qantas airways limited · • benefits from exiting older fleet types (b767s, b734s) — expected...
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Qantas Airways LimitedFleet, Efficiency & Engineering
Gareth Evans, Chief Financial Officer
Seattle, 6 October 2013
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• 5 key principles
— Right aircraft, right route
— Fleet simplification
— Flexibility – delivery, retirement, renewal
— Sustainable fleet investment profile
— Continual reduction in fuel and unit cost
• Maximum fleet plan flexibility
— Firm orders, options, purchase rights
— Orders span family of aircraft types
— Strong relationships with manufacturers and suppliers
Group Fleet StrategyFlexibility, Simplification, Efficiency
• Up to 96 narrow‐body, 13 wide‐body aircraft planned for delivery in next 5 years
• 37 options and 268 purchase rights through to Dec 2025
• 27 narrow‐body, 10 wide‐body and 4 turboprop aircraft potential lease renewals in next 3 years
• Up to 37 aircraft retirements in next 5 yearsFor
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Group Fleet StrategyDeliveries and Retirements
AIRCRAFT DELIVERIES (INDICATIVE TIMING)
Aircraft Type FY14 FY15‐FY16 FY17‐FY25
A380‐800 ‐ ‐ 8
B787‐8 6 5 3
A320 Family1 8 15 80
B737‐800NG 4 5 ‐
B717‐200 5 ‐ ‐
Q400 3 ‐ ‐
Total Deliveries 26 25 91
AIRCRAFT RETIREMENTS & LEASE RETURNS(INDICATIVE TIMING)
Aircraft Type FY14 FY15‐FY16
B747‐400 2 2
B767‐300 7 13
B737‐400 6 ‐
B737‐800 ‐ 0‐6
A320‐200 5‐7 6‐23
A380 v B747 A320neo v A320 (no sharklets)
B787 v B767
~ 10%
~ 15%~ 20%
REDUCTION IN FUEL CONSUMPTION PER ASK2
~ 35%
Q400 v similar sized jet
1. Includes Jetstar Asia, excludes Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong. 2. On a per available seat kilometre basis. Source: Qantas internal assessment and manufacturer guidance.
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COMPETITOR FLEET AGE FY13 (YEARS)2,3
Group Fleet StrategyMaintaining a young, fuel‐efficient fleet
• Young average fleet age of 7.9 years1
• Lowest fleet age since privatisation
• Forecast fleet age to decline further
— 15 retirements of older fleet type in FY14 6xB737‐400, 7xB767‐300, 2xB747‐400
— 26 new aircraft deliveries in FY14
• A320 order supports cost‐effective future fleet growth at Jetstar associates
1. Average fleet age of the Group’s scheduled passenger fleet based on manufacturing date. 2. Source: Airfleet.net. 3. Qantas Group fleet age includes Qantas and Jetstar scheduled passenger fleet.Jetstar fleet age includes Jetstar Australia Domestic and International, Jetstar New Zealand and Jetstar Asia scheduled passenger fleet.
QANTAS GROUP AVERAGE FLEET AGE3
0
2
4
6
8
10
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
JetstarQantas Group
4.96.4
7.5 7.99.1 9.7 10.1
13.414.7
16.8
0
5
10
15
Jetstar
Emira
tes
Singapore Airline
s
Qantas Group
Cathay Pacific
Japan Airline
s
Air N
ew Zealand
British Airw
ays
American
Airlines
Delta
Airlines
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• Flexibility key to long‐term fleet strategy
• Arrangements with manufacturers provide maximum optionality for Qantas to manage orders to demand
• 41 lease expiries1 over next 3 years; ability to replace or extend with existing orders
• Future fleet replacement decisions, ongoing assessment of products
B7382 B737Max, A320/A321neo3
B747 A380, A330, A350XWB, B787, B777XB717 A319neo , B737‐7Max, Bombardier
C‐series, Embraer E‐jet family
Group Fleet StrategyThe next big decisions
B7874 OPTION AND PURCHASE RIGHT TIMING
TIMING OPTIONS PURCHASE RIGHTS5
FY17 5
FY18 6
FY19 7
FY20 2
FY25
Total 20 30
1. Includes Network Aviation aircraft. 2. Eight options still remaining. 3. Currently have 190 options and purchase rights for A320neo or A321neo. 4. Qantas has conversion rights for all B787 familyaircraft. 5. Subject to availability.
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Fleet SimplificationDriving unit cost improvements
2016 ‐ 7 Fleet Types20131 ‐ 9 Fleet Types
A380
B747
A333
B767
B737‐400B737‐800
A320
A330
A332
B737‐800
A320
B787 JETSTAR
A332
Benefits of fleet simplification:
• Operational synergies
• Commonality cost savings
• Lower spares cost
• Network and scheduling benefits
• Customer satisfaction from consistent product offering
A380
B747
A333
QAN
TAS
1. As at 30 June 2013.
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Fleet SimplificationQantas Domestic wide‐body fleet evolution
Operational Synergies and Commonality cost savings: Reduced tech crew, cabin crew, engineering and reserve crew requirements. Catering equipment and other equipment designed for use with B767s no longer required.
Lower spares cost: B767s have 2 engine types specific to fleet, enabling a lower spares inventory requirement.
Right aircraft, right route: With retirement of B767s, consistent fleet type used on domestic routes. Currently B767s fly East‐West and East Coast. Simplification results in dedicated wide‐body fleet flying East‐West (A332s) and narrow‐body fleet (B738s) flying East Coast.
Customer satisfaction with consistent product: Retirement of the B767 fleet, and introduction of new domestic product, will result in all Qantas A330s having consistent product and in‐seat IFE2 offering.
20131
A332
2016
B767 A332
(4 configurations)
(4 configurations) (1 configuration)
1. As at 30 June 2013. 2. In‐Flight Entertainment.
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Fleet SimplificationAssisting Qantas Domestic unit cost improvement
Fleet Simplification & Reconfigurations
Right Aircraft, Right RouteFleet Renewal
Qantas Transformation
ProgramsIncreased Utilisation
A332 v B763 B738 v B734
>10%
>15%
FUEL COST IMPROVEMENT PER ASK1• B763, B734 fleet retirement
• Qantas Transformation initiatives
— Engineering
— Operations
• B717 fleet on right route (Canberra, Hobart)
• Increase narrow‐body utilisation
— Scope for additional off‐peak and leisure services
— Commercial
— Overhead
1. On a per available seat kilometre basis. Source: Qantas internal assessment and manufacturer guidance.
Reduce Qantas Domestic unit cost gap to competitor
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Fleet SimplificationEvolution of fleet configurations
B747
A330
2008
6 Configurations 2 Configurations
7 Configurations
2013 Future State
3 Configurations 1 Configuration
• Retirement of aircraft with legacy product older than 20 years
• Continued operation of refreshed 9xB747s
• Superior A380 product on 9xB747s:• Latest IFE• Refreshed seats in all cabins• Fully lie‐flat Business class skybeds
2013 2016
• All Jetstar A330s transferred to Qantas Domestic by mid‐2015• Reconfiguration of Qantas Domestic and Qantas International aircraft:
• Fully flat business class seat A330‐300/200• New economy seats for international A330‐300• Refreshed economy seats for domestic A330‐200• New IFE with Q‐Streaming technology
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Fleet EconomicsImproved utilisation
• Improving asset utilisation to drive unit cost benefits
— Reconfiguration programs: driving fuel savings on a per‐seat basis and capacity increases without heavy capital investment
— B738 engine refresh program: 19 aircraft to be refreshed by Aug 2014, driving approximately 1.5% fuel burn saving1
— Jetstar sharklet program: 7xA320s with sharklets delivering 3‐4% fuel burn saving2
• FY14 Group utilisation forecast at ~9.9 hours (FY13 ~9.4 hours)3
— Natural ground time initiatives
— Increasing utilisation both internationally and domestically
Aircraft type Configuration changes FY11‐Current (seats)
Seat change
B7444 307 / 353 364 19%
A380 450 484 8%
B717 (single class) 115 / 117 125 9%
A320 177 180 2%
1. Engine replacement program. Fuel burn efficiency based on Qantas internal assessment. 2. Source: Airbus guidelines. 3. Utilisation refers to Qantas jet operations. 4. Nine aircraft reconfigured asat 30 June 2013.
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World class product offering on main fleet types:
• B747 reconfiguration completed Oct 2012 (9 aircraft)
• B738 to fully replace B734 by Feb 2014
— In‐seat IFE on all B738s delivered from Aug 2009
• A330 reconfiguration commencing end 2014, completed by end 2016 (30 aircraft)
— Latest IFE, new business suites with fully lie‐flat beds, refreshed/new economy seats
• B767 cabin refresh completed May 2013 (15 aircraft)
— Q‐streaming iPad technology (fully transferable to other aircraft), refreshed seats and interiors
• B717 two‐class introduction in FY14
— First two‐class offering on regional network, latest IFE
Fleet Economics Reconfiguration programs
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Fleet EconomicsQantas International
Finding more flying time from existing long‐haul fleet
• Natural ground time
— Line maintenance conducted in Los Angeles when A380 otherwise idle
— 1 extra day of flying available; 15% utilisation increase
— Exploring further opportunities within network
• Improved utilisation
— Perth‐Auckland A330 seasonal flying, aircraft otherwise idle in Perth on weekends
— Rescheduling of JetConnect Tasman flying to release equivalent of ~1 aircraft for domestic flying
• Additional capacity options
— Utilise improved A380 heavy maintenance schedule to up‐gauge B747 flying with A380 or add frequencies on core routes (e.g. Brisbane‐Los Angeles)
— Seasonal supplementary flying (e.g. from 3 to 4 weekly Sydney‐Santiago)
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• Younger fleet requires less maintenance spend per ASK:
— Improved technology results in reduced maintenance requirements (maintenance on demand)
— New aircraft require less frequent heavy maintenance checks than older aircraft
• Engineering cost savings
— Lower inventory levels per aircraft
— Less spare engines per aircraft
— Less total support staff per aircraft
• Benefits from exiting older fleet types (B767s, B734s)
— Expected wide‐body engineering cost base reduction ~$100 million FY16 vs FY121
— Further cost savings through engineering, spares, flight operations, crew
• B747 fleet now in maintenance ‘honeymoon’ FY13‐FY16
— Period of heavy maintenance investment FY08‐FY12
— 25‐30% reduction in forecast B747 engineering costs compared to FY12
Fleet Simplification & EngineeringDriving efficiency gains
1. Annual benefit from removal of B767 engineering program only.
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Qantas Engineering1Removing maintenance complexity
QF Fleet Seating Configurations 2008 2011 2013 Future State
A380 ‐ 1 1 1
B747 7 5 3 1
A330 4 4 4 2
B767 4 4 4 Exit
B737 2 2 2 1
Fleet 17 Configs 16 Configs 14 Configs 5 Configs
QF Fleet Engine Types 2008 2011 2013 Future State
A380 ‐ T900 T900 T900
B747 RB211‐GTCF6‐80C2(B5F)
RB211‐GTCF6‐80C2(B5F)
RB211‐GTCF6‐80C2(B5F)
RB211‐GTCF6‐80C2(B5F)
A330 CF6‐80E1 CF6‐80E1 CF6‐80E1 CF6‐80E1
B767 RB211‐HTCF6‐80C2(B6)
RB211‐HTCF6‐80C2(B6)
RB211‐HTCF6‐80C2(B6) Exit
B737 CFM‐56‐7CFM‐56‐3
CFM‐56‐7CFM‐56‐3
CFM‐56‐7CFM‐56‐3 CFM‐56‐7
Fleet 7 Engine Types 8 Engine Types 8 Engine Types 5 Engine Types
1. Excludes Jetstar.
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Qantas Engineering Transforming legacy cost base
• Heavy maintenance consolidation
• Maintenance on demand
• Reduction in engineering facility expenses
— Older fleet retirement and network changes (e.g. exit of loss‐making routes)
• Consolidation of engineering support services from Melbourne into Sydney
• New Maintenix IT system improving maintenance efficiency
QANTAS ENGINEERING C/ASK PEER COMPARISON: MAINTENANCE SPEND C/ASK1
1. Calculated in AUD. Source: US DOT Form 41; Company Annual Reports.
FY13FY12FY11FY10
‐18.9%
American
Lufthansa
JAL
FY13
A
FY12
A
Air N
Z
Cathay P.
United
US Airw
ays
Iberia
Malaysia
A.
‐29%
LCC Av
g
Singapore A.
AF‐KLM
Delta
Continen
tal
FY11
AAverage
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Disclaimer & ASIC Guidance
This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas).
Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 6 October 2013. The information in this Presentation does not purport to be complete. It should be read in conjunction with Qantas Group’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au.
Not financial product advice This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Qantas shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction. Qantas is not licensed to provide financial product advice in respect of Qantas shares. Cooling off rights do not apply to the acquisition of Qantas shares.
Financial data All dollar values are in Australian dollars (A$) and financial data is presented within the financial year ended 30 June 2013 unless otherwise stated.
Future performanceForward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance.
An investment in Qantas shares is subject to investment and other known and unknown risks, some of which are beyond the control of Qantas Group, including possible delays in repayment and loss of income and principal invested. Qantas does not guarantee any particular rate of return or the performance of Qantas Group nor does it guarantee the repayment of capital from Qantas or any particular tax treatment. Persons should have regard to the risks outlined in this Presentation.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this Presentation. To the maximum extent permitted by law, none of Qantas, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this Presentation. In particular, no representation or warranty, express or implied is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in this Presentation nor is any obligation assumed to update such information. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies. Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances.
Past performance Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Not an offer This Presentation is not, and should not be considered, an offer or an invitation to acquire Qantas shares or any other financial products.
ASIC GUIDANCEIn December 2011 ASIC issued Regulatory Guide 230. To comply with this Guide, Qantas is required to make a clear statement about whether information disclosed in documents other than the financial report has been audited or reviewed in accordance with Australian Auditing Standards. In line with previous presentation, this presentation is unaudited. Notwithstanding this, the presentation contains disclosures which are extracted or derived from the Consolidated Financial Report for the year ended 30 June 2013 which is audited by the Group’s Independent Auditor.
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Jetstar GroupJetstar in Asia
Jayne Hrdlicka, Jetstar CEO
Seattle, 6 October 2013
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OPPORTUNITIESFOR GROWTH
INVESTMENT IN INNOVATION
LOW FARES SEGMENT LEADER
Jetstar Group Model‘Virtuous circle’ drives growth and innovation for strong, independent airlines
Maximised profitability
Cost disciplineplus scale
Customer advocacy
Market‐leading ancillary revenue
Strong, engaged team
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What is good for the customer is good for Jetstar Group airlines‘’Low fares are just part of the story’’
Price leadership
Increased revenue and margin
Standardised, replicable model
Scale across attractive markets
Low fares
Best products and services
Consistent experience
More places to fly, more often
CUSTOMER PROMISE JETSTAR ECONOMICS
CUSTOMER ADVOCACY INCREASED PROFITABILITY
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Growth
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New Travellers
More people live inside the orange region than outside2
Population Growth
RisingIncomes
‘Once‐in‐a‐century’ LCC Opportunity
The Asian CenturyJetstar Group Airlines1 positioned for success across the region
2008‐2012 ASK3 Growth:• 7% in Asia vs 3% in Rest of World• 28% for Asia low‐cost carriers vs 9% for Rest of World LCCs4
1. Jetstar Group Airlines are Jetstar (Australia & New Zealand), Jetstar International (Australia), Jetstar Asia (Singapore), Jetstar Japan, Jetstar Pacific (Vietnam), and Jetstar Hong Kong. Jetstar Hongoperations subject to regulatory approval. 2. Source: World Population Prospects, the 2012 Revision. United Nations Department of Economic and Social Affairs, Population Division, PopulationEstimates and Projections Section. 3. Available Seat Kilometres. 4. Low Cost Carriers. Source: Centre for Aviation (CAPA) data. Asia includes seat capacity to/from and within Central Asia, North East Asia,South East Asia and South Asia
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Jetstar Group in AsiaStimulating underlying market growth to achieve 32% passenger growth
1. Source: CAPA analysis dated 8 August 2013. 2. Includes Jetstar International services into Asia, Jetstar Asia, Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong (subject to regulatory approval.3. Jetstar Group Asian revenue CAGR FY09‐FY13 includes Jetstar International services into Asia, Jetstar Asia, Jetstar Pacific and Jetstar Japan. 4. As at 30 June 2013. 5. Jetstar Trans Tasman servicescommenced in 2005, Jetstar NZ (Domestic) services commenced in 2009. 6. Subject to regulatory approval. Previously 50% ownership. 7. Jetstar Pacific rebranded in 2008.
Jetstar Group Airlines have ‘grown the pie’ by stimulating local demand for LCC travel
• Japanese LCCs added 2.6 million domestic passengers to the market (>50% of market growth for 12 months to March 13)1
Jetstar Group Airlines’ 32% passenger2, 19%3 revenue growth in Asia
• Since FY09, 10 million customers have flown Jetstar from Australia to Asia
• Since FY09, 23 million customers have flown Jetstar Group Airlines within Asia
• More than 90% of Jetstar Group Airlines’ customers within Asia are point‐to‐point
JETSTAR GROUP AIRLINES – PAX GROWTH IN ASIA2
FY09 FY10
+32%
FY14FFY13FY12FY11
BUSINESS OWNERSHIP LAUNCH BASED AIRCRAFT4
Jetstar Australia 100% 2004 50xA320s/A321s
Jetstar International 100% 2006 10xA330s
Jetstar NZ5 100% 2009 9xA320s
Jetstar Asia (Singapore) 49% 2004 17xA320s
Jetstar Japan 33% 2012 13xA320s
Jetstar Hong Kong6 33% – –
Jetstar Pacific (Vietnam)7 30% 2008 5xA320s
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9.4 million members
Jetstar Group’s Asian Footprint: 125 aircraft1Established and start‐up airlines in key growth markets
Route Map as at 30 June 2013
JETSTAR GROUP – GROWING NETWORK OF ROUTESJETSTAR GROUP AIRLINES
JETSTAR AUSTRALIA JETSTAR
NZ
JETSTAR INTERNATIONAL
JETSTAR ASIA
(SINGAPORE)
JETSTAR JAPAN
JETSTAR HONG KONG2
JETSTAR PACIFIC
(VIETNAM)
FY09
96
FY08
82
FY07
67
FY06
59
FY05
39
FY04
31
+18%
FY14F2
157
FY13
129
FY12
115
FY11
109
FY10
98
Asia Routes
Non Asia Routes
1. Fleet based on FY14 forecast. 2. Subject to network optimisation and route planning changes. Jetstar Hong Kong subject to regulatory approval.
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81. Jetstar Group FY13 passengers carried in Asia includes Jetstar International services into Asia, Jetstar Asia, Jetstar Pacific and Jetstar Japan.
Successful model in AsiaThe best of strong, independent, local airlines plus Jetstar Group scale & experience
Local, independent
airlines
• Control by local management team, flying majority local passengers (2,000+ local employees serving 9.5 million1 passengers)
• The right strategic, local shareholders for each market• Commercial and operational decisions driven by local CEO and board• Model geared to local culture norms, consumer needs, and regulators
Group scale
• Robust, replicable model to deliver both customer service and low cost• Combination of Jetstar model and local partners’/shareholders’ scale• Multi‐lingual, multi‐airline sales and distribution platforms• Pan‐Asia Pacific network connectivity across >130 routes
Wisdom of experience
• Nearly ten years of experience delivering safe operations ‐ built on 90+ years of Qantas safety practices
• Dual‐brand ‘know‐how’ embedded in the Jetstar LCC model• Regular experience sharing between Group airlines• Award‐winning customer experience
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InnovationFor
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UNIQUEmarketing assets, including 5 million MyJetstar subscribers, Friday Fare Frenzy and a pan‐Asia‐Pacific brand
PIONEERING booking interface with ‘low‐fare finder’/Price‐Beat Guarantee
PIONEERING LCC‐Airport models (e.g. Gold Coast)
Opened new markets as the FIRST LCC to fly long‐haul in 2006
FIRST LCC to open‐up new markets on more than 80 routes
Jetstar Group innovation in the LCC marketFirst profitable LCC to come from a full service carrier
FIRST LCC to offer interline and codeshare flights
SMART Revenue Management and data analytics
FIRST LCC in Asia Pacific to fly B787 (Nov‐13)
FIRST LCC in Asia‐Pacific to unbundle check‐in bags
FIRST LCC in Asia‐Pacific to have SMS boarding pass
FIRST LCC in Asia‐Pacific to introduce customer self‐service for changes/disruptions
FIRST airline to put iPads with the latest content on‐board
FIRST LCC to win wine awards for business‐class cabin
FIRST LCC group to have a Pan‐Asia catering product
FIRST LCC to launch avatar chat, ‘Ask Jess’ (Nov‐13)
FIRST LCC in Asia‐Pac to launch targeted, pro‐active webchat
LEADING social media presence (over 700,000 Facebook likes)FIRST airline in
Singapore to fly Sharklet‐equipped A320
INNOVATIVEpay options (bank direct, ATMs, 7‐11s)
INSPIRATION BOOKING DEPARTURE IN‐FLIGHT POST‐TRIP
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CUSTOMER ADVOCACY
more flexibility, more choice, more responsive
INNOVATION DELIVERS . . .
REVENUE
Over 9% year‐on‐year ancillary revenue growth1
COST
B787 cost efficiencies
Unlocking potential through innovation
1. FY05‐FY13 ancillary revenue growth.
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Product innovation delivering higher customer advocacyFinding better ways to provide a seamless customer experience
More choiceMore flexibility More responsiveCustomer Help Avatar1Web check‐in Bundles
Higher customer advocacy… with more ancillary revenue and lower costs
1. To be launched November 2013.
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Baggage
Domestic freight
Catering
Product Innovation delivering higher revenuesMarket‐tailored product innovation drives ancillary revenue growth
+9.4%
FY12
$30.6
FY10 FY13FY11
$24.1$31.6
$22.3
FY09
$20.8
FY08
$19.0
FY07
$17.8
FY06
$15.8
FY05
$15.5
Lawson partnership(Japan)
Club Jetstar(AUS / NZ)
JCB Card Facility (Vietnam)
YEAR‐ON‐YEAR INNOVATION ACROSS ALL MARKETS
JETSTAR GROUP – ANCILLARY REVENUE (AUD/PAX)
Extra leg‐room
Comfort packs
Hotels
Short‐haulfreight
In‐flight entertainment
(IFE)
Prepaid extra baggage
Jetstar MasterCard® (Australia)
Seating improvements
Hotels and car rentals (Singapore)
Upgrades
Activities
Upfront seats
Jetstar travel card
Travel SIM card
Route pricing
Bundles
Priority boarding
iPadsLong‐haulfreight
Insurance & car rentals
Distributionrecovery
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Product Innovation driving lower unit costB787 delivering value to customers and airline
1. Source: Internal unit cost estimates.
• B787 to widen Jetstar International profit margin vs LCC competitors
– Lower unit costs for the airline
– Keep fares low
– Enhanced product for the customer
– Seat‐back IFE to deliver ancillary revenue from every passenger seat
• Delayed B787 delivery has allowed for
– Learning through others’ experience
– Tailored product to our customer base, including Asian IFE content/catering
B787 UNIT COST IMPROVEMENT1
Jetstar B788
>10%
Jetstar A332
Key drivers of improvement• Fuel efficiency• Reduced engineering
costs
B787 IFE PROPOSITION
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Results
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Success story in Asia Case Study: Building brand presence in Japan ahead of launch of independent airline
1. Source: CM Databank, ‘Top 100 Breakthrough Brands’.
Brand Positioning• Jetstar International first LCC to fly to Japan in 2007 • By the time of Jetstar Japan launch in July 2012:
– Jetstar Group flew into Japan from Manila, Taipei, Gold Coast and Cairns
– >2m passengers already carried to/from Australia
– Jetstar recognised as a top 100 brand in Japan1
Scale Benefits• Accessing same ports, infrastructure and suppliersUnderstanding of Local Market• Existing knowledge of operating in Japan (local staff,
local distribution, Japanese customers)Feed Traffic• Connectivity between long‐haul and short‐haul
networks gives customers more destinations to fly
JETSTAR GROUP – ROUTE MAP
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87%
PhilippinesMalaysia
57%
Within Europe
36%
Australia
23%
Japan
5%
South Korea
31%
Jetstar Japan Growth potential in Japan is significant
Significant potential for LCC growth in Japan
• Domestic LCC penetration only 5% of total market2 with potential to be >30%
• Japan’s population 6 x size of Australia’s
Jetstar Japan well placed to lead the market
• Early mover advantages
– Existing brand strength
– First LCC in Narita
– Largest domestic network
• Growth plan in place to maintain leading LCC position in domestic and international markets into FY16
1. Source: CAPA, Jan‐Sep 2013 market penetration by seats. 2. CAPA Report Domestic LCC market share (% seats) Jan‐May 2013, dated 14 June 2013.
DOMESTIC LCC MARKET PENETRATION, YTD 2013 1
Jetstar Japan celebrates 2 million passengers on 13 August 2013
Jetstar Japan and Lawsons partner in accessing 10,000 convenience store
locations throughout Japan
ジェットスター・ジャパン
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Jetstar Japan Already the largest LCC in Japan
1. Based on fleet at 30 June 2013 and Domestic plus International seats compared to Peach Aviation and AirAsia Japan. 2. As at September 2013. 3. By seats, CAPA analysis dated 8 August 2013. 4.Source: Based on Jul‐Sep 2013 seat capacity per Diio Mi extract at September 2013. Japan market includes domestic and international seats, Jetstar Group in Japan includes Jetstar Japan, Jetstar Asiaand Jetstar International. 5. Source: Jul‐Sep 2013 seat capacity per Diio Mi extract at September 2013. 6. AirAsia Japan market exit by end of October 2013 to be replaced by Vanilla in December 2013.
JETSTAR JAPAN FLEET GROWTH
Sep‐13
15
Aug‐13
Jul‐1
3
Jun‐13
May‐13
Apr‐13
Mar‐13
Feb‐13
Jan‐13
Dec‐12
Nov‐12
Oct‐12
Sep‐12
Aug‐12
Jul‐1
2
3
From launch in July 201215 aircraft in 15 months
JUL‐SEP FY14 TOTAL SEATS5
Peach
AirAsia
Japan
Jetstar
Group
4
+55%
1.4
0.50.9
6
Seats (m)
ジェットスター・ジャパン
• Jetstar Japan is the largest LCC1 in Japan with 9 destinations, 13 routes2
• Japan is the third largest domestic aviation market in world3
• Jetstar Group4 combined is the 8thlargest carrier in Japan
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Dec‐12Nov‐12Oct‐12Sep‐12Aug‐12Jul‐12Jun‐12May‐12Apr‐12 Jan‐13
Jetstar JapanStimulating market demand to unlock and capture value
• Japan domestic passenger growth 8.7%, first increase in 6 years1
• Innovation in LCC distribution channels
– First airline in Japan to sell fares at multi‐media kiosks
– Lawson partnership (10,000 stores)
– Multiple travel agency partnerships
• Japan Airways (JAL) codeshare and access to JAL and Qantas Frequent Flyer Programs
• Increased passenger numbers and amenities at ports served by Jetstar Japan
– Passenger growth – Narita 33%2, Osaka 18%3, Sapporo 24%4
– New Narita amenities include low‐cost shuttle services, accommodation deals
1. Based on domestic passenger growth in 12 months to 31 March 2013. Source: CAPA analysis dated 8 August 2013. 2. 12 months to August 2013, Source: Kotsu Mainichi Shimbun, 21 September 2013.3. 12 months to August 2013, Source: Asahi Shimbun, 21 September 2013. 4. 12 months to August 2013, Source: Hokkaido Shimbun, 21 September 2013. 5. Source: Chin Chitose airport data.6. Source: Narita international airport data.
STIMULATING DEMAND5
JALSkymarkANAJetstar JapanAirAsia Japan
TOKYO – SAPPORO PASSENGERS
Newly generated demand
STIMULATING DEMAND6
Jul‐1
3
May‐13
Jun‐13
Apr‐13
Mar‐13
Feb‐13
Oct‐12
Aug‐12
Jan‐13
Dec‐12
Nov
‐12
Sep‐12
Jul‐1
2
Jun‐12
May‐12
Aug‐13
Apr‐12
Mar‐12
Feb‐12
Jan‐12
Other Domestic PaxJetstar Japan Domestic Pax
NARITA AIRPORT DOMESTIC PASSENGERS
ジェットスター・ジャパン
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Jetstar JapanStrong operational performance despite Year One challenges
1. June‐August 2013.
Jetstar Japan shows all the hallmarks of a highly successful LCC:• On‐time performance >90%1, cancellations
rates <1%1, strong customer advocacy and ancillary revenue growth
Year One performance impacted by: • Rapid fleet and network expansion to capture
#1 LCC market position• Significant investment to develop core
Japanese market ahead of other LCCs• Narita‐based LCC competition (AirAsia Japan
to exit Narita in October 2013)• Domestic‐only operations and Narita curfews
impacting aircraft utilisation • Embedding LCC operating model into local
environment
JETSTAR JAPAN – REVENUE GROWTH
1Q20141Q2013
216%
JETSTAR JAPAN – CUSTOMER ADVOCACY
NET PROMOTER SCORE
0
Feb‐13
Jan‐13
Dec‐12
Nov‐12
Mar‐13
Apr‐13
May‐13
Jun‐13
Aug‐12
Oct‐12
Sep‐12
Jul‐1
3
Jul‐1
2
ジェットスター・ジャパン
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Jetstar AsiaGateway to South East Asia: Core platform to access growing demand
1. Source: Diio Mi Singapore capacity by seats July 2004 to June 2013. 2. Includes Jetstar Asia and Valuair.
Singapore core to Jetstar Group’s potential in Asia• Strategically important ‘gateway’ market
• Forefront of LCC innovation in Asia
Eight years of growth• Capacity growth of 22% (FY05‐FY13) in intensely
competitive regional market
• Focus on improving returns from current base, leveraging partnerships, growth opportunities
Regional partnerships key to future success
• 19 intra‐South East Asia interline agreements including Qantas, Emirates, Air France, British Airways, China Southern, Lufthansa, Turkish Airlines
JETSTAR ASIA SEAT GROWTH2
FY12 FY13FY06FY05 FY07 FY08
+22.3%
FY10 FY11FY09
SINGAPORE LCC MARKET GROWTH1
Singapore LCC market has grown from 7% in FY05 to 35% of the total market in FY13
FY13FY12FY11FY10FY09FY08FY07FY06FY05
FSCLCC
捷星亞洲航空公司
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Jetstar Pacific
Significant growth opportunity in Vietnam
• Average GDP growth rate 6% (2008‐2012)1
• Lowest LCC penetration among major South East Asian countries at only 25% domestic and 14% international2
Jetstar Pacific positioned to take advantage
• Local management team with market insights
• Transitioned to all A320 fleet delivering significant unit cost improvements vs older B737 aircraft3
– 5 aircraft with planned growth
• Currently servicing 7 domestic destinations
– ~2 million passengers flown in FY13
• Strong yield improvement continuing
Challenges remain as local LCC market develops
1. Source: International Monetary Fund. 2. CAPA Report dated 22 February 2013. 3. Fleet renewal complete on 18 January 2013. 4. Financial years ended 30 June 2012 and 30 June 2013 (excludes freight).
ANCILLARY ĐỒNG/PAX4
FY12 FY13
+30%
JETSTAR PACIFIC – ROUTE MAP
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Don’t know: 1% Don’t know: 1% Don’t know: 1%
1. Subject to regulatory approval. 2. Penetration rate of available seat capacity, CAPA report dated 23 March 2013. 3. Research by HK People’s Opinion Platform (July 2013) n=1,035.
Jetstar Hong Kong1
• Untapped potential in Hong Kong market
– Current LCC penetration is 5% with the potential to triple to 15% in 20152
– Nearly 70% of Hong Kong people surveyed said they intended to fly LCC in the next 12 months3
• Local CEO, Chairman, and management team
• Shun Tak joined China Eastern Airlines and Qantas as equal shareholder in June 2013
• Jetstar Hong Kong management working with Hong Kong government on regulatory approvals
– Application to Air Transport Licencing Authority gazetted, now in public consultation process
• Jetstar Hong Kong management leveraging Group learnings from Jetstar Japan to ensure early success
STRONG DEMAND FOR LCCs IN HONG KONG3
捷星
Would fly more if fares were lower
Would spend the saved money on other travel expenditure if airfares were cheaper
HK should have more home based
LCCs
Agree79%
Agree81%
Agree84%
Neither agree/ disagree: 13%
Neither agree/ disagree: 14%
Neither agree/ disagree: 10%
Disagree: 7% Disagree: 4% Disagree: 4%
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Valuing the Potential
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Valuation of Asia‐Pacific and Global LCCsJetstar Group has the right platform to capture growth and deliver value
1 Based on available seat kilometres. 2. Source: Bloomberg. 3. Source: Bloomberg, Market Capitalisation and Forward Price to Earnings extracted and converted to AUD 2 October 2013. 4. Fleet basedon FY14 forecast. 5. Jet aircraft only (excluding regional aircraft); fleet as at 25 September 2013. TAH, RYA, AAX ‐ listed on website, EZY‐ IR pack dated 10 September 2013, AIRA, airfleets.net: TAA, PAA,AA IAA 4.
Jetstar Group’s Asia Pacific Growth Global LCC Comparison
JETSTAR: MARKET‐LEADING POSTION1
► #1 LCC Australia, New Zealand, Trans‐Tasman► #1 LCC Australia to Asia ► #1 LCC in Japan► #2 LCC in Singapore► #2 LCC in Vietnam► First LCC in Hong Kong (subject to regulatory approval)
AirAsia XTiger Group
AirAsia bhd
RyanairEasyJet
MARKET CAPITALISATION (AUD M)2
48 13 129 212 303Fleet 4
JETSTAR GROUP AIRLINES
FY13FY12
10488
+18.2%
FY12 FY13
21 24
+16.0%
FLEET PASSENGER (M)
Jetstar Group growing to 125 aircraft by end of FY145
16.0 10.3 8.3 12.6 12.8P/E3
Asia‐Pacific LCC peers
13,121
9,0242,395
868470
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Valuation of Asia‐Pacific and Global LCCs It takes time to unlock full potential
Thailand
20
0
‐20
‐40
60
40
YR6YR5YR4YR3YR2YR1
SGD M
Singapore
‐1,500
2,000
1,500
1,000
500
0
‐500
‐1,000
~3‐4 YEARS START UP TRAJECTORY IN NEW LCC MARKETSBEFORE REACHING PROFIT STABILITY1
THB M
1. Tiger Singapore financials based on 2007‐2013 Annual Company Returns , AirAsia Thailand financials based on Quarterly Financial reports 2005‐2010 .
• Other Asia‐Pacific LCCs have taken 3‐4 years to break‐even
• Rapid ramp‐up is needed to achieve scale in each market
• Jetstar Group has a capital‐light model with risk/reward shared between strategic investors
• Local shareholder support is strong and built on a shared ambition for the profitability of each airline
Launch date
AirAsia did not produce segment reporting in
this period
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Jetstar Group ModelStrong, independent airlines provide growth and innovation opportunities
OPPORTUNITIESFOR GROWTH
Jetstar (Australia)
…potential future growth markets
Jetstar International(Australia)
Jetstar Asia(Singapore)
Jetstar (New Zealand)
Jetstar Pacific(Vietnam)
Jetstar Japan
JetstarHong Kong1
…ongoing innovation serving growing
passenger numbers
1. Subject to regulatory approval.
INVESTMENT IN INNOVATION
Boeing 787introduction
All markets/cultures driving innovation
iPads and IFE
Self‐service
Online and mobile distribution
Interline/codeshare connectivity
Distribution partners
A320 SharkletsLOW FARES SEGMENT LEADER
Maximised profitability
Cost disciplineplus scale
Customer advocacy
Market‐leading ancillary revenue
Strong, engaged team
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Disclaimer & ASIC Guidance
This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas).
Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 6 October 2013. The information in this Presentation does not purport to be complete. It should be read in conjunction with Qantas Group’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au.
Not financial product advice This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Qantas shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction. Qantas is not licensed to provide financial product advice in respect of Qantas shares. Cooling off rights do not apply to the acquisition of Qantas shares.
Financial data All dollar values are in Australian dollars (A$) and financial data is presented within the financial year ended 30 June 2013 unless otherwise stated.
Future performanceForward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance.
An investment in Qantas shares is subject to investment and other known and unknown risks, some of which are beyond the control of Qantas Group, including possible delays in repayment and loss of income and principal invested. Qantas does not guarantee any particular rate of return or the performance of Qantas Group nor does it guarantee the repayment of capital from Qantas or any particular tax treatment. Persons should have regard to the risks outlined in this Presentation.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this Presentation. To the maximum extent permitted by law, none of Qantas, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this Presentation. In particular, no representation or warranty, express or implied is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in this Presentation nor is any obligation assumed to update such information. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies. Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances.
Past performance Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Not an offer This Presentation is not, and should not be considered, an offer or an invitation to acquire Qantas shares or any other financial products.
ASIC GUIDANCEIn December 2011 ASIC issued Regulatory Guide 230. To comply with this Guide, Qantas is required to make a clear statement about whether information disclosed in documents other than the financial report has been audited or reviewed in accordance with Australian Auditing Standards. In line with previous presentations, this presentation is unaudited. Notwithstanding this, the presentation contains disclosures which are extracted or derived from the Consolidated Financial Report for the year ended 30 June 2013 which is audited by the Group’s Independent Auditor.
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