FINANCIAL ANALYSIS REPORT Table of Contents 2 A Company Overview...... 4

2.1 Business model...... 5

2.1.1 Full service carrier (FSC) and low cost carrier (LCC) models...... 5

2.2 Social and economic environment...... 6

2.2.1 Porter five forces analysis...... 6

2.2.2 SWOT Analysis...... 7

3 Financial Analysis - ...... 8

3.1 Horizontal Analysis...... 8

3.1.1 Income Statement...... 8

3.1.2 Statement of Financial Position...... 10

3.1.3 Income Statement...... 11

4 Financial Analysis – Virgin ...... 13

4.1 Horizontal Analysis...... 13

4.1.1 Income Statement...... 13

4.1.2 Statement of Financial Position...... 15

4.2 Vertical Analysis...... 16

4.2.1 Income Statement...... 16

4.2.2 Statement of Financial Position...... 17

5 Comparison between Qantas and Virgin...... 19

5.1 Horizontal Analysis...... 19

5.1.1 Income Statement...... 19

5.1.2 Statement of Financial Position...... 20

5.2 Vertical Analysis...... 21

5.2.1 Income Statement...... 21

5.2.2 Statement of Financial Position...... 22

1 6 Key Ratios...... 23

6.1 Return and Profitability...... 23

6.1.1 Net Profit Margin...... 23

6.1.2 Return on Equity...... 24

6.1.3 EBITDAR Margin...... 24

6.2 Risk Ratios...... 25

6.2.1 Current Ratio/Working Capital Ratio...... 25

6.2.2 Quick Ratio...... 25

6.2.3 Debt to Equity Ratio...... 26

7 Other Relevant Information...... 27

8 Conclusion and Recommendations...... 28

9 References...... 29

A Appendix...... 30

A.1 Details of Qantas Group’s Acquisitions and Milestones...... 30

A.2 Financial Statements – Qantas...... 32

A.2.1 Income Statement...... 32

A.2.2 Statement of Financial Position...... 33

A.3 Financial Statements – ...... 34

A.3.1 Income Statement...... 34

A.3.2 Statement of Financial Position...... 35

A.4 Formulas and Calculations...... 36

A.4.1 Horizontal Analysis...... 36

A.4.2 Vertical Analysis...... 36

A.4.3 Net Profit Margin...... 36

A.4.4 Return on Equity...... 36

A.4.5 EBITDAR Margin...... 37

A.4.6 Current Ratio...... 38

2 A.4.7 Quick Ratio...... 38

A.4.8 Debt to Equity...... 38

3 u-rus blw atsik aeig ats Fegt xrs rud Handling, Ground Express Freight, and .Qantas Holiday Qantas Catering, Q QantasLink, below: sup-groups world's the as regarded in one ofthe strongest and distance long leading Australia. its built Qantashave widely is Qantas (QANTAS), Limited Northern Services and Aerial Territory the as originally largest Registered Australia's airline. be international to and grown domestic has Qantas 1920, in outback Queensland the in Founded 1 ports -Sydney, . and , Australian four in centres catering has Catering catering Q Fresh. two Snap and operates Catering Q that - businesses subsidiary owned wholly a is Limited Group Catering Qantas and regional metropolitan, 56 to week each across destinations international flights Australia Moresby New and to Port in Papua Guinea. 2000 over operates QantasLink    A Company Overview

Qantas Freight Catering Q QantasLink Qantas

Group QuantasHoliday ExpressGround QantasFreight QantasLink Q Catering Handling Jetstar 4 Focused on providing excellence in airfreight services, Enterprises is Australia's largest independent airfreight services business employing over 1,300 people in Australia and across the world.

Qantas Freight operates a network of 21 specialist cargo handling terminals in 15 major gateway ports across Australia and in a dedicated terminal in Los Angeles. These terminals handle freight for Qantas and Jetstar, as well as many other major carriers.

 Express Ground Handling

A wholly owned subsidiary of Qantas Airways within the Qantas and Catering Group, provides comprehensive ground handling services to Jetstar and several regional .

 Qantas Holiday

Part of the Jetset Travelworld Group wholesale suite, is one of Australia's leading travel wholesalers. Qantas Holidays markets an extensive range of competitively priced products and services covering the Qantas network, including partner airlines and codeshare services, as well as packages for other airlines under the Viva! Holidays . In addition to destination specific promotions, Qantas Holidays sells packages to a number of special events in Australia, such as popular stage shows and sporting events.

 Jetstar

The Jetstar Group is a value based, low fares network of airlines operating in the leisure and value based markets offering all day, every day low fares.

1.1 Business model 1.1.1 Full service carrier (FSC) and low cost carrier (LCC) models Using their dual complementary airlines, Qantas and Jetstar, the Group focuses on its main business as transportation of passengers and is committed to maintaining their leading position in operating long-haul international, and short-haul domestic and regional services. There are two business models in the airline industry, namely the FSC and LCC models. FSC model is essentially based on a differentiation strategy that bears much heavier overheads, while LCC model based on the cost minimisation strategy by significantly cutting costs through reducing their overheads (Alamdari and Fagan, 2005). Qantas airline (both domestic and international) is operating based on the FSC model, while Jetstar is operating based on LCC model as a direct competitor to the low cost Virgin Blue in Australia (Hunter, 2006). 5 Qantas Group also possesses a broader portfolio of businesses and investments, including Qantas Loyalty and Qantas Freight, which creates assorted revenue streams and generates more values for customers and investors as a result (Details please see Appendix A.1).

1.2 Social and economic environment 1.2.1 Porter five forces analysis • Industry Competitors

Qantas observes severe competition from Virgin Australia domestically and a number of low cost airlines internationally such as China Southern Airline and Malaysia airline. Qantas must always revitalise its product offerings in order to be competitive and sustainable amongst other players.

• Threat of new entrants

Extremely high fixed initial costs along with government regulatory requirements increase the entry threshold for the air transportation industry. Therefore, the high barriers of entry and the dominant powers of existing large players significantly reduce the number of new entrants.

• Threat of substitute products or services

Other forms of transportation like railways, buses, ships and personal transportation are direct substitutes for those who are not concerned about travelling fast. Indirect substitutes such as teleconferencing, online chatting and VoIP (Voice over IP) will increase the threat of substitutes as they save time and money for customers who are travelling.

• Bargaining power of customers

Buyers for Qantas consist of business travellers, leisure travellers, budget travellers, travel agents, and many others. The expectations of the customer have grown over time as they demand more value for every dollar spent. In addition, technology development also allows firms and individuals to communicate with ease which strengthens the bargaining power of customers.

• Bargaining power of suppliers

The aircraft suppliers for Qantas are the only two largest aircraft manufacturers: Boeing and Airbus. Fuel will be supplied by companies like Shell and BP. Hotels and catering service are also provided to the customers as well as crew members in different destination of its

6 operations. In order to lower the cost, Qantas need to maintain a fairly good communication with its suppliers to achieve the competitive edge.

1.2.2 SWOT Analysis Qantas' strong dominance in Australian domestic market enables it to take advantage of the local expertise to gain access to key markets as well as enhancing the quality of its services. However, increased competition from the growing numbers of low cost and low fare airlines could impact the group's market share especially in the Asian region.

FIGURE 2.2.2-1 SWAT ANALYSIS OF QANTAS

Strength • 1. Strong support of Australian Government • 2. One of the top and largest airlines operating in Weakness Australia • 3. Has been one of the historical airline operators in • 1. Heavy concentration around the the world Australia region • 4. Has over 40 destinations domestically and • 2. Costly and ineffective employee training internationally schedule • 5. Good brand building exercises through advertising and sponsorship

Opportunity • 1. Due to the monopolistic nature of Qantas, it Threats reduces the chance of other airlines gaining • 1. Increasing fuel prices more market share in Australia • 2. Rising Labor Costs • 2. More potential international destinations in Asia • 2. Increasing Competition in Australian Market from new start ups • 3. Collaboration with international airlines

Based on the above SWOT analysis, it can be inferred that the strengths of Qantas make it a well respected airline which infuses public confidence. Furthermore, its brand name gives good selling prospects. However, due to the attribute of aviation industries, there are a lot of challenges that contributes to the uncertainty of the financial performances.

7 2 Financial Analysis - Qantas

2.1 Horizontal Analysis 2.1.1 Income Statement

TABLE 3.1.1-1 HORIZONTAL ANALYSIS - INCOME STATEMENT QANTAS

In 2009-2014 timeframe, Qantas has experienced a low rate of growth in Revenue and Other Income of 1.2% on average per year. Its highest figure was reached in 2013 when it was $15,902m. However in 2014 Annual Report it declined to $15,352m (-3.2% YoY 2013-2014). Revenue and Other Income are highly affected for a decline in Other (-10.2% YoY average 2009-2014) and a low rate of growth in Net passenger revenue (2.9% YoY average 2009- 2014). Other account includes Frequently Flyer marketing revenue (-38%) and Contract work revenue (-48%).

Qantas’ Expenditure has an average rate of growth of 6.3%. Fuel Expense, as one of the most important expenditures in airline companies, has grown for most of the years (4.8% YoY average 2009-2014). In 2014 this company did an impairment review that had a high impact in the Income Statement, this program cost the company $2,849m in expense.

8 The growth of Revenue and Other Income between 2009 and 2014 was 5.5%. Yet, Expenditure has grown 33.3% in the same period. As a result the Statutory profit shows a declining trend. In 2014 Qantas attained the highest losses among the years analysed in this report.

9 2.1.2 Statement of Financial Position

TABLE 3.1.2-2 HORIZONTAL ANALYSIS-STATEMENT OF FINANCIAL POSITION QANTAS

10 Qantas’ assets have declined from $20,049m in 2009 to $17,318m in 2014 (-13.6%). This event occurred due to the decrease in Property, Plant and Equipment (PPE) (-13.6%) and Cash and cash equivalent (-17%). Major decrease in PPE account occurred in 2014 due to the impairment review.

Liabilities have increased 1.2% from $14,284m in 2009 to $14,452m in 2014. An increase of 11.8% during 2014 in Revenue received in advance had a high impact in Qantas’ liabilities.

From 2009 to 2013, Qantas’ equity had no relatively large changes with an average of $5,841m. However, in 2014, this company had recorded a high statutory loss that resulted a 50.9% decline in company’s equity.

Vertical Analysis

2.1.3 Income Statement

TABLE 3.1.3-3 VERTICAL ANALYSIS - INCOME STATEMENT QANTAS

Net passenger revenue has always been the major source of income for Qantas while Fuel expense has been one of the largest components among expenditures. In 2014 Fuel consisted 29.1% of Revenue.

11 Statement of Financial Position

TABLE 3.1.3-4 VERTICAL ANALYSIS-STATEMENT OF FINANCIAL POSITION QANTAS

PPE has been the largest assets in Qantas’ Statement of Financial Position as they ranged between 60.6% and 69% of the total assets. In addition, the company always tends to have a

12 significant proportion of assets in Cash and cash equivalents, this account ranged on average 16.9% in the past 6 years.

Qantas has used Bank Loans as its long term financing source. Interest-bearing liabilities account is on average 36.2% of the Total Liabilities. Revenue received in advance is an important source of short financing for this company.

3 Financial Analysis – Virgin Australia

3.1 Horizontal Analysis 3.1.1 Income Statement

TABLE 4.1.1-5 HORIZONTAL ANALYSIS INCOME STATEMENT VIRGIN

The financial statements of Virgin Australia showed that there has been an increase in Revenue and Income over the years. In 2014 the Revenue hits $4,307m, which is 63% higher than it was in 2009. The average rate of growth for the timeframe is 10.5%.

13 Virgin’s Expenditure has also increased for the past 6 years. Fuel Expense increased moderately as the crude oil price rose over the years (10.1% YoY average 2009-2014).

Given that Virgin is a large sized public corporation, it has rather volatile statutory profits (or losses) during the last 6 years and there is no clear trend. However, in 2014 Virgin reached the highest level of losses ($356m).

14 3.1.2 Statement of Financial Position

TABLE 4.1.2-6 HORIZONTAL ANALYSIS-STATEMENT OF FINANCIAL POSITION VIRGIN

15 Virgin’s Total Assets have increased from $3,367m in 2009 to $4,679m in 2014 (39%). This remarkable increase is mainly due to the growth in Cash and cash equivalents (15.6% average increase YoY), as well as the growth in Trade and other receivables (20.6% average increase YoY).

Total Liabilities have increased 30.2% in the last 6 years, despite that the non-current liabilities have remained stable (average rate of growth 1.2%). On the other hand, the current liabilities increased from $1,159m in 2009 to $1,921m in 2014. This large increase is due to the fact that Virgin refinanced a collateralised pool of aircrafts and entered into new bank loans in the recent years.

3.2 Vertical Analysis 3.2.1 Income Statement

TABLE 4.2.1-7 VERTICAL ANALYSIS INCOME STATEMENT VIRGIN

Virgin’s relative Income statement compositions have not changed much in the past 6 years. As expected, Fuel and Labour expenses have the highest proportion in Virgin’s Expenditure. On average, 27.5% of the revenue is spent in Fuel expense and 22.8% is spent in Labour and staff expense. 16 3.2.2 Statement of Financial Position

TABLE 4.2.2-8 VERTICAL ANALYSIS-STATEMENT OF FINANCIAL POSITION VIRGIN

17 PPE as the most important assets in Virgin’ Statement of Financial Position, decreased from 78.6% in 2009 to 57.8% in 2014. Yet, Virgin increased the proportion of assets in Cash and cash equivalents in 2014, this account had an average of 17.2% in the past 6 years.

Virgin uses Bank Loans as its long term financing source. Interest-bearing liabilities account is on average 36.2% of the Total Liabilities. Revenue received in advance is an important source of short financing for this company.

18 4 Comparison between Qantas and Virgin

4.1 Horizontal Analysis 4.1.1 Income Statement

TABLE 5.1.1-9 COMPARISON HORIZONTAL ANALYSIS INCOME STATEMENT

Being in the aviation industry, Qantas and Virgin have both suffered the same problems such as rising Fuel price, in the past years. Both companies have positive rates of growth in the timeframe of 2009-2014. However Virgin has a higher average than Qantas (10.5% and 1.2% respectively). Total Expense for both companies increased, nevertheless, Virgin has a higher average in Total Expenditure as well as in Fuel Expense and Labour Expense. This could be explained by Virgin’s increasing Revenue.

19 4.1.2 Statement of Financial Position

TABLE 5.1.2-10 COMPARISON HORIZONTAL ANALYSIS STATEMENT OF FINANCIAL POSITION

In 2014, both companies performed an impairment review and it had a considerate impact in PPE, with Qantas’ account decreased by 24.1% while Virgin’s declined by 11.8%. From the numbers above it shows that Qantas and Virgin both use Revenue received in advance as a short-term financing source. The comparison of the Statement of Financial Position reflects that both companies experienced similar challenges in the past years.

20 4.2 Vertical Analysis 4.2.1 Income Statement

TABLE 5.2.1-11 COMPARISON VERTICAL ANALYSIS INCOME STATEMENT

Qantas and Virgin Australia have different market share proportions and the Vertical Analysis comparison shows how close their performances are. On average, 50.3% of the Income was expended in Fuel and Labour salaries (the difference between companies is non-existent). Both companies have an increasing trend in the ratio of Operating Expenses/Revenue, this is due to the increasing competition in Market.

21 4.2.2 Statement of Financial Position

TABLE 5.2.2-12 COMPARISON VERTICAL ANALYSIS STATEMENT OF FINANCIAL POSITION

The proportions in the Statement of Financial Position are pretty similar for both companies, on average PPE is close to 65% of the Assets while Liabilities represent 75% of the credit- side.

22 5 Key Ratios Scarcity of resources is the primary drive for investors to determine the best alternative in investing and various analysis can be performed by calculating the ratios, to measure the return and risk of an investment.

5.1 Return and Profitability This report will use the Net Profit Margin, Return on Assets (ROA), Return on Equity (ROE), and EBITDAR margin to measure the profitability of Qantas and Virgin.

5.1.1 Net Profit Margin Companies with good market position will have high Net Profit Margin and these companies usually have a good cost control and small number of debt.

TABLE 6.1.1-13 NET PROFIT MARGIN COMPARISON

The figures above demonstrate that the performance of Qantas has declined from year to year. Based on CSI Market (www.csimarket.com) the average Net Profit Margin of 25 airline companies in 2014 is 2.82%, which is above Qantas. Such a relatively low figure suggests that the airline has high operating costs and the company operates in a highly competitive market.

More specifically, the high operating costs were also due to the high debt to equity ratio, leading to high spending on loans. Furthermore, the company's ability to control spending on fuel is very limited. On top of that, operating in a competitive market makes it very difficult for Qantas to raise flight fares.

In 2012, Qantas had a negative Net Profit Margin because of the restructuring of the organization. It was problematic to work with the industrial union , which forced the company to stop operating its fleet. In 2014 the company had its assets restructured, which led to assets impairment and added significant costs in its 2014 financial statements.

Overall, the performance of Qantas is better than Virgin Australian. The reason may be that its brand name is stronger than Virgin’s, leading to a greater market share, and that Qantas can manage its operating costs better than the competitor.

23 24 5.1.2 Return on Equity Return on equity (ROE) shows the rate return on the capital invested by shareholders.

TABLE 6.1.2-14 RETURN ON EQUITY COMPARISON

Based on data taken from Capital IQ & Bloomberg summarized by Aswath Damodaran, published at Damodaran Online, the industry average ROE currently is 3%. For Qantas the ratio is far below the average and it means that investors would lose 61 cents for every dollar invested.

As mentioned earlier, the restructuring of its assets resulted in large costs. However, these costs can be a sign that the company is changing for the better. Despite that, the figures suggest that both Qantas & Virgin’s ROE performance are getting worse and it could be a sign that the business is not profitable.

5.1.3 EBITDAR Margin EBITDAR measures how much actual return earned by the company from sales before the deduction of interest, tax, depreciation, amortization and airplane lease expense. This ratio will measure the performances of the companies regardless of differences in interest expenses, tax burden and lease expenses.

TABLE 6.1.3-15 EBITDAR MARGIN COMPARISON

As above stated, both companies showed a decreasing trend. It could suggest that the airline industry is an unfavourable industry. However Qantas shows a more stable EBITDAR than the competitor. That is an indicator that their management has a better understanding in daily operation and maintaining their operational expenses.

25 5.2 Risk Ratios 5.2.1 Current Ratio/Working Capital Ratio

TABLE 6.2.1-16 CURRENT RATIO COMPARISON

Since 2010, Qantas has had better ability to fulfil all the current liabilities. In 2014 the current ratio for Qantas is 66%, which means their current assets only cover 66% their current liabilities. For most companies this ratio target is 120%-170% but in air transportation industry the average current ratio is about 70% (www.csimarket.com). Qantas and Virgin both outperform the industry average from 2012.

Current liabilities generally arise from procurement of current assets such as inventories which if sold would result in current assets such as accounts receivable or cash. Therefore, current assets would at least be able to meet current liabilities (100% ratio). In an air transportation service company like Qantas, current liabilities are also included as part of long-term liabilities in the form of rent payable maturities of less than one year, which is quite large and does not directly contribute to improving the current assets of the company. Overall, companies need at least above the average ratio to be consider as a less risk company for investing.

5.2.2 Quick Ratio The quick ratio measures the company ability to cover all the current liabilities by its current assets minus inventory. Transportation companies do not necessarily pile up their inventory since they get the revenue from providing services to customers.

For the cash ratio, a high value indicates that too much capital is being tied up in the business, whilst the acid test or quick ratio indicates the company’s ability to repay immediate commitments using cash or near-cash. It excludes inventory in order to show the immediate solvency of the company.

TABLE 6.2.2-17 QUICK RATIO COMPARISON

26 The average quick ratio for the transportation industry is around 40%, which is lower than both Qantas and Virgin. Qantas and Virgin both have a good ratio but Virgin’s is better. Both companies’ current assets are mostly cash equivalents and accounts receivable that can be used instantly to fulfil their current liabilities.

5.2.3 Debt to Equity Ratio As a firm's debt-to-equity ratio increases, it becomes more risky. This is because if the company is less likely to meet its debt obligations, it will lead to higher chances of bankruptcy.

TABLE 6.2.3-18 DEBT TO EQUITY RATIO COMPARISON

Airline companies are technological and capital intensive companies with high DER. The ratio of Qantas is larger, which indicates higher risk for the company, compared to Virgin Australia. Qantas has a total debt of 5 times larger than its shareholders’ equity, and for Virgin, 3.5 times.

There are two benchmarks that can be used for comparison. Based on the calculations of Aswath Damodaran, the average ratio of 142 firms in this industry is 303%. Another reference that can be used is based on CSI Market, which is 142%. Both companies have higher risk than the industry average.

27 6 Other Relevant Information To support Qantas' goal of delivering continuous return to investors, a well structured administration system is crucial. Corporate governance is fundamental in ensuring the creation, protection and enhancement of shareholder value. The Qantas Board of Directors, currently consisted of nine Independent Non-Executive and Executive Directors, is responsible in reviewing strategic direction of Qantas and monitoring application of strategy by Management, which includes supervision of the integrity of the accounting and corporate financial reporting systems.

The Board has a series of business principles and group policies, which include areas such as health, environment, fair trading and safety, to promote ethical and responsible decision making. For instance, Qantas's Employee Share Trading Policy provides guidelines that prohibit certain nominated employees from dealing in Qantas shares to protect the Qantas Group. Crisis management are also emphasized to ensure that Qantas can respond swiftly to, and recover efficiently from unexpected economic shock.

With aviation sector being a high risk industry, risk management and internal control system are practiced to support and fulfil corporate governance obligations. Audits and risk management reviews are reported to the Board through the Audit Committee on quarterly basis for verification. The other Board Committee responsible for oversight of risk-related matters is the Safety, Health, Environment and Security Committee. This committee helps to protect Qantas' reputation as one of the safest and most secure airline company in the world and also monitor the group's operational safety system (QMS). Along with QMS, several other policies and system have been implemented to identify and manage risks across the Group.

According to airline rating system, which classifies commercial airlines based on their quality and service standards, on the scale of 1-5 star, Qantas was generously rewarded a 4 star for their overall performance. There were some customer reviews about lack of communication from the company and technical faults, which are inevitable for any airline company. That being said, majority of the reviews were positive and this displays Qantas' consistency in maintaining good service quality and product for their customers.

28 7 Conclusion and Recommendations The 2014 financial year was not a profitable year for Qantas. Despite a cost reduction of $440m; the statutory loss after tax was $2.8b. From an investor’s perspective, these numbers seem unappealing.

According to the business analysis and financial analysis in the earlier report, Qantas has had a low growth of revenue below that of industry average and limited control over expenditures over the recent years. This may be explained by the competitive nature of the industry and the larger expenses such as fuel, aircraft leases, staff training and allowances. Qantas also has relatively large risk ratios. Furthermore, similar performances of Qantas and Virgin may suggest that the airline business is perhaps not a fruitful industry as an investment.

Nonetheless, investors should not base their decisions solely on the numbers. Qantas poses advantages such as ‘dual-brand’, which covers both the high-end and low-end of the Australian domestic market; it is positioned geographically within the Asia-Pacific region where booming economies attract more international travellers. It also receives support by the general Australian population as it is regarded to be the national flagship carrier. In addition, the management of Qantas is aware of the industry challenges and has set in place clear strategies and recovery plans for the future.

In conclusion, Qantas does have attributes that would attract certain investors depending on their investment goals and strategies. However for the value investors, investing in an airline company such as Qantas may not be the best decision for the reasons mentioned in this report.

29 8 References

 Qantas Company Information. Retrieved from: http://www.qantas.com.au/travel/airlines/company/global/en  Qantas Annual Reports. Retrieved from: http://www.qantas.com.au/travel/airlines/investors-annual-reports/global/en  Virgin Annual Reports. Retrieved from: http://www.virginaustralia.com/au/en/about-us/company-overview/investor- information/full-year-results/  Major Airlines Information. Retrieved from: http://biz.yahoo.com/ic/ll/770tor.html  Airline Industry Ratios I. Retrieved from: http://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1102  Airline Industry Ratios II. Retrieved from: http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=1102  Glakas, S. 15 Financial Ratios Every Investor Should Use (2011). Retrieved from: http://www.investinganswers.com/education/ratio-analysis/15-financial-ratios-every- investor-should-use-3011  ABC News related to Qantas. Retrieved from: http://www.abc.net.au/news/2012-08-23/qantas-profit-result/4217264, 28/9/2014  Airline Rating. Retrieved from: http://www.airlinequality.com/  Schmidlin, N. The Art of Company Valuation and Financial Statement Analysis, A Value Investor’s Guide with Real-life Case Study. Wiley

30 A Appendix

A.1 Details of Qantas Group’s Acquisitions and Milestones June 1992 Qantas purchased (domestic carrier)

March 1993 purchased 25 per cent of Qantas

June 1995 Public Share Offer launched

July 1995 Privatisation of Qantas complete and shares listed on the Australian Securities Exchange (ASX)

1998 Qantas increased its equity in Air Pacific to 46 per cent

October 2001 $450m share placement

November 2001 Qantas Group acquired (domestic carrier)

February 2002 Launch of Snap Fresh (catering facility)

September 2002 $720m JUMBO rights issue and share purchase plan

October 2002 Launch of Australian Airlines (international carrier)

December 2003 Star Track Express acquired by a joint venture between Qantas and Australia Post

May 2004 Jetstar commenced operations in Australia

September 2004 British Airways sold its stake (18.25 per cent at the time) in Qantas

December 2004 Jetstar Asia, based in Singapore, commenced services

July 2006 Australian Airlines ceased operations (international carrier)

November 2006 Jetstar International commenced operations

September 2007 Qantas Frequent Flyer business segmented from Qantas Group

May 2008 Completed on market buy-back of 91m shares for $506m

July 2008 Qantas Holidays and Jetset Travelworld merged and formed the Jetset Travelworld Group with Qantas Group as a 58 per cent shareholder. The Jetset Travelworld Group is listed on the ASX

February 2009 $525m capital raising and share purchase plan

31 April 2009 New ownership structure for Jetstar Asia and Valuair announced 49 per cent holding for Qantas Group (Newstar Investment)

June 2009 Jetstar replaced Qantas Jetconnect services in the New Zealand Domestic market

September 2010 Jetset Travelworld Group merged with Stella Travel Services. Qantas Group has a 29 per cent shareholding of Jetset Travelworld Limited

October 2010 Qantas Group investments in Australian air Express and Star Track Express transferred to AUX Investments in exchange for a 50 per cent shareholding in the entity

February 2011 Qantas Group acquired 100 per cent of the Group

August 2011 Qantas Group acquired 100 per cent of Wishlist Holdings

April 2012 Qantas operated Australia’s first commercial flights powered by sustainable aviation fuel

July 2012 Jetstar Japan commenced operations

November 2012 Qantas Group acquired 100 per cent of Australian air Express and sold its 50 per cent stake in Star Track Express

December 2012 Commenced on market buy-back of up to $100m

March 2013 Qantas and partnership commenced

August 2013 Qantas Group announced the sale of its wholly owned subsidiary Qantas Defence Services (QDS) to Northrop Grumman Australia

32 A.2 Financial Statements – Qantas A.2.1 Income Statement

33 A.2.2 Statement of Financial Position

34 A.3 Financial Statements – Virgin Australia A.3.1 Income Statement

35 A.3.2 Statement of Financial Position

36 A.4 Formulas and Calculations A.4.1 Horizontal Analysis Current year amount−Base year amount Change since base period= Base year amount

A.4.2 Vertical Analysis Account amount onanalysis Percentageof baseamount = Baseaccount amount

A.4.3 Net Profit Margin Net Profit Net Profit Margin= Total Revenue

A.4.4 Return on Equity Profit Returnon Equity= Average Equity

37 A.4.5 EBITDAR Margin

EBITDAR EBITDAR Margin= Revenue

38 A.4.6 Current Ratio Current Assets Current Ratio= Current Liabilities

A.4.7 Quick Ratio Current Assets−Inventory Quick Ratio= Current Liabilities

A.4.8 Debt to Equity Total Liabilities Debt ¿Equity= Total Equity

39