Qantas Airways Limited · ASX:QAN
Qantas Airways — FY2022 Earnings Presentation
72 slides from Qantas Airways's earnings presentation, Aug 25, 2022
Slide 1: Qantas Group FY22 Investor Presentations
25 August 2022 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group FY22 Investor Presentations Qantas Airways Limited attaches the following documents: • Qantas Group FY22 Investor Presentation; and • Qantas Group FY22 Investor Pre
Slide 2: FY22 Results Presentation
FY22 Results Presentation Qantas Airways Limited 25 August 2022 ASX: QAN US OTC: QABSY
Slide 3: Disclaimer
Disclaimer 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 related bodies corporate (Qantas Group) and their activities current as at 25 August 2022, unless otherwise
Slide 4: FY22 overview
FY22 overview Operating result impacted by COVID-19 • FY22 Underlying EBITDA1 of $281m, Underlying Loss Before Tax (ULBT)2 of ($1,859)m, Statutory Loss Before Tax of ($1,191)m — Group capacity at 33% of pre-COVID levels3 for the financial year, impacted by COVID-19 border closures and lockdowns, rec
Slide 5: Qantas has come through an unprecedented period of uncertainty
Qantas has come through an unprecedented period of uncertainty FY20-22 Group capacity, ASKs as a % of FY19 1H22 2H22 FY20 FY21 FY22 Underlying EBITDA ($245)m $526m 110 % FY19: ASKs 74% 19% 33% Underlying Loss Before Tax ($1.28)b ($0.58)b 100 Average capacity1 18% 50% 90 Rapid recovery of demand with
Slide 6: Three-Year Recovery Plan progress
Three-Year Recovery Plan progress Scorecard Complete On-track Status for FY23 Completion timeframe • Financial strength restored Focus area Target FY21 FY22 FY23 — Lowest Net Debt since GFC5, strong liquidity; $3.3b cash balance, Sustainable positive Net Free Cash Flow prepaid $450m of gross debt, >
Slide 7: Network, demand and workforce management
Network, demand and workforce management Network and demand recovery Group Capacity Outlook (ASKs as a percentage of FY19) • Rapid recovery in Group network through 2H22 underpinned by easing of COVID 120% 112% 107% restrictions and full stand up of workforce 92% 96% 92% Domestic 100% 81% 81% Intern
Slide 8: The aviation ecosystem has been severely disrupted by COVID
The aviation ecosystem has been severely disrupted by COVID Aviation industry Operational disruptions in 2022 Restart challenges • The aviation industry is a complex ecosystem of Global Airport On Time Departures (%): June 20223 Challenging time for operational performance across providers, all of w
Slide 9: Australia has also had unique challenges which have complicated the return of travel
Australia has also had unique challenges which have complicated the return of travel Disruption drivers Local factors Examples • Winter causing a “double peak” of flu and COVID infections Operational sick leave rates compared with COVID Cases3 • >6 million COVID cases since March 2022 Sick leave Ave
Slide 10: Qantas Group is working hard to fix operational challenges
Qantas Group is working hard to fix operational challenges Across the Group we have plans in place to restore operational performance so we can get back to delivering the standard of service our customers expect and that we hold ourselves accountable for delivering. Steps made to address performance
Slide 11: Case study: Contact centres
Case study: Contact centres – Qantas took decisive action to address wait times, now below pre-COVID levels 1 2 3 Despite uncertainty around travel demand and Increased calls and complexity with International Investment in technology and resourcing unlocked ~33% restrictions, Qantas began preparing
Slide 12: Recognising all stakeholders for their support through COVID
Recognising all stakeholders for their support through COVID Customers Employees Shareholders and lenders Rewarding customer loyalty and Rewarding employees with a Rewarding shareholders for their focusing on improving operational range of measures for their support during COVID and our performance
Slide 13: Environment, social and governance approach
Environment, social and governance approach Our approach to managing ESG is reflected in our sustainability framework (which has three key pillars) and is supported by sound governance structures. Key achievements in FY22 include: Valuing our • Released Group Climate Action Plan with key sustainabil
Slide 14: Financial Performance
Financial Performance
Slide 15: FY22 Key Group financial metrics
FY22 Key Group financial metrics Profit metrics Balance Sheet and Cash Flow metrics Other statistics (v FY19) $281m $2,670m $4.6b (67%) Underlying EBITDA profit Operating cash flow Total liquidity ASKs5 ($245)m | $526m $137m | $2,533m $3.94b (73%) 1H22 | 2H22 EBITDA (loss)/profit 1H22 | 2H22 Operati
Slide 16: FY22 Profit Bridge compared to FY19
FY22 Profit Bridge compared to FY19 1,326 (6,493) Manpower cost benefit $ 730 m 286 (149) 1H 135 (1,859) Other cost benefits $ 190 m 524 Restructuring benefits1 $ 920 m 1,693 Selling & Marketing $ 573 m 1,186 Property $ 98 m Computer & Communication $ 1m Capacity Hire $ 118 m 1,998 Other $ (266) m 2
Slide 17: FY22 Profit Bridge compared to FY21
FY22 Profit Bridge compared to FY21 342 Manpower cost benefit $ 250 m Other cost benefits $ 20 m (1,013) Restructuring benefits 1 $ 270 m 647 Selling & Marketing $ (123) m Property $ 1m (1,054) Computer & Communication $ (132) m Capacity Hire $ (55) m Other $ (370) m 2,185 Other Expense Increase $ (
Slide 18: FY22 movement in cash position
FY22 movement in cash position Net Free Cash Flow $2,430m 789 (1,029) (239) Predominantly lease liability Predominantly (950) repayments 2,628 aircraft capitalised (358) 3,343 maintenance. Includes TripADeal 2,221 281 acquisition Predominantly RRIA1 30 Jun 21 Underlying EBITDA Net working capital In
Slide 19: Segment Results
Segment Results
Slide 20: Qantas Domestic
Qantas Domestic • Domestic travel returned to near pre-COVID levels through 4Q22 Pre-COVID FY22 FY21 FY194 — 4Q22 capacity averaged 98%1 — Premium leisure revenue intakes significantly above pre-COVID levels Revenue $M 3,448 2,745 6,098 — Strong return in business purpose travel driven by resource a
Slide 21: Qantas International (including Freight)
Qantas International (including Freight) • Qantas International commenced recovery as travel restrictions eased, with freight Pre-COVID FY22 FY21 operations acting as a natural hedge to the passenger business FY197 • Record freight performance1 supported by record international yields and continued
Slide 22: Jetstar Group
Jetstar Group • Jetstar’s Australian business returned to Underlying EBITDA profit1 in 4Q22 Pre-COVID FY22 FY21 FY198 — 4Q22 AU Domestic RASK2 +1% and AU International +4%3,4 — AU Domestic capacity above pre-COVID levels3 and AU International RASK2 Revenue $M 1,440 1,140 3,961 strengthened to 19%3,4
Slide 23: Qantas Loyalty
Qantas Loyalty • 7% year on year growth in Underlying EBIT1 ; double digit growth2 in 2H22 and third Pre-COVID FY22 FY21 consecutive year contributing >$1b of gross receipts3 towards Group cash result FY19 • Significant recovery in business drivers observed in 4Q22 Revenue8 $M 1,334 984 1,654 — >200
Slide 24: Financial Framework
Financial Framework
Slide 25: Financial Framework recognises the role of ESG and EPS in driving TSR
Financial Framework recognises the role of ESG and EPS1 in driving TSR 1 2 3 Maintaining an optimal capital structure ROIC3 > WACC4 through the cycle Disciplined allocation of capital Minimise cost of capital by targeting Deliver ROIC > 10%5 Grow invested capital with disciplined a Net Debt range of
Slide 26: Maintaining an optimal capital structure
Maintaining an optimal capital structure Capital structure and liquidity • Net Debt2 at $3.94b, reflecting priority of debt reduction in 2H22 • Total liquidity of $4.6b including $3.3b cash3 and committed undrawn facilities of Debt maturity profile1 as at 30 June 2022 ($M) $1.3b extended, maturing i
Slide 27: Robust financial risk management
Robust financial risk management Operational Fuel and FX Capital Expenditure FX – Hedging of USD Aircraft Payments • FY22 fuel cost was $1.85b; hedging approach provided substantial • Hedging remains consistent with long term approach to risk management protection from elevated fuel prices allowing
Slide 28: Disciplined capital allocation
Disciplined capital allocation 1 Completed Balance Sheet repair Net Debt1 ($B) — FY22: Achieved Net Debt1 below target range FY22 target — FY23 onwards: Target bottom of Net Debt1 target range range lower than pre-COVID driven 2 Invest to drive sustainable earnings growth and returns > WACC2 5.6 5.9
Slide 29: Revenue Received In Advance (RRIA) and travel credits
Revenue Received In Advance (RRIA) and travel credits Total Revenue Received in Advance ($B) Includes $0.2b of Qantas travel credits • Credit usage expected to remain strong given continued recovery in generated from Oct-21 which have 7.9 Group capacity reverted to pre-COVID terms & conditions 0.4 —
Slide 30: Group Domestic narrow-body fleet transformation
Group Domestic narrow-body fleet transformation Strategic Priorities: Right Aircraft, Right Route Maintain flexibility Maintain competitiveness A320/21ceo 641 A321XLR 20 • Domestic narrow-body fleet renewal program includes roll-over of A320/321ceo and 717/737NG fleets across Jetstar and Qantas resp
Slide 31: Group fleet deliveries
Group fleet deliveries Greater flexibility of delivery profile Committed fleet units FY23 FY24 FY25 …. FY29 • Competitive orders for next generation technology secured supporting fleet renewal and sustainability 787-9 3 3 objectives A350-1000 1 12 • 299 narrow body aircraft now on order across the G
Slide 32: Outlook
Outlook
Slide 33: Group Domestic
Group Domestic FY23 Outlook Competitive Positioning • Leisure continuing to lead domestic recovery, with revenue intakes Qantas • Margin advantage through completion of cost transformation significantly above pre-COVID levels Domestic and yield premium — Market research indicates continued high prio
Slide 34: Group International (including Freight)
Group International (including Freight) FY23 Outlook Competitive Positioning • Leisure continuing to lead recovery with strong booking momentum, Qantas • Positioned to benefit from strong demand with full return of particularly on non-stop offerings and in premium cabins International fleet expected
Slide 35: Qantas Loyalty
Qantas Loyalty FY23 Outlook Growth Strategy • Loyalty “Flywheel” strategy 2 seeks to increase the number of members FY24 Target: $500-$600m and their participation in earning and redeeming Qantas Points Impacted by COVID • Loyalty profitability correlated to the number of members and Qantas 1H 2H Po
Slide 36: FY23 Group Outlook
FY23 Group Outlook As the Group is still continuing its full recovery to pre-COVID activity, a number of the financial outlook statements below are comparatives to FY19. FY23 Financial Assumptions (comparative statements versus FY19 Restated EBITDA of $3,544m) • Lower Group International revenue wit
Slide 37: Looking forward, we remain committed to the FY24 targets
Looking forward, we remain committed to the FY24 targets Qantas Jetstar Qantas Jetstar International Qantas Loyalty Domestic Domestic International Relative competitive Stable earnings growth Relative margin advantage Relative margin advantage Lowest cost position advantage Targeting EBIT margin1 ~1
Slide 38: FY22 Results Supplementary Presentation
FY22 Results Supplementary Presentation Qantas Airways Limited 25 August 2022 ASX: QAN US OTC: QABSY
Slide 39: Disclaimer
Disclaimer This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its related bodies corporate (Qantas Group) and their activities current as at 25 August 2022, unless otherwise
Slide 40: Group Performance
Group Performance
Slide 41: FY22 Key Group financial metrics
FY22 Key Group financial metrics Pre-COVID FY22 FY21 Comments vs FY19 and FY21 FY1911 Underlying (Loss)/Profit Before Tax1 ($M) (1,859) (1,774) 1,326 Reduced flying, fixed costs, depreciation and COVID-19 lockdowns Underlying Earnings per Share2 (c) (71.2) (69.4) 57.3 Statutory (Loss)/Profit Before
Slide 42: Underlying Income Statement summary
Underlying Income Statement summary Pre-COVID $M FY22 FY21 Comments vs FY19 and FY21 FY193 Net passenger revenue 5,951 3,766 15,696 Movement largely in line with movement in passengers carried Increase driven by e-commerce trends and international belly space Net freight revenue 1,963 1,316 971 avai
Slide 43: Items not included in Underlying LBT
Items not included in Underlying LBT $M FY22 Comments Costs incurred to implement restructuring as part of the Recovery Plan that Recovery Plan restructuring costs (21) were not previously provided for in FY21 and relating to acquisition of new business Reversal of impairment of assets and related c
Slide 44: Reconciliation to Underlying (Loss)/Profit Before Tax
Reconciliation to Underlying (Loss)/Profit Before Tax $M FY22 Pre-COVID FY192 Statutory Items not included Underlying1 Statutory Items not included Underlying1 in Underlying in Underlying Net passenger revenue 5,951 - 5,951 15,696 – 15,696 Net freight revenue 1,963 - 1,963 971 – 971 Other revenue 1,
Slide 45: Unit Cost breakdown
Unit Cost breakdown c/ASK FY22 Comments Total Unit Cost1 13.16 Excluding: Fuel (3.65) Impact of changes in the discount rate on provisions 0.38 Share of net (loss) of investments accounted for under the equity method (0.25) Ex-Fuel Unit Cost2 9.64 Excluding: Depreciation (3.32) Impairment (0.08) Nor
Slide 46: Revenue detail – compared to Pre-COVID/FY19
Revenue detail – compared to Pre-COVID/FY19 Net passenger revenue down 62% Revenue ($B) • Group capacity down 67% due to COVID-related border restrictions • Group Unit Revenue up 7% -49% – Group Domestic1 Unit Revenue down 18% 18.0 – Group International2 Unit Revenue up 17% Net freight revenue up 10
Slide 47: Expenditure detail – compared to Pre-COVID/FY19
Expenditure detail – compared to Pre-COVID/FY19 Fuel down 52% Expenditure2 ($B) • Reduced consumption due to COVID-related travel restrictions -35% • Higher AUD jet fuel prices vs FY19 16.4 Manpower and staff-related down 28% • Decreased due to rightsizing and restructuring as part of the Recovery P
Slide 48: $1b Recovery Plan Benefits
$1b Recovery Plan Benefits Breakdown by Segment1 Breakdown by Category1,2 Loyalty & Other Property Aircraft Operating Variable Jetstar Group 2% Technology ~4% ~6% 9% ~12% Selling & Qantas Marketing ~10% 46% Domestic ~9% Other Expenses Qantas 43% ~59% International & Freight Manpower Freight contribu
Slide 49: Cash flow
Cash flow $M FY22 FY21 • Operating cash flow of $2,670m driven by Operating cash flows 2,670 (386) — Underlying EBITDA profit of $281m Investing cash flows (240) (722) — Favourable net working capital and other movements (predominately RRIA2) of $2,628m Net free cash flow1 2,430 (1,108) — Net intere
Slide 50: 2H22 movement in cash position
2H22 movement in cash position Net Free Cash Flow $1,878m (116) 35 (690) Predominantly 2,123 lease liability Predominantly aircraft (1,062) repayments capitalised 3,343 maintenance. (178) 526 Includes 2,705 Predominantly TripADeal RRIA1 acquisition 31 Dec 21 Underlying EBITDA Net working capital Int
Slide 51: Impact of adoption of IFRIC Agenda Decision on Cloud Computing Arrangements
Impact of adoption of IFRIC Agenda Decision on Cloud Computing Arrangements • The adoption of IFRIC Agenda Decision on Cloud Computing Arrangements required restatement of • The Group’s previous accounting policy had been to 1H21 and FY21 capitalise costs related to Cloud Computing Arrangements in l
Slide 52: IFRIC Agenda Decision – Restatement of Balance Sheet and Income Statement
IFRIC Agenda Decision – Restatement of Balance Sheet and Income Statement 1H21 and FY21 Restated Consolidated Balance Sheet FY21 Impact of FY21 • Upon adoption, FY21 and 1H21 have been restated $M Reported Adoption Restated • FY21 intangible assets were reduced by $104m (recognised through Intangibl
Slide 53: Invested Capital calculation
Invested Capital calculation As at As at 30 Jun As at 30 Jun $M 30 Jun 2022 20213 20194 Receivables (current and non-current) 1,107 633 1,178 Inventories 269 279 364 Other assets (current and non-current) 1,170 856 680 Investments accounted for under the equity method 57 57 217 • Aircraft financed v
Slide 54: Return on Invested Capital (ROIC) calculation
Return on Invested Capital (ROIC) calculation $M FY22 FY215 Underlying EBIT (1,558) (1,473) Add back: Lease depreciation under AASB 16 336 373 Less: Notional depreciation1 (118) (105) Less: Cash expenses for non-aircraft leases (219) (199) ROIC EBIT (1,559) (1,404) $M FY22 FY215 Net working capital2
Slide 55: Net Debt target range
Net Debt target range • Net Debt target range = 2.0x – 2.5x ROIC EBITDA where ROIC = 10% • At average Invested Capital of $4.9b, optimal Net Debt range is $4.2b to $5.2b Jun 22 Drivers of Net Debt range $B Invested Capital 4.9 Invested Capital will grow in line with aircraft deliveries Avg Invested
Slide 56: Net Debt and liquidity position
Net Debt and liquidity position As at As at $M Change4 30 Jun 22 30 Jun 21 Current interest-bearing liabilities on • Net Debt decreased by $2.0b for the 12 months to June 2022 669 969 300 Balance Sheet Non-current interest-bearing liabilities — Borrowing activity for the period included 5,291 5,861
Slide 57: Net Debt movement under the Financial Framework
Net Debt movement under the Financial Framework $M FY22 FY21 • The Financial Framework considers aircraft leases as part of Net Opening Net Debt (5,890) (4,734) Debt Net cash from operating activities 2,670 (386) — Aircraft leases are initially recognised in Net Debt at fair value Less: Net lease pr
Slide 58: 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 59: Group Fleet as at 30 June 2022
Group Fleet as at 30 June 2022 Aircraft Type FY22 FY21 Change A380-8001 10 12 (2) A330-200 18 18 - A330-300 10 10 - 737-800 75 75 - • Group Fleet now includes embedded lease and related financing 787-9 11 11 - of Embraer E190s and 747 Atlas Freighters as they have been Total Qantas 124 126 (2) recog
Slide 60: Supplementary Segment Information
Supplementary Segment Information
Slide 61: Jetstar Group Overview
Jetstar Group Overview Jetstar Domestic Jetstar International1 Jetstar in Asia • Low fares leadership with margin premium over • Australia outbound • Jetstar Japan is positioned for the recovery once competitors driven by low-cost base, scale, network Japan’s COVID cases reduce, borders reopen and b
Slide 62: Diversification and growth at Qantas Loyalty
Diversification and growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • Group cash contribution1 >$1b for 3rd consecutive year; contributing long term value to the Qantas Group • 4% growth2 in Qantas Frequent Flyer membership; 13% growth2 in QBR3 membership with >370,
Slide 63: Accounting for points – a lifecycle overview
Accounting for points – a lifecycle overview Qantas Loyalty generates a gross margin on both Gross margin is only generated on ‘external points’ Issuance and Redemption activity (unique compared to other airline loyalty programs) (Not to scale and for illustrative purposes only) Pre-COVID activity a
Slide 64: 2H22 Group and Group Domestic Traffic Statistics vs Pre-COVID
2H22 Group and Group Domestic Traffic Statistics vs Pre-COVID 3Q22 Pre-COVID Change (%) 4Q22 Pre-COVID Change (%) 2H22 Pre-COVID Change (%) 3Q19 4Q19 2H19 Total Qantas Group Operations Passengers carried (‘000) 5,772 13,670 (58) 10,087 13,643 (26) 15,859 27,313 (42) Revenue Passenger Kilometres (m)
Slide 65: 2H22 Group International Traffic Statistics vs Pre-COVID
2H22 Group International Traffic Statistics vs Pre-COVID 3Q22 Pre-COVID Change (%) 4Q22 Pre-COVID Change (%) 2H22 Pre-COVID Change (%) 3Q19 4Q19 2H19 Group International Available Seat Kilometres (m) 4,944 24,742 (80) 10,164 24,087 (58) 15,108 48,829 (69) Group International Unit Revenue change (%)
Slide 66: 2H22 Group and Group Domestic Traffic Statistics vs 2H21
2H22 Group and Group Domestic Traffic Statistics vs 2H21 3Q22 3Q21 Change (%) 4Q22 4Q21 Change (%) 2H22 2H21 Change (%) Total Qantas Group Operations Passengers carried (‘000) 5,772 4,440 30 10,087 6,511 55 15,859 10,951 45 Revenue Passenger Kilometres (m) 8,902 5,033 77 18,373 7,956 131 27,275 12,9
Slide 67: 2H22 Group International Traffic Statistics vs 2H21
2H22 Group International Traffic Statistics vs 2H21 3Q22 3Q21 Change (%) 4Q22 4Q21 Change (%) 2H22 2H21 Change (%) Group International Available Seat Kilometres (m) 4,944 516 >100 10,164 1,188 >100 15,108 1,704 >100 Group International Unit Revenue change (%) 61 90 80 Qantas International Passengers
Slide 68: Qantas Domestic
Qantas Domestic1 FY 1H 2H FY22 FY19 1H22 1H19 2H22 2H19 Variance% Variance% Variance% Revenue $M 3,448 6,098 (43) 1,127 3,230 (65) 2,321 2,868 (19) Underlying EBITDA $M (27) 1,503 <(100) (265) 857 <(100) 238 646 (63) Underlying EBIT $M (765) 778 <(100) (613) 478 <(100) (152) 300 <(100) Operating Mar
Slide 69: Qantas International and Freight
Qantas International and Freight1 FY 1H 2H FY22 FY19 1H22 1H19 2H22 2H19 Variance% Variance% Variance% Revenue $M 3,706 7,420 (50) 1,317 3,693 (64) 2,389 3,727 (36) Underlying EBITDA $M 448 1,045 (57) 89 477 (81) 359 568 (37) Underlying EBIT $M (238) 323 <(100) (238) 119 <(100) 0 204 (100) Operating
Slide 70: Jetstar Group
Jetstar Group1 FY 1H 2H FY22 FY19 1H22 1H19 2H22 2H19 Variance% Variance% Variance% Revenue $M 1,440 3,961 (64) 394 2,048 (81) 1,046 1,913 (45) Underlying EBITDA $M (448) 836 <(100) (243) 471 <(100) (205) 365 <(100) Underlying EBIT $M (796) 400 <(100) (417) 253 <(100) (379) 147 <(100) Operating Marg
Slide 71: Qantas Loyalty
Qantas Loyalty FY 1H 2H FY22 FY19 1H22 1H19 2H22 2H19 Variance% Variance% Variance% Revenue1 $M 1,334 1,654 (19) 485 809 (40) 850 845 1 Underlying EBIT $M 292 376 (22) 127 175 (27) 165 201 (18) Operating Margin2 % 21.9 22.7 (0.8pts) 26.2 21.6 4.6pts 19.4 23.8 (4.4pts) QFF Members3 M 14.1 12.9 9 13.8
Slide 72: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for passengers, multiplied by the number Net on Balance Sheet debt – Interest-bearing liabilities reduced by cash and cash equivalents of kilometres flown Net working capital – Net total of the following items disclosed in th