Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Presentation (October 2013)
44 slides from Qantas Airways's investor presentation, Oct 7, 2013
Slide 1: Fleet, Efficiency & Engineering
For personal use only Qantas Airways Limited Fleet, Efficiency & Engineering Gareth Evans, Chief Financial Officer Seattle, 6 October 2013
Slide 2: Group Fleet Strategy: Flexibility, Simplification, Efficiency
Group Fleet Strategy Flexibility, Simplification, Efficiency For personal use only • 5 key principles — Right aircraft, right route — Fleet simplification — Flexibility – delivery, retirement, renewal — Sustainable fleet investment profile — Continual reduction in fuel and unit cost • Maximum fleet
Slide 3: Group Fleet Strategy: Deliveries and Retirements
Group Fleet Strategy Deliveries and Retirements For personal use only AIRCRAFT DELIVERIES AIRCRAFT RETIREMENTS & LEASE RETURNS (INDICATIVE TIMING) (INDICATIVE TIMING) Aircraft Type FY14 FY15‐FY16 FY17‐FY25 Aircraft Type FY14 FY15‐FY16 A380‐800 ‐ ‐ 8 B747‐400 2 2 B787‐8 6 5 3 B767‐300 7 13 A320 Famil
Slide 4: Maintaining a young, fuel-efficient fleet
Group Fleet Strategy Maintaining a young, fuel‐efficient fleet For personal use only • Young average fleet age of 7.9 years1 COMPETITOR FLEET AGE FY13 (YEARS)2,3 • Lowest fleet age since privatisation 15 16.8 14.7 13.4 • Forecast fleet age to decline further 10 9.7 10.1 9.1 7.5 7.9 — 15 retirements
Slide 5: The next big decisions
Group Fleet Strategy The next big decisions For personal use only • Flexibility key to long‐term fleet strategy B7874 OPTION AND PURCHASE RIGHT TIMING • Arrangements with manufacturers provide TIMING OPTIONS PURCHASE RIGHTS5 maximum optionality for Qantas to manage FY17 5 orders to demand FY18 6 • 4
Slide 6: Fleet Simplification: Driving unit cost improvements
Fleet Simplification Driving unit cost improvements For personal use only Benefits of fleet 20131 ‐ 9 Fleet Types 2016 ‐ 7 Fleet Types simplification: A380 • Operational synergies A380 • Commonality cost B747 B747 savings A333 QANTAS • Lower spares cost A333 • Network and A332 scheduling benefits A3
Slide 7: Qantas Domestic wide-body fleet evolution
Fleet Simplification Qantas Domestic wide‐body fleet evolution For personal use only Operational Synergies and Right aircraft, right route: With Commonality cost savings: retirement of B767s, consistent Reduced tech crew, cabin fleet type used on domestic routes. crew, engineering and reserve Curren
Slide 8: Assisting Qantas Domestic unit cost improvement
Fleet Simplification Assisting Qantas Domestic unit cost improvement For personal use only Reduce Qantas Domestic unit cost gap to competitor Qantas Right Aircraft, Fleet Simplification & Fleet Renewal Transformation Increased Utilisation Right Route Reconfigurations Programs • B763, B734 fleet reti
Slide 9: Evolution of fleet configurations
Fleet Simplification Evolution of fleet configurations For personal use only 2008 2013 Future State B747 7 Configurations 3 Configurations 1 Configuration • Superior A380 product on 9xB747s: • Retirement of aircraft with legacy • Latest IFE product older than 20 years • Refreshed seats in all cabins
Slide 10: Fleet Economics: Improved utilisation
Fleet Economics Improved utilisation For personal use only • Improving asset utilisation to drive unit cost benefits — Reconfiguration programs: driving fuel savings on a per‐seat basis and capacity increases without heavy capital investment — B738 engine refresh program: 19 aircraft to be refreshed
Slide 11: Reconfiguration programs
Fleet Economics Reconfiguration programs For personal use only World class product offering on main fleet types: • B747 reconfiguration completed Oct 2012 (9 aircraft) • B738 to fully replace B734 by Feb 2014 — In‐seat IFE on all B738s delivered from Aug 2009 • A330 reconfiguration commencing end 20
Slide 12: Qantas International: more flying time from existing fleet
Fleet Economics Qantas International For personal use only Finding more flying time from existing long‐haul fleet • Natural ground time — Line maintenance conducted in Los Angeles when A380 otherwise idle — 1 extra day of flying available; 15% utilisation increase — Exploring further opportunities w
Slide 13: Driving efficiency gains
Fleet Simplification & Engineering Driving efficiency gains For personal use only • Younger fleet requires less maintenance spend per ASK: — Improved technology results in reduced maintenance requirements (maintenance on demand) — New aircraft require less frequent heavy maintenance checks than olde
Slide 14: Removing maintenance complexity
Qantas Engineering1 Removing maintenance complexity For personal use only QF Fleet Seating Configurations 2008 2011 2013 Future State A380 ‐ 1 1 1 B747 7 5 3 1 A330 4 4 4 2 B767 4 4 4 Exit B737 2 2 2 1 Fleet 17 Configs 16 Configs 14 Configs 5 Configs QF Fleet Engine Types 2008 2011 2013 Future State
Slide 15: Transforming legacy cost base
Qantas Engineering Transforming legacy cost base For personal use only • Heavy maintenance consolidation • Maintenance on demand • Reduction in engineering facility expenses — Older fleet retirement and network changes (e.g. exit of loss‐making routes) • Consolidation of engineering support services
Slide 16: Disclaimer & ASIC Guidance
Disclaimer & ASIC Guidance For personal use only 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 6 Octob
Slide 17: Jetstar in Asia
For personal use only Jetstar Group Jetstar in Asia Jayne Hrdlicka, Jetstar CEO Seattle, 6 October 2013 1
Slide 18: Jetstar Group Model
Jetstar Group Model ‘Virtuous circle’ drives growth and innovation for strong, independent airlines For personal use only OPPORTUNITIES INVESTMENT IN FOR GROWTH INNOVATION Maximised profitability Strong, LOW FARES Cost discipline engaged team SEGMENT plus scale LEADER Market‐leading Customer ancilla
Slide 19: What is good for the customer is good for Jetstar Group airlines
What is good for the customer is good for Jetstar Group airlines ‘’Low fares are just part of the story’’ For personal use only CUSTOMER PROMISE JETSTAR ECONOMICS Low fares Price leadership Best products and services Increased revenue and margin Consistent experience Standardised, replicable model M
Slide 20: Growth
For personal use only Growth 4
Slide 21: The Asian Century
The Asian Century Jetstar Group Airlines1 positioned for success across the region For personal use only More people live inside the orange region than outside2 2008‐2012 ASK3 Growth: • 7% in Asia vs 3% in Rest of World • 28% for Asia low‐cost carriers vs 9% for Rest of World LCCs4 Population Rising
Slide 22: Jetstar Group in Asia: stimulating market growth
Jetstar Group in Asia Stimulating underlying market growth to achieve 32% passenger growth For personal use only Jetstar Group Airlines have ‘grown the pie’ JETSTAR GROUP AIRLINES – PAX GROWTH IN ASIA2 by stimulating local demand for LCC travel • Japanese LCCs added 2.6 million +32% domestic passeng
Slide 23: Jetstar Group's Asian Footprint
Jetstar Group’s Asian Footprint: 125 aircraft1 Established and start‐up airlines in key growth markets For personal use only JETSTAR GROUP AIRLINES JETSTAR GROUP – GROWING NETWORK OF ROUTES Asia Routes JETSTAR Non Asia Routes JAPAN 157 JETSTAR PACIFIC (VIETNAM) JETSTAR 129 HONG KONG2 JETSTAR 115 +18
Slide 24: Successful model in Asia
Successful model in Asia The best of strong, independent, local airlines plus Jetstar Group scale & experience For personal use only • Control by local management team, flying majority local passengers Local, (2,000+ local employees serving 9.5 million1 passengers) independent • The right strategic,
Slide 25: Innovation
For personal use only Innovation 9
Slide 26: Jetstar Group innovation in the LCC market
Jetstar Group innovation in the LCC market First profitable LCC to come from a full service carrier For personal use only PIONEERING LCC‐ UNIQUE marketing PIONEERING booking Airport models assets, including interface with ‘low‐fare (e.g. Gold Coast) FIRST airline to put 5 million MyJetstar finder’/P
Slide 27: Unlocking potential through innovation
Unlocking potential through innovation For personal use only INNOVATION DELIVERS . . . CUSTOMER REVENUE COST ADVOCACY more flexibility, more choice, Over 9% year‐on‐year B787 cost efficiencies more responsive ancillary revenue growth1 1. FY05‐FY13 ancillary revenue growth. 11
Slide 28: Product innovation delivering higher customer advocacy
Product innovation delivering higher customer advocacy Finding better ways to provide a seamless customer experience For personal use only More flexibility More choice More responsive Web check‐in Bundles Customer Help Avatar1 Higher customer advocacy… with more ancillary revenue and lower costs 1.
Slide 29: Product Innovation delivering higher revenues
Product Innovation delivering higher revenues Market‐tailored product innovation drives ancillary revenue growth For personal use only JETSTAR GROUP – ANCILLARY REVENUE (AUD/PAX) +9.4% $30.6 $31.6 $19.0 $20.8 $22.3 $24.1 $15.5 $15.8 $17.8 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 YEAR‐ON‐YEAR INN
Slide 30: Product Innovation driving lower unit cost
Product Innovation driving lower unit cost B787 delivering value to customers and airline For personal use only • B787 to widen Jetstar International profit B787 UNIT COST IMPROVEMENT1 margin vs LCC competitors >10% – Lower unit costs for the airline Key drivers of improvement – Keep fares low • Fue
Slide 31: Results
For personal use only Results 15
Slide 32: Case Study: Building brand presence in Japan
Success story in Asia Case Study: Building brand presence in Japan ahead of launch of independent airline For personal use only JETSTAR GROUP – ROUTE MAP Brand Positioning • Jetstar International first LCC to fly to Japan in 2007 • By the time of Jetstar Japan launch in July 2012: – Jetstar Group fl
Slide 33: Jetstar Japan: Growth potential in Japan is significant
Jetstar Japan ジェットスター・ジャパン Growth potential in Japan is significant For personal use only Significant potential for LCC growth in Japan DOMESTIC LCC MARKET PENETRATION, YTD 2013 1 • Domestic LCC penetration only 5% of 87% total market2 with potential to be >30% 57% • Japan’s population 6 x size of A
Slide 34: Jetstar Japan: Already the largest LCC in Japan
Jetstar Japan ジェットスター・ジャパン Already the largest LCC in Japan For personal use only • Jetstar Japan is the largest LCC1 in Japan JETSTAR JAPAN FLEET GROWTH with 9 destinations, 13 routes2 From launch in July 2012 15 15 aircraft in 15 months • Japan is the third largest domestic aviation market in worl
Slide 35: Stimulating market demand to unlock and capture value
Jetstar Japan ジェットスター・ジャパン Stimulating market demand to unlock and capture value For personal use only • Japan domestic passenger growth 8.7%, STIMULATING DEMAND5 first increase in 6 years1 TOKYO – SAPPORO PASSENGERS • Innovation in LCC distribution channels Newly generated – First airline in Japan
Slide 36: Strong operational performance despite Year One challenges
Jetstar Japan ジェットスター・ジャパン Strong operational performance despite Year One challenges For personal use only Jetstar Japan shows all the hallmarks of a highly JETSTAR JAPAN – REVENUE GROWTH successful LCC: 216% • On‐time performance >90%1, cancellations rates <1%1, strong customer advocacy and ancill
Slide 37: Jetstar Asia: Gateway to South East Asia
Jetstar Asia 捷星亞洲航空公司 Gateway to South East Asia: Core platform to access growing demand For personal use only Singapore core to Jetstar Group’s potential in Asia SINGAPORE LCC MARKET GROWTH1 • Strategically important ‘gateway’ market Singapore LCC market has grown from 7% in FY05 to 35% of the tota
Slide 38: Jetstar Pacific: Significant growth opportunity in Vietnam
Jetstar Pacific For personal use only Significant growth opportunity in Vietnam JETSTAR PACIFIC – ROUTE MAP • Average GDP growth rate 6% (2008‐2012)1 • Lowest LCC penetration among major South East Asian countries at only 25% domestic and 14% international2 Jetstar Pacific positioned to take advanta
Slide 39: Jetstar Hong Kong
Jetstar Hong Kong1 捷星 For personal use only • Untapped potential in Hong Kong market STRONG DEMAND FOR LCCs IN HONG KONG3 – Current LCC penetration is 5% with the potential to Don’t know: 1% Don’t know: 1% Don’t know: 1% triple to 15% in 20152 Disagree: 7% Disagree: 4% Disagree: 4% Neither agree/ Ne
Slide 40: Valuing the Potential
For personal use only Valuing the Potential 24
Slide 41: Valuation of Asia-Pacific and Global LCCs
Valuation of Asia‐Pacific and Global LCCs Jetstar Group has the right platform to capture growth and deliver value For personal use only Jetstar Group’s Asia Pacific Growth Global LCC Comparison JETSTAR GROUP AIRLINES MARKET CAPITALISATION (AUD M)2 FLEET PASSENGER (M) 13,121 +18.2% +16.0% Asia‐Pacif
Slide 42: It takes time to unlock full potential
Valuation of Asia‐Pacific and Global LCCs It takes time to unlock full potential For personal use only ~3‐4 YEARS START UP TRAJECTORY IN NEW LCC MARKETS • Other Asia‐Pacific LCCs have BEFORE REACHING PROFIT STABILITY1 taken 3‐4 years to break‐even THB M SGD M • Rapid ramp‐up is needed to 60 2,000 Si
Slide 43: Jetstar Group Model: Strong, independent airlines
Jetstar Group Model Strong, independent airlines provide growth and innovation opportunities For personal use only OPPORTUNITIES INVESTMENT IN FOR GROWTH INNOVATION Jetstar Maximised Boeing 787 (Australia) introduction profitability Jetstar All markets/cultures International driving innovation (Aust
Slide 44: Disclaimer & ASIC Guidance
Disclaimer & ASIC Guidance For personal use only 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 6 Octob
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