Qantas Airways Limited · ASX:QAN
Qantas Airways — H1 FY2024 Earnings Presentation
62 slides from Qantas Airways's earnings presentation, Feb 22, 2024
Slide 1: Qantas Group HY24 Investor Presentations
22 February 2024 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group HY24 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group HY24 Investor Presentation; and • Qantas Group HY24 Investor P
Slide 2: 1H24 Results Investor Presentation
1H24 Results Investor Presentation Qantas Airways Limited 22 February 2024 ASX:QAN US OTC: QABSY
Slide 3: Disclaimer
Disclaimer Summary information This Presentation is unaudited. Notwithstanding this, the No representation or warranty, express or implied, is made as This Presentation contains summary information about Qantas Presentation contains disclosures which are extracted or to the fairness, accuracy, compl
Slide 4: We've listened closely and we are committed to returning to our best and beyond
We’ve listened closely and we are committed to returning to our best and beyond. Our People Our Customers Thank you for your support while we restore trust and pride in the national carrier. Vanessa Hudson Group CEO Our Shareholders Our Community & Partners 1H24 Results | 3
Slide 5: 1H24 overview
1H24 overview Operating results $1,245m • Qantas Domestic, Qantas International and Jetstar Group delivered strong performance 1H24 Profit Before Tax (PBT) • Qantas Loyalty 2H CY23 earnings of $270m, achieving Underlying EBIT guidance of >$500m for CY23 • Operating cash flow of $1.3b predominantly i
Slide 6: Group 1H24 integrated portfolio earnings
Group 1H24 integrated portfolio earnings • Dual Brand strategy drives segment success and sustainable industry leading margins with leadership positions across all key market segments Portfolio Segment EBIT ($b) Domestic • Current and future fleet provide flexibility, optimise route economics and op
Slide 7: Our Vision – It starts with our people and customers
Our Vision – It starts with our people and customers OUR PEOPLE OUR CUSTOMERS Proud to work for us Proud to fly with us Passionate about our customers and Trust and depend on us to take care empowered to provide great service of you in the moments that matter Work in a safe and inclusive Rely on us
Slide 8: Investing in our People and Culture
Investing in our People and Culture Listening Supporting Inclusion & Diversity Retention Dec-23 Group Attrition3 6.6% Continued to steadily decline over the past 12 months Attraction • Be present with our teams to • Continue to prioritise safety • Roll out inclusive leadership hear experiences direc
Slide 9: Investing in our Customers
Investing in our Customers Exceptional flying experience Seamless digital interactions Performance % flights Domestic On Time Performance 1 85 Qantas Jetstar 80 75 70 65 60 Jul Aug Sep Oct Nov Dec Jan Feb • Lifting operational reliability through • Investing to improve ease, transparency and MTD inv
Slide 10: Investing in our Customers
Investing in our Customers Trusted to recover well Unrivalled reward and recognition Performance Contact centre satisfaction1 % Qantas Jetstar 90 80 70 60 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb • Better service during disruptions: digital self- • Record number of Classic Rewards
Slide 11: Continuing to deliver value in travel for our customers
Continuing to deliver value in travel for our customers Real average fares1 >35 sales -11% campaigns6 -11% >1.3 million • Discover Australia Sale QAD QAI • Red Tail Sale Qantas Total fares sold3 • Footy Finals Sale 2Q23 2Q24 below $200 in 1H24 • Feels like Christmas Real average fares1 >150 sales -1
Slide 12: Travel intentions have remained consistently strong
Travel intentions have remained consistently strong 1 QFF net spend intentions in the next 6 months1 1 QFF members continuing to prioritise spend on travel1 International travel 27% Domestic travel 21% • Despite reduced spending intentions across most categories, Groceries 8% travel continues to rem
Slide 13: Investing in our Community
Investing in our Community Connecting the regions Supporting Communities First Nations partnerships Qantas and Jetstar partnered with government Supported the Matildas during the Women’s Soccer Ongoing support for recognition of First Nations to provide discounted fares to FNQ post-cyclone World Cup
Slide 14: Investing in Sustainability
Investing in Sustainability Significant progress against 2030 targets and Climate Action Plan Sustainable aviation fuel Sustainable operations • Credible path to meet 2030 target (10% SAF), of $400m Qantas Climate • New efficiency, waste programs linked to STIP2 leveraging wide-body orders and new >
Slide 15: Financial Performance
CANTAS GROUP Financial Performance
Slide 16: 1H24 Group financial metrics
1H24 Group financial metrics Profit metrics Balance Sheet and Cash Flow metrics Key statistics (vs 1H23) $1,245m $1.34b +25.0% Underlying/Statutory profit before tax Operating cash flow ASKs $869m $1.49b +22.5% Statutory profit after tax Net Capital Expenditure RPKs 52c $4.0b (target $4.0b - $5.0b)
Slide 17: 1H24 profit bridge compared to 1H23
1H24 profit bridge compared to 1H23 $m 1H23 1H24 ASKs (m) 55,438 +25% 69,324 Discount rate & FX $ (80) m Associates share of profits (incl. JJP) $ 40 m Net Finance Costs $ 16 m Other $ (1) m 485 Other $ (25) m (576) 1,428 50 (146) 179 (84) 1,245 CPI (186) (25) 154 Industry costs (34) (220) Food & Be
Slide 18: 1H24 movement in Net Debt
1H24 movement in Net Debt driven by seasonal RRIA decline, capex spend and share buy-backs Lease Buy Outs $ (0.3) b $m Treasury Shares2 $ (0.3) b One Offs $ (0.6) b A/C Acquisition $ (0.8) b Maintenance $ (0.5) b Other $ (0.1) b (565) Net Capex $ (1.5) b (636) 2,202 (1,490) RRIA Seasonality $ (0.4)
Slide 19: Segment Results
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Slide 20: The Group's integrated portfolio builds sustainable long term shareholder value
The Group’s integrated portfolio builds sustainable long term shareholder value • Coordinated Dual Brand strategy with integrated offering across all key customer segments driving industry leading performance, scale in operations and more options for customers in recovery • Home market distribution
Slide 21: Qantas Domestic
Qantas Domestic Strong domestic earnings underpinned by robust demand and transformation 1H24 1H23 Change • Robust Domestic demand with RASK decline of (5%) vs 1H23 as expected as pent-up demand Revenue $M 3,758 3,634 +3% experienced in 1H23 moderated (seat factor and yield) • Leading market share p
Slide 22: Qantas International (including Freight)
Qantas International (including Freight) International yields remain strong despite returning capacity 1H24 1H23 Change • (13%) decline in RASK v 1H23 despite 39% growth in ASK. RASK remains +43% vs 1H19 Revenue $M 4,340 3,802 +14% – Yield and RASK decline largely as expected as pent-up demand moder
Slide 23: Jetstar Group
Jetstar Group Jetstar’s Australian domestic network delivered $175m Underlying EBIT 1H24 1H23 Change • 1H24 Total RASK declined (4%) vs 1H23. Demand environment and intention to travel remains strong Revenue1 $M 2,486 2,096 +19% with fares moderating as expected as capacity returns. Ancillary revenu
Slide 24: Qantas Loyalty
Qantas Loyalty Achieving $501m Underlying EBIT in CY23 (2H23 : $231m; 1H24 $270m) 1H24 1H23 Change • Consumer spending patterns and QFF travel spending intentions remain strong for both INT Revenue $M 1,271 1,027 +24% (+27%) & DOM (+21%)3, as members continue to prioritise travel over other spend ca
Slide 25: Financial Framework
Wcantas croup Financial Framework
Slide 26: Financial Framework: Settings reviewed and confirmed
Financial Framework: Settings reviewed and confirmed • Since 2015, the Financial Framework has set appropriate risk parameters for the Group’s balance sheet and allocation of capital • The Framework has guided the Group through challenging periods and is well regarded by key stakeholders • As the Gr
Slide 27: Financial Framework continues to drive capital discipline
Financial Framework continues to drive capital discipline 1 Maintain optimal capital structure 2 ROIC > WACC through the cycle 3 Disciplined allocation of capital Net Debt $B Return on Invested Capital % Surplus Capital Uses $B 4.9 3.6 3.7 2.9 3.0 3.0 2.6 1.0 2.1 1.0 1.9 5.2 4.9 4.7 0.6 1.0 1.2 0.5
Slide 28: Liquidity and debt maturity profile
Maintaining an optimal capital structure: Liquidity and debt maturity profile Total liquidity of >$9.2b as at 31 December 2023 Liquidity Expected Unencumbered Fleet Profile by age7 (A $b) • Unencumbered assets include ~$4.4b of unencumbered aircraft >$4.0b >$4.7b >$5.0b >$5.7b (~64% of the Group fle
Slide 29: Financial Framework: Net Debt Target
Financial Framework: Net Debt Target To date FY24 to FY26 • In FY22 to FY23, the appropriate target was to be at or below the • The dynamic nature of the Financial Framework allows the bottom of the net debt target range as the Group recovered from the Group to recognise the impact of low IC on leve
Slide 30: Financial Framework Application
Financial Framework Application Maintain net debt at or below middle of the target range Expected Net Debt Target Range ($b) • Net Capex guidance: FY24 $3.0b – $3.2b, FY25 $3.7b - $3.9b Not to scale, • Target range calculated on a financial year basis and expected to increase by ~$0.7b for illustrat
Slide 31: New aircraft deliveries and fleet flexibility
New aircraft deliveries and fleet flexibility New aircraft deliveries1 Key: Changes from FY23 investor presentation in superscript New fleet technology continues to drive long-term advantage • Fleet renewal delivers substantial transformation benefits and step-change in cost FY24 FY25 FY26 Current f
Slide 32: Jetstar Australia A321LR and B787 redeployment
CASE STUDY Jetstar Australia A321LR and B787 redeployment Narrowbody fleet renewal International Growth and B787 redeployment & investment • Jetstar has received 11 x A321LRs as at 1H241, growing to 15 by end FY24, • ~1 x A321LR launched on Sydney-Rarotonga & Melbourne-Nadi routes driving fleet rene
Slide 33: Outlook
CANTAS GROUP Outlook
Slide 34: Outlook
Outlook Business Outlook 2H24 Financial Outlook • The Group is seeing 2H24 travel demand remaining strong across the portfolio • FY24 fuel cost expected to be $5.4b1 at current fuel prices inclusive of hedging • Group RASK to continue to moderate vs 2H23 as international capacity returns to pre-COVI
Slide 35: Outlook: Guidance Tables
Outlook Guidance Tables Capacity Guidance1 FY24 1Q25 Qantas Loyalty FY24 (vs prior corresponding period) 3Q24 4Q24 2H24 FY24 (% of pre- 1Q25 (% of pre- COVID) COVID) Points Earned B >180 Group Domestic +7% +3% +5% +7% 103% +2% 105% Points Redeemed3 B >180 Qantas Domestic +2% (3%) (1%) +2% 98% (1%) 9
Slide 36: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available investing cash flows included in the Consolidated Cash Flow RRP – Recovery and Retention Plan for passengers, multiplied by the number of kilometres flown Statement and the impact to Invested Capital from acquiring or SAF – S
Slide 37: 1H24 Results Supplementary Presentation
1H24 Results Supplementary Presentation Qantas Airways Limited 22 February 2024 ASX:QAN US OTC: QABSY 1H24 Results | 1
Slide 38: Disclaimer
Disclaimer Summary information This Presentation is unaudited. Notwithstanding this, the No representation or warranty, express or implied, is made as This Presentation contains summary information about Qantas Presentation contains disclosures which are extracted or to the fairness, accuracy, compl
Slide 39: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available Statement and the impact to Invested Capital from acquiring or Seat Factor (Load factor)– RPKs divided by ASKs for passengers, multiplied by the number of kilometres flown returning leased aircraft. Refer to slide 17 for the
Slide 40: Group Performance
Group Performance 1H24 Results | 4
Slide 41: 1H24 Key Group Financial Metrics
1H24 Key Group Financial Metrics 1H24 1H23 Profit metrics Revenue $M 11,127 9,909 Underlying Profit Before Tax1 $M 1,245 1,428 Statutory Profit Before Tax $M 1,245 1,435 Statutory Profit After Tax $M 869 1,001 Statutory Earnings per Share c 51.8 53.9 Balance Sheet and Cash Flow metrics Rolling 12 mo
Slide 42: 1H24 Key Group Operating Metrics
1H24 Key Group Operating Metrics 1H24 1H23 Change (%) Unit Revenue (RASK)1 c/ASK 11.65 13.05 (10.7) % Total Unit Cost1 c/ASK (9.85) (10.47) 5.9% Unit Cost (ex-Fuel)1 c/ASK (5.99) (6.32) 5.2% Available Seat Kilometres (ASK) M 69,324 55,438 25.0% Revenue Passenger Kilometres (RPK) M 57,989 47,322 22.5
Slide 43: Reconciliation to Underlying Profit Before Tax
Reconciliation to Underlying Profit Before Tax $M 1H24 1H23 Statutory Items not included Underlying Statutory Items not included Underlying in Underlying in Underlying Net passenger revenue 9,614 – 9,614 8,393 – 8,393 Net freight revenue 605 – 605 810 – 810 Other revenue 908 – 908 706 – 706 Total Re
Slide 44: Revenue received in advance (RRIA) and travel credits
Revenue received in advance (RRIA) and travel credits Total Revenue Received in Advance ($B) 8.7 8.3 7.9 0.6 7.9 • Loyalty unredeemed Frequent Flyer revenue continues to grow 0.8 0.5 0.1 1.0 0.5 in line with member and points activity 0.5 0.4 5.9 5.8 • Passenger RRIA declined since June 23 in line w
Slide 45: COVID credit balance continues to wind down through usage and refunds
COVID credit balance continues to wind down through usage and refunds COVID Credit1 Balance Movements ($m) • The COVID credit balance has decreased by >75% to $468m 652 from a COVID period high of $2b (184) • As of 31 December 2023, $468m of customer balances 468 remaining in COVID credits • Signifi
Slide 46: Group Unit Revenue and Unit Cost (c/ASK)
Group Unit Revenue and Unit Cost (c/ASK) RASK 1H24 CASK 1H24 Net passenger revenue $M 9,614 Underlying (Profit) Before Tax $M (1,245) Excluding Other passenger revenue $M (1,537) Excluding Ticketed passenger revenue $M 8,077 A Ticketed Passenger Revenue $M 8,077 C Net expenditure $M 6,832 Less: Fuel
Slide 47: Ongoing transformation focus
Ongoing transformation focus Targeting ~$400m in FY24 cost and revenue transformation Identified Pipeline of through initiatives already underway Value Creation for FY25+ FY24 Enablers FY25+ Enablers Fleet & Network • Fleet renewal: 1H24 2H24 ◦ 3 x A321s and 2 x A330 deliveries to Qantas Freight • C
Slide 48: Financial Framework
Financial Framework 1H24 Results | 12
Slide 49: Return on Invested Capital (ROIC) Calculation
Return on Invested Capital (ROIC) Calculation 12 mths to 12 mths to $M Dec 23 Dec 22 • ROIC EBIT is derived by adjusting Underlying EBIT Underlying EBIT 2,483 1,115 to exclude AASB 16 lease depreciation and includes notional depreciation for leased aircraft as if they Add back: Lease depreciation un
Slide 50: Balance Sheet Summary under Financial Framework
Balance Sheet Summary under Financial Framework As at 31 Dec As at 31 Dec $M 2023 2022 • Invested Capital is defined as Net Assets adjusted for Net Assets 117 16 the following: Less: Cash and cash equivalents (1,545) (4,145) – Exclusion of Cash and cash equivalents and Interest-bearing liabilities w
Slide 51: Net Debt Target Range
Net Debt Target Range • Net Debt target range = 2.0x — 2.5x EBITDA where ROIC = 10% • Net debt target range is forward-looking and calculated on an annual basis • At forecasted average Invested Capital of $4.3b1, optimal Net Debt range is $4.0b to $5.0b Forecast Jun 24 Drivers of Net Debt Range $B I
Slide 52: Net Debt and Liquidity Position
Net Debt and Liquidity Position As at 31 As at 30 Net Debt increased by ($1.1b) for the 6 months to December 2023 $M Change2 Dec 2023 Jun 2023 – ($1.6b) cash decrease mainly driven by debt reduction, Net Capital Net on Balance Sheet debt1 3,341 1,998 (1,343) Expenditure and Shareholder Distributions
Slide 53: Net Debt movement under the Financial Framework
Net Debt movement under the Financial Framework $M 1H24 1H23 The Financial Framework considers aircraft leases as part of Net Opening Net Debt (2,885) (3,937) Debt – Aircraft leases are initially recognised in Net Debt at fair value Net cash from operating activities 1,341 2,811 Less: Net lease prin
Slide 54: Financial risk management framework
Financial risk management framework Hedging Program Principles of Financial Risk Management • Principles of financial risk management Reducing cash flow volatility in the short term through – Manage net cash flow impacts disciplined hedging program to allow for implementation of operational levers –
Slide 55: Robust financial risk management
Robust financial risk management Operational Fuel and FX Capital Expenditure FX – Hedging of USD Fleet Payments • 1H24 fuel cost at $2.7b • Hedging remains consistent with long term approach to risk management – Hedging strategy provided time to implement operational changes for – Preference for opt
Slide 56: Group Net Capital Expenditure
Group Net Capital Expenditure Net Capex1 Capital allocation Capital Expenditure step change from FY23 A$b Proportion of non-new aircraft capital by category 1 Capitalised maintenance2 2.7 • ~A$1.1b p.a. +/- A$200m: Capital to maintain existing aircraft and cabin reconfigurations / refreshes • Mainte
Slide 57: Supplementary segment information
Supplementary segment information 1H24 Results | 21
Slide 58: Qantas Domestic and International Overview
Qantas Domestic and International Overview Qantas Domestic Qantas International • Full service offering targeting business purpose and premium leisure sectors • Globally recognised long haul carrier targeting high demand business and premium leisure segments into USA, Europe and South East Asia – Ma
Slide 59: Jetstar Group Overview
Jetstar Group Overview Jetstar Domestic Jetstar International5 Jetstar in Asia and New Zealand • Targeting industry-leading LCC1 EBIT margin • Targeting industry-leading LCC EBIT margin Jetstar Japan • Low fares leadership with margin premium over • Strong profitability and RASK performance in 1H24
Slide 60: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs ▪ Contributing ~$1.1b towards the Group Cash Flow1 in 1H24; delivering long term value to the Qantas Group ▪ >1.1m new members joined Qantas Frequent Flyer in the last year +8% YoY to 15.8m; 20% gro
Slide 61: 1H24 Group and Group Domestic Traffic Statistics vs 1H23
1H24 Group and Group Domestic Traffic Statistics vs 1H23 1Q24 1Q23 Change (%) 2Q24 2Q23 Change (%) 1H24 1H23 Change (%) Total Qantas Group Operations Passengers Carried ‘000 12,861 11,186 15 13,151 11,489 14 26,012 22,675 15 Revenue Passenger Kilometers M 28,840 22,940 26 29,149 24,382 20 57,989 47,
Slide 62: 1H24 Group International Traffic Statistics vs 1H23
1H24 Group International Traffic Statistics vs 1H23 1Q24 1Q23 Change (%) 2Q24 2Q23 Change (%) 1H24 1H23 Change (%) Group International Available Seat Kilometers M 20,510 14,077 46 21,324 16,037 33 41,834 30,114 39 Group International Unit Revenue Change % (6) (15) (11) Qantas International Passenger