passenger2 forecasts Europe Middle East North America 2017 profit: $5.6b 2017 profit: $0.3b 2017 profit: $18.1b Passenger Growth: Passenger Growth: Passenger Growth: +2.5
Slide 4: The Qantas Group has Unique Competitive Advantages that Set Us Apart
QANTAS GROUP OVERVIEW The Qantas Group has Unique Competitive Advantages that Set Us Apart $ Dual Brand Strategy to Structurally Advantaged Innovative Loyalty Positioned in Asia with Reputation for Operational Segment and Grow Markets Domestic Position Business with Valuable Premier Airline Partners
Slide 5: Providing a More Stable Earnings Base and Supporting Growth
QANTAS GROUP OVERVIEW Providing a More Stable Earnings Base and Supporting Growth Group Earnings Profile1 Two highest-margin carriers operating in Australia Group International2 Generating >80% of domestic profit pool from <2/3 capacity share $ Continued Loyalty earnings growth Group Domestic & Loya
Slide 6: Having Come Through Qantas Transformation, the Group is in a Position of Strength
QANTAS GROUP OVERVIEW Having Come Through Qantas Transformation, the Group is in a Position of Strength Return on Invested Capital of >20% (12 months to 31 Dec 2016) All segments delivering ROIC >10% Group Operating Margin2 On track to deliver $2.1b Transformation Program 12% 11% Ex-fuel expenditure
Slide 7: Recognising and Responding to Emerging Global Forces
QANTAS GROUP OVERVIEW Recognising and Responding to Emerging Global Forces will Ensure Qantas Continues to Maximise Opportunity and Mitigate Risk New Centres of Customer Rapid Digitisation and Shifting Customer and Resource Constraints Demand and Geopolitical Disruption from Big Data Workforce Prefe
Slide 8: Recognising and Responding to Emerging Global Forces: Strategic Priorities to FY20
QANTAS GROUP OVERVIEW Recognising and Responding to Emerging Global Forces Will Ensure Qantas Continues to Maximise Opportunity and Mitigate Risk Understanding the Long-term Context New Centres of Shifting Customer Customer Demand Rapid Digitisation and Resource Constraints and Workforce and Geopoli
Slide 9: Safety is Always Our First Priority
QANTAS GROUP OVERVIEW Safety is Always Our First Priority Committed to the ongoing safety and security of our operations • ‘World’s Safest Airline’ 4 years running1 • Encouraging our people to report risk through ‘Just Culture’ Continued focus on improving the safety and wellbeing of our people • Po
Slide 10: Trust in the Qantas Brand is a Key Differentiator
QANTAS GROUP OVERVIEW Trust in the Qantas Brand is a Key Differentiator Qantas has the highest level of trust compared to other major sectors in Australia1 Leads on almost all drivers of trust including: • Having a brand that is ‘well known and respected’ • For being ‘transparent and honest’ • For ‘
Slide 11: Maximising our Leading Domestic Position FY18-FY20
QANTAS GROUP OVERVIEW Maximising our Leading Domestic Position FY18-FY20 Domestic Market Capacity Peaked in FY141 Group Domestic Airlines targeting ROIC >10% through FY20 10% 90000 • Maintaining margin advantage to competitors 7.5% 89500 8% 89000 88500 • Holding corporate market share, growing SME a
Slide 12: Building a Resilient and Sustainable Qantas International FY18-FY20
QANTAS GROUP OVERVIEW Building a Resilient and Sustainable Qantas International FY18-FY20 Qantas International targeting ROIC >10% through FY20 • Realising cost and revenue benefit from 787-9 entry • Retiring older 747 fleet as 787-9s arrive • Growing capacity to Asia • Increasing revenue from airli
Slide 13: Aligning Jetstar with Asia's Growth
QANTAS GROUP OVERVIEW Aligning Jetstar with Asia’s Growth FY18-FY20 Jetstar International (AU-based) targeting ROIC >10% through FY20 • Leveraging 787-8 to grow point-to-point leisure markets in Asia • Feeding traffic between Jetstar Group airlines across Asia Pacific Jetstar airlines in Asia reinve
Slide 14: Diversification and Growth at Qantas Loyalty FY18-FY22
QANTAS GROUP OVERVIEW Diversification and Growth at Qantas Loyalty FY18-FY22 Qantas Loyalty targeting 7-10% CAGR1 in earnings2 Qantas Loyalty EBIT2 ($M) through FY22: $500m - $600m2 7-10% CAGR New • Growing core Qantas Frequent Flyer and Business Businesses Rewards with member and partner expansion
Slide 15: Embed a Culture of Transformation for Ongoing Benefits Through FY20
QANTAS GROUP OVERVIEW We Will Continue to Embed a Culture of Transformation for Ongoing Benefits Through FY20 Technology Supplier Targeting $400m gross annual benefits Utilisation + Group Initiatives to more than offset expected annual cost inflation of ~$250m Continuous Improvement (FY18-FY20) Indi
Slide 16: We Will Continue to Invest in Our People
QANTAS GROUP OVERVIEW We Will Continue to Invest in Our People, Our Greatest Strength Engagement Diversity Leadership and Talent • Top 10 companies to work for in • 35% of senior roles held by women • Investment in development and Australia1 training, across-Group careers • Enhanced parental leave,
Slide 17: Balanced Scorecard to Measure Success to FY20
QANTAS GROUP OVERVIEW Balanced Scorecard to Measure Success to FY20 Qantas Jetstar Qantas Jetstar Qantas Loyalty Domestic Domestic International International Stable earnings growth Relative margin advantage Relative margin advantage Relative competitive advantage Lowest cost position Targeting ROIC
Slide 18: Disciplined Application of Financial Framework
Disciplined Application of Financial Framework Tino La Spina, Qantas Group CFO
Slide 19: Financial Framework Aligned with Shareholder Objectives
FINANCE Financial Framework Aligned with Shareholder Objectives Maintaining an Optimal ROIC > WACC1 Disciplined Allocation 1. Capital Structure 2. Through the Cycle 3. of Capital Lowest cost of capital Deliver ROIC > 10%2 Grow invested capital with disciplined investment, return surplus capita
Slide 20: Maintaining an Optimal Capital Structure
FINANCE Maintaining an Optimal Capital Structure Lowest cost of capital 1 Maintaining an Optimal Capital Structure Leverage and Liquidity 2 ROIC > WACC Funding Strategy 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 20
Slide 21: Maintaining an Optimal Capital Structure: Net Debt Target Range
FINANCE Maintaining an Optimal Capital Structure • Net Debt Target Range = 2.0x – 2.5x ROIC EBITDAR where EBITDAR achieves a fixed 10% ROIC • At current Invested Capital of ~$9b, optimal net debt range is $4.8b to $6.0b • Targeting net debt to be within the range on a forward looking basis CALCULATI
Slide 22: Maintaining an Optimal Capital Structure: Leverage and Liquidity
FINANCE Maintaining an Optimal Capital Structure Leverage and liquidity Optimal capital structure (net debt $4.8b - $6.0b) • Ensures access to diverse funding sources Debt Maturity Profile2 $M as at 31 December 2016 • Maintain no financial covenants Right-sized unsecured • Extend and smooth tenor ma
Slide 23: Maintaining an Optimal Capital Structure: Cost of Capital
FINANCE Maintaining an Optimal Capital Structure Cost of capital Cost of net debt1 is reducing: Cost of Capital Curve 12% 11% 6.2% 5.6% 10% 9% Optimal FY15 FY17F Capital Structure 8% Further opportunities: 7% • Continue to optimise liquidity to minimise cost of Investment grade Sub-investment grade
Slide 24: Maintaining an Optimal Capital Structure: FY18 Funding Strategy
FINANCE Maintaining an Optimal Capital Structure FY18 funding strategy Reduce Reduce Optimise Lowers cost unencumbered surplus cash refinancing risk aircraft pool of capital Buy-out maturing operating leases where appropriate Extend operating leases where appropriate Refinance drawn A$280m
Slide 25: Delivering ROIC > WACC
FINANCE Delivering ROIC > WACC 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC Return on Invested Capital 3 Disciplined Allocation of Capital Risk Management 4 Total Shareholder Return Performance 25
Slide 26: Delivering ROIC > WACC
FINANCE Delivering ROIC > WACC Resilient portfolio of businesses all returning ROIC > WACC Qantas Jetstar Qantas Jetstar Qantas Loyalty Domestic Domestic International International Stable earnings growth Relative margin advantage Relative margin advantage Relative competitive advantage Lowest cost
Slide 27: Delivering ROIC > WACC Through the Cycle
FINANCE Delivering ROIC > WACC Through the Cycle Reducing ROIC volatility through disciplined hedging program Indicative Fuel and Foreign Currency Exposure Reducing Volatility of Earnings / Cash Flow Foreign Gross SHORT TERM TIME Currency Other Currency USD Net Receipts Receipts Receipts OPERATIONAL
Slide 28: 1H18 Fuel Cost (A$m)
FINANCE Delivering ROIC > WACC Through the Cycle 1H18 fuel cost - Price sensitivity (fuel and FX correlated) 1,750 1,728 1,680 Hedging strategy designed to: 1,653 • Cap worst case 1H18 Fuel Cost (A$m)1 • Allow participation to falling prices 1,610 1,540 1H18 worst case total fuel cost A$1.7b • Fuel
Slide 29: Disciplined Allocation of Capital
FINANCE Disciplined Allocation of Capital 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 29
Slide 30: Disciplined Allocation of Capital
FINANCE Disciplined Allocation of Capital Capital allocation framework maximises shareholder value Capital allocation prioritised to: Capital Allocation Priorities • Debt reduction (where required) >$6.0B $6.0B $4.8B <$4.8B to achieve optimal capital structure Greater returns to Debt reduction Capit
Slide 31: Disciplined Allocation of Capital: Fleet Flexibility
FINANCE Disciplined Allocation of Capital Fleet – Flexibility maintained Regional Competitor Fleet Ages2 Fleet Age1 as at December 2016 VARA3 ~15 years Alliance ~24 years REX ~23 years Qantas International Qantas Jetstar Qantas Domestic average fleet age of 10.5 Domestic average fleet age of 6.9 Reg
Slide 32: Total Shareholder Return Performance
FINANCE Total Shareholder Return Performance 1 Maintaining an Optimal Capital Structure 2 ROIC > WACC 3 Disciplined Allocation of Capital 4 Total Shareholder Return Performance 32
Slide 33: Total Shareholder Return Performance
FINANCE Total Shareholder Return Performance • $1.63b in capital management since October 2015 Qantas Relative TSR Performance –Returned > $250m in dividends to shareholders Commencement of Transformation –Issued capital decreased by 17.7% since 100 October 2015 at an average cost of $3.41 per share
Slide 34: Externally Recognised Financial Framework
Externally Recognised Financial Framework S&P Global Ratings – 24 August 2016 “Underpinning the credit rating is the airline's prudent financial policy framework that we view favorably against Australian corporate and global industry peers. In our opinion, this framework appropriately balances the i
Slide 35: Transformation and Innovation
Transformation and Innovation Rob Marcolina, Group Executive Strategy, Transformation and IT
Slide 36: Transformation and Innovation
TRANSFORMATION Transformation and Innovation Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 36
Slide 37: Transformation Program Principles
TRANSFORMATION Transformation Program Principles Set the bar high (targets and timeline) Focus on the ‘how’ versus the ‘what’ Link to the bottom line Centralise program management Embed a cost-conscious culture Bring our people along the journey Improve customer proposition 37
Slide 38: Transformation Program Scorecard
TRANSFORMATION Transformation Program Scorecard TARGET METRICS TIMEFRAME PROGRESS TO DATE $2b Benefits, extended to $2.1b FY17 $2.0b benefits realised Accelerated >10% Cost Group Ex-fuel expenditure reduction1 Ex-fuel expenditure down by 10%2 Transformation Benefits 5,000 FTE reduction FY17 5,067 fe
Slide 39: Transformation Program Major Outcomes
TRANSFORMATION Transformation Program Major Outcomes Example structural changes made during Transformation Program • Heavy base maintenance consolidation (3 into 1) Transformation Benefits Categories1 • Contact centres consolidation (4 contact centres into 2) 13% 19% • 717 Operating Model Implementa
Slide 40: Transformation Going Forward
TRANSFORMATION Transformation Going Forward FY18-FY20 targeting average annual gross benefit of $400m, offset by ~$250M in cost base inflation, to ensure Qantas remains competitive Owned Business Unit ownership, centrally supported Shared Working together towards a common goal Linked Direct line of
Slide 41: Ongoing Transformation Themes
TRANSFORMATION Ongoing Transformation Themes Continuous Technology Supplier Utilisation Indirect Costs Group Initiatives Improvement ~$100m ~$75m ~$75m ~$75m ~$25m ~$50m • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead • Consolidate CONTINUE and ratio
Slide 42: FY18 Transformation Status
TRANSFORMATION FY18 Transformation Status Well Positioned to Achieve FY18 Target FY18 Key Initiatives • 787-9 fleet introduction • Group travel website for Asian Development • Fuel Burn Program markets Development Development • Operations centre optimisation • Freight Air Lease and Contracts • Fligh
Slide 43: Transformation Summary
TRANSFORMATION Transformation Summary Continue to drive competitive margin Strong pipeline of initiatives and funnel of ideas Embedded process and culture 43
Slide 44: Transformation and Innovation
TRANSFORMATION Transformation and Innovation Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 44
Slide 45: Innovation - it all began with AVRO
Avro Pic to be provided Innovation - it all began with AVRO 45
Slide 46: Qantas has a Long History of Innovation
INNOVATION Qantas has a Long History of Innovation Successfully executing across multiple horizons Core Innovation Adjacent Innovation Disruptive Innovation Inflatable life rafts Business class 46
Slide 47: Innovation will Continue to be Important to Drive Long-term Competitive Advantage
INNOVATION Innovation will Continue to be Important to Drive Long-term Competitive Advantage Core Adjacent and Disruptive Next-gen aircraft and Personalised service “Smart” operations Market and business model product and experience extensions • Flight planning futures • A320neo, 787-9, • Invisible
Slide 48: Internal and External Sources of Innovation
INNOVATION Both Internal and External Sources of Innovation will be Leveraged, while Making Investments in Key Enablers Internal Innovation External Innovation APPROACH Build Partner Co-Develop Invest Buy Leverage internal capability Accelerate growth efforts Leverage external ecosystem Minority sta
Slide 49: A Key Pillar of External Innovation is the AVRO Accelerator
INNOVATION A Key Pillar of the External Innovation Strategy is the AVRO Accelerator1 Objectives Themes Potential Outcomes • Access early insights into key trends and • Platform to attract promising early-stage emerging technologies technology businesses • Extension of R&D efforts • Employees take le
Slide 50: Transformation and Innovation
TRANSFORMATION Transformation and Innovation Sustainable Transformation Current Program FY18 - FY20 Driving Innovation Demonstrated History Path Forward 50
Slide 51: Brand and Marketing as a Competitive Advantage
Brand and Marketing as a Competitive Advantage Olivia Wirth, Group Executive Brand, Marketing and Corporate Affairs
Slide 52: Group Multi-brand Structure
BRAND AND MARKETING Group Multi-brand Structure Targeted to diverse customer segments and marketplace Australia New Zealand Singapore Vietnam Japan Premium business and 11.7 million members Price sensitive segment leisure travel segment 52
Slide 53: Placing the Customer at the Centre of our Thinking
BRAND AND MARKETING Placing the Customer at the Centre of our Thinking Breadth and depth of data and insights are a key competitive advantage Web, mobile and social Customer flying behaviour media interactions Frequent Flyer Profiles 30 years of data history 8m visits per week to Customer NPS and Fe
Slide 54: Net Promoter Score Global Benchmarking
BRAND AND MARKETING Net Promoter Score Global Benchmarking Methodology What is NPS? DETRACTORS PASSIVES PROMOTERS • NPS or Net Promoter Score is a global brand benchmarking model of customer advocacy • It is embedded into operations of Qantas and Jetstar • Enables continuous feedback 0 1 2 3 4 5 6 7
Slide 55: A New Look for The Spirit of Australia
BRAND AND MARKETING A New Look for The Spirit of Australia A new era for Qantas 1944 - 1947 1947 - 1968 1968 - 1984 1984 - 2007 2007 Today 55
Slide 56: Evolving and Cohesive Brand Campaign
BRAND AND MARKETING Evolving and Cohesive Brand Campaign Reconnecting with Australians • ‘Feels like Home’ brand campaign launched in November 2014, with follow up campaigns in 2015 and 2017 • Customer insights led proposition to re-connect emotionally with Australians • Campaign films have had over
Slide 57: Consistency in Qantas Brand Message Maintained
BRAND AND MARKETING Consistency in Qantas Brand Message Maintained Successful ‘Home’ and ’Belonging’ emotional connection continues 57
Slide 58: But Brand is What You Do, Not Just What You Say
BRAND AND MARKETING But Brand is What You Do, Not Just What You Say ‘Qantas did, not just said’ Customers People Community and Partnerships • Launched fast, free inflight Wi-Fi, • Top 10 companies to work for in Australia1 • Continued extensive support across including new partnerships with Foxtel,
Slide 59: Digital and Data Marketing Capabilities are Transformed
BRAND AND MARKETING Digital and Data Marketing Capabilities are Transformed Enabling personalised communications and customer experiences Integrated data and digital offering • Cross channel co-ordination and personalisation across digital ecosystem • More than 70% of Qantas’ marketing media spend i
Slide 60: Jetstar Brand Leadership, Clarity and Consistency
BRAND AND MARKETING Jetstar Brand Leadership, Clarity and Consistency Maintaining our leadership low cost carrier position Over 200 million passengers since launch1 • An Australian brand leading the way across Asia-Pacific • The market leader on price perception • Brand strength across all markets s
Slide 61: One Brand, Local Market
BRAND AND MARKETING One Brand, Local Market 61
Slide 62: Jetstar Brand Preference and Positive Perceptions
BRAND AND MARKETING Jetstar Brand Preference and Positive Perceptions Jetstar maintaining strong position in low-cost market Flyer attitudes and perceptions YTD 20172 Australia Australia April 20172 #1 Most preferred LCC1 in Australia for domestic and international 79% Leading domestic carrier on pe
Slide 63: Qantas Experience and Perceptions Continue to be Strong
BRAND AND MARKETING Qantas Experience and Perceptions Continue to be Strong Investing and focusing on our customers and brand Flyer attitudes and perceptions YTD 2017 Mar 20171 Iconic Brand Domestic 96% Perceive Qantas as an iconic +64% Perceived best Business Australian company over VA2 airline ove
Slide 64: Qantas is in a Unique Position as a 'Big Business' in Australia
BRAND AND MARKETING Qantas is in a Unique Position as a ‘Big Business’ in Australia Trust in Brand is a key competitive advantage Q. Thinking about: Qantas Airways. How do you feel they perform on each of the following attributes? Please give a rating where ‘1’ means you think they do this very poor
Slide 65: Summary
BRAND AND MARKETING Summary • Number one preferred premium airline brand and low fare brand in Australia1 • Data and Digital transformation to drive engagement and revenue uplift • Customer insights driving strategy across Insert picture that product and marketing represents the Group, not just Qant
Slide 66: Qantas Loyalty Innovation Led Growth
Qantas Loyalty Innovation Led Growth Lesley Grant, Qantas Loyalty CEO
Slide 67: The Evolution of Our Airline Loyalty Program
QANTAS LOYALTY The Evolution of Our Airline Loyalty Program a lifestyle brand and Qantas airline loyalty program rewarding members across Loyalty multiple categories and touchpoints 67
Slide 68: Qantas Loyalty is More than just Qantas Frequent Flyer
QANTAS LOYALTY Qantas Loyalty is More than just Qantas Frequent Flyer It is one of the world’s most diverse airline loyalty businesses Qantas Loyalty Business White Qantas Loyalty Opportunities Label Credit Card Life Partners Health Travel Financial Services Retail Rewards - Market Place Business to
Slide 69: Qantas Loyalty has Advantaged Assets and Capabilities
QANTAS LOYALTY Qantas Loyalty has Advantaged Assets and Capabilities that are Unique Amongst Australian Companies • 11.7M members 50% of Australian households1 • Trusted brand • 147K+ SMEs • Advocacy 30pts premium over competitors5 Members Brand • Proven ability to stretch across various products an
Slide 70: Qantas Loyalty's Coalition Program
QANTAS LOYALTY Qantas Loyalty’s Coalition Program • >120 billion points earned by members last year • ~8,000 products on the Qantas Store • Partnerships with all 4 major banks 220+ Coalition partners • 35% of credit card spend in Australia is Qantas Mall on Qantas co-branded credit cards1 • 4.9M sea
Slide 71: External Points Sales
QANTAS LOYALTY External Points Sales Influencing customer behaviour, driving commercial outcomes for partners Core Points Sales – Generates Points Margin Margin is Only Generated on ‘External Points’ (Unique to other airline loyalty programs) Internal ~40% Price = cost Qantas, Jetstar Creating value
Slide 72: 'Coalition Effect' is a Key Growth Driver
QANTAS LOYALTY ‘Coalition Effect’ is a Key Growth Driver – Providing a Multiplier Benefit Breadth of program engagement multiplies points on offer Generating an uplift in partner earn Number of Level of Number of loyalty Use of loyalty members members’ participants affiliated payment expenditure (e.
Slide 73: Growing the Coalition through Personalisation and Active Member Engagement
QANTAS LOYALTY Growing the Coalition through Personalisation and Active Member Engagement • Qantas Frequent Flyer: Australian population growth + evolve offer for underpenetrated segments Member growth • Qantas Business Rewards: SME penetration including partner focus • Simplified and personalised m
Slide 74: New Businesses to Grow and Strengthen Qantas Loyalty - Core Criteria
QANTAS LOYALTY New Businesses to Grow and Strengthen Qantas Loyalty – Core Criteria New Businesses Financial Health and Services Wellness • Market attractiveness • Latent disruption potential • Relative applicability of Qantas Loyalty’s assets and capabilities Data and Retail Marketing – market plac
Slide 75: Financial Services is Adapting to Market Changes
QANTAS LOYALTY Financial Services is Adapting to Market Changes With growth beyond regulatory impact Qantas co-branded credit cards Interchange reset impacting short term growth, • Partnerships with all four major Australian banks but new offers to maintain growth beyond regulatory impact • ~35% of
Slide 76: Financial Services - White Label Credit Card
QANTAS LOYALTY Financial Services – Introducing Qantas Loyalty’s Next Venture: White Label Credit Card Rewarding for our members • Uncapped earning potential • Special Qantas travel benefits • Innovative app to track your money Qantas white label Platinum credit card • Customers have broad points ea
Slide 77: Health and Wellness - Qantas Assure
QANTAS LOYALTY Health and Wellness – Qantas Assure Innovation in the insurance market Strategy Business Model Points costs Share of Brand Contribution Insurance Marketing and Sales Costs Premiums Operating costs (Breakeven in June 2017) Insights Digital Rewards Wellness Program Members More effectiv
Slide 78: Data and Marketing - One of the Most Valuable Data Sets
QANTAS LOYALTY Data and Marketing – One of the Most Valuable Data Sets in Australia, with Advanced Analytics Capability Holistic Data Sets and Unique Abilities Business Model Media LEAD INDICATOR Services Partnerships Revenue OF PURCHASE INTENT DEMOGRAPHICS and Web, content, social, bookings Researc
Slide 79: Qantas Loyalty - Strategically Positioned for Growth
QANTAS LOYALTY Qantas Loyalty – Strategically Positioned for Growth Qantas Loyalty will continue to innovate Qantas Loyalty EBIT2 ($M) and diversify for stable, non-cyclical $500m - $600m2 earnings growth through the cycle 7% - 10% CAGR1 New Businesses Integral to achieving this goal is disruption l
Slide 80: Continuing to Win in the Australian Domestic Market
Continuing to Win in the Australian Domestic Market Andrew David, Qantas Domestic CEO
Slide 81: Delivering a Sustainable Competitive Advantage in the Domestic Market
QANTAS DOMESTIC Delivering a Sustainable Competitive Advantage in the Domestic Market • Flexibility to move capacity and adjust gauge across domestic and international networks • Established corporate customer relationships • Improved proposition to SME customers • Record and improving customer advo
Slide 82: Strategy Focused on Margin Advantage
QANTAS DOMESTIC Strategy Focused on Margin Advantage Five strategic pillars Rigorous and proactive capacity management Qantas Domestic Margin1 Advantage Leadership in corporate, SME and premium leisure markets 8.2pts 1H16 Relentless drive for cost efficiency 1H17 12.9% 12.7% Continued investment in
Slide 83: Rigorous and Proactive Capacity Management
QANTAS DOMESTIC Rigorous and Proactive Capacity Management Mitigating resource exposure and pursuing opportunity Mitigating Resource Market Exposure Maximising East Coast1 Opportunity Passenger Revenue Decline ($M) Passenger Revenue Improvement ($M) FY16 v FY15 (55) FY15 v FY14 (80) FY15 v FY14 (120
Slide 84: Rigorous and Proactive Capacity Management: Fleet Flexibility
QANTAS DOMESTIC Rigorous and Proactive Capacity Management Using fleet flexibility to optimise utilisation 737 and A330 redeployed internationally A330-200 / 271 seats F100 / 100 seats Q300 Q400 / 74 seats redeployed 737-800 / 174 seats to Jetstar NZ 737 Q300, Q200 / 36-50 seats redeployed domestica
Slide 85: Rigorous and Proactive Capacity Management: Network Advantage
QANTAS DOMESTIC Rigorous and Proactive Capacity Management 42% more peak hour capacity1 47% more capacity on 34% more Melbourne – frequencies1 Sydney2 43% more departures from capital city ports2 Maintaining network and schedule advantage supports revenue premium 1. Qantas Domestic compared to Virgi
Slide 86: Leadership in Corporate, SME and Premium Leisure
QANTAS DOMESTIC Leadership in Corporate, SME and Premium Leisure Reinforcing our position in our three target segments Improving corporate position ~$2 billion • Maintaining and growing corporate share Corporate market1 • Offering the right product and services at the right times on the right routes
Slide 87: Launch of Qantas Business Rewards
QANTAS DOMESTIC Leadership in Corporate, SME and Premium Leisure Launch of Qantas Business Rewards Qantas Points for Business from the first flight Since launch in February 2017 More rewards the • 14% increase in businesses more you fly with three levels of using the program benefits • 20,000+ new m
Slide 88: Relentless Drive for Cost Efficiency
QANTAS DOMESTIC Relentless Drive for Cost Efficiency Evolving the Qantas Domestic transformation levers Technology Supplier Utilisation Continuous Indirect Costs Improvement • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead Continue and rationalise • S
Slide 89: Continued Investment in Customer Experience
QANTAS DOMESTIC Continued Investment in Customer Experience Combining product and service with technology Lounges and Onboard Digital and Personalisation Disruption Management Onboard Wi-Fi • Brisbane Business Lounge Making it easy for customers • Industry-first system design • 737 and A330 enabled
Slide 90: Achieving Record Customer Advocacy
QANTAS DOMESTIC Continued Investment in Customer Experience Achieving record1 customer advocacy Qantas Domestic NPS2 vs Competitor Network and Schedule Qantas Domestic Competitor +34pts compared to Product and Service competitor in March 17 On Time Performance Disruption Management +21pts compared t
Slide 91: Engaging Our People for Continuous Improvement
QANTAS DOMESTIC Engaging Our People for Continuous Improvement Case example: Brisbane heavy maintenance Key Transformation Principles Touch time increased from 33% to 45% Build Community from Within Heavy maintenance completed in 5.6 weeks Build Leadership Capability (one week early) 25% reduction i
Slide 92: Sustaining Margin Advantage to Deliver Superior ROIC Performance
QANTAS DOMESTIC Sustaining Margin Advantage to Deliver Superior ROIC Performance Strong foundation for Qantas Domestic Qantas Increasing Margin Advantage1 25% • 14% Unit Revenue premium to competitor1 22% • Closed the cost gap to competitor to 3%1 20% 18% 18% • Record levels of customer satisfaction
Slide 93: Building a Sustainable Competitive Advantage from Our Home Market
Building a Sustainable Competitive Advantage from Our Home Market Gareth Evans, Qantas International and Freight CEO
Slide 94: Continued Delivery Against Clearly Defined Strategy
QANTAS INTERNATIONAL Continued Delivery Against Clearly Defined Strategy 1 Unwavering commitment to meeting our customers’ needs 2 A fit and competitive business through Transformation Building a sustainable competitive advantage 3 from our home market 4 Targeting ROIC > 10% 94
Slide 95: Building a More Resilient and Sustainable Qantas International
QANTAS INTERNATIONAL Building a More Resilient and Sustainable Qantas International A business in need A fit and competitive of transformation Qantas International • High cost base vs peers • >$800m in Transformation benefits • Over-exposed to challenged markets • Capacity redirected to advantaged m
Slide 96: A Fit and Competitive Business with an Unwavering Customer Focus
QANTAS INTERNATIONAL A Fit and Competitive Business with an Unwavering Customer Focus Unit Cost (ex Fuel)4 -12% > $1b EBIT1 Forecast to be delivered +30% Revenue Contribution through from FY15 - FY17 from partners2 strategic partnerships 2014 2017 36% Capacity Focused on high -12% Unit cost Compared
Slide 97: An Improved Competitive Position
QANTAS INTERNATIONAL An Improved Competitive Position • Established revenue premium to competitors out of Australia Qantas International Margin Performance is Strong Against Key Competitors in Asia3 –Strong Loyalty proposition –Iconic brand with rejuvenated customer offering –Network benefit of Dome
Slide 98: Ongoing Transformation Themes
QANTAS INTERNATIONAL Ongoing Transformation Themes Continuous Technology Supplier Utilisation Indirect Costs Improvement • Simplify, standardise • Renegotiate terms • Network efficiency • Fuel Burn reduction • Overhead Continue and rationalise • Spend monitoring • Dual brand program effectiveness •
Slide 99: Building a Sustainable Competitive Advantage from our Home Market
QANTAS INTERNATIONAL Building a Sustainable Competitive Advantage from our Home Market Fleet Renewal Network and Grow with Asia Strategic Airline Own the High-Yield Hub1 Evolution Partnerships Customer 1. Perth hub commences March 2018. 99
Slide 100: Fleet Renewal: Cost Efficiency and Premium Configuration of 787-9
QANTAS INTERNATIONAL Fleet Renewal: Cost Efficiency, Smaller Gauge and Premium Configuration of 787-9 Drives Margin Improvement Cost Efficiency1 Revenue Optimisation 787-9 provides significant margin improvement ~20% saving Increased mix of premium seats2 in fuel consumption compliments Qantas high-
Slide 101: Fleet Renewal: Next Generation Aircraft Drives Earnings Stability
QANTAS INTERNATIONAL Fleet Renewal: Next Generation Aircraft Drives Earnings Stability Current Widebody Aircraft ASK1 Mix 787-9 MEL-LAX December 2017 First 4 787-9 PER-LHR March 2018 32% Twin engine 747 Quad engine - Retire 747 x 2 68% A380 2 x A380 for growth to Asia + and seasonal opportunities Wi
Slide 102: Network and Hub Evolution: Unique East and West Coast Hubs
QANTAS INTERNATIONAL Network and Hub Evolution: Unique East and West Coast Hubs Increased capacity to high-growth Asia markets • Delivers seasonal A380 capacity growth Premium product to LAX Gateway • Same aircraft service from Perth to US • Improved product to premium, growing market • Lower gauge
Slide 103: Network and Hub Evolution: Repositioned Capacity
QANTAS INTERNATIONAL Network and Hub Evolution: Qantas International has Repositioned Capacity in Response to Shifting Global Traffic Flows UK1 Asia1 N. America Other2 -15pts +10pts +4pts +1pt FY12 Qantas FY18 (4 x 787-9)3 International Capacity 28% 40% 36% 11% 32% 10% 30% 13% UK represents one of t
Slide 104: Growing with Asia: Increasing Qantas Direct Services to Major Business Hubs
QANTAS INTERNATIONAL Growing with Asia: Increasing Qantas Direct Services to Major Business Hubs in Asia PEK TYO Daily services from Sydney, Melbourne and Brisbane into major PVG business hubs of Singapore, Hong Kong and Tokyo HKG BKK MNL New Beijing service linking Australia to Chinese capital SIN
Slide 105: Growing with Asia: Three-pronged Strategy on Australia China Growth
QANTAS INTERNATIONAL Growing with Asia: Three-pronged Strategy to Capitalise on Australia China Growth 4 3.2m 26% China Southern codeshare PEK 20 Cathay Group markets cities beyond beyond Hong Kong NKG China inbound visitors of total inbound visitor Guangzhou PVG to Australia in FY251 market in FY25
Slide 106: Strategic Airline Partnerships: Growth of Codeshare Partners
QANTAS INTERNATIONAL Strategic Airline Partnerships: Growth of Codeshare Partners for Efficient Expansion and Support of Qantas-operated Services Two-way Billings Growth6 110 54 68 2013-2016 codeshare codeshare codeshare destinations destinations destinations in the in EMEA2 in Asia3 +114% Americas1
Slide 107: Strategic Airline Partnerships: Growth of Cornerstone Emirates Alliance
QANTAS INTERNATIONAL Strategic Airline Partnerships: Growth of Cornerstone Emirates Alliance Qantas-Emirates Alliance Passengers (m) 2.2m • Partnership passengers, +104%1 +104% 114% • Increase in total partnership billings to >$1b2 2.2 1.1 134% • Growth in Frequent Flyer flight redemptions to 110,00
Slide 108: Strategic Airline Partnerships: Revenue Growth from Partner Contribution
QANTAS INTERNATIONAL Strategic Airline Partnerships: Revenue Growth Supported by Increased Partner Contribution Qantas Revenue Associated with Airline Partners ($B)1 Partner Airlines growing as an important distribution channel for Qantas +30% • 35%2 increase in partner sales on Qantas (Domestic and
Slide 109: Owning the High Yield Customer: Continued Investment
QANTAS INTERNATIONAL Owning the High Yield Customer: Continued Investment to Maintain Record Customer Advocacy Technology-enabled Innovative Onboard Global Lounge Program Award-winning Service Journeys Product Qantas continues to be recognised in leading global airline awards 109
Slide 110: Owning the High Yield Customer: Record Customer Advocacy
QANTAS INTERNATIONAL Owning the High Yield Customer: Record Customer Advocacy Qantas International NPS1 Overall Flight Experience Network and Schedule +23pts Product and Service compared to January 2012 Frequent Flyer Program Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 1. Net Promotor Score, based on
Slide 111: Summary
QANTAS INTERNATIONAL Summary Qantas International has addressed its competitive disadvantages • Transformation of cost base and operating model • Network redesign to advantaged markets • Partnerships with leading global airlines • Consistent customer experience Building a sustainable competitive adv
Slide 112: A Profitable and Winning Model for Growth
A Profitable and Winning Model for Growth Jayne Hrdlicka, Jetstar Group CEO
Slide 113: The Jetstar Group Model to Drive Sustainable Competitive Advantage
JETSTAR GROUP The Jetstar Group Model to Drive Sustainable Competitive Advantage Cost Discipline • Robust, proprietary Jetstar LCC model Ancillary Network • Delivers both customer service and low cost Innovation Strength • Over twelve years of experience delivering safe operations built on 90+ years
Slide 114: Strong, Independent Jetstar-branded Airlines
JETSTAR GROUP Strong, Independent Jetstar-branded Airlines Australia • Commercial and operational decisions driven by local CEO and Board International New Zealand • The right local, strategic shareholders for each market Jetstar • Combination of Jetstar and local partners’ scale – improving unit co
Slide 115: Substantial Jetstar Footprint Throughout Asia Pacific
JETSTAR GROUP Substantial Jetstar Footprint Throughout Asia Pacific 200M+ passengers since inception 82 destinations 16 countries 177 routes 129 aircraft 51% aircraft in Asia and New Zealand Note. Relates to the combination of Jetstar Airways, Jetstar Asia, Jetstar Pacific and Jetstar Japan, as at 3
Slide 116: Maximising Jetstar's Leading LCC Position in Australia
JETSTAR GROUP Maximising Jetstar’s Leading LCC Position in Australia Jetstar Holds a Significant Margin Advantage1 Strong Sustainable Advantages Clear brand and customer leadership 13pts 15% Network depth and breadth 14% Dual brand sophistication 6% 2% Network agility – making markets and moving wit
Slide 117: Extending Successful Model for Jetstar in New Zealand
JETSTAR GROUP Extending Successful Model for Jetstar in New Zealand • Compelling brand position, providing choice and accessibility –Strong network serving leisure and business customers –Largest direct Government contract in Jetstar history –Successful launch of product for small businesses • Regio
Slide 118: Jetstar International Delivering Record Results
JETSTAR GROUP Jetstar International Delivering Record Results1 Strong Sustainable Advantages Jetstar Group Flies Where Australians Want to Travel Brand and point-of-sale strength Australia Outbound – outbound leisure Top 10 Destinations2 1 New Zealand 8 6 Brand strength in key inbound markets 2 Indo
Slide 119: Jetstar in Asia: Profitable and Delivering Continued Significant Growth
JETSTAR GROUP Jetstar in Asia: Profitable and Delivering Continued Significant Growth • Jetstar Singapore supporting over 25 Interline and 5 codeshare partnerships • Jetstar Japan continuing to grow and develop the “low fares” segment and expanding international network • Jetstar Vietnam operates in
Slide 120: Jetstar Group Airlines Benefitting from Surging China Tourism
JETSTAR GROUP Jetstar Group Airlines Benefitting from Surging China Tourism • Jetstar Group airlines strategically well positioned China Outbound: Top 10 Destinations in Asia Pacific1 –High growth potential in underserved market Bubble size represents Chinese 1M segments Outbound passengers –Attract
Slide 121: Jetstar Japan is Well Placed to Capture Growth
JETSTAR GROUP As Largest Domestic LCC, Jetstar Japan is Well Placed to Capture Growth and Could Ultimately be Larger than Jetstar Australia • Japan is the third largest aviation market in the world1 Market share: Japan Domestic –Stable, profitable domestic market LCC 7% Other –LCC introduction growi
Slide 122: Relentless Focus on Driving Continuous Cost Reduction
JETSTAR GROUP Relentless Focus on Driving Continuous Cost Reduction D ¥ $ • Continuous cost reduction program has contributed $300M+ over three years • Focused investment in technology delivering improved customer experience and lower cost –Aircraft: 787-8s and A320neos –Digital: re-platforming all
Slide 123: Digital Transformation and Innovative Partnerships
JETSTAR GROUP Digital Transformation and Innovative Partnerships Enabling Customer Experience and Revenue Growth Digital transformation upgrading customer experience • New Jetstar.com is up to 4 x faster than our competitors’ sites1 • 60% of our customers use digital check-in options2 Product innova
Slide 124: Jetstar: a Winning and Profitable Model with Significant Growth Potential
JETSTAR GROUP Jetstar: a Winning and Profitable Model with Significant Growth Potential Strong foundation for Jetstar Group • Highest margins in market1, driving continuous performance improvement • Key markets, well placed strategically • Digital and data innovation enhancing revenue growth Profita
Slide 125: CEO Summary
New Group Image CEO Summary Alan Joyce, CEO Qantas Group
Slide 126: The Qantas Group is Strongly Positioned for Growth and Sustainable Returns
CEO SUMMARY The Qantas Group is Strongly Positioned for Growth and Sustainable Returns • Structurally advantaged position in growing Domestic profit pool • Restructured Qantas International delivering ROIC > 10% • Continued momentum of Jetstar Group across Asia Pacific • Qantas Loyalty diversificati
Slide 127: A Balanced Scorecard to Measure Success to FY20
CEO SUMMARY A Balanced Scorecard to Measure Success to FY20 Group Return on Invested Capital to exceed 10% Sustainable returns to shareholders 127
Slide 128: Disclaimer and ASIC Guidance
Disclaimer and ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). An investment in Qantas shares is subject to investment and other known and unknown risks, some of which are beyond the control of the Qantas Group, including possible delays in