Qantas 2013/14 Half-Year Results - Investor Presentation

8/12/2019 Qantas 2013/14 Half-Year Results - Investor Presentation

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Qantas Airways Limited1H14 Results

27 February 2014

2

OverviewImmediatepriorities,longtermcompetitiveness

1H14earningsdeteriorationinverydifficultoperatingenvironment

Currentchallenges:

Capacitygrowthaheadofdemandpressuringyields

Distortedaviation

marketplace

Uncompetitivecostbaseandworkpractices

HighAUDfuelcosts,mixedeconomicconditions

Immediatepriorities:

Earningsrecoverythroughacceleratedbusinesstransformation

Rightsizingfleetandnetwork

Capitalexpenditure(capex)alignedwithfinancialperformance

STRENGTHENINGOURCOREBUSINESSFORLONGTERMCOMPETITIVENESS


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1H14FinancialResults

1H14UnderlyingPBT1 lossof$252minlinewithguidance;StatutoryLossAfterTax$235m

Revenuedeclinefromyieldandloadpressure,recordfuelcost

Strongliquidity

position

$3b2

Capex weightedto1H14 $0.9b,(2H14:$0.3b)

Nointerimdividenddeclared

KEYGROUPFINANCIALMETRICS 1H14 1H13 VLY3

Revenue($M) 7,903 8,242 4%

YieldexcludingFX(c/RPK) 10.10 10.43 3%

Comparable

Unit

Cost4

(c/ASK) 5.04 5.13 2%Netfreecashflow5 ($M) (358) 205 >(100)%

1. Underlying Profit Before Tax (PBT) is a non statutory measure and is the primary reporting measure used by the Qantas Groups chief operating decision making bodies, being the Chief ExecutiveOfficer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Group. All line items in the 1H14 Results Presentation are reported on anUnderlying basis . Refer to Supplementary Slide 4 for a reconciliation of Underlying to Statutory PBT. 2. Includes cash and cash equivalents and $630m undrawn revolver facility at 31 December 2013.3. Variance to last year. Favourable variances are reported in green. 4. Comparable Unit Cost is calculated as Underlying PBT less passenger revenue and fuel per ASK adjusted for the impact of theBoeing settlement (1H13), B767 phased fleet retirement, share of the Groups associate losses, change in FX rates and movements in average sector length. Refer to Supplementary Slide 9 for furtherdetail. 5. Net free cash flow is operating cash flows less investing cash flows. Free cash flow is a measure of the amount of operating cash flows that are available (i.e. after investing activities) to fundreductions in net debt or payments to shareholders.

4

220

(252)

190

(125)

(90) (10)

(138)

(187)

(112)

1H14FinancialResults

UNDERLYINGLOSSBEFORETAX($M)

1H13Underlying

PBT

Yield

Costbaseimprovement1

1H14Underlying

PBT

Boeingsettlement

in1H13Load

1. Cost base improvement includes Qantas Transformation benefits (excluding passenger revenue initiatives) as well as other cost and efficiency improvements in Jetstar Group, Loyalty, QantasFreight and Corporate. 2. Company estimate. Includes wage inflation.

FuelpriceandFX

Associatelosses

CPI2


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5

UnderlyingIncomeStatementSummary

$M 1H141 1H131,3 VLY%

Netpassengerrevenue2 6,786 7,042 (4) Sustainedaggressivecompetitoractivityimpactingyieldandload

Netfreightrevenue 500 475 5 ConsolidationofAustralianairExpress4;reducedinternationalcapacity

Otherrevenue2 617 725 (15) 1H13Boeingsettlement$125m

Revenue 7,903 8,242 (4)

Operatingexpenses(excludingfuel) 4,797 4,770 (1) QantasTransformationinitiatives;0.7%capacitygrowth

Fuel 2,255 2,181 (3) 9%increaseinaverageAUDfuelpricebeforehedging;offsetby3%fuelefficiency5 improvements

Depreciationandamortisation 746 719 (4) Netincreaseof7ownedaircraft

Noncancellableaircraftoperatingleaserentals

261 265 2 Netreductionof2aircraftleases

UnderlyingEBIT (156) 307 >(100)

Underlyingnetfinancecosts (96) (87) (10) Increaseinnetdebt

UnderlyingPBT1 (252) 220 >(100)

1. All line items presented on an Underlying basis. Refer to Supplementary Slide 4 for a reconciliation of Underlying PBT to Statutory PBT. 2. Net passenger revenue has been adjusted in 1H14 to includerevenue from charter operations previously reported in Other revenue. 1H13 Net passenger revenue and Other revenue have been restated accordingly. These items remain excluded from thecalculation of yield. 3. 1H13 has been restated for the impact of the mandatory application of the revised Accounting Standard AASB 119: Employee Benefits . 4. Following acquisition in November 2012.5. Fuel efficiency measured as litres per Available Seat Kilometre (ASK).

6

OtherItemsNotIncludedinUnderlyingPBT1

$M 1H14 1H13

Statutory(loss)/profitbeforeincometaxexpense (305) 148

AASB139marktomarketmovementsrelatingtootherreportingperiods

(54) (34)

Redundancies,restructuringandothertransformationcosts

59 68 OngoingQantasTransformationinitiativesincludingconsolidationof

AvalonHeavyMaintenanceandclosureofAdelaideCateringfacility

Netimpairmentofproperty,plantandequipment 23 62 B763retirement

Netprofitondisposalofinvestmentinjointlycontrolledentity

(30)

B7878introductioncosts 9

Other 16 6

TotalItemsnotincludedinUnderlyingPBT 53 72

UnderlyingPBT (252) 220

1. Items which are identified by Management and reported to the Qantas Groups chief operating decision making bodies as not representing the underlying performance of the business are notincluded in Underlying PBT. The determination of these items is made after consideration of their nature and materiality and is applied consistently from period to period. Items not included inUnderlying PBT primarily result from revenues and expenses relating to business activities in other reporting periods, major transformational/restructuring initiatives, transactions involving investmentsand impairments of assets outside the ordinary course of business.


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CashFlowandDebtPosition

DEBTPOSITIONANDGEARING

1H14 2H134 VLY%

Netonbalancesheetdebt2 ($M) 3,829 3,226 (19)

Gearingratio3 49:51 46:54 (3)pts

SUMMARISEDCASHFLOW

$M 1H14 1H13 VLY%

Cashgeneratedfromoperations 692 788 (12) 1H13Boeingsettlementpartiallyoffsetby1H14improvementin

forwardbookingsdrivenbystrategicpartnershipsincludingEmirates

Otheroperating

cash

flows1 (111) (8) >(100) 1H13redundancycostsoffsetbyStarTrackExpressdividendsaspartofsaletransaction

Investingcashflows (939) (575) (63) Capexweightedto1H14vs2H14;1H13includesproceedsfromsale

ofStarTrackExpress

Freecashflow(NetOperating&Investing) (358) 205 >(100)

Financingcashflows (82) (547) 85 SaleandleasebackofB787sandB738s;1H13repaymentof

borrowings

Netchangeincashheld (440) (342) (29)

EffectsofFXoncash 6 2 >100

Cashatendofperiod 2,395 3,058 (22) Maintainingstrongliquidityposition

1. Includes total of cash payments to employees for redundancies, interest received, interest paid, dividends received from investments in entitles accounted for using the equity method, and income taxespaid. 2. Net on balance sheet debt includes interest bearing liabilities and the fair value of hedges related to debt less cash, cash equivalents and aircraft security deposits. 3. Gearing ratio is net debtincluding operating lease liability to net debt including operating lease liability and equity (excluding hedge reserve). The gearing ratio is used by Management to represent the Qantas Groups debtobligation including obligations under operating leases. 4. 2H13 restated for the impact of the mandatory application of the revised accounting standard AASB119: Employee Benefits. 7

8

CapitalManagementandTreasury

Strongliquidity$3b1

Cash$2.4b

$630mundrawndebtfacilities

Nomajor

unsecured

maturity

until

April

2015

~30%oftotalpassengerfleetdebtfree

31newunencumberedaircraftsinceFY10

7 unencumberedaircraftadded1H14

20midlifeaircraftbecomedebtfreeinFY14

Youngaveragefleetage7.6years2

Majorityofhedgingeffectiveatcurrentrates3

UNSECUREDDEBTMATURITYPROFILE$M

1.Includescashandcashequivalentsand$630mundrawnrevolverfacilityat31December2013. 2.AveragefleetageoftheGroupsscheduledpassengerfleetbasedonmanufacturingdate. 3.Asat25February2014

0

200

400

600

800

1000

FY14 FY15 FY16 FY17 FY18 FY19 FY20

SyndicatedLoanFacility Drawn

Bonds

2H14EXPOSURE3 %HEDGED

Fuelcosts 98

Operatingforeignexchange 88

FLEETAGE2(YRS)

7.0

7.5

8.0

8.5

9.0

9.5

10.0

FY08 FY09 FY10 FY11 FY12 FY13 1H14


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1H14 Segment Results

10

QantasDomestic

UnderlyingEBIT$57m

1H14demandbelowmarketcapacitygrowth

Resourcessectorsoftening(QLDandWA)

Corporateaccount

pricing

pressure

UnfavourablefuelpriceandFX$40m

ComparableUnitCostimprovement1%1

1H14 1H13 VLY%

Revenue $M 3,086 3,220 (4)

UnderlyingEBIT $M 57 218 (74)

ASKs M 19,227 19,187 0.2

Seatfactor % 74.9 76.9 (2.0)pts

1. Comparable Unit Cost is calculated as Underlying EBIT less passenger revenue and fuel per ASK adjusted for Boeing settlement (1H13), B767 phased fleet retirement, change in FX rates andmovements in average sector length. 2. Source: Monthly BITRE data January 2009December 2013.

Maintained>80%ofcorporateaccountsbyrevenue

Fleetrenewalimprovingeconomics

B734fleetexitcompletedFebruary2014,9xB763retiredinlast2years

Recordcustomeradvocacylevels

Superiorontimeperformance(OTP)2 5th yearrunning,includingunprecedented

12outof12monthsin2013


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QantasInternational

UnderlyingEBITlossof$262m

Competitorcapacitygrowthof9%1

Europe,South

East

Asia

yields

most

pressured


StrongComparableUnitCostimprovement4%2

ReducedB747heavymaintenancecosts

~5%increaseinfleetutilisation

Improvedeconomicsfromreconfigurations

Customer

advocacy

continues

at

record

levels

3

Enhancedcodesharenetwork,seamlesscustomerproposition

throughEmiratesalliancedrivingpositivesentiment

1. Source: BITRE (July 2013November 2013). 2. Comparable Unit Cost is calculated as Underlying EBIT less passenger revenue and fuel per ASK adjusted for the impact of the Boeing settlement (1H13),change in FX rates and movements in average sector length. 3. Since recording commenced in February 2003.

1H14 1H13 VLY%

Revenue $M 2,621 2,818 (7)

UnderlyingEBIT $M (262) (91) >(100)

ASKs M 29,863 29,625 0.8


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JetstarGroup

UnderlyingEBITlossof$16m

DomesticAustraliaprofitable

Associatelosses$29mduringstartupphase

Competitiveenvironment

impacting

yields,

inparticularSouthEastAsia


LowCostCarrier(LCC)businessfundamentalsremainstrong

2%ControllableUnitCost1 improvement

1H14 1H13 VLY%

Revenue $M 1,671 1,757 (5)

UnderlyingEBIT $M (16) 128 >(100)

ASKs M 22,754 22,562 0.9


1%ancillaryrevenueperpassenger2 improvement

IntroductionofB787intolonghaulbusinesstoimproveunitcost,customerbenefits

Recordcustomer

advocacy

levels

StrongandgrowingbrandpresenceacrossAsiaPacific

1. Controllable Unit Cost is calculated as total underlying expenses excluding fuel, carbon tax, Jetstar Asia and share of associate losses, adjusted for change in FX rates and movements in averagesector length per ASK. 2. Ancillary revenue per passenger is calculated in local currency and excludes management and branding fee revenue, adjusted for change in customer mix.


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RecordUnderlyingEBIT1 $146m,up7%

Up10%excludingnewbusinessstartupcosts2

Billings3 up9%,

double

digit

credit

card

point

sales

8 newQFFpartnersdrivingmorewaystoearn

Sustainedrecordcustomeradvocacylevels

9.8m4 membersandgrowing; FY14target10m

3millionawardsredeemed,up11%

Growth initiatives exceedingexpectations

QantasCash over200,000activations4

AQUIRE ~25,000SMEspreregistered;morethan10

keypartnersincorecategories;31Marchlaunchdate

QantasLoyalty

1H14 1H13 VLY%

UnderlyingEBIT $M 146 137 7

Billings $M 662 607 9

DeferredRevenue Growth5

$M 59 45 31

Members M 9.7 9.0 8

1.RecordUnderlyingEBITresultcomparedtopriorperiodsnormalisedforchangesinaccountingestimatesofthefairvalueofpointsandbreakageexpectationseffective1January2009.2.QantasCashandAQUIREstartupcosts. 3.Billingsrepresentpointsalestopartners.4.AsatFebruary2014. 5.Deferredrevenuegrowthfrom1July2013 and1July2012respectively.

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QantasFreight

1.Saleof50%stakeinStarTrackExpresstoAustraliaPostandacquisitionof100%ofAustraliaairExpresscompleted13November2012.

UnderlyingEBIT$11m

SaleofStarTrackExpressandacquisitionof

AustraliaairExpressduring1H131

Challengingairfreightmarkets

Internationalcapacityreductions

AustraliaairExpress1 integrationcompleted

Fullrunratebenefitsfrom2H14

Exitof1B747freighterin2H14

Focusoncostreductionandservice

improvementthroughtechnology

1H14 1H13 VLY%

Revenue $M 568 531 7

UnderlyingEBIT $M 11 22 (50)

Capacity

(InternationalAFTKs) B 1.8 2.0 (8.2)

Load(International) % 53.9 55.9 (2.0)pts


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Group Strategy Update

16

GroupStrategyUpdate

1. Marketconditions

2. TrackrecordofdeliveringTransformation

3. Immediatepriorities

AcceleratingQantasTransformation


Deliveringforcustomers

Ourpeople

Realigningcapex withfinancialperformance

4. Structuralreview

update

5. Longtermcompetitiveness


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1.MarketConditions InternationalCompetitorcapacitygrowthconstrainingyields

CompetitorcapacitygrowthintoAustralia

runningatdoubleglobalaverage:

46%increase

since

FY09,

vs

global

growthof21%from200920131

Liberalaviationpolicy,attractiveAUD

Growthledbystateownedairlines

FY14marketcapacityforecasttogrow9%

Shiftingglobalaviationlandscape,new

alliances battleamonghubcarriers

TotalMarket

+9%

FY14INTERNATIONALCAPACITYGROWTH2

UK/Europe&

MiddleEast

+8%

Singapore/

Malaysia

+24% China+4%

USA3 +2%

Tasman +4%Tasman+4%

1.BITREandIATACarrierTrackerdataforindustryASKgrowth.2.GrowthpercentagesbasedonseatnumbersvsFY13.AlldatasourcedfromBITREexceptFY14Q2Q4whichisbasedonFY13seatsadjustedfordaysinFY14Q2Q4andcarriermarketannouncementsasatthe31December2013.3.DoesnotincludeHawaii.

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1.MarketConditions DomesticCapacityoversupplyexacerbatingweakunderlyingdemand

CompetitorgrowthhasoutpacedQantas

GroupsincebeginningofFY12

4.5bASKsaddedbyVirginAustralia

Group1,2 vs4.3bASKsbyQantasGroup3

Demandimpactedbyresourcessectorsoftening,cautiousbusinessenvironment,

lowconsumerconfidence

Growthaheadofmarketdemandhas

compressedyieldsacrossallsegments

Domesticprofitpoolreducedfrom

>$700minFY12to


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QANTAS VIRGIN

ShareRegister

Ownership Restrictions

Singleforeignshareholder Max25%1 Nocap AirNZapprovedfor26% holding4

Totalforeignownership Max49%1 Nocapondomesticbusiness ~75%foreignowned

Totalforeignairlineownership Max35%1 Nocap 64%ownedby3stateownedforeignairlines

StateownedForeignAirlines

Govtownership

OwnershipinVAH3

Etihad 100% 19.9%

SIA2 56% 19.8%

AirNZ2 51% 24.5%

1.MarketConditions DomesticUnevenplayingfielddistortingmarketplace

Stateowned

ForeignAirlines

Institutions

&Other

Virgin

Group

Cashinjections:

Nov12 $105mshare

placementtoSIA

Nov13 $350mequity

raisingunderwrittenbyairline

shareholders

Institutions

Other

1.AspertheQantasSaleAct1992. 2.SingaporeAirlines,AirNewZealand 3.EtihadandSingaporeAirlines holdafurther1.34% economicinteresteach,heldviaanequityswap,subjecttoForeignInvestmentReviewBoardapproval. 4.ApprovalfromForeignInvestmentReviewBoard.

20

1.MarketConditions Conclusions

Competitiveintensityincoremarketstopersistinshortterm

Revenuewillremainunderpressure

AUD

fuel

to

remain

high

Distortedaviationmarketplace

Inresponsetounprecedentedchallenges,wemuststrengthenourcorebusinessand

driveearningsrecoverythroughacceleratedbusinessandcostbasetransformation.


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2.TrackRecordofDeliveringTransformation

SinceFY09,Qantashasfacedincreasinglychallengingenvironment:

Groupyieldsdown11%1 (~$1.2bimpactonrevenue)

Adverseimpact

of

fuel

price

and

FX

of

>$500m

(FY13

vs

FY09)

Domesticcarbontaxunrecovered($106minFY13)

FromFY09FY13,pressuresweremitigatedbytransformationinitiatives:

ComparableUnitCost2 reducedby19%,(21%reduction1H09to1H14)

Significantinroadsintolegacycostbaseandworkplacepractices

Includingmajorinitiatives:

ACTION TIMEFRAME TOTALBENEFIT

Heavy maintenance Consolidated3basesto1 FY10toFY13 $110m

Commercial Alliances,codeshare

Cost ofsale

FY10toFY13 $280m

Network Exitunderperforming routes

Utilisationandscheduling

FY10 toFY13 $250m

1. Adjusted for movements in average sector length. 2. Comparable Unit Cost is adjusted to aid comparability between reporting periods. Comparable Unit Cost is calculated as net expenditure(Underlying PBT less passenger revenue and fuel) per ASK adjusted for the items listed in the table on slide 22.

22

FTEs FY08 FY13 %change

QantasBrands 29,736 27,384 (8)

Jetstar 2,735 5,201 90

QantasGroup 34,295 33,265 (3)

ASKs(B) 127 140 10

Passengers(M) 39 48 23

2008 2013

2.TrackRecordofDeliveringTransformationSignificantinroadsintolegacycostbaseandworkplacepractices

IMPROVEDFTE2 EFFICIENCY19%UNITCOSTREDUCTIONFY09TOFY13,

21%UNITCOSTREDUCTION1H09TO1H14

GroupFTE/Passengerdown22%

1. Comparable Unit Cost is adjusted to aid comparability between reporting periods. Comparable Unit Cost is calculated as net expenditure (Underlying PBT less passenger revenue and fuel) per ASKadjusted for the items listed in the table above. 2. Full Time Equivalent employee

UnitCost 1H09 1H14

NetExpenditure(excludingfuel) 3,767 3,754

ASKs(B) 64 72

UnderlyingUnitCost(c/ASK) 5.90 5.23

1H14B767phasedfleetretirement (0.03)

1H14 Associatelosses (0.04)

1H14ImpactofCarbonTax (0.08)

CumulativeFX 0.09

SectorLength (0.50)

ComparableUnitCost1 (c/ASK) 5.90 4.67

21%reduction


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3.ImmediatePrioritiesOurguidingstrategicprinciplesareconsistent

Safetyisalwaysourfirstpriority

Thefirstchoiceforcustomersineverymarketweserve

Maintainingdualbrandstrengthindomesticmarket

ReshapingQantasInternationaltoremaincompetitive

MaintainingtheJetstaropportunityinAsia

BroadeningQantasLoyaltyforstrong,diversifiedearnings

Drivingefficiency

and

productivity

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3.ImmediatePrioritiesButwehavetochangeandaccelerateimplementation

EARNINGSRECOVERYTHROUGHBUSINESSTRANSFORMATION

STRENGTHENINGOURCOREBUSINESS

Acceleratingcostreduction


Workingexistingassetsharder

Deferringgrowth

Aligningcapex tofinancialperformance

Acceleratingsimplification


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3.AcceleratingQantasTransformationExtensiverestructuringincompressedtimeframe

TARGET:$2BCOSTSAVINGSBYFY17

Productivity

$600m

Rightsizing

(FleetandNetwork)

$600m

Technology

$200m

Supplier

$150m

Consolidation

$450m

RightsizingFleetandnetworkchanges

ProductivityImprovingefficiencyandutilisation

ConsolidationRationalisationofactivities

TechnologyEnhancingefficiencywithtechnology

SupplierImprovedtermswithsuppliers

26

3.AcceleratingQantasTransformationExtensiverestructuringincompressedtimeframe

~250INITIATIVESACROSSQANTASGROUPTOREMOVE$2BCOSTSBYFY17

MajorInitiatives

Outcome Rightsizing Productivity Consolidation Technology Supplier

Benefit($m) 600 600 450 200 150

Definition Fleet,utilisationand

networkchanges

Improvingefficienciesand

utilisation

Rationalisationof

activitiestocease

costs

Enhancingefficiency

withtechnology

Improved termswith

suppliers

Topinitiatives 1. Domesticfleet

utilisation

2. International

network

optimisationand

fleetutilisation

3. Acceleratedfleet

retirement(non

reconfiguredB747,

B767)

1. Aligninglabourand

equipment

requirementsto

demand(including

LMO1 changes)

2. Fuel burnreduction

programs

3. SYD2 andnational

airportstaffing

improvements

1. Headofficeand

management

restructure

2. Heavy

Maintenance:

closureofAvalon

3. SupplyChain:

transformation&

procurement

benefits

4. Catering:ADL3

closure

1. B787rollout

2. Freight:Supply

chain/terminal

improvement

program

3. Application

rationalisation

4. NextGencheckin

1. Renegotiate

commercial

contractsacross

business

2. Vendor

management

3. ITsupportand

infrastructure

1.LineMaintenanceOperations.2.Sydney3.Adelaide


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FY14F FY17F

3.AcceleratingQantasTransformationStepchangeinlabourproductivity

LABOURCOSTGROSSREDUCTIONS($M)

$500600m

reduction

FTEstoreduceby5,000byFY17

4,000headcountreductionbyFY15

30%reductioninmanagementand

nonoperationalroles(~1500FTEs)

Rightsizing,Productivity,Consolidation

andTechnologytoreducelabouracross

business

TotalFY14andFY15redundancycosts

~$500m

Wageinflationmitigation wagefreeze

untilcompanymakesFYunderlyingprofit:

Ongoingforexecutives

Immediatefor

open

EBAs

ProposedforotherEBAcoveredstaff

28

3.RightsizingFleetandNetwork

1.SydneyMelbourneBrisbane 2.MelbourneLondon3.Sydney,BrisbaneSingapore. 4.PerthSingapore.

Increasedomesticnarrowbodyutilisationthroughreducedturnaroundtimes,schedule

redesign,fleetsimplification

QantasDomestictofocuswidebody aircraft onEastWest,peakTriangle1 servicesonly

A330sfreeduptoenterQantasInternational asreplacementaircraft

IncreaseA380utilisationthroughretimesandnaturalgroundtimemaintenance

MELLHR2 serviceretimedtoincreaseutilisation,improverevenue

Rightaircraft,rightroute

SYD,BNESIN3 toA330(fromB747),1QFY15

EvaluatingoptionsfordeploymentofA380to befreedupfromutilisationincrease

Exitunderperforming routes

Qantas International:PERSIN4,1QFY15

Accelerateretirementofoldestaircraft

B767fleet,nonreconfiguredB747s

Leveragingflexibilitytomanagefleetrequirements

Suspendinggrowth at JetstarAsia(Singapore),beddingdownotherAsiaventures

A380:Deferred

remaining 8

aircraft

with

ongoing

review

of

delivery

dates

to

meet

potentialfuturerequirements

B7878:Deferredfinal3of14aircraftonfirmorder

A320:Restructureoforderbook

Working

existingassets

harder

Rightsizing

fleetand

network

Deferringgrowth


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A332

B737800B737800

A320

3.RightsizingFleetandNetworkAcceleratedfleetsimplificationtounderpinunitcostimprovements

FY131 11FleetTypes

A380

B747

(nonreconfig)

A333

B767

A332

A330

B747(reconfig) FY162 7FleetTypes

A320

B787

A380

B747

(reconfig)

A333

QANTAS

JETSTAR

Maintainyoungaveragefleet

ageof8yearsinFY16

B747:6nonreconfigured

aircraftretiredby2HFY16

B767:all15retiredby3QFY15

B734:allretiredbyFebruary

2014

B787

B737400

1.Asat30June2013. 2.Byendoffinancialyear20152016

Deferorsellover50aircraft

30

3.DeliveringforCustomersThefirstchoiceforourcustomersineverymarketweserve

Investmentincustomersessentialtomaintaincompetitiveadvantages

A330reconfigurationforbestinclassdomesticandinternationalproduct

ContinuedrolloutofB787;improvedonboardexperience

Newlounges

in

LAX,

HKG,

BNE1 to

add

to

success

of

new

SIN2 lounge

QantasLoyaltycustomerinnovation;QantasCash,AQUIRE,expandingpartners

Technologytoimprovecustomerexperience,increaseefficiency

Ongoingstaffservicetrainingtomaintainrecordcustomeradvocacylevels

1.LosAngeles,HongKong,Brisbane. 2.Singapore


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3.OurPeople

OurpeoplearewellawareofchallengesfacingQantas

Over21,000signaturesforFairgoforQantaspetition

Ourpeoplecontinuetodoagreatjobforourcustomers

Intensivecustomertrainingcontinues

Recordcustomeradvocacyresults1

Scopeofchangerequiredwillbedifficult,andwewillcontinuetoworkcloselywith

ourpeople

Stronginternalcommunications,regularupdates

1. Customer advocacy measured by Net Promoter Score (NPS). NPS 2013/2014 YTD average at record levels.

32

3.FundingQantasTransformation

TransformationtoFY17tobefundedthrough:

Reprioritisationofcapital

FuturefreecashflowasbenefitsfromTransformationrealised;rapidpaybackfrom

immediateinitiatives

Assetsales

TargetingpositivefreecashflowfromFY151

Capex alignedwithfinancialperformance

Flexibilitymaintainedforfurtherreductions

1. Assumes no material adverse change in operating environment.


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3.RealigningCapex withFinancialPerformanceRemoving$1bover2years,maintainingflexibility

1.00.8 0.8

0.4 0.6

FY14F FY15F FY16F

($B) FY14F FY15F FY16F

NetCapex1 1.2 1.0 0.9

Movementinleaseliabilities2 (0.2) (0.2) (0.1)

NetCapex&LeaseInvestment 1.0 0.8 0.8

NETCAPEX1 &LEASEINVESTMENT2 ($B) Deferreddeliveryoffinal8A380sonorder

withongoingreviewofdeliverydatesto

meetpotentialfuturerequirements

Deferredfinal3B7878of14onfirmorder

A320orderbookrestructured

Capex planprovidesforinvestmentin

maintainingcompetitiveadvantages,

preservingflexibilitytoadjustspending

1. Excludes proceeds/payments relating to asset disposals/acquisitions, includes payments for investments in associates. 2. Movement in on and off balance sheet lease debt including the movementin operating lease liabilities (calculated as the present value of minimum lease payments for aircraft operating leases which, in accordance with AASB 117: Leases, is not recognised on balance sheet)and the movement in aircraftrelated Japanese operating leases (with call options) accounted for in financing cash flows.

34

4.StructuralReviewUpdateUnlockingvaluetofundTransformationandstrengthencorebusiness

1. Saleofnoncoreassetstounlockcapital

Brisbaneairportterminalleasereturn:$112m1

DiscussionscontinuewithMelbourneandSydneyairports

2. ReviewhasconfirmedQantasGrouphasvaluableanddesirableassetsacrossa

diversifiedportfolio.Qantaswilltakethenecessarytimetomaketherightstrategic

decisionsforthefuture.

Nofinaldecisionsmadeonotherassets

1. Proceeds from lease return together with related assets.


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AUSTRALIASLEADINGAIRLINES

ANDLOYALTYBUSINESS

Qantas

Group

in

FY17

Profitable

Competitivecostbase

Continuedleadingproductand

service

Strongbalancesheet

Improvingcredit

profile

THEFIRSTCHOICEFORCUSTOMERSINTHEMARKETSWESERVE

Growing

froma

stronger

base

5.LongtermCompetitivenessStrengthenedcoreforsustainable,profitablegrowth

SUSTAINABLERETURNSFORSHAREHOLDERS

36

Outlook

TheGroups2H14operatingenvironmentremainsverychallengingandvolatile:

Softunderlyingdomesticdemandcontinuinginseasonallyweakerhalf

DomesticandInternationalyieldsandloadsexpectedtoremaindepressed

CurrentGroupoperatingexpectations:

Groupcapacitytoincreaseby33.5%in2H14comparedto2H13

Groupdomesticcapacitytoincreaseby34%in2H14comparedto2H13,whilst

maintainingflexibility

Underlyingfuelcostsexpectedtobe~$4.6b1 inFY14

NoGroupprofitguidanceprovidedatthistimeduetothemajortransformationbeing

undertakenby

Qantas,

and

the

high

degree

of

volatility

and

uncertainty

in

the

competitiveenvironment,globaleconomicconditions,fuelpricesandFXrates.

1. As at 25 February 2014, excluding carbon tax.


19/19

37

Disclaimer&ASICGuidance

ThisPresentationhasbeenpreparedbyQantasAirwaysLimited(ABN16009661901)(Qantas).

Summaryinformation

ThisPresentationcontainssummaryinformationaboutQantasanditssubsidiaries(QantasGroup)andtheiractivitiescurrentasat27February2014.TheinformationinthisPresentationdoesnotpurporttobecomplete.Itshould

bereadinconjunctionwiththeQantasGroupsotherperiodicandcontinuousdisclosureannouncementslodgedwiththeAustralianSecuritiesExchange,whichareavailableatwww.asx.com.au.

Notfinancialproductadvice

ThisPresentationisforinformationpurposesonlyandisnotfinancialproductorinvestmentadviceorarecommendationtoacquireQantassharesandhasbeenpreparedwithouttakingintoaccounttheobjectives,financial

situationorneedsofindividuals.Beforemakinganinvestmentdecisionprospectiveinvestorsshouldconsidertheappropriatenessoftheinformationhavingregardtotheirownobjectives,financialsituationandneedsandseek

legaland

taxation

advice

appropriate

to

their

jurisdiction.

Qantas

is

not

licensed

to

provide

financial

product

advice

in

respect

of

Qantas

shares.

Cooling

off

rights

do

not

apply

to

the

acquisition

of

Qantas

shares.

Financialdata

AlldollarvaluesareinAustraliandollars(A$)andfinancialdataispresentedwithinthesixmonthsended31December2013unlessotherwise stated.

Futureperformance

Forwardlookingstatements,opinions andestimatesprovidedinthisPresentationarebasedonassumptions andcontingencieswhicharesubjecttochangewithoutnotice,asarestatementsaboutmarketandindustrytrends,

whicharebasedoninterpretations ofcurrentmarketconditions.Forwardlookingstatementsincludingprojections,guidanceonfutureearningsandestimatesareprovidedasageneralguideonlyandshouldnotberelieduponas

anindicationorguaranteeoffutureperformance.

AninvestmentinQantassharesissubjecttoinvestmentandotherknownandunknownrisks,someofwhicharebeyondthecontroloftheQantasGroup,includingpossible delaysinrepaymentandlossofincomeandprincipal

invested.QantasdoesnotguaranteeanyparticularrateofreturnortheperformanceoftheQantasGroupnordoesitguaranteetherepaymentofcapitalfromQantasoranyparticulartaxtreatment.Personsshouldhaveregard

totherisksoutlinedinthisPresentation.

Norepresentationorwarranty,expressorimplied,ismadeastothefairness,accuracy,completeness orcorrectnessoftheinformation, opinions andconclusionscontainedinthisPresentation.Tothemaximumextentpermitted

bylaw,noneofQantas,itsdirectors,employeesoragents,noranyotherpersonacceptsanyliability,including,withoutlimitation,anyliabilityarisingoutoffaultornegligence,foranylossarisingfromtheuseoftheinformation

containedinthisPresentation.Inparticular,norepresentationorwarranty,expressorimpliedisgivenastotheaccuracy, completenessorcorrectness,likelihood ofachievementorreasonablenessofanyforecasts,prospectsor

returnscontainedinthisPresentationnorisanyobligationassumedtoupdatesuchinformation.Suchforecasts,prospectsor returnsarebytheirnaturesubjecttosignificantuncertaintiesandcontingencies.Beforemakingan

investmentdecision,youshouldconsider,withorwithouttheassistanceofafinancialadviser,whetheraninvestmentisappropriateinlightofyourparticularinvestmentneeds,objectivesandfinancialcircumstances.

Pastperformance

Pastperformanceinformation giveninthisPresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.

Notanoffer

ThisPresentationisnot,andshouldnotbeconsidered,anofferoraninvitationtoacquireQantassharesoranyotherfinancialproducts.

ASICGUIDANCE

InDecember2011ASICissuedRegulatoryGuide230.TocomplywiththisGuide,Qantasisrequiredtomakeaclearstatementabout whetherinformationdisclosedindocumentsotherthanthefinancialreporthasbeenauditedor

reviewedinaccordancewithAustralianAuditingStandards.Inlinewithpreviousyears,thisPresentationisunaudited.Notwithstanding this,thePresentationcontainsdisclosureswhichareextractedorderivedfromthe

ConsolidatedInterimFinancialReportforthehalfyearended31December2013whichisreviewedbytheGroupsIndependentAuditor.

Documents

Qantas 2013/14 Half-Year Results - Investor Presentation