Business SummaryQantas Airways Limited (QAN) operates its main business of transportation ofpassengers using two complementary airline brands - Qantas and Jetstar.The Company also operates other airlines, and businesses in specialistmarkets such as Q Catering.

Jetstar: The Jetstar Group is a low fares network of airlines operating in theleisure and value based markets offering all day, every day low fares. It offersmore than 4,000 flights a week to more than 60 destinations in 17 countriesand territories across the Asia Pacific region with a fleet of 115 aircraft.

QantasLink: QantasLink operates over 2000 flights each week to 56metropolitan, regional and international destinations across Australia and toPort Moresby in Papua New Guinea.

Qantas Freight: Qantas Freight operates a network of 21 cargo handlingterminals in 15 gateway ports across Australia and in a dedicated terminal inLos Angeles. These terminals handle freight for Qantas and Jetstar, as wellas many other carriers. Qantas Freight operates a fleet of 11 freighter aircraftto supplement capacity to import and export destinations in Australia andaround the world. The aircraft operate a mix of scheduled and charterservices. It also owns a number of logistics businesses including: ExpressFreighters Australia, JETS Transport Express and Qantas Courier NewZealand.

Q Catering: Qantas Catering Group Limited is a wholly owned subsidiarythat operates two catering businesses - Q Catering and Snap Fresh. QCatering has catering centres in four Australian ports - Sydney, Melbourne,Brisbane and Perth. Snap Fresh is a state-of-the-art plant in Queensland builtto centralise meal production for airlines and to supply non-aviation markets.

Express Ground Handling: Express Ground Handling, a wholly ownedsubsidiary of Qantas Airways within the Qantas Airports and Catering Group,provides ground handling services to Jetstar and several regional airlines.

Holidays: The Jetset Travelworld Group (JET) is an integrated travelbusiness operating wholesale travel businesses, a range of franchise basedand affiliate retail travel agency networks, airline representative operation, aswell as, travel management services.

Latest ResearchAlert: Responding to the Challenges of Covid-19

Qantas responds to challenging operating environment – Qantas hasramped up its response to the Covid-19 challenges as demand conditionshave deteriorated over the past six weeks. Qantas will now seek to reduceinternational capacity by 23% to as far out as September 2020 or until theoperating environment becomes clearer. Qantas’ primary focus remainsensuring its balance sheet can withstand any

remaining challenges ahead. As a result. Qantas is cancelling the A$150million off-market buyback announced at the 1H20 results.

For more information see research 11 Mar 2020.

GICS - Transportation

Qantas Airways Limited

ASX Code: QAN Price: $4.45 12 Mth Target Price: $6.70 Rating: Neutral - High

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

11 March 2020$6,634m1,490.8m$7.46$3.85

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral - High Risk$6.7050.6%7.6%58.2%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 934.0 676.0 980.0 1,044.0Profit (norm)* $m 934.0 676.0 980.0 1,044.0

EPS* ¢ 57.0 45.0 68.0 72.0EPS Growth % -9.5 -21.0 51.1 5.9P/E* x 7.8 9.9 6.5 6.2P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 25.0 18.0 34.0 36.0Yield % 5.6 4.0 7.6 8.1Franking % 100.0 100.0 0.0 0.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2015A 2016A 2017A 2018A 2019A

Sales Revenue 15,532 15,784 15,680 16,628 17,597Total Revenue ex. Int. 15,816 16,200 16,064 17,060 17,966EBITDA 2,291 3,118 2,931 3,261 3,125Depreciation & Amort. -1,096 -1,224 -1,382 -1,528 -1,665Goodwill Amortisation -- -- -- -- --EBIT 1,195 1,894 1,549 1,733 1,460Net Interest -259 -219 -196 -182 -185Profit Before Tax 936 1,675 1,353 1,551 1,275Income Tax -229 -395 -328 -411 -374Outside Equity Int. -3 -- -1 -- --Profit after Tax 704 1,280 1,024 1,140 901Significant Items after Tax -147 -251 -172 -160 -10Reported Profit after Tax 557 1,029 852 980 891Preferred Dividends -- -- -- -- --

Cash Flow ($M)2015A 2016A 2017A 2018A 2019A

Receipts from Customers 17,239 17,723 16,947 18,039 19,050Funds from Operations 2,241 2,980 2,828 3,530 3,174Net Operating Cashflow 2,048 2,819 2,704 3,413 2,807Capex -1,359 -1,618 -1,368 -1,959 -1,944Acquisitions & Investments -56 -39 -16 -2 -60Sale of Invest. & Subsid. 294 -- -- 17 150Net Investing Cashflow -944 -1,923 -2,046 -2,201 -1,651Proceeds from Issues -- -- -- -- --Dividends Paid -4 -- -264 -249 -363Net Financing Cashflow -1,218 -1,825 -854 -1,296 -705Net Increase Cash -114 -929 -196 -84 451Cash at Beginning 3,001 2,908 1,980 1,775 1,694Exchange Rate Adjust. 21 1 -9 3 12Cash at End 2,908 1,980 1,775 1,694 2,157

Ratios and Substantial Shareholders2015A 2016A 2017A 2018A 2019A

Profitability RatiosEBITDA Margin % 14.75 19.75 18.69 19.61 17.76EBIT Margin % 7.69 12.00 9.88 10.42 8.30Net Profit Margin % 4.53 8.11 6.53 6.86 5.12Return on Equity % 20.45 39.32 28.95 28.82 26.25Return on Assets % 5.41 8.86 6.90 6.98 5.49

Debt/Safety RatiosNet Debt/Equity % 76.99 88.40 86.53 77.14 89.26Interest Cover x 4.61 8.65 7.90 9.52 7.89

Top 5 Substantial ShareholdersPendal Group Limited 6.6%BT Investment Management Limited 5.2%

Balance Sheet ($M)2015A 2016A 2017A 2018A 2019A

Cash & Equivalent 2,908 1,980 1,775 1,694 2,157Receivables 959 795 784 908 1,101Inventories 322 336 351 351 364Other Current Assets 724 330 197 641 570Current Assets 5,049 3,458 3,119 3,712 4,193Prop. Plant & Equipment 10,715 11,670 12,253 12,851 12,977Intangibles 803 909 1,025 1,113 1,225Other Non-Current Assets 858 464 320 741 647Non-Current Assets 12,481 13,247 14,102 14,935 15,184Total Assets 17,530 16,705 17,221 18,647 19,377Interest Bearing Debt 5,562 4,862 4,838 4,748 5,224Other Liabilities 8,521 8,583 8,843 9,940 10,717Total Liabilities 14,083 13,445 13,681 14,688 15,941Net Assets 3,447 3,260 3,540 3,959 3,436Share Capital 4,623 3,575 3,053 2,393 1,719Reserves -66 -220 12 479 111Retained Earnings -1,115 -100 472 1,084 1,603Outside Equity Int. 5 5 3 3 3Total Shareholders Equity 3,447 3,260 3,540 3,959 3,436

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Nicole Maryanne MaloneMr Andrew John FinchMr Benjamin William Elliott

Directors

Ms Barbara Kay Ward(Non-Executive Director)Ms Belinda Jane Hutchinson(Non-Executive Director)Mr Richard James Barr Goyder(Non-Executive Director)Mr Paul Ashley Rayner(Non-Executive Director)Mr Alan Joseph Joyce(Chief Executive Officer,Managing Director)Ms Jacqueline Cherie Hey(Non-Executive Director)Ms Maxine Nicole Brenner(Non-Executive Director)Mr Michael Gerard L'Estrange(Non-Executive Director)Mr James Todd Sampson(Non-Executive Director)Mr Antony Nigel Tyler(Non-Executive Director)

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Qantas Airways Limited

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