Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2018 Earnings Presentation
36 slides from Qantas Airways's earnings presentation, Aug 23, 2018
Slide 1: Qantas Airways Limited FY18 Results
For personal use only Qantas Airways Limited FY18 Results 23 August 2018 ASX:QAN US OTC:QABSY
Slide 2: FY18 Highlights
FY18 Highlights For personal use only Record Group financial performance in rising fuel environment Earnings Per Share (Cents) • Record1 Underlying Profit Before Tax2 (PBT) $1,604m, Statutory PBT $1,391m 64 53 55 56 49 46 • Record Statutory EPS 56 cps, Underlying EPS3 64 cps 32 25 • Strong Return on
Slide 3: Integrated Group Portfolio Weighted to Domestic Australia
Integrated Group Portfolio Weighted to Domestic Australia For personal use only Maximising leading Dual Brand Domestic position through network Operating Segment EBIT4 ($M) leadership and customer focused investments 2000 Group International Group Domestic1 Underlying EBIT of $1,079m supported by pr
Slide 4: FY18 Key Group Financial Metrics
FY18 Key Group Financial Metrics For personal use only Underlying PBT1 Underlying EPS3 12 Month ROIC%4 Cash Flow $1,604m 64c $3,413m Operating cash flow, Up $709m2 Up $203m2 Up 18%2 22.0% > WACC5 $1,442m Statutory PBT $1,391m Statutory EPS 56c Up $210m2 Up 21%2 Net free cash flow6, Up $133m2 Unit Re
Slide 5: FY18 Profit Bridge
FY18 Profit Bridge For personal use only Underlying Profit Before Tax ($M) 193 (193) 189 (189) 254 250 (250) 645 51 (51) 36 (23) 23 1,604 26 (26) 1,401 Net Revenue benefits2 $176m Fuel efficiency benefits3 $ 33m Non-fuel cost reduction $254m Transformation benefits $463m FY17 Ticketed Passenger Fuel
Slide 6: Maximising Leading Dual Brand Domestic Position
Maximising Leading Dual Brand Domestic Position Dual Brand strategy at the core of Group’s portfolio strength For personal use only Group Domestic Unit Revenue Growth5 $1,079m Record Group Domestic1 Underlying EBIT in FY18, up 25%2 Market Capacity growth 6 Group Domestic Unit Revenue growth 6.8% 4.4
Slide 7: Building a Resilient Qantas International
Building a Resilient Qantas International For personal use only Airline Group Operating Margin3 $399m Underlying EBIT in FY18 up 6.7% compared to FY17 11.5% Japan Airlines 13.6% 10.5% >10% >10% ROIC1 since FY15 Qantas Group +0.6pts 9.9% 10.4% Air New Zealand 11.1% Ordered 14 new 787-9 Dreamliners to
Slide 8: Segment Results
For personal use only Segment Results
Slide 9: Qantas Domestic
Qantas Domestic For personal use only • Record1 Underlying EBIT up 19.1% to $768m FY18 FY17 VLY %8 • Record Operating Margin Revenue $M 5,973 5,632 6.1 – Have offset fuel price increases • Unit Revenue up 8% in FY18 Underlying EBIT $M 768 645 19.1 • Continued capacity management discipline Operating
Slide 10: Qantas International
Qantas International1 For personal use only • Underlying EBIT up 6.7% to $399m FY18 FY174 VLY % – Unit Revenue increase of 2.5%2 in competitive market conditions Revenue $M 6,892 6,413 7.5 – Maintained strong operating margin in rising fuel price environment • Structural transformation continues to
Slide 11: Jetstar Group
Jetstar Group For personal use only • Record Underlying EBIT up 10.6% to $461m FY18 FY17 VLY % • Record Domestic result1, Unit Revenue up 5% driven by a 3 pts seat factor improvement on 1% capacity reduction Revenue10 $M 3,767 3,600 4.6 • Strong Jetstar International2 earnings3 Underlying EBIT $M 46
Slide 12: Qantas Loyalty
Qantas Loyalty For personal use only • Strategy to mitigate interchange fee regulatory change on track FY18 FY17 VLY % – Record Underlying EBIT of $372m Revenue $M 1,546 1,505 2.7 • Coalition Business fundamentals continue to strengthen – Co-branded credit card growth outpacing market1, members acti
Slide 13: Financial Framework
For personal use only Financial Framework
Slide 14: Financial Framework Aligned with Shareholder Objectives
Financial Framework Aligned with Shareholder Objectives For personal use only 1. Maintaining an Optimal 2. ROIC > WACC2 3. Disciplined Allocation Capital Structure Through the Cycle of Capital Minimise cost of capital by Deliver ROIC > 10%3 Grow invested capital with targeting a net debt range of th
Slide 15: Maintaining an Optimal Capital Structure
Maintaining an Optimal Capital Structure Leverage and liquidity For personal use only Optimal capital structure Net Debt Profile FY14 to FY18 ($B) • Net debt1 at $4.9b, below the bottom of the target range 8 33% Reduction – Provides significant financial flexibility 6 • Extended tenor and diversifie
Slide 16: Delivering ROIC >10% Through the Cycle: Hedging
Delivering ROIC >10% Through the Cycle Protecting ROIC through the disciplined hedging program For personal use only • Effective hedging program contained FY18 fuel cost increase to $193m or Fuel Cost (A$B) 6%1, market USD Jet prices increased on average ~25% over the same period2 3.90 3.23 3.04 3.2
Slide 17: Delivering ROIC >10% Through the Cycle: Fuel and Revenue Outlook
Delivering ROIC >10% Through the Cycle Fuel and revenue outlook For personal use only Reducing short term earnings volatility Well positioned to substantially recover higher fuel costs • FY19 fuel cost is expected to be ~A$3.92b1, • Expect to recover fuel price increases in the domestic market throu
Slide 18: Delivering ROIC >10% Through the Cycle: Transformation Status
Delivering ROIC >10% Through the Cycle Transformation status For personal use only Achieved $463m Transformation benefits in FY181 FY19 On track to deliver targeted annual gross benefit of $400m in pipeline FY19 and FY20 • Net revenue benefits2 of $176m 32% • Additional 787-9 Dreamliners, retirement
Slide 19: Disciplined Capital Allocation
Disciplined Capital Allocation Capital expenditure and shareholder distributions For personal use only Shares on Issue (M) • FY18 net capital expenditure1 of $1.97b, $1.0b in 2H18 >26% Reduction3 – Sustainable operating cash flow has allowed significant deleveraging of the balance sheet, supporting
Slide 20: Building Long-Term Shareholder Value
For personal use only Building Long-Term Shareholder Value
Slide 21: Recognising and Responding to Emerging Global Forces
Recognising and Responding to Emerging Global Forces The long-term context For personal use only Understanding the Long-term Context New Centres of Rapid Digitisation Shifting Customer Customer Demand Resource Constraints and the Rise of Big and Workforce and Geopolitical and Climate Change Data Pre
Slide 22: Balanced Scorecard to Measure Success to FY20
Balanced Scorecard to Measure Success to FY20 On track to meet near term targets For personal use only TARGET METRICS TIMEFRAME PROGRESS TO DATE ROIC > 10% FY18 – FY20 FY18 ROIC > 10% for all operating segments Segment Performance Qantas Loyalty targeting EBIT CAGR1 7-10% FY22 On track for $500-600m
Slide 23: Maximising Leading Domestic Position through Dual Brand Strategy
Maximising Leading Domestic Position through Dual Brand Strategy For personal use only • Network and frequency advantage to competitors1 • Sophisticated disciplined approach to capacity management to optimise earnings • Reciprocal codeshare deal with Air New Zealand on domestic network • Enhancing d
Slide 24: Building a Resilient and Sustainable Qantas International
Building a Resilient and Sustainable Qantas International For personal use only Network and Defend and Grow Premium Customer Fleet Renewal Partner for Success Hub Evolution Priority Markets Experience • Five 789s in service as at • Launched direct Perth – • 38% of Qantas • Emirates partnership • Cab
Slide 25: Aligning Qantas and Jetstar with Asia's growth
Aligning Qantas and Jetstar with Asia’s growth For personal use only • Qantas routes focused on strong outbound business and premium leisure segment demand • Qantas Asian network expanded through codeshare and alliances • Jetstar International routes focused on strong leisure markets of Bali and Phu
Slide 26: Investing in Customer, Brand, Data and Digital
Investing in Customer, Brand, Data and Digital For personal use only • Major lounge investments to support growth in premium international travel – Updates to Sydney International First Lounge and Auckland Lounge, refresh of Tokyo Narita Lounge, expanded Brisbane International Lounge • Two Regional
Slide 27: Diversification and Growth at Qantas Loyalty
Diversification and Growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs For personal use only • Growing Loyalty business with advantaged assets and capabilities – 12.3 million members, equivalent to ~50% of the Australian population – Unique value of Qantas frequent fly
Slide 28: Focus on People, Culture and Leadership
Focus on People, Culture and Leadership For personal use only • Employee engagement at 80% in 2018 Qantas Group Engagement – Strong correlation between high engagement and strong financial performance – Rewarding non-executive employees with over $300m in bonuses for the past 4 years 1 – Ongoing inv
Slide 29: Acting Responsibly
Acting Responsibly For personal use only In FY18 the Qantas Group has made significant gains in maintaining high operational standards, acting responsibly and being transparent. Our No.1 Priority – Safety Environment Community Risk management starts with the safety of Targeting 'carbon neutral growt
Slide 30: Fleet Strategic Priorities
Fleet Strategic Priorities For personal use only Qantas Group fleet strategy Current Priorities Qantas International Match the right aircraft • Grow 787-9 Dreamliner fleet to 14 aircraft to the right route • A380 refurbishment program commences in 2019 • All 747s retired by end of 2020 • Evaluating
Slide 31: Pathway for Fleet Transition to Next Generation Aircraft Technology
Pathway for Fleet Transition to Next Generation Aircraft Technology For personal use only Retiring Sustaining and Investing in Adopting Next Generation Evaluating Future Fleet Type1 Mainstream Technology2 Technology3 Technology4 A380 12 747-4 10 787-8 11 Accelerated retirement A330 28 777X by 2020 A
Slide 32: Outlook
For personal use only Outlook
Slide 33: 1H19 Outlook – Domestic and International Operating Environment
1H19 Outlook – Domestic and International Operating Environment For personal use only • Early signs provide confidence that we will substantially recover higher fuel costs – Value of forward bookings up 6.2% as of 30 June 20181 • 1H19 planned Group capacity to increase by ~0-1%2 • Group Domestic cap
Slide 34: FY19 Group Outlook
FY19 Group Outlook For personal use only • Current Group operating expectations: – FY19 fuel cost is expected to be ~A$3.92b1 – FY19 net depreciation and non-cancellable aircraft operating lease rentals expected to be ~$155m higher than FY18 FY19 depreciation and amortisation expense expected to b
Slide 35: Questions?
For personal use only Questions?
Slide 36: 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 23 Augu