Annual Report 2008 Annual
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Q Qantas a n t a s Annual Report 2008 A n n u Annual Report 2008 a l R e p o r t 2 0 0 8 For personal use only QTS3074 04 Fins_FA.indd 153 22/9/08 2:20:41 PM Contents 51 Performance Summary 52 Discussion and Analysis 1 Introduction of Performance Summary 2 Qantas A380 55 Directors‘ Report 4 Financial and Operational Highlights 74 Financial Statements 6 Chairman’s Report and Notes 8 Chief Executive Officer’s Report 145 Shareholder Information 10 Qantas 146 Qantas Group Five Year Summary 18 Jetstar 147 Sustainability Statistics and Policies 24 Portfolio and Service Businesses 152 Financial Calendar 30 Sustainability 42 Board of Directors 46 2008 Corporate Governance Statement For personal use only QTS3074 04 Fins_FA.indd 153 23/9/08 2:24:39 PM Over recent years, the Qantas Group has made a series of far-reaching decisions: • To create two flying brands that deliver unrivalled flexibility • To invest in the world’s most fuel efficient aircraft • To unlock the potential of our portfolio businesses • To find substantial and sustainable cost reductions and efficiencies • To set new benchmarks for premium product and service In 2007/08, these decisions culminated in a record performance. As the future becomes more challenging, these key decisions will ensure Qantas continues to deliver for our shareholders, customers, employees and the people of Australia. For personal use only 1 Qantas Annual Report 2008 QTS3074 01 FrontSect_FA.indd Sec1:1 23/9/08 7:44:31 AM A New Aviation Era Bigger, better, quieter. Introducing the Qantas A380, the most technologically advancedFor personal use only aircraft ever made. 2 Qantas Annual Report 2008 With… Plus… Interiors conceived by Marc Newson, one of Neil Perry inspired menus in First, Business the world’s leading designers, featuring: and Premium Economy cabins State-of-the art First cabin, offering customers Award winning wine selections in First privacy and luxury in their own suite and Business classes Fully-flat new generation Skybed and New designer amenities, from exclusive dedicated lounge area in Business class collections by Collette Dinnigan and Akira Isogawa in First class… to comfort kits A Premium Economy cabin with extra wide in Economy class Recaro seats And… New ergonomically designed Recaro seats and self-service refreshment bars in Economy class An almost silent cabin experience inflight and For personal use only take-off noise reduced by half On demand entertainment system with over 1,000 entertainment options and onboard Cutting-edge fuel efficiency, offering reduced connectivity consumption and emissions per passenger compared with the B747 3 Qantas Annual Report 2008 Financial Highlights Revenue +7.5 per cent to $16.2 billion Profit before tax +45.9 per cent to $1.4 billion Earnings per share +47.6 per cent to 50.2 cents Dividends declared per share +16.7 per cent to 35.0 cents Cash returned to shareholders +175.8 per cent to $1.1 billion Sales and other income ($M) Profit before related income tax expense ($M) $16,191.9 million $1,407.6 million +7.5 per cent +45.9 per cent 08 16,191.9 08 1,407.6 For personal use only 07 15,060.4 07 965.1 06 13,660.6* 06 671.2* 05 12,563.9* 05 914.3* 04 11,353.7* 04 964.6* *As reported prior to the adoption of Interpretation 13 – Customer Loyalty Programmes. 2004 information is as reported under previous GAAP. 4 Qantas Annual Report 2008 QTS3074 01 FrontSect_FA.indd Sec1:4 24/9/08 7:56:50 AM Operational Highlights Passengers carried 38.6 million Flights and destinations 6,720 services per week Network spanning 146 destinations in 38 countries Sustainable Future benefits +$3 billion savings over five years Emission efficiency savings +1.3 million tonnes over two years Dividends declared (cents per share) Passengers carried (000) 08 35.0 08 38,621 07 30.0 07 36,449 06 22.0 06 34,075 05 20.0 05 32,658 For personal use only 04 17.0 04 30,076 5 Qantas Annual Report 2008 Qantas is well placed to chart its way forward in what is the most challenging environment the airline industry has ever faced Leigh Clifford Chairman For personal use only 6 Qantas Annual Report 2008 QTS3074 01 FrontSect_FA.indd Sec1:6 29/9/08 7:37:38 AM In 2007/08, the Qantas Group capitalised on a positive operating Capital Management environment for much of the year to achieve its largest ever profit. Prudent capital management is an essential component of Qantas’ Qantas announced a profit before tax of $1,408 million for the underlying strength. A strong balance sheet gives the Group the year ended 30 June 2008, a 46 per cent increase on the previous flexibility to acquire and manage resources in order to respond year’s result. effectively to changing conditions. This year the Board announced an interim dividend of 18 cents per share and is pleased to announce Highlights a final dividend of 17 cents per share. The Board will continue to Highlights of the 2007/08 year included: strive for the optimal balance between rewarding shareholders and maintaining an investment grade credit rating, taking into account • profit before tax of $1,408 million; the needs of the business. • net profit after tax of $970 million; • revenue of $16.2 billion; CEO Appointment and Board Changes The Board appointed Alan Joyce Chief Executive Officer Designate • earnings per share of 50.2 cents; and and invited him to join the Board with immediate effect on 28 July • operating cash flow of $2.1 billion. 2008. Alan is an outstanding executive with wide experience in all The Directors declared a fully franked final ordinary dividend of facets of the airline industry and the Board considers him the best 17 cents per share, taking the total year’s dividend to 35 cents per person to take Qantas forward in a very challenging environment. share – a Qantas record. Alan has been with the Qantas Group since 2000, has led Jetstar since 2004 and previously worked in senior roles for Ansett and Key Drivers of the Result Aer Lingus. • Strong performances by the flying businesses, with demand Alan’s appointment becomes effective on 28 November 2008, in most domestic and international markets leading to a 1.2 when Geoff Dixon steps down following the Annual General per cent yield improvement and a 0.8 per cent improvement Meeting. in seat factor to 80.7 per cent for the Group. Jetstar’s domestic build-up and international expansion led to a 42 per cent growth On behalf of the Qantas Board, I would like to pay tribute to the of its profit before tax to $116 million. outstanding leadership of Geoff Dixon who, together with his team, • Superior margin management continued to deliver significant has led Qantas successfully through numerous challenges since his capacity growth while containing costs. Despite capacity growth appointment as Chief Executive Officer in 2000 and ensured that of 4.0 per cent and CPI increases of 3.4 per cent, operating today Qantas is recognised as one of the best managed airlines in expenditure only increased by 5.6 per cent and unit costs the world. reduced by 2.3 per cent. Both Paul Anderson and James Packer retired as Directors (in August • Continuing efficiency improvements across the Group under 2007 and April 2008 respectively). Margaret Jackson AC retired in the Sustainable Future Program, with $747 million in benefits November 2007 after 15 years’ distinguished service to the Board, over the year. including seven as Chairman. Peter Gregg will step down as Chief Financial Officer and Director on 30 September 2008. Peter was • Liquidated damages receivable of $291 million, partially offset by integral to this airline’s success over the past decade. Colin Storrie accelerated depreciation and asset write-downs of $165 million. will be our new Chief Financial Officer and will join the Board on Qantas has a highly committed and capable workforce and I thank 30 September 2008. Mike Codd AC will retire from the Board in all employees for their contribution over the year. October 2008, after more than 16 years’ service. Three new Non- Executive Directors were appointed to the Qantas Board in June and The performance of the Qantas flying businesses in the fourth July 2008: Richard Goodmanson, Barbara Ward and Paul Rayner. quarter of 2007/08 was negatively affected by higher fuel costs, These individuals bring wide international business and aviation a softening in demand, intense competition, particularly in experience to the Board. domestic leisure markets and a significant increase in domestic and international market capacity. QF30 A New Aviation Environment On 25 July 2008, QF30 from Hong Kong to Melbourne was diverted to Manila following an incident that caused a hole in the aircraft’s Qantas, like all domestic and global airlines, confronted a fuselage. While this was a dramatic incident, the performance of transformation in its operating environment in the second half of the 2007/08 year. the pilots and cabin crew during that difficult situation was testimony to their professionalism, skills and dedication. Safety remains our Over the course of the year the crude oil price doubled from US$70 top priority. per barrel to US$140 per barrel. Through an effective hedging strategy, Qantas was able to partially mitigate the impact of this Outlook cost impost for the 2007/08 year. With fuel now comprising The likelihood of significantly higher fuel prices in the future presents approximately 35 per cent of total costs, Qantas cannot be immune all airlines with considerable challenges.