Qantas Airways Limited · ASX:QAN
Qantas Airways — H1 FY2021 Earnings Presentation
62 slides from Qantas Airways's earnings presentation, Feb 25, 2021
Slide 1: Qantas Group HY21 Investor Presentations
25 February 2021 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group HY21 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group HY21 Investor Presentation; and • Qantas Group HY21 Investor P
Slide 2: Qantas Airways Limited 1H21 Results
Qantas Airways Limited 1H21 Results 25 February 2021 ASX: QAN US OTC: QABSY
Slide 3: 1H21 overview
1H21 overview Protecting the Balance Sheet and positioning for the recovery • 1H21 Underlying EBITDA1 of $86m, Underlying Loss Before Tax (ULBT)2 of ($1.0)b, Statutory Loss Before Tax of ($1.5)b, despite losing ~$7b3 of Total Revenue • Domestic airlines generated positive underlying cash flow4 despi
Slide 4: Recovery Plan launched, Balance Sheet repair to begin
Recovery Plan launched, Balance Sheet repair to begin Restructuring and Domestic Domestic ramp up and Preserving liquidity - 2H20 restart - 1H21 International restart - 2021 • Acted swiftly to safely hibernate the • On track to deliver $0.6b of cost benefits in • Well positioned to manage through bu
Slide 5: Agile management of domestic network
Agile management of domestic network Pre-COVID schedule development process Schedule development process during COVID-19 • Structured twice yearly process with periodic optimisation • Demand unpredictable and unprecedented • Predictable demand seasonality • Traditional booking windows and lead times
Slide 6: Recovery Plan on track
Recovery Plan on track On track to deliver $0.6b1 of restructure cost benefits in FY21, $0.8b by FY22 and at least $1.0b by FY23 Restructure - Ways of Working ~60%2 Restructure - Digitalisation/Supplier ~40%2 FY21 $206m ~60% Improved workforce flexibility and Efficiencies across the business ~90% re
Slide 7: Recovery Plan scorecard
TRANSFORMATION Recovery Plan scorecard TARGET KEY AREA OF FOCUS METRICS TIMEFRAME AS AT 31 DECEMBER 2020 Restructuring cost benefits of $0.6b in FY21, $0.8b by FY22, $1.0b by FY23 FY23 On track, reviewing opportunities for revenue and margin benefits Cost savings Increased target to at least 8,500 e
Slide 8: Qantas is committed to acting responsibly, respecting our social licence to operate
Qantas is committed to acting responsibly, respecting our social licence to operate Acting responsibly • Despite the financial and operational impacts of COVID-19 the Group remains focused on its role in reducing our emissions as we return to flying — One of the first airlines to commit to net zero
Slide 9: Financial Performance
Financial Performance
Slide 10: 1H21 key Group financial metrics
1H21 key Group financial metrics Profit metrics Balance Sheet metrics Other statistics (v 1H19) $86m ($861)m $4.2b (89%) Underlying EBITDA Statutory operating cash flow Total liquidity3 ASKs5 ($888)m $514m $6.05b (91%) Underlying EBIT loss Net capital expenditure2 Net debt RPKs6 ($1,034)m $2,606m $7
Slide 11: 1H21 Profit Bridge
1H21 Profit Bridge Group Total Revenue Activity based, rightsizing and decline $6.9b restructuring benefits $5.1b 775 Manpower cost reduction $ 142 m 9 63 (70) AOV cost reduction $ 2m 675 (1,034) Other cost reduction $ 62 m Restructuring benefits $ 206 m (6,729) 1,433 Selling & Marketing $ 382 m Com
Slide 12: Items not included in Underlying LBT
Items not included in Underlying LBT $M 1H21 Comments Redundancies incurred as part of the Recovery plan not previously Recovery plan restructuring costs 284 provided for in 2H20 Includes adjustment to the A380 AUD market value, Jetstar Asia fleet Impairment of assets and related costs 167 impairmen
Slide 13: 1H21 movement in cash position
1H21 movement in cash position Cash flows from financing Net free cash flow activities $468m (excluding one-offs) $540m 72 (202) (241) 839 Amortising 1,054 Debt repayment ($132m) and Bond Including (514) 3,520 repayment Aircraft and (1,915) Non Aircraft ($70m) Lease Liability $625m AMTN repayments I
Slide 14: Net debt and liquidity position
Net debt and liquidity position As at 31 As at 30 $M Dec 20 Jun 20 Current interest-bearing liabilities on • 1H21 new borrowings of $0.8b debt made up of $0.6b 922 868 Balance Sheet unsecured and $0.2b secured borrowings Non-current interest-bearing liabilities on • Repayment of $132m secured amorti
Slide 15: Segment Results
Segment Results
Slide 16: Qantas Domestic
Qantas Domestic • Generated positive underlying operating cash flow despite ~70% decline in revenue Pre-COVID 1H21 1H20 — Minimised cash costs by flexibly adjusting network and redeploying multi-gauge 1H19 fleet in response to changing flying patterns due to border closures; 99% of all Revenue $M 1,
Slide 17: Qantas International (including Freight)
Qantas International (including Freight) • Record Freight profit1 supported by constrained international belly space and Pre-COVID surging domestic e-commerce trends; a natural hedge to passenger business 1H21 1H20 1H19 — Replaced lost international belly space with redeployed A330 passenger aircraf
Slide 18: Jetstar Group
Jetstar Group • Profits1 from the ramp up of the Australian domestic business partially offset Pre-COVID losses from the international operations2 1H21 1H20 1H19 — AUS domestic business delivered $43m EBITDA through its highly variable cost Revenue5 $M 384 2,120 2,048 base and leading position in th
Slide 19: Qantas Loyalty
Qantas Loyalty • Group cash contribution ~$450m of gross receipts1 in 1H21 Pre-COVID 1H21 1H20 • Diversified earnings strategy driving positive EBIT contribution 1H19 Revenue8 $M 438 872 809 – Maintained total share of credit card spend despite 10% decline in spend on Qantas Points Earning Credit Ca
Slide 20: Financial Framework
Financial Framework
Slide 21: Financial Framework will continue to guide our capital decisions
Financial Framework will continue to guide our capital decisions 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 $5.6b1 Deliver ROIC >
Slide 22: Maintaining an optimal capital structure
Maintaining an optimal capital structure Capital structure as at 31 December 2020 Debt maturity profile as at 31 December 2020 ($M)1 • Net debt2 at $6.05b, prioritising debt reduction • Total liquidity of $4.2b including $2.6b cash3 and increased committed undrawn facilities of $1.6b • Unencumbered
Slide 23: Historical operating cash flow trend
Historical operating cash flow trend Rolling 12 months Statutory EBITDA (excl impairments) ($M)1 Pre-COVID • Significant one-off cash outflows mostly complete 2,657 2,937 3,202 3,415 – Statutory EBITDA of ($0.8)b (excluding impairments) for the 12 months to Dec 2020 – Includes impact of $0.8b redund
Slide 24: Working Capital rebuild of approximately $2-2.5b through RRIA and Payables
Working Capital rebuild of approximately $2-2.5b through RRIA and Payables Revenue Received in Advance ($M) Pre-COVID +$2b RRIA rebuild Other revenue received in advance • $3.7b 1H21 Revenue received in advance (RRIA) excluding Unredeemed frequent travel credits flyer revenue Unavailed passenger (3,
Slide 25: Robust fuel and FX risk management
Robust fuel and FX risk management Fuel cost ($B) 1H21 actual fuel cost -1.7 • 1H21 fuel cost of $0.3b, down $1.7b through 82% reduction in consumption and lower AUD fuel costs 2.0 Looking ahead • FY21 fuel cost is expected to be materially lower than FY20 0.3 — 2H21 fuel cost fully hedged in collar
Slide 26: Disciplined capital allocation
Disciplined capital allocation Capital expenditure Shareholder capital Disciplined capital expenditure ($B) movements ($B) -0.4 +2.8 • Net capital expenditure1 of $0.5b in 1H21, including capitalised maintenance on operational fleet and delivery of the first of three -0.8 A321-200P2F freighters • FY
Slide 27: Fleet strategic priorities
Fleet strategic priorities Qantas Group fleet strategy Current priorities Recovery phase • Continuing to defer delivery of 787-9s and A321NEOs Right aircraft • 747s retired from fleet Right route • 12 x A380s in long term storage, refurbishment program deferred • Building QantasLink fleet to service
Slide 28: 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 29: Outlook
Outlook
Slide 30: Australian Domestic market
Australian Domestic market Group Domestic operating environment • Recent domestic border closures since December 2020 disrupted positive momentum; recovery delayed by ~3 months (assuming no further border closures) – Planned 3Q21 capacity decreased from ~80% to ~60%; Growing to ~80% of Pre-COVID lev
Slide 31: Group International and Freight
Group International and Freight Freight operating environment International operating environment • International freight market • International border closures and quarantine restrictions remain in place – International belly space capacity expected to • Planning for Trans Tasman bubble from July a
Slide 32: Qantas Loyalty
Qantas Loyalty Loyalty prospects Giving customers confidence to book • Expected to continue to deliver strong cash flow • Clear dual brand strategy in domestic market providing certainty for contribution to the Group customers in value proposition • Rebound in earnings expected as the economy and tr
Slide 33: Outlook
Outlook FY21 outlook The Group’s conservative 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 network planning processes and mult
Slide 34: Well positioned for recovery
Well positioned for recovery Group Domestic1 airlines are well positioned to benefit from the Operating Segment EBITDA 4 recovery in domestic travel and changing competitive environment; $2.2b capacity share ~70%; significant unit cost reduction post restructuring; 1H21 Underlying EBITDA of $71m $1.
Slide 35: Looking forward, we remain committed to the FY24 targets
Looking forward, we remain committed to the FY24 targets Qantas Jetstar Qantas Jetstar International Qantas Loyalty Domestic Domestic International Relative competitive Stable earnings growth Relative margin advantage Relative margin advantage Lowest cost position advantage Targeting EBIT margin1 ~1
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Slide 37: Disclaimer & ASIC Guidance
Disclaimer & ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 25 February 2021, unless othe
Slide 38: 1H21 Results Supplementary Presentation
Qantas Airways Limited 1H21 Results Supplementary Presentation 25 February 2021 ASX: QAN US OTC: QABSY
Slide 39: Group Performance
Group Performance
Slide 40: 1H21 key Group financial metrics
1H21 key Group financial metrics 1H21 1H20 Pre-COVID 1H19 Comments EBITDA profit could not offset the impact of Depreciation Underlying (Loss)/Profit Before Tax1 ($M) (1,034) 771 775 and amortisation Underlying Earnings per Share2 (c) (40.5) 34.3 31.3 Statutory (Loss)/Profit Before Tax ($M) (1,467)
Slide 41: Underlying Income Statement summary
Underlying Income Statement summary Pre-COVID $M 1H21 1H20 Comments 1H19 Net passenger revenue 1,298 8,305 8,027 Reduction largely in line with decline in passengers carried Net freight revenue 613 496 525 Driven by e-commerce trends and restricted belly space availability Includes the impact of COV
Slide 42: Reconciliation to Underlying (Loss)/Profit before tax
Reconciliation to Underlying (Loss)/Profit before tax $M 1H21 Pre-COVID 1H19 Statutory Items not incl’d in Underlying1 Statutory Items not incl’d in Underlying1 Underlying Underlying Net passenger revenue 1,298 – 1,298 8,027 – 8,027 Net freight revenue 613 – 613 525 – 525 Other revenue 419 – 419 654
Slide 43: Revenue detail compared to Pre-COVID/1H19
Revenue detail compared to Pre-COVID/1H19 Net passenger revenue down 84% • Group Unit Revenue increased 15.6% due to lower mix of international flying – Group Domestic1 Unit Revenue decreased 16.9% Revenue ($B) – Group International2 Unit Revenue decreased 20.0% • Group capacity declined by 89% due
Slide 44: Expenditure detail compared to Pre-COVID/1H19
Expenditure detail compared to Pre-COVID/1H19 Fuel down 84% • Reduced consumption due to COVID related travel restrictions Expenditure1 ($B) • Lower AUD jet fuel prices 8.3 Manpower and staff-related down 60% • Decrease due to stand downs from significantly reduced flying and benefit of JobKeeper Ai
Slide 45: Cash flow (Statutory)
Cash flow (Statutory) • Significant drop in operating cash flow due to the impact of $M 1H21 1H20 travel restrictions and border closures due to COVID-19 and Operating cash flows (861) 1,475 one-off cash outflows for restructuring, redundancies, refunds and deferred payables Investing cash flows (51
Slide 46: Invested Capital calculation
Invested Capital calculation As at 31 Dec As at 30 Jun As at 31 Dec $M 2020 20203 2019 Receivables (current and non-current) 735 621 1,084 Inventories 296 306 379 Other assets (current and non-current) 602 562 607 Investments accounted for under the equity method 65 59 222 Property, plant and equipm
Slide 47: ROIC calculation
ROIC calculation $M 12 mths to Dec 20 12 mths to Dec 19 Underlying EBIT (1,393) 1,592 Add back: Lease depreciation under AASB 16 400 370 Less: Notional depreciation1 (107) (109) Less: Cash expenses for non-aircraft leases (202) (206) ROIC EBIT (1,302) 1,647 $M As at 31 Dec 20 As at 31 Dec 19 Net wor
Slide 48: 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 EBITDAR where EBITDAR achieves a fixed 10% ROIC • At Invested Capital of $6.0b as at 30 June 2020, optima
Slide 49: Net debt movement consistent with Financial Framework
Net debt movement consistent with Financial Framework $M 1H21 1H20 • The Financial Framework considers aircraft leases as part of net debt Opening Net Debt (30 June) (4,734) (4,710) — Aircraft leases are recognised in net debt at fair value Net cash from operating activities (861) 1,475 — Principal
Slide 50: Unit Cost breakdown
Unit Cost breakdown Group Unit Cost 1H21 Comments Total Unit Cost1 22.03 Excluding: Fuel (3.50) Change in FX rates Impact of changes in the discount rate and other actuarial assumptions (0.23) Share of net profit/(loss) of investments accounted for under the equity method (0.76) Ex-Fuel Unit Cost 2
Slide 51: 1H21 Australian Government COVID-19 packages
1H21 Australian Government COVID-19 packages The Coronavirus and government border restrictions reduced the Group’s revenue for 1H21 by ~$7.0b1. Australian Government COVID-19 packages totalled $699m for 1H21, including $459m for JobKeeper payments benefiting employees who were stood down and subsid
Slide 52: Fleet as at 31 December 2020
Fleet as at 31 December 2020 Aircraft Type 1H21 FY20 Change • Group fleet5 of 314 aircraft as at 31 December 2020 A380-800 12 12 – A330-200 18 18 – • Movements in 1H21 include: A330-300 10 10 – — Disposal of one 747-400ER, three held for sale with 737-800NG 75 75 – settlement of transactions to occu
Slide 53: Supplementary Segment Information
Supplementary Segment Information
Slide 54: 1H21 Group and Group Domestic Traffic Statistics vs Pre-COVID
1H21 Group and Group Domestic Traffic Statistics vs Pre-COVID 1Q21 Pre-COVID 1Q19 Change (%) 2Q21 Pre-COVID 2Q19 Change (%) 1H21 Pre-COVID 1H19 Change (%) Qantas Group Operations Passengers carried (‘000) 1,647 14,103 (88) 3,268 14,397 (77) 4,915 28,500 (83) Revenue Passenger Kilometres (m) 1,816 32
Slide 55: 1H21 Group International Traffic Statistics vs Pre-COVID
1H21 Group International Traffic Statistics vs Pre-COVID 1Q21 Pre-COVID 1Q19 Change (%) 2Q21 2Q19 Change (%) 1H21 Pre-COVID 1H19 Change (%) Qantas International Passengers carried (‘000) 0 2,184 (100) 3 2,244 (100) 3 4,428 (100) Revenue Passenger Kilometres (m) 2 14,911 (100) 6 15,133 (100) 8 30,044
Slide 56: 1H21 Group and Group Domestic Traffic Statistics vs 1H20
1H21 Group and Group Domestic Traffic Statistics vs 1H20 1Q21 1Q20 Change (%) 2Q21 2Q20 Change (%) 1H21 1H20 Change (%) Qantas Group Operations Passengers carried (‘000) 1,647 14,341 (89) 3,268 14,535 (78) 4,915 28,876 (83) Revenue Passenger Kilometres (m) 1,816 32,766 (94) 3,752 32,671 (89) 5,568 6
Slide 57: 1H21 Group International Traffic Statistics vs 1H20
1H21 Group International Traffic Statistics vs 1H20 1Q21 1Q20 Change (%) 2Q21 2Q20 Change (%) 1H21 1H20 Change (%) Qantas International Passengers carried (‘000) 0 2,186 (100) 3 2,262 (100) 3 4,448 (100) Revenue Passenger Kilometres (m) 2 14,899 (100) 6 15,039 (100) 8 29,938 (100) Available Seat Kil
Slide 58: Jetstar Group as at 31 December 2020
Jetstar Group as at 31 December 2020 Jetstar Branded Airlines Ownership1 Launch Aircraft2 ❶Jetstar Australia 100% 2004 51 x A320s/A321s ❷Jetstar International 100% 2006 11 x 787-8s ❸Jetstar New Zealand3 100% 2009 5 x A320s ❹Jetstar Asia (Singapore) 49% 2004 15 x A320s ❺Jetstar Japan 33% 2012 25 x A3
Slide 59: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 2% growth1 in Qantas Frequent Flyer membership; >10% growth in QBR2 membership with ~320,000 SME members3 • ~550 Partners4; 7 new Qantas Business Rewards partners onboarded • BP Australia and Qant
Slide 60: Margin is only generated on 'external points sales'
Margin is only generated on ‘external points sales’ Corepoints sales – generates pointsmargin Margin is only generated on ‘externalpoints’ (unique compared to other airline loyalty programs) Creating value for our partners ~40% Internal Qantas,Jetstar • Customer acquisition Price =cost • Customer re
Slide 61: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for passengers, multiplied by the Net on balance sheet debt – Interest-bearing liabilities reduced by cash and cash equivalents number of kilometres flown Net Working capital – Net total of the following items disclosed in th
Slide 62: Disclaimer & ASIC Guidance
Disclaimer & 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 25 February 2021, unless othe