The Transformation Continues QANTAS ANNUAL REPORT 2013 For personal use only For personal use only QANTAS ANNUAL REPORT 2013 ANNUAL REVIEW 04 Chairman’s Report 07 CEO’s Report 08 Financial Overview 11 Qantas Group Strategy Update 23 Qantas in Transformation 27 Qantas/Emirates Network 36 Jetstar’s Pan-Asian Network 38 Qantas Group Passenger Fleet Map 41 Australia’s National Carrier ANNUAL REPORT 50 Board of Directors 54 Review of Operations 64 Corporate Governance Statement 71 Directors’ Report 97 Financial Report 165 Shareholder Information 166 Sustainability Statistics and Notes 180 Financial Calendar and Additional Information For personal use only 01 “Qantas is in a period of transformation as we make our business better and stronger.” Qantas Group CEO Alan Joyce For personal use only 02 QANTAS ANNUAL REPORT 2013 For personal use only 03 Chairman’s Report Group Performance Looking Forward This result The Qantas Group reported statutory The very competitive operating profi t after tax of $6 million and conditions facing the Group are unlikely demonstrates the underlying profi t before tax of $192 to ease during 2013/2014. Productivity million* for the 2012/2013 fi nancial year — and cost-competitiveness will be vital for strength of our a result that demonstrates the strength the Australian economy as a whole, and portfolio and the of our portfolio and the progress we have Qantas in particular. made with our strategy in a challenging While we are making progress, there is progress we have aviation market. still a great deal of work to do. However, made with our Three of our four major operating the Group is well positioned for future segments were profi table and we took success. The actions we took during strategy. important steps to strengthen the Group 2012/2013 are delivering results. And we further. We maintained a clear market- have a clear strategy to build long-term leading position with our domestic shareholder value. business. Jetstar continued to build Australia’s National Carrier Qantas Board Changes in Asia through the launch of Jetstar It’s important to remember the role Japan. And our loyalty business reported As we look to the future I’d like to pay Qantas plays in Australian life. Many * another record result. tribute to the late James Strong, a nations no longer have a fl agship singular fi gure in Qantas’ history. His Having reached an infl ection point in carrier. Yet Qantas continues to support record as Qantas CEO, on the Qantas 2011/2012, the turnaround of Qantas Australian business — at home and Board and in many other fi elds of International is on track. overseas — promote Australian tourism business and culture was remarkable. and trade, work with charities and Securing and launching a partnership James will be greatly missed. provide resources for our government with Emirates was a superb achievement, We always seek to ensure that we have and emergency services. giving Qantas International a global a plan in place to renew the Board and, network via Dubai. It will deliver benefi ts Our strategy for a strong, sustainable accordingly, Patricia Cross will step not just for Qantas International but for and successful Qantas Group will ensure down at the AGM in October. Patricia the Group as a whole, and Alan Joyce that this unique role continues long into has served on the Board for a total of and his team deserve great credit for the future. nine years, as well as chairing Qantas putting together such a signifi cant Superannuation between 2002 and 2005. The Group’s many achievements in agreement in a short period of time. She has brought great experience and 2012/2013 are a tribute to the skill and We also strengthened the Group’s judgement as a Director and I thank her dedication of our more than 30,000 fi nancial position in 2012/2013, reducing for her signifi cant contribution. employees. I thank them sincerely for debt and capital expenditure*. Liquidity their contribution. I would also like to acknowledge at 30 June was $3.4 billion, comprising Corinne Namblard, who left the Board $2.8 billion in cash and $630 million in in February. undrawn debt facilities. At the same time, we welcome two new Crucially, the Group is becoming more Directors, appointed in August 2013. effi cient and productive through the Maxine Brenner and Jacqueline Hey ongoing Qantas Transformation program. are excellent additions to the Board and I look forward to working with them. For personal use only *For explanations of non-statutory measures see the Review of Operations section in this report. 04 QANTAS ANNUAL REPORT 2013 For personal use only 05 For personal use only 06 QANTAS ANNUAL REPORT 2013 CEO’s Report After a year of achievement the Qantas At the same time, the Emirates partnership The Group’s fl eet modernisation program Group is in a strong position. has enabled us to strengthen our network continues to improve the customer in Asia and in the trans-Pacifi c and experience and increase operational During 2012/2013 we launched a ground- trans-Tasman markets. Offering almost effi ciency. Thanks to the strong breaking partnership with Emirates 900 destinations around the world investment we have already made in and a new Jetstar airline in Japan; we through our gateway strategy, Qantas new aircraft, our average scheduled strengthened our network in every part International has a network advantage passenger aircraft age has reached of the globe; we continued to renew over every other airline serving Australia. 7.9 years: its lowest level in two decades. our fl eet; and we secured the Group’s fi nancial position through the prudent Jetstar continues to build its presence This, in turn, has allowed us to reduce management of capital, costs and debt. in Australia, New Zealand and Asia. planned capital expenditure and achieve In 2012/2013 it reached 100 million our goal of positive net free cash fl ow. A Strong Group Performance passengers and 100 aircraft, making We must continue to manage our costs Qantas Domestic, Jetstar and Qantas it bigger than Ryanair or Easyjet at prudently given the headwinds we Loyalty are all strong and profi table, the same age. face — with fuel costs, in particular, still while Qantas International improved With Jetstar Japan off to a strong start at near-record levels. its performance signifi cantly. and Jetstar Hong Kong working towards In the domestic market, we are approval, Jetstar is positioned for long Satisfi ed Customers, Engaged winning against the competition on term success in Asia, the world’s biggest Employees every measure, with the best airline aviation market and a region critical to I am very proud of the record customer in each category. Australia’s economic future. satisfaction scores the Group is receiving. These refl ect investment in aircraft, Qantas and Jetstar maintained the Qantas Loyalty continues to go from lounges, and technology — but, most Group’s profi t-maximising 65 per cent strength to strength, reaching 9.4 million importantly, they refl ect the world-class share of the domestic market. With total members in 2012/2013 — at an average service that our people provide. domestic underlying EBIT* of more than rate of 2,000 new members per day. It $450 million, we remain the clear profi t now has hundreds of program partners, It is not just customers who are noticing leader domestically. including Woolworths, David Jones, this Group-wide focus on service. Optus and all major Australian banks, Employee engagement scores are up by We also retained an 85 per cent share of and we continue to add value to the 8 percentage points across the business, the domestic corporate travel market and program through network expansion a signifi cant improvement, with record added important new accounts. And, and innovations such as the new Qantas engagement among customer-facing staff. for the fourth consecutive year, we were Cash membership card. superior to the competition for on-time There is a new energy at Qantas that performance. Qantas in Transformation makes it an exciting time to be working for this great company. Our strong domestic business is the The Qantas Transformation program foundation for the global network we are delivered substantial strategic benefi ts We are laying the foundations for the building with Qantas International. The in 2012/2013. We have withdrawn from Qantas Group to succeed and grow Emirates partnership is great news for loss-making routes, retired aircraft, in the 21st century aviation industry, customers, opening up 65 destinations consolidated operations and improved representing the best of Australia across Europe, the Middle East and North the economics of our fl eet. wherever we fl y. Africa, plus unique frequent fl yer benefi ts. Overall, we reduced Group-wide Bookings and customer satisfaction with comparable unit costs* by 5 per cent the partnership have been outstanding. (including a 5 per cent reduction for Qantas International). For personal use only Qantas Domestic, Jetstar and Qantas Loyalty are all strong and profi table, while Qantas International improved its performance signifi cantly. *For explanations of non-statutory measures see the Review of Operations section in this report. 07 Financial Overview A Year of Transformation For the year ended 30 June The Group made good progress in its The Group has strengthened its fi nancial * 2013, the Qantas Group strategy against a challenging backdrop, position, with positive net free cash fl ow with high fuel costs, excess capacity of $372 million at 30 June and liquidity* of * reported underlying profi t in the domestic market and intense $3.4 billion, including $2.8 billion in cash. before tax of $192 million, competition in the international market.