Category Archives: QANTAS Group

Air France-KLM Group steps up cooperation with QANTAS Group

Air France-KLM released this statement:

Loyalty Programs Collaborate to Enhance Customer Value Proposition

After the resumption of codeshare cooperation in 2018, offering best-in-class solutions to fly between Europe and Australia via Singapore and Hong Kong, the Air France-KLM Group and Qantas Group have continued working on further cooperation opportunities for the benefit of their respective customers.

Starting December 9, 2019 members of Flying Blue, the loyalty program used by the airlines of the Air France-KLM Group, can earn1 miles and XP (Experience Points) as well as spend miles on Qantas flights.

Flying Blue elite members will also have access to additional benefits such as priority airport services and additional checked baggage allowance when traveling on Qantas.

New Codeshare with Jetstar

By the end of December, both Air France and KLM plan to launch a codeshare cooperation with Jetstar Airways and Jetstar Asia Airways, two airlines which are part of the Qantas Group portfolio, connecting respectively in Denpasar and Singapore, thus expanding customer travel options to Southeast Asia and Australia.

Air France and KLM customers will benefit from a seamless travel experience with single ticket itineraries and through-checked baggage.

Under this agreement, Air France and KLM customers will have access to a wider range of destinations in Southeast Asia. Connecting in Singapore from Amsterdam or Paris, Air France and KLM will place their code on 12 additional destinations2 operated by Jetstar Asia Airways: Da Nang (Vietnam), Ho Chi Minh City (Vietnam), Denpasar (Indonesia), Medan (Indonesia), Surabaya (Indonesia), Phnom Penh (Cambodia), Siem Reap (Cambodia), Kula Lumpur (Malaysia), Penang (Malaysia), Phuket (Thailand), Yangon (Myanmar), and Darwin (Australia).

During the winter 2019 season, KLM plans to implement codeshares with Jetstar Airways providing itineraries beyond its Denpasar flight to four destinations in Australia: Adelaide, Melbourne, Perth, and Sydney2.

Also expected during December 2019, Air France, KLM and Qantas will extend their codeshare to flights connecting in Bangkok, on top of the existing codeshare via Singapore and Hong Kong, and providing a third route to connect Amsterdam and Paris with Sydney.

Additionally, the two airline groups continue to explore opportunities like potential cooperation with airport lounges.

(1) Earning of miles and XP is only possible on Qantas operated flights that are marketed by Air France, KLM or Qantas
(2) All subject to governmental authorizations

Jetstar Airways aircraft photo gallery:

QANTAS Group to slash carbon emissions

100 Centenary Scheme - "QANTAS Time Capsule Towards 2120"

The QANTAS Group will reach net zero carbon emissions by 2050 in a major expansion of the airline’s commitment to a more sustainable aviation industry.

The national carrier will:

  • Immediately double the number of flights being offset
  • Cap net emissions from 2020 onwards
  • Invest $50 million over 10 years to help develop a sustainable aviation fuel industry

 

CUTTING NET CARBON EMISSION

This announcement means that Qantas is the only airline group to commit to cap its net emissions at 2020 levels, and the second to commit to net zero emissions by 2050.

In total, these commitments are the most ambitious carbon emissions targets of any airline group globally.

Qantas, Jetstar*, QantasLink and Qantas Freight will offset all growth in emissions from domestic and international operations from 2020.

This includes offsetting all net emissions from Project Sunrise, the carrier’s plan to operate non-stop flights from the east coast of Australia to London and New York, should the project proceed. This will also extend to domestic flying, meaning that growth on key routes like Melbourne-Sydney will be carbon neutral.

The aviation industry, which contributes around 2 per cent of global CO2 emissions, has committed to halving emissions by 2050 compared to 2005 levels. It was the first industry to make such commitments. Qantas had signed up to those commitments but will now exceed them.

Qantas will work with industry, research institutions and governments to develop the long-term solutions to significantly reduce greenhouse gas emissions from the aviation industry over the next three decades.

OFFSETTING FLIGHTS

Qantas currently operates the largest carbon offset program in the aviation industry, with around 10 per cent of customers booking flights on Qantas.com choosing to offset their flights.

From today, Qantas and Jetstar will double the number of flights offset by matching every dollar spent by customers who tick the box to fly carbon neutral. By matching our customers’ commitment, we expect even more people to offset their emissions.

This additional investment will see Qantas Future Planet, which is already the largest private sector buyer of Australian carbon credits, support more conservation and environmental projects in Australia and around the world.

Existing projects include protecting the Great Barrier Reef, working with Indigenous communities to reduce wildfires in Western Australia and securing over 7000 hectares of native Tasmanian forest.

SUSTAINABLE AVIATION FUEL

Qantas will invest $50 million over the next ten years to help develop a sustainable aviation fuel industry.

Sustainable aviation fuel can reduce carbon emissions by eighty per cent compared to traditional jet fuel, but are currently almost double the price.

Qantas will work with governments and private sector partners to support the development of sustainable aviation fuel in Australia and overseas to make it more viable and increase demand throughout the industry.

The national carrier will also continue to reduce its emissions through continued investment in more fuel efficient aircraft, more efficient operations such as single-engine taxiing, and smarter flight planning to reduce fuel burn.

Qantas is on track to replace its Boeing 747 fleet by the end of 2020 with the more fuel-efficient B787 Dreamliners, which burn 20 per cent less fuel than aircraft of a similar size. Jetstar’s A321neo (LR) aircraft,
which begin arriving next year, use 15 per cent less fuel than the aircraft they are replacing.

The Qantas Group continues to work with aircraft and engine manufacturers on next-generation technology that will deliver a further step-change in emissions reduction – however, innovations such as electric aircraft engines are still some time away.

CEO COMMENTS

Qantas Group CEO Alan Joyce said these commitments would make Qantas a leader in the aviation industry’s efforts to reduce carbon emissions.

“We recognise that airlines have a responsibility to cut emissions and combat climate change. We’ve already made some good progress, especially by investing in newer aircraft that have a much smaller carbon footprint.

“We want to do more, and faster. We’re effectively doubling our carbon offsetting program from today and we’re capping our net emissions across Qantas and Jetstar from 2020 so that all new flying will be carbon
neutral.

“Qantas offsets all of its own travel needs and so do many of our customers. By matching their efforts, we’re hoping it will encourage even more people to offset and the program will keep growing.

“These short-term actions will go towards a longer-term goal of being completely net carbon neutral by 2050. It’s ambitious, but achievable.

“Innovation is going to be key. We’re investing $50 million to hopefully kickstart a sustainable aviation fuel industry in Australia. We know from our own trials that the technology works but we need to get to a scale of production where it’s a practical substitute.

“Concerns about emissions and climate change are real, but we can’t lose sight of the contribution that air travel makes to society and the economy. The industry has already come a long way in cutting its footprint and the solution from here isn’t to simply ‘fly less’ but to make it more sustainable.

“We’re doing this because it’s the responsible thing to do, but hopefully it will also encourage more people to choose Qantas and Jetstar because of the action we’re taking,” added Mr Joyce.

Copyright Photo: Gordon Reid via John Adlard.

In other news, Qantas has completed precautionary inspections of thirty-three 737NG aircraft, checking for hairline cracks that have appeared in some high cycle aircraft worldwide.

The cracks relate to the ‘pickle fork’ structure, which is located between the wing and fuselage. Qantas brought forward these precautionary checks by up to seven months and completed them within seven days.

Of the 33 of Qantas’ 737 aircraft that required inspection, three were found to have a hairline crack in the pickle fork structure. These aircraft have been removed from service for repair.

The aircraft had all completed around 27,000 cycles. Any aircraft with more than 22,600 cycles was inspected, in line with advice from regulators.

Qantas will minimise any customer impact from having these aircraft temporarily out of service.

Qantas is working with Civil Aviation Safety Authority and Boeing to resolve this issue, which involves some complex repair work. All three aircraft are expected to return to service before the end of the year.

CEO of Qantas Domestic, Andrew David said: “As people would expect with Qantas, we’ve gone above what was required to check our aircraft well ahead of schedule.

“We would never fly an aircraft that wasn’t safe. Even where these hairline cracks are present they’re not an immediate risk, which is clear from the fact the checks were not required for at least seven months.

“Unfortunately, there were some irresponsible comments from one engineering union, which completely misrepresented the facts. Those comments were especially disappointing given the fantastic job our engineers have done to inspect these aircraft well ahead of schedule, and the priority they give to safety every day of the week,” added Mr David.

Qantas will continue to monitor aircraft that are in scope of the airworthiness directive as inspections fall due.

Top Copyright Photo: QANTAS Airways Boeing 787-9 Dreamliner VH-ZNJ (msn 66074) (100 Centenary) PAE (Nick Dean). Image: 948008.

QANTAS Airways aircraft slide show:

QANTAS Group posts record revenue, strong profit in FY 2019

QANTAS Group posts record revenue, strong profit in FY2019:

  • Underlying Profit Before Tax: $1.30 billion (down 17%)
  • Statutory Profit Before Tax: $1.27 billion (down 6%)
  • Record revenue for the Group
  • Statutory Earnings Per Share: 54.6c (flat on last year)
  • Return On Invested Capital: 18.4%
  • Net free cash flow: $1,244 million
  • Shareholder return of 13 cents per share fully franked dividend, plus an off-market buyback of up to 79.7 million shares
  • $1,250 staff travel bonus for 25,000 non-executive employees, worth $32 million
  • The Qantas Group has achieved an Underlying Profit Before Tax of $1.30 billion and a Statutory Profit Before tax of $1.27 billion for the Financial Year 2019.

While the Underlying result was 17 per cent lower compared with the Group’s record profit in FY18, it was impacted by an $614 million increase in fuel costs from higher oil prices and a further $154 million of the foreign exchange impacts on non-fuel net expenditure.

The result was also impacted by a $92 million non-cash expense on provisions for items including employee leave entitlements – part of an accounting requirement that means this charge increases when interest rates fall.

All key parts of the Group’s portfolio remain strongly profitable, generating significant cashflow that allows for ongoing investment as well as shareholder returns.

CEO COMMENTARY

Qantas Group CEO Alan Joyce said the FY19 performance was particularly positive given mixed market conditions.

“This result shows the strength of our individual businesses but also the strength of our portfolio as a whole. Even with headwinds like fuel costs and foreign exchange, we remain one of the best performing airline groups in the world.

“Our performance is the result of having the right strategy and the ability to deliver it.

“Domestically, our dual brand approach with Qantas and Jetstar continued to give us a leadership position in the corporate, premium leisure and budget travel categories, all with strong margins.

“Qantas International has improved its competitive position by evolving its fleet, network and partnerships. We’ve carved out some unique advantages like the Perth-London route and there is a lot of value still to be unlocked through our alliances.

“Qantas Loyalty returned to double-digit earnings growth in the second half, thanks to new revenue streams from insurance and financial services as well as improvements to the Frequent Flyer program.

“The simple message from this result is that the Qantas Group has solid foundations to keep investing and innovating, and to keep rewarding our shareholders as a result.

“We’re pleased to reward around 25,000 of our people with a $1,250 staff travel bonus each, which would take a family of four from Sydney to Honolulu on Jetstar. Since 2015, we’ve now set aside more than $340 million in cash and staff travel bonuses for non-executives.

“Looking ahead, the overall market remains mixed. Domestically, we’re seeing weakness in the price sensitive leisure market but premium leisure demand is steady.

“Overall demand from our corporate customers is flat, with continued strength in the resources sector offsetting weaker demand from other industries, like financial services and telecommunications. In competitive terms we’re growing our overall share of the corporate and SME sectors.

“Internationally, the outlook remains positive for premium international travel demand, helped by a reduction in broader market capacity.

“Our anticipated flat Group domestic capacity for the first half of FY20 reflects the mixed environment, and we’ll continue to monitor our settings against demand and our strategic position,” said Mr Joyce.

GROUP DOMESTIC

Group Domestic delivered an Underlying EBIT of $1.03 billion, down by 4 per cent. Unit Revenue from Qantas and Jetstar’s domestic operations grew by a combined 4 per cent on flat capacity, as fares caught up to higher oil costs.

Qantas Domestic, which achieved its second-highest Underlying Profit, increased Unit Revenue by 5 per cent and seat factors were steady at 78 per cent.

Qantas’ share of both the corporate and small business markets grew, helping to offset some broader weakness in travel demand. Qantas maintained a 15 point customer satisfaction premium to its domestic competitor.

The resources market continued to strengthen, with capacity added in Western Australia and Queensland contributing to a $47 million revenue increase from this part of the market.

Jetstar’s domestic Unit Revenue increased by 3 per cent and ancillary revenue per passenger rose by 12 per cent, driven largely by take-up of new baggage options and Club Jetstar reaching 340,000 members. The airline’s upgrade of its A320 cabins is now complete, delivering a 3 per cent capacity improvement per aircraft.

As a low fares leader, the Jetstar Group sold almost two-thirds of its fares for less than $100.

GROUP INTERNATIONAL

Qantas International delivered an Underlying EBIT of $285 million, down by 28 per cent. There was a significant improvement in second half performance, as competitor capacity and overall fare levels adjusted to higher fuel prices.

Unit Revenue grew by 6 per cent compared with FY18 and seat factor grew by 2 percentage points to 86 per cent.

Network and fleet changes continue to deliver benefits, with particularly strong performances on the Perth-London route and Singapore hub services. Competitive pressure on the Pacific remained intense but Qantas’ performance is expected to improve following implementation of the American Airlines joint business and the start of new routes, including Brisbane-Chicago in FY20.

Qantas Freight continued to provide steady earnings, which will be supported going forward by an expanded seven-year contract with Australia Post.

Jetstar’s international services achieved significant Unit Revenue growth, with solid performance on key leisure routes such as Bali and Japan.

Jetstar Japan delivered a record profit[1] (opens in new window) and Jetstar Pacific remained profitable, while Jetstar Asia faced challenges due to a significant increase to airport charges and taxes in its home market of Singapore. Jetstar’s regional services in New Zealand were loss-making and market conditions are being monitored closely.

QANTAS LOYALTY

Qantas Loyalty achieved a record Underlying EBIT of $374 million, up 8 per cent.

Earnings growth was driven by the core Frequent Flyer Program as well as new insurance and financial products.

Total points redeemed grew by 12 per cent compared with a 5 per cent increase in membership. High levels of engagement with the program are expected to keep improving as the recent changes to redemption costs and flight availability take full effect from September 2019. Already, there has been a 24 per cent increase in Classic flight redemptions since these changes were announced in June.

The Qantas Business Rewards program, which helps drive airline market share in the SME segment as well as earnings from Loyalty partners, reached 250,000 members.

Growth of credit cards that earn Qantas Points continued to outperform the broader market[2] (opens in new window) and Qantas’ own premium cards performed well. Qantas health insurance customers grew by 46 per cent[3] (opens in new window), helped by one of the lowest average premium increases in the market.

FINANCIAL FRAMEWORK

The Group continued to deliver on the three pillars of its financial framework.

Operating cashflow was strong at $2.81 billion and net debt is now below the target range[4] (opens in new window) at $4.7 billion. Net capital expenditure was $1.6 billion after adjusting for cash received from the sale of Qantas Catering and the Melbourne Domestic Terminal lease. This resulted in net free cashflow of $1.24 billion.

Ongoing transformation delivered $452 million of revenue and cost benefits.

The Group’s total fuel cost was $3.85 billion, an increase of $614 million on FY18. Ongoing efficiency measures, including fleet modernisation and a new flight planning system, drove a 2.2 per cent improvement in fuel efficiency.

The Group incurred $374 million income tax on its FY19 profit.

REWARDING SHAREHOLDERS

The Qantas Board has announced a fully franked dividend totaling $204 million dollars or 13 cents per share to be paid on 23 September 2019 with a record date of 3 September 2019, as well as an off market buy-back of up to 79.7 million shares. Detail on the buyback, which is worth approximately $400 million at yesterday’s share price, is available via https://www.investor.qantas.com.

This latest buyback, once complete, will bring the total reduction in shares on issue by nearly one third since 2015 – the most of any company in the ASX All Ordinaries in the past five years.

Surplus capital will continue to be assessed at each half, in-line with our financial framework. The first tranche of this surplus will be allocated to a base dividend, which is currently assessed at $400 million a year. Adjusting for the EPS benefits from the buyback announced today, this equates to 27 cents a share per annum.

INVESTING FOR THE FUTURE

The Qantas Group continues to invest for the future, with key initiatives including:

  • Today’s announcement of three research flights for Project Sunrise before the end of calendar 2019. Operating non-stop from New York and London to Sydney using Qantas’ existing 787-9s, and made possible by carrying a small number of people to minimise weight, the flights will test different approaches to crew and passenger wellbeing as part of designing unique ultra-long haul services. The research flights, which are re-routed delivery flights, will have their emissions fully offset. The final business case for Project Sunrise has several hurdles to pass ahead of a final decision in December 2019. (See separate release and video (opens in new window).)
  • A complete refurbishment of Qantas’ 12 Airbus A380 aircraft, including upgrades to each class of cabin, a new on-board lounge and 27 per cent increase in premium seating. Work on the first aircraft is underway, which is expected to be in service by September.
  • Delivery of six additional 787-9s for Qantas International from October 2019, taking the total fleet to 14 aircraft.
  • Increasing lounge capacity in Qantas’ Singapore hub by 60 per cent, including an expansion to the existing Business Lounge and opening of a new First lounge.
  • Rolling out $25 million of improvements to Frequent Flyer, including 1 million more reward seats per annum, reducing some carrier charges for points bookings by up to 50 per cent and cutting the points required for international Economy seats by up to 10 per cent.
  • Progress towards cutting 100 million single-use plastics by end-2020 and eliminating 75 per cent of waste to landfill by end-2021.
  • Preparations to introduce the A321 NEO to Jetstar, with 18 aircraft to begin arriving from mid-2020. 

OUTLOOK

The Group continues to focus on matching capacity with demand, together with growing revenue to recover higher fuel costs.

The Group’s current operating expectations for FY20 are[5] (opens in new window):

  • Total fuel bill is expected to increase to ~A$3.95 billion (up ~$100 million) and is fully hedged.
  • Group capacity is expected to increase by ~1 per cent in in the first half of FY20. Group Domestic is expected to be flat to slightly down. Group International is expected to increase by ~1.5 per cent while competitor capacity is expected to decline by ~1 per cent in the first half of FY20.
  • Inflation impact on Group expenditure (including wage growth) expected to be ~$250 million.
  • Transformation benefits are expected to be ~$400 million.
  • Gross capital expenditure expected to be $2.0 billion for FY20.
  • Net underlying depreciation and amortisation expected to be ~$130 million higher than FY19.

[1] (opens in new window) Record AUD profit share.

[2] (opens in new window) Qantas Points earning credit cards includes co-branded credit cards and Qantas Premier cards. Based on RBA credit and card charges statistics at June 2019 and Qantas internal analysis.

[3] (opens in new window) Qantas/ NIB internal analysis and estimates.

[4] (opens in new window) Net Debt Target Range as at 30 June 2019 is $5.2 billion to $6.5 billion.

[5] (opens in new window) See Investor Presentation for detailed outlook assumptions.

QANTAS backs the Airbus A321XLR with an agreement for 36 aircraft

QANTAS Airways Limited is backing Airbus’ new extended range A321XLR with an agreement covering 36 aircraft. This includes the conversion of 26 existing A320neo Family orders plus a new firm order for 10 A321XLRs.

The aircraft will allow the QANTAS Group, which includes low-cost carrier Jetstar, to improve its network and fleet flexibility to better serve point-to-point markets in Australia, Asia and the South Pacific.

Images: Airbus.

QANTAS Link resumes flights between Cairns and Port Moresby

QANTAS Link-Sunstate Airlines Bombardier DHC-8-402 (Q400) VH-QOD (msn 4123) BNE (Ton Jochems). Image: 946143.

QANTAS Group has made this announcement:

QantasLink is again making it easier for customers to travel between Cairns and Port Moresby with the return of daily flights between the two cities on March 31.

Photo: Nick D.

QantasLink has resumed the service after a resurgence in customer demand, offering around 1,000 seats per week on its 74-seat Q400 aircraft. The service, which QantasLink had operated until 2016, complements Qantas’ existing daily services between Brisbane and Port Moresby.

Flights will depart Cairns at 9:55am arriving in Port Moresby at 11:55am each day. The return flight will depart Port Moresby at 12:30pm, landing back in Cairns at 2:20pm.

QANTAS acquires a 19.9% share of Alliance Airlines

Alliance Airlines (Australia) Fokker F.28 Mk. 0100 (Fokker 100) VH-XWS (msn 11314) BNE (Ton Jochems). Image: 945035.

The QANTAS Group has issued this statement:

The QANTAS Group has taken a 19.9 percent shareholding of Australian-based charter operator, Alliance Airlines.

Alliance Airlines is a significant service provider to the resources sector, which continues to stimulate travel demand in Western Australia and Queensland in particular. Alliance is a profitable, well-managed business with high levels of operational maturity. It is also a long-term provider to the QANTAS Group and flies regional services on behalf of the national carrier.

 

The 19.9 percent stake was acquired for an average price of $2.40 per share and for a total cost of $60 million.

QANTAS expects to ultimately seek regulatory approval from the ACCC to build on its current shareholding, with a longer-term view of taking a majority position in Alliance Airlines in order to better serve the charter market by unlocking synergies.

In the meantime, QANTAS is supportive of the ‘business as usual’ approach of Alliance Airlines management and is not seeking Board representation.

Top Copyright Photo (all others by the airline): Alliance Airlines (Australia) Fokker F.28 Mk. 0100 (Fokker 100) VH-XWS (msn 11314) BNE (Ton Jochems). Image: 945035.

Alliance aircraft slide show:

Alliance Airlines Route Map:

 

QANTAS Group reports a record full year profit

  • Underlying Profit Before Tax: $1.6 billion (up 14%)
  • Statutory Profit Before Tax: $1.4 billion (up 18%)
  • Statutory Earnings Per Share: 56c (up 21%)
  • Return On Invested Capital: 22%
  • Net free cash flow: $1,442 million (up 10%)
  • Shareholder return of up to $500 million: 10 cents per share ordinary franked dividend, plus an on-market buyback of up to $332 million
  • Bonus for 27,000 non-executive employees, worth a total of $67 million
  • Extension of global lounge improvement program –– six additional ports to be upgraded
  • Commitment to create a second pilot academy facility in regional Australia.

 

The QANTAS Group has reported an Underlying Profit Before Tax of $1.6 billion for the 2018 financial year – a record for the national carrier.

All parts of the business contributed to the result, helped by healthy levels of demand across key markets, higher revenue and a particularly strong performance in the domestic flying businesses of Qantas and Jetstar.

The result enables the Group to return further capital to shareholders, keep investing for customers and reward its employees with a cash bonus.

 

CEO COMMENTS

Chief Executive Officer Alan Joyce said the record profit reflected a strong market as well as the benefits of ongoing work to improve the business and build long-term shareholder value.

“These numbers show a company that’s delivering across the board,” said Mr Joyce.

“Our investment in free Wi-Fi and cabin improvements are delivering a better experience for customers as well as higher earnings for Qantas and Jetstar. The overall value for the travelling public remains extremely strong, with domestic sale fares almost 40 per cent lower in real terms than they were fifteen years ago.

“We’re seeing healthy demand across key sectors matched with improving levels of capacity discipline, which is a positive sign for the year ahead.

“This record result comes despite higher oil prices. We’re facing another increase to our fuel bill for FY19 and we’re confident that we will substantially recover this through a range of capacity, revenue and cost efficiency measures, in addition to our hedging program.

“Ultimately our success relies on the great service and dedication to safety from our people, which is supported by continuing to invest and innovate.

“We’re very pleased to reward our people with a bonus for this fantastic result. It brings the total amount set aside for non-executive employees to over $300 million over the past four years for their part in the Group’s exceptional performance,” added Mr Joyce.

 

GROUP DOMESTIC

The Group’s domestic flying operations delivered EBIT of $1.1 billion, which is 25 per cent higher than FY17 and represents a new record for the business.

This was achieved through the combination of Qantas and Jetstar’s network, schedule and product strengths in key markets, and supported by capacity discipline driving higher seat factors and higher unit revenue.

Margin growth was helped through efficiency gains (such as Jetstar’s A320 cabin refit program) and investing for a higher premium (such as new lounges and free inflight Wi-Fi on Qantas). Qantas Domestic achieved a 19 per cent increase in earnings from a 6 per cent increase in revenue.

The Group maintained its corporate share, increased its share of small to medium enterprises, and saw a continuation of growth in the resources sector that began in the first half of the year. Demand was also boosted by flows from international partner airlines on to domestic services. Leisure demand remains strong and Jetstar carried 24 million passengers domestically and internationally for under $100.

 

GROUP INTERNATIONAL

Qantas International increased its earnings by 7 per cent to $399 million and maintained its margin in the face of strong competition and higher fuel prices.

Qantas International made several important structural changes during the year, including the introduction of the 787, new routes like Perth–London and taking on additional Trans Tasman flying for partner Emirates. These changes started delivering cost and revenue benefits in late FY18, which will continue through FY19 onwards.

Jetstar International posted a strong profit after managing an $11 million impact from Bali ash clouds and start-up of new routes like Melbourne-Ho Chi Minh.

Jetstar branded airlines in Asia were all profitable and continue to give the Group a capital-light foothold in key growth markets. The expansion of Qantas’ Singapore hub has been helped by traffic flows and onward connections with these airlines.

Qantas Freight continued to perform well, with the international market strengthening and the domestic market stable.

 

QANTAS LOYALTY

Qantas Loyalty achieved a record result of $372 million, up 1 per cent from the prior year. Margins dropped by 0.4 percentage points due to a mix of market conditions and bonus points promotions to support the launch of new financial products, but remained strong at 24.1 per cent.

The impact of interchange fee adjustments – which continued into the second half of the year – was mitigated by consumer demand for Qantas Points. While total growth in new credit cards issued in Australia shrank by 4 per cent, cards that earn Qantas Points grew at 7 per cent[2] (opens in new window), showing the value that points have in card acquisition.

The Frequent Flyer program grew by 4.2 per cent[3] (opens in new window) to reach 12.3 million members. Levels of member engagement increased, helped by the widening number of partners in the program and additional ‘opt-ins’ among Woolworths customers to earn Qantas Points.

There was continued revenue growth from new ventures, including health insurance and Qantas’ own premier credit card. Further expansion into financial services is planned in the first half of FY19.

 

FINANCIAL FRAMEWORK

The Group delivered against its financial framework in FY18.

Net free cash flow increased by $133 million, helping to push net debt below the low end of the preferred range. This gives future flexibility for earnings accretive investment and to continue rewarding shareholders.

The Group remains on track for a combined $3 billion in capital expenditure for FY18 and FY19 (net of asset sales), with $1.97 billion of this delivered in FY18. Ongoing transformation delivered $463 million of revenue and cost benefits.

Hedging helped minimise impact of fuel price increases during FY18, giving the Group time to adjust revenue settings to reflect increased costs. This has continued into FY19, with the first half of the year 87 per cent hedged.  Ongoing efficiency measures drove a 1 per cent reduction in fuel consumption and the same is expected in FY19.

Continued profitability saw Qantas exhaust the last of its available carry forward tax losses and incur company tax in the second half of FY18.

 

SHAREHOLDER RETURNS

The Qantas Board has announced up to $500 million to be returned to shareholders. This comprises an increased, fully franked dividend of 10 cents per share to be paid on 10 October 2018 with a record date of 6 September 2018, as well as an on market buy-back of up to $332 million.

This will bring the amount of capital returned to Qantas shareholders to $3.1 billion since October 2015 and the total reduction in shares on issue to around 26 per cent.

 

INVESTING FOR THE FUTURE 

Several major investments were announced during FY18, including six additional 787-9s for Qantas International, accelerated retirement of remaining 747s, a major upgrade of A380 cabins and 18 new A321LR NEOs for Jetstar.

Work on Project Sunrise – which will unlock direct flights from the east coast of Australia to London and New York by 2022 – advanced to the request for proposal stage with Airbus and Boeing. And several lounge upgrades were announced, underway or completed.

Qantas has today announced an extension of its global lounge upgrade program, designed to support demand for premium travel across six additional ports. They are:

  • Updated and expanded Sydney International First Lounge
  • Major upgrade to the Auckland Lounge
  • Refreshed Tokyo Narita Lounge
  • Expanded Brisbane International Lounge
  • Two regional lounge upgrades – Tamworth and Hobart.

The Qantas Group has today also committed to a second Pilot Academy facility, which will help meet the unprecedented global demand for skills as the aviation sector continues to grow. The academy concept is designed to provide a future talent pipeline for Qantas Group airlines and support General Aviation in a country that relies heavily on air transport. It also represents a commercial opportunity to create a centre of excellence to train pilots for airlines throughout the region.

The concept has been met with substantial levels of support from state governments, local councils and the private sector. (See separate release.)

Qantas has set aside a total of $20 million towards establishment of the two facilities. Both will be located in regional Australia, with cities to be announced in coming weeks. The first location will open during calendar year 2019 and the second expected to follow in 2020.

Qantas has also committed to delivering up to $3 million to regional communities as part of its drought assistance program.

 

OUTLOOK

The strength of forward bookings and continued focus on transformation provides confidence that the Group will substantially recover higher fuel costs in FY19. This is supported by capacity discipline and fundamental strengths of our dual brand strategy in the domestic market, combined with margin advantage and fleet investment in the international market.

The Group’s current operating expectations for FY19 are:

  • Total fuel bill is expected to increase to ~A$3.92 billion (up ~$690 million).
  • Inflation impact on Group expenditure (including wage growth) expected to be ~$250 million.
  • Transformation benefits are expected to be ~$400 million.
  • Net capital expenditure1 expected to be $1.0b for FY19.
  • Total Group capacity to increase by ~0–1 per cent in the first half of FY19, with Group International up by 1 per cent and Group Domestic capacity flat.
  • Net depreciation and non-cancellable aircraft operating leases expected to be ~$155 million higher than FY18.

[1] (opens in new window) BITRE Australian Domestic Best Discount Air Fare Index.

[2] (opens in new window) At June 2018 compared to June 2017. Source: RBA credit and card charges statistics.

[3] (opens in new window) At June 2018 compared to June 2017.

[4] (opens in new window) See Investor Presentation for detailed outlook assumptions.

Top Copyright Photo (all others by QANTAS): QANTAS Airways Boeing 787-9 Dreamliner VH-ZNB (msn 39039) LAX (Michael B. Ing). Image: 942566.

QANTAS aircraft slide show:

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