Qantas 2008 Annual Report Download

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Annual Report 2008Annual Report 2008
Annual Report 2008
QantasQantas
For personal use only

Table of contents

  • Page 1
    For personal use only Annual Report 2008

  • Page 2
    For personal use only Contents Introduction Qantas A380 Financial and Operational Highlights Chairman's Report Chief Executive Officer's Report Qantas Jetstar Portfolio and Service Businesses Sustainability Board of Directors 2008 Corporate Governance Statement 1 2 4 6 8 10 18 24 30 42 46 51 ...

  • Page 3
    ... 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...

  • Page 4
    For personal use only 2 A New Aviation Era Bigger, better, quieter. Introducing the Qantas A380, the most technologically advanced aircraft ever made. Qantas Annual Report 2008

  • Page 5
    ...Dinnigan and Akira Isogawa in First class...to comfort kits in Economy class And...An almost silent cabin experience inflight and take-off noise reduced by half Cutting-edge fuel efficiency, offering reduced consumption and emissions per passenger compared with the B747 3 Qantas Annual Report 2008

  • Page 6
    ....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 +7.5 per...

  • Page 7
    ... 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) 08...

  • Page 8
    For personal use only 6 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 Qantas Annual Report 2008

  • Page 9
    ... sustainable business practices (including for the first time, a stand-alone report on our performance as a sustainable business, available online at qantas.com), two-brand strategy, a portfolio of globally competitive and efficient businesses, and more fuel efficient fleet coming on stream, Qantas...

  • Page 10
    ... out of our cost base. • Again in 2003, we commenced a major program to invest over $2 billion in Qantas international and domestic product and services - an investment that has consistently placed Qantas in the world's top five premium airlines. • We initiated a two-brand strategy with the...

  • Page 11
    For personal use only Qantas people have risen magnificently to the challenges put before them so far and their contribution has been integral to the Group's success. Geoff Dixon Chief Executive Officer 9 Qantas Annual Report 2008

  • Page 12
    ...-reaching network spanning Australia and the globe. Within Australia, Qantas and QantasLink operate more than 4,000 flights to 51 destinations each week. Internationally, Qantas offers 750 services to Asia, the Pacific, North and South America, Europe and South Africa. 10 Qantas Annual Report 2008

  • Page 13
    ...at key domestic airports Pioneering new technology with the introduction of SMS and email capabilities on domestic ï¬,ights The first non-stop service between Australia and South America Raising the bar on service levels with a new Customer Service Centre of Excellence 11 Qantas Annual Report 2008

  • Page 14
    ... Premium Economy cabin. Qantas expanded its reach to a new continent with the announcement of its first non-stop service to Buenos Aires from November 2008. Qantas added capacity on growth routes, including the USA, China and Hong Kong in 2007/08, and announced plans for increased capacity to South...

  • Page 15
    ... crew, additional hand baggage allowance, priority boarding and disembarkation and self-service bar. Customer satisfaction with Premium Economy is already very high at over 85 per cent. • The new Qantas First Lounge in Sydney received a prestigious Australian International Design Award in May 2008...

  • Page 16
    ... the Tom Bradley International Terminal in Los Angeles in November 2007. Domestic Qantas remains the airline of choice for Australian business travellers with its strong brand positioning, extensive network, schedule frequency and full service product offering. Qantas recorded a strong performance...

  • Page 17
    ... in Sydney, Canberra, Brisbane, Melbourne and Perth. Product Developments • Qantas opened dedicated Business class lounges at the Sydney, Melbourne and Brisbane terminals in July 2008. The lounges offer services unmatched in the domestic market, with spacious layouts, private seating arrangements...

  • Page 18
    ... services from Adelaide to Olympic Dam. Capacity on the Brisbane-Mackay route was increased from June 2008, with QantasLink forming a partnership with Alliance Airlines to operate 13 weekly return services using Alliance Airlines 100-seat Fokker 100 aircraft. • In response to high fuel prices...

  • Page 19
    ... Flyer Program, the Any Seat Awards redemption engine was launched, allowing Frequent Flyers to book any seat on a Qantas or Jetstar flight with either points or a combination of Points Plus Pay. qantas.com was awarded Best Website Customer Experience 2008 in the Airlines and Travel Agents category...

  • Page 20
    ..., entering new markets in South East Asia and unveiling a new relationship with the Vietnam-based carrier Jetstar Pacific. Jetstar carried 9.2 million passengers in 2007/08, up 20 per cent on the previous year, with total operating capacity increasing by 44 per cent. 18 Qantas Annual Report 2008

  • Page 21
    ... Seat Kilometre and aircraft utilisation at an industry high Entering new markets - with new services to Tokyo from Cairns and the Gold Coast and to Bali and Jakarta from Perth Investing in the success of the Jetstar brands, with significant investment in new aircraft 19 Qantas Annual Report 2008

  • Page 22
    ... travelling without checked baggage. Jetstar is now a pan-Asian brand, with new operations evolving in high growth Asian markets. Jetstar established a hub in Darwin in September 2008 to provide better access to Jetstar's growing networks in Singapore and Vietnam. Jetstar will base three aircraft...

  • Page 23
    ... Qantas Group plans to increase its ownership in Jetstar Pacific to 30 per cent by 2010 and the carrier is supported by a management team that includes Jetstar and Qantas executives. Product Developments • The introduction and strong customer take-up of JetSaver Light in February 2008, a new fare...

  • Page 24
    ... QantasLink's Dash 8-100 fleet by the end of 2008. In November 2007, Qantas unveiled its short-haul fleet plan for the next decade by announcing the acquisition of up to 188 narrowbody aircraft to support the further growth of its two brands, Qantas and Jetstar, in Australia and Asia. The Group will...

  • Page 25
    ...more point-to-point services without the need to operate via hubs. Jetstar, which will take delivery of the first 15 B787s for long-haul international flying, was originally expected to operate the new aircraft from 2008 but manufacturing delays announced by Boeing have pushed the delivery date back...

  • Page 26
    ... business model, the Group is creating a more resilient enterprise, better able to handle the shocks and challenges unique to the aviation industry. Each business draws strength from the network associations of the Group but also seeks its own local and global markets. 24 Qantas Annual Report 2008

  • Page 27
    ... Businesses Highlights Frequent Flyer The relaunch of the Frequent Flyer Program, including new Any Seat Awards, allowing members to access any seat on any Qantas or Jetstar ï¬,ight in addition to the existing Awards system Freight Strategic acquisitions by Qantas Freight Enterprises in new markets...

  • Page 28
    ...Qantas Group company, is well equipped to withstand consolidation in the market and capitalise on future growth opportunities. 5m The Qantas Frequent Flyer program is Australia's leading loyalty program with more than five million members and 350-plus program partners. 26 Qantas Annual Report 2008

  • Page 29
    ... international and domestic services. Qantas Air Freight is investing in a major project to improve capacity utilisation and yield management systems and processes, and to strengthen integration with customers and other participants in the supply chain. Qantas Air Freight also holds an Air Operators...

  • Page 30
    ... input into the management, engineering and quality systems of the new company. Qantas announced the formation of a joint venture with global MRO Lufthansa Technik AG in April 2008 to secure jet engine maintenance in Australia. This will retain the jobs of 140 engineers in Melbourne and align the...

  • Page 31
    ... Developments • The new Altea Departure Control - Customer Management system now manages all physical and electronic check-in, passenger boarding and aircraft departures for Qantas at domestic and international ports. • A Station Operations Control Centre opened in June 2008 at Sydney Airport...

  • Page 32
    For personal use only 30 Qantas Annual Report 2008

  • Page 33
    Sustainability For personal use only Sustaining the Qantas Spirit is about behaving ethically, operating in a responsible way and nurturing the communities of Australia. 31 Qantas Annual Report 2008

  • Page 34
    ... record for aviation safety and security. Safety is a core value of the Qantas brand; • protecting the health and welfare of our employees through reduction in injuries. A healthy and engaged workforce improves operational efficiency through lower costs and improved productivity; • reducing fuel...

  • Page 35
    ... operational areas including check-in, baggage, freight, engineering and catering. Qantas' security training programs exceed standards set by the International Civil Aviation Organization and the Australian Government. One Safety is the number one priority of Qantas. 33 Qantas Annual Report 2008

  • Page 36
    ... promote reconciliation action to Qantas' corporate partners and customers. Physician or Medical Kits Qantas QantasLink âœ" âœ" âœ" âœ" âœ" âœ" âœ" - âœ" Jetstar 12,000 Qantas provides a comprehensive annual security training program for over 12,000 air crew worldwide. 34 Qantas Annual Report...

  • Page 37
    ... 2008. The Brisbane Joey Club will complement centres in Melbourne and Sydney; • the expansion of the Employee Assistance Program to include free, confidential professional assistance for employees with critical financial issues and online counselling for employees who are absent from their home...

  • Page 38
    ... for 2008/09 has been set. Internal and external safety audits are conducted by business units, corporate Occupational Health and Safety personnel and government. 84% Qantas has achieved an 84 per cent improvement rate in its Lost Time Injury Frequency Rate since 2002. 36 Qantas Annual Report 2008

  • Page 39
    ... 50 years, earlier if possible. This estimate is based on the planned arrivals of new technology aircraft, further operational efficiencies, the introduction of cleaner jet fuels and improvements in government controlled air traffic management systems. Qantas' response to climate change is based on...

  • Page 40
    ... additional fuel efficiency initiatives next year following successful trials in 2008. These include new techniques for cleaning and polishing aircraft to improve performance. Jetstar's JetSaver Light offering, a new fare that provides customers with the option to travel with only carry-on baggage...

  • Page 41
    ... domestic Qantas Group flight on 19 September 2007, Fly Carbon Neutral Day, by planting 90,000 trees in conjunction with CO2 Australia; and • offset emissions for all employees travelling for business purposes and its ground transport vehicles. By the end of the first year of the program, Jetstar...

  • Page 42
    ... community program - Sharing the Spirit - in 2004, with the aim of engaging its large and diverse customer base in supporting five charities - CanTeen, CARE Australia, Mission Australia, Starlight Children's Foundation Australia and UNICEF. Charity Flights Each year, Qantas operates special flights...

  • Page 43
    ... every domestic flight booked on jetstar.com on 30 August 2007. Jetstar's customers are able to make donations inflight and a Workplace Giving program offers Jetstar staff the opportunity to sponsor a child. To support the Gold Coast, Jetstar has undertaken marketing and sales initiatives to promote...

  • Page 44
    ...He was appointed to the Qantas Board in August 2000. Mr Dixon is a Member of the Qantas Safety, Environment & Security Committee and Chairman of a number of controlled entities of the Qantas Group. He is a Director of Consolidated Media Holdings Limited, Crown Limited and Air Pacific Limited. He was...

  • Page 45
    ... the Board after more than 16 years of service. He is Chairman of the Qantas Safety, Environment & Security Committee and a Member of the Qantas Audit Committee. Mr Codd is Chancellor of the University of Wollongong. He is a Director of the Wealth Management Companies of the National Australia Bank...

  • Page 46
    ... and Chief Executive Officer and Country Managing Partner of Arthur Andersen. He holds a Bachelor of Business (Accounting). Age: 53 Paul Rayner Independent Non-Executive Director Paul Rayner was appointed to the Qantas Board on 16 July 2008. He is a Member of the Qantas Audit Committee. Mr Rayner...

  • Page 47
    ... Officer of the Order of Australia. Age: 64 Barbara Ward Independent Non-Executive Director Barbara Ward was appointed to the Qantas Board on 19 June 2008. She is a Member of the Qantas Safety, Environment & Security Committee. Ms Ward is the Chairman of Country Energy (a New South Wales Government...

  • Page 48
    ...the Qantas Code of Conduct & Ethics); • overseeing the Qantas Group, including its control and accountability systems; • approving the annual operating budget and monitoring the operating and financial performance of the Qantas Group; • approving and monitoring the capital management strategy...

  • Page 49
    ... of customers - where goods or services supplied by the Qantas Group exceed $100 million per annum. Qantas, as the principal Australian airline, has commercial relationships with most, if not all, major entities in Australia. As such, in determining whether a Non-Executive Director is independent...

  • Page 50
    ... of Qantas assets; • proper accounting; • dealing with auditors; • unauthorised public statements; • conï¬,ict of interest; • use of inside information; and • Qantas Employee Share Trading Policy. A copy of the Qantas Code of Conduct & Ethics is available on the Corporate Governance...

  • Page 51
    ... Australian/New Zealand Standard on Risk Management (AS/NZS 4360:2004) and the COSO (the Committee of Sponsoring Organisations of the Treadway Commission) framework for evaluating internal controls. Safety, Environment & Security Committee In 1994, the Board established the SESC which: • currently...

  • Page 52
    ... in the future." The Board Remunerates Fairly and Responsibly The Qantas Executive Remuneration Philosophy and Objectives is set out in full in the Directors' Report (from page 60). Remuneration Committee The Board has a Remuneration Committee which: • has three members who are Independent Non...

  • Page 53
    ... Qantas Group Income Statement 2008 $M For personal use only Sales and Other Income Net passenger revenue Net freight revenue Tours and travel revenue Contract work revenue Other Sales and other income Expenditure Manpower and staff related Aircraft operating variable Fuel Selling and marketing...

  • Page 54
    ... Jetstar International network. Costs increased in line with increased activity and higher fuel prices. • PBT for the portfolio businesses totalled of $353.0 million. Qantas Frequent Flyer was the largest contributor to the portfolio businesses with PBT of $233.9 million in the current year. This...

  • Page 55
    ... debt repayments. Total of Equity • Issued capital decreased by $505.7 million reï¬,ecting the share buy-back undertaken during the year. Reserves increased due to the movements in the fair value of fuel and foreign exchange derivatives during the year. Gearing • Qantas Group gearing (including...

  • Page 56
    ... Statements 1. Statement of Significant Accounting Policies 2. Change in Accounting Policy 3. Segment Reporting 4. Profit before Related Income Tax Expense and Net Finance Income/(Costs) 5. Net Finance Income/(Costs) 6. Income Tax 7. Auditors' Remuneration 8. Earnings per Share 9. Dividends...

  • Page 57
    ...' Report for the year ended 30 June 2008 The Directors of Qantas Airways Limited (Qantas) present their Report together with the Financial Statements of the consolidated entity, being Qantas and its controlled entities (Qantas Group), for the year ended 30 June 2008 and the Independent Audit Report...

  • Page 58
    Directors' Report for the year ended 30 June 2008 Directorships of Listed Companies Held by Members of the Board as at 30 June 2008 - for the period 1 July 2005 to 30 June 2008 Leigh Clifford Qantas Airways Limited Barclays Bank plc Rio Tinto Limited1 Rio Tinto plc Geoff Dixon2 Qantas Airways ...

  • Page 59
    Directors' Report for the year ended 30 June 2008 Qualifications and Experience of each Person who is a Company Secretary of Qantas Cassandra Hamlin - Company Secretary, Bachelor of Commerce, CA, FCIS joined Qantas in January 1996; responsible for the management of all Corporate Governance issues ...

  • Page 60
    Directors' Report for the year ended 30 June 2008 Directors' Interests and Benefits continued Alan Joyce Deferred shares held in trust under: 2004 Performance Share Plan Alan Joyce Award (2005) 2005 Performance Share Plan 2006 Performance Share Plan 2006 Retention Plan 2007 Performance Share Plan ...

  • Page 61
    Directors' Report for the year ended 30 June 2008 Share Entitlements In previous years, Entitlements over unissued shares in Qantas were awarded to Executive Directors and Senior Executives under the Qantas Long-Term Executive Incentive Plan. During the year, 2,728,952 Entitlements were converted ...

  • Page 62
    ... of Qantas. For personal use only Reward Framework Fixed Annual Remuneration Performance Cash Plan Performance Equity Plan Performance Share Plan Performance Rights Plan Short-term Medium-term Customer Long-term Operational People Financial Set with reference to role, market and experience Group...

  • Page 63
    ... Annual Report. The Board has instituted a cap on the PCP pool of 200 per cent and a cap on the PSP pool of 120 per cent. Qantas Code of Conduct & Ethics - Employee Share Trading Policy, Margin Loans and Hedging The Terms & Conditions of the Qantas Deferred Share Plan (DSP) (which govern awards...

  • Page 64
    Directors' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Short-term Employee Benefits For personal use only Fixed Annual Remuneration Salary decisions are based on FAR, which involves a guaranteed salary level from which superannuation and certain other benefits...

  • Page 65
    Directors' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Short-term Employee Benefits of Key Management Personnel and Highest Remunerated Executives for the Year Ended 30 June 2008 For personal use only Set out in the following tables are the Short-term Employee ...

  • Page 66
    ... an internal unit cost reduction measure. The Balanced Scorecard performance criteria aim to align Executive remuneration with the key value drivers for the Qantas Group and complement the short-term financial targets which are the focus of the PCP. The targets are set by the Qantas Board annually...

  • Page 67
    ...' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Performance Rights Plan continued The relative TSR measure in comparison to companies with ordinary shares included in the S&P/ASX 100 Index (as outlined above) was retained in relation to one half of the award of...

  • Page 68
    ...ended 30 June 2008 Remuneration Report (Audited) continued Employee Share Ownership Plan For personal use only The Employee Share Ownership Plan allows Directors and employees to purchase shares at no discount to market price on a salary sacrifice basis, and operates under the Terms & Conditions...

  • Page 69
    Directors' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Post-Employment and Other Long-term Benefits continued For personal use only End of Service Payments The approach adopted since 2006 has been to have ongoing contracts of employment for all Executives with ...

  • Page 70
    ...the year ended 30 June 2008 Remuneration Report (Audited) continued Post-Employment and Other Long-term Benefits of Key Management Personnel and Highest Remunerated Executives for the Year Ended 30 June 2008 continued For personal use only Post-Employment Benefits Superannuation $ Travel $ Total...

  • Page 71
    Directors' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Remuneration of Key Management Personnel for the Year Ended 30 June 2008 For personal use only Performance Related Remuneration Cash-based Remuneration Components as a Proportion of Total Remuneration PCP ...

  • Page 72
    Directors' Report for the year ended 30 June 2008 Remuneration Report (Audited) continued Summary of Performance Conditions For personal use only Link between Remuneration Policy and Qantas' performance The graph on the left below shows Qantas' full-year profit before related income tax expense ...

  • Page 73
    ... Non-Executive Directors are entitled to one international trip and three domestic trips per year of service. Executive Directors The key contract and other terms of the Executive Directors are set out below: Contract Details Length of existing contract Fixed Annual Remuneration Geoff Dixon Ongoing...

  • Page 74
    ... of its operations through the Safety, Environment & Security Committee (SESC), which is responsible for monitoring compliance with these regulations and reporting to the Board. The Directors are satisfied that adequate systems are in place for the management of the Qantas Group's environmental...

  • Page 75
    ... this Directors' Report and the Financial Report have been rounded to the nearest one hundred thousand dollars unless otherwise indicated. Signed pursuant to a Resolution of the Directors: Leigh Clifford Chairman 22 September 2008 Geoff Dixon Chief Executive Officer 73 Qantas Annual Report 2008

  • Page 76
    ...Manpower and staff related Aircraft operating variable Fuel Selling and marketing Property Computer and communication Tours and travel Capacity hire Ineffective and non-designated derivatives - closed positions Other Depreciation and amortisation Non-cancellable operating lease rentals Share of net...

  • Page 77
    ...14,371.1 5,117.5 1,049.7 4,648.4 702.3 403.2 444.8 60.4 7,308.8 14,159.1 4,662.3 Equity Issued capital Treasury shares Reserves Retained earnings Equity attributable to members of Qantas Minority interest Total equity 23 23 3,975.5 (61.0) 454.3 1,362.4 5,731.2 3.7 5,734.9 4,481.2 (32.6) 148.2 1,038...

  • Page 78
    ...fair value of assets available for sale Foreign exchange impact of fair value reserve transferred to foreign currency translation reserve Foreign currency translation of controlled entities Acquisition of controlled entity Own shares acquired Shares vested to employees Share-based payments Dividends...

  • Page 79
    ... the hedge reserve to the Income Statements totalled $208.8 million (2007: ($9.7) million). These amounts were allocated to revenue (2008: ($124.7) million; 2007: $18.1 million) and fuel expenditure (2008: $333.5 million; 2007: ($27.8) million) in the Income Statements. 77 Qantas Annual Report 2008

  • Page 80
    ...dividend but has been re-instated for the payment of dividends commencing with the 2008 final dividend. During the year, nil (2007: 28,991,867) shares were issued under the DRP. Dividends settled in shares rather than cash during the year totalled nil (2007: $99.0 million). 78 Qantas Annual Report...

  • Page 81
    ... and jointly controlled entities. The Financial Report of Qantas for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors on 22 September 2008. • AASB 2008-1 Amendments to Australian Accounting Standard - Share based Payment: Vesting Conditions and...

  • Page 82
    ... the Financial Statements for the year ended 30 June 2008 1. Statement of Significant Accounting Policies continued (D) Principles of Consolidation When the Qantas Group's share of losses exceeds the carrying value of its investment in a jointly controlled entity, the Qantas Group's carrying amount...

  • Page 83
    ... and travel air tickets and land content are utilised. Unused tickets are recognised as revenue using estimates regarding the timing of recognition based on the terms and conditions of the ticket. Changes in these estimation methods could have a material impact on the financial statements of Qantas...

  • Page 84
    ... the aircraft with adherence to certain maintenance conditions, provision is made during the lease term. This provision is based on the present value of the expected future cost of meeting the maintenance return condition having regard to the current ï¬,eet plan and long-term maintenance schedules...

  • Page 85
    ...the Financial Statements for the year ended 30 June 2008 1. Statement of Significant Accounting Policies continued (K) Tax Consolidation continued (O) Impairment Non-financial Assets The carrying amounts of assets (other than inventories and deferred tax assets) are reviewed at each balance date to...

  • Page 86
    ...fits will eventuate and the costs can be measured reliably. Amortisation is charged to the Income Statement on a straight-line basis over the estimated useful life of three to five years. Buildings and leasehold improvements Plant and equipment Aircraft and engines Aircraft spare parts 10 - 50...

  • Page 87
    ... future increases in wage and salary rates including related on-costs and expected settlement dates based on staff turnover history and is discounted using the rates attaching to Australian Government bonds at balance date which most closely match the terms of maturity of the related liabilities...

  • Page 88
    ... Statements for the year ended 30 June 2008 1. Statement of Significant Accounting Policies continued (U) Earnings per Share (Z) Share Capital Ordinary Shares Incremental costs directly attributable to issue of ordinary shares are recognised as a deduction from equity, net of any related income...

  • Page 89
    ...to the total number expected to be redeemed. The impact of the adoption of Interpretation 13 on the Balance Sheet as at 1 July 2006 and 30 June 2007 and the Income Statement for the year ended 30 June 2007 is shown in the following tables. Qantas Group Previously Reported 1 July 2006 $M Effect of...

  • Page 90
    ... year ended 30 June 2008 2. Change in Accounting Policy continued Qantas Group Previously Reported Year Ended 30 June 2007 $M Effect of Adoption of Interpretation 13 $M For personal use only Sales and Other Income Net passenger revenue1 Net freight revenue Tours and travel revenue1 Contract work...

  • Page 91
    ... the Financial Statements for the year ended 30 June 2008 2. Change in Accounting Policy continued Qantas Effect of Adoption of Interpretation 13 $M Effect of Adoption of Interpretation 13 $M For personal use only Previously Reported 1 July 2006 $M Revised 1 July 2006 $M Previously Reported 30...

  • Page 92
    ... airline and QantasLink regional ï¬,ying businesses, which are supported by the Qantas Engineering and Airports businesses; • Jetstar - representing the Jetstar domestic and international ï¬,ying businesses as well as the Qantas Group's investments in Asian low-cost carriers; • Qantas Freight...

  • Page 93
    ...the revenue and the financial impact on the segment receiving the revenue. Ancillary and support services have been allocated to segments on a cost only basis. 2 Notional interest has been attributed to Qantas, Qantas Freight, Qantas Catering and Corporate/Unallocated. 91 Qantas Annual Report 2008

  • Page 94
    ...the revenue and the financial impact on the segment receiving the revenue. Ancillary and support services have been allocated to segments on a cost only basis. 2 Notional interest has been attributed to Qantas, Qantas Freight, Qantas Catering and Corporate/Unallocated. 92 Qantas Annual Report 2008

  • Page 95
    ... 15,304.4 Other income Tours and travel revenue Contract work revenue Other unallocated Sales and other income Finance income Total income 745.8 453.5 449.8 16,191.9 284.7 16,476.6 For the year ended 30 June 2008, the principal assets of the Qantas Group comprised the aircraft ï¬,eet, all except...

  • Page 96
    ...year ended 30 June 2008 4. Profit before Related Income Tax Expense and Net Finance Income/(Costs) continued Qantas Group Qantas 2007 $M 2008 $M 2007 $M For personal use only Other items included in profit before related income tax expense and net finance income/(costs) Equity settled share-based...

  • Page 97
    ... income tax expense Profit before related income tax expense Income tax using the domestic corporate tax rate of 30 per cent Add/(less) adjustments for: Non-assessable income - non-taxable Australian dividends - non-taxable foreign dividends - share of associates' and jointly controlled entities...

  • Page 98
    ... year ended 30 June 2008 7. Auditors' Remuneration Qantas Group 2008 $000 2007 $000 Qantas 2008 $000 2007 $000 For personal use only Audit services Auditors of Qantas - KPMG Australia 2,772 49 227 3,048 2,740 35 227 3,002 2,074 34 - 2,108 2,033 2 - 2,035 - audit and review of Financial Reports...

  • Page 99
    Notes to the Financial Statements for the year ended 30 June 2008 9. Dividends Qantas Dividends declared and paid in the current and prior year by Qantas are: For personal use only Type Cents per Share Total Amount $M Date of Payment Franked Tax Rate for Franking Credit % Percentage Franked ...

  • Page 100
    ... deposits have been pledged as security to providers of aircraft finance. Sundry debtors of Qantas and the Qantas Group also includes the present value of liquidated damages of $496.3 million (2007: $201.8 million) resulting from the delay in delivery of aircraft. 98 Qantas Annual Report 2008

  • Page 101
    ... Jetstar Pacific Airlines Aviation Joint Stock Company Jupiter Air Oceania Limited1 PT Holidays & Travel Tour East (TET) Ltd. Travel Software Solutions Pty Limited Total associates Air transport Resort accommodation Passenger handling services Tours and travel Tours and travel Tours and travel Air...

  • Page 102
    ... controlled entities Reclassification from other investments Carrying amount of investments in associates as at 30 June Summary financial position of associates The Qantas Group's share of aggregate assets and liabilities of associates is as follows: Current assets Non-current assets Total assets...

  • Page 103
    ... Harvey Holidays Pty Ltd Kilda Express Pte Limited1 Orangestar Investment Holdings Pte Limited Star Track Express Holdings Pty Limited Total jointly controlled entities Air cargo Tours and travel Freight services Air transport Express road freight Australia Australia Singapore Singapore Australia...

  • Page 104
    ... for the year ended 30 June 2008 14. Investments Accounted for Using the Equity Method continued Qantas Group For personal use only Commitments 2008 $M 2007 $M Share of jointly controlled entities' capital expenditure commitments contracted for Share of jointly controlled entities' non-capital...

  • Page 105
    Notes to the Financial Statements for the year ended 30 June 2008 16. Property, Plant and Equipment Qantas Group 2008 $M 2007 $M Qantas 2008 $M 2007 $M For personal use only Freehold land - owned At cost Total land at net book value Buildings - owned At cost Less: accumulated depreciation 71.9 ...

  • Page 106
    Notes to the Financial Statements for the year ended 30 June 2008 16. Property, Plant and Equipment continued Qantas Group 2008 $M 2007 $M Qantas 2008 $M 2007 $M For personal use only Aircraft and engines - owned At cost Less: accumulated depreciation 11,086.1 4,796.4 6,289.7 2,575.1 721.4 1,853...

  • Page 107
    ... only 2008 $M Qantas Group Reconciliations Freehold land - owned Buildings - owned Buildings - leased Total buildings Leasehold improvements Plant and equipment Aircraft and engines - owned Aircraft and engines - hire purchased Aircraft and engines - leased Aircraft and engines - maintenance Total...

  • Page 108
    ...2008 $M Qantas Opening Written Down Value Additions Disposals Transfers Depreciation and Amortisation Other1 Closing Written Down Value Reconciliations Freehold land - owned Buildings - owned Buildings - leased Total buildings Leasehold improvements Plant and equipment Aircraft and engines...

  • Page 109
    ... 207.2 197.6 233.1 Closing Written Down Value $M Airport landing slots At cost 35.5 35.5 Software At cost Less: accumulated amortisation 511.6 245.2 266.4 Total intangible assets Opening Written Down Value $M 448.4 Qantas Group 2008 Additions $M Entities Acquired $M Amortisation $M Other...

  • Page 110
    ... for the Qantas Group. Inï¬,ation of 3.6 per cent per annum (2007: 2.5 per cent per annum) represents the long-term average change in the consumer price index in Australia. Assumption Discount rate Market share Real market growth Fuel Currency Fleet age Inflation 108 Qantas Annual Report 2008

  • Page 111
    ... $M Tax losses - New Zealand operations 15.1 16.3 7.8 8.4 Deferred tax assets have not been recognised with respect to these items because it is not probable that future taxable profit will be available against which the Qantas Group can utilise these benefits. 109 Qantas Annual Report 2008

  • Page 112
    ... for the year ended 30 June 2008 18. Deferred Tax Assets and Liabilities continued Movement in temporary differences during the year For personal use only Qantas Group 2008 Opening Balance $M Recognised in Income $M Recognised in Equity $M Entities Acquired $M Closing Balance $M Inventories...

  • Page 113
    Notes to the Financial Statements for the year ended 30 June 2008 19. Payables Qantas Group Qantas 2007 $M 2008 $M 2007 $M For personal use only Current Trade creditors Controlled entities Associates and jointly controlled entities Other parties 2008 $M - 0.2 669.6 669.8 - 1.8 672.8 674.6 - 1,...

  • Page 114
    ....5 416.9 2.2 268.9 28.9 51.0 8.7 76.3 436.0 Employee benefits - annual leave - long service leave - staff redundancy Onerous contracts Insurance, legal and other Non-current Employee benefits - long service leave Make good on leased assets $M $M $M $M 283.2 1.5 41.6 97.3 423.6 295.2 15...

  • Page 115
    ... the present-value of the Qantas Group's obligation for the related current service cost. Balance as at 1 July Payments made Balance as at 30 June Make good on leased assets The Qantas Group has leases that require the asset to be returned to the lessor in certain condition. A provision has...

  • Page 116
    ... the share capital of Qantas during the current and prior year were as follows: Number of Shares M Date Details $M 1 July 2006 4 October 2006 16 February 2007 30 June 2007 20 August 2007 6 September 2007 to 23 April 2008 30 June 2008 Balance DRP Issue of shares under the QLTEIP Balance Issue of...

  • Page 117
    ... having regard to the historical four year volatility of Qantas shares and the implied volatility on exchange traded options. The risk-free rate was the yield on a five year Commonwealth Government bond. The expected life assumes immediate exercise after vesting. 115 Qantas Annual Report 2008

  • Page 118
    ...29 - - Shares are valued based on the volume weighted average price of Qantas shares as traded on the ASX for the seven calendar days up to and including the date of allocation. Expected dividends are not taken into account when calculating the fair value. Qantas Long-Term Executive Incentive Plan...

  • Page 119
    ...crude, gasoil and jet kerosene derivative contracts and options; • future interest payments by interest rate derivative contracts (forwards, swaps or options); and • future capital expenditure payments by foreign exchange derivative contracts (forwards or options). 117 Qantas Annual Report 2008

  • Page 120
    ... as fair value hedge on foreign exchange risk Gains/(loss) on derivative designated as fair value hedge on interest rate risk Total gain/(loss) on derivative designated as fair value hedges Total ineffectiveness from fair value hedges in net finance income/(costs) 118 Qantas Annual Report 2008 118...

  • Page 121
    ... 19.26 per cent of Kilda Express Pte Limited for $0.5 million bringing the total shareholding held by Qantas to 69.26 per cent. Qantas acquired the remaining 50 per cent of Jet Turbine Services Pty Limited on 15 December 2006 for a purchase price of $12.1 million. 119 Qantas Annual Report 2008

  • Page 122
    ... the combined balances of Qantas and its wholly-owned controlled entities. Subject to the continuance of satisfactory credit ratings, the bank overdraft facility may be utilised at any time. Commonwealth Bank of Australia may terminate this facility without notice. 120 Qantas Annual Report 2008

  • Page 123
    ... leases aircraft and plant and equipment under finance leases with expiry dates between one and 17 years. Most finance leases contain purchase options exercisable at the end of the lease term. The Qantas Group has the right to negotiate extensions on most leases. 121 Qantas Annual Report 2008

  • Page 124
    ... than five years Qantas leases out freighter aircraft under long-term operating leases with rentals received monthly. (C) Capital expenditure commitments $M $M $M $M Capital expenditure commitments contracted but not provided for in the Financial Statements: Aircraft Building works Other 16,495...

  • Page 125
    ... costs on future lease payments if certain assumptions made at the time of entering the transactions, including assumptions as to the rate of income tax, subsequently become invalid. Freight investigations and class actions Qantas has been co-operating with regulators in the USA, Europe, Australia...

  • Page 126
    ... million). Qantas Group 2008 $M 2007 $M Qantas 2008 $M 2007 $M Changes in the present value of defined benefit obligations Opening defined benefit obligations Current service cost Interest cost Actuarial losses/(gains) Exchange differences on foreign plans Transfer of retirement aged members to...

  • Page 127
    ... the year ended 30 June 2008 29. Superannuation continued Qantas Group Qantas 2006 $M 2005 $M 2008 $M 2007 $M 2006 $M 2005 $M For personal use only Historical amounts Fair value of plan assets Present value of defined benefit obligation Surplus Experience adjustments on plan assets Experience...

  • Page 128
    ... Key Management Personnel remuneration The aggregate remuneration of the KMP of the Qantas Group and Qantas is set out below: For personal use only Qantas Group 2008 $ 2007 $ Qantas 2008 $ 2007 $ Short-term employee benefits Post-employment benefits Other long-term benefits Share-based...

  • Page 129
    ... as remuneration during the year to each KMP are set out below. For more information on the operation of the RP, see page 65. Key Management Personnel Geoff Dixon Peter Gregg Grant Date Value as at Grant Date Balance as at 30 June 2007 Number of Retention Shares Granted during the Year Number...

  • Page 130
    ... Qantas shares to each KMP are set out below. For more information on the operation of the PRP, including a summary of the performance criteria to be met prior to vesting, see page 65. Key Management Personnel Geoff Dixon Grant Date Fair Value as at Grant Date1 Balance as at 30 June 2007 Number...

  • Page 131
    ...terms. The nature of transactions, other than air travel, is set out below: • Paul Meadows, a related party to Mrs Cross, is a Partner of Allens Arthur Robinson. Mr Meadows is also an advisor to UBS Investment Bank. Mr Meadows performs no work for Qantas; • Toolangi Vineyards is a related entity...

  • Page 132
    ... • Qantas receives engine maintenance services from Jet Turbine Services Pty Limited. Transactions and balances with partly and wholly-owned controlled entities are included in the Financial Statements as follows: Qantas Notes 2008 $M 2007 $M Sales and other income Dividend revenue Finance costs...

  • Page 133
    ... and contract work for Air Pacific Limited (Air Pacific); • Qantas provides ramp handling services to Australian air Express Pty Limited (Australian air Express); • Qantas leases aircraft and domestic freight capacity and sub-leases certain property to Australian air Express; • Qantas...

  • Page 134
    ... Australia Australia Australia Australia Australia Australia Cayman Islands Australia New Zealand New Zealand Australian Airlines Limited BD No 1 Limited Jetconnect Limited Qantas Investments (NZ) Limited Express Ground Handling Pty Limited Jetstar Asia Holdings Pty Limited Jet Turbine Services...

  • Page 135
    ... Qantas Holidays Limited Qantas Business Travel Pty Limited Qantas Viva! Holidays Pty Limited QH Cruises Pty. Limited. Qanfad Pty Limited Qanlease Limited Qantas Cabin Crew (UK) Limited Qantas Asia Investment Company Pty Ltd Qantas Asia Investment Company (Singapore) Pte Ltd Qantas Defence Services...

  • Page 136
    ... it controlled the Board as of 23 May 2007. 8 The Qantas Group obtained a 100 per cent interest in Coffs Jet Centre Pty Ltd on 31 January 2008. Coffs Jet Centre Pty Ltd changed its name to Aerial Operations Services Pty Limited on 18 March 2008. 9 Qantas Flight Catering Holdings Limited changed its...

  • Page 137
    ... Deferred lease benefits/income Total non-current liabilities Total liabilities Net assets Equity Issued capital Treasury shares Reserves Retained earnings Total equity 2008 $M 2007....9 5,473.1 3,975.5 (61.0) 477.6 1,191.3 5,583.4 4,481.2 (32.6) 148.6 875.9 5,473.1 135 Qantas Annual Report 2008

  • Page 138
    ..., interest rate, foreign exchange, fuel price and credit risks. These risks are an inherent part of the operations of an international airline. The Qantas Group manages these risk exposures using various financial instruments, using a set of policies approved by the Board. Qantas Group policy is...

  • Page 139
    ..., foreign exchange and fuel price risk. The following section summarises Qantas Group's approach to managing these risks. (i) Interest rate risk Interest rate risk refers to the risk that the fair value or future cash ï¬,ows of a financial instrument will ï¬,uctuate because of changes in market...

  • Page 140
    ... ï¬,uctuate because of changes in foreign exchange rates. The source and nature of this risk arises from operations, capital expenditures and translation risks. Cross-currency swaps are used to convert long-term foreign currency borrowings to currencies in which the Qantas Group has forecast suf...

  • Page 141
    ... year ended 30 June 2008, other financial assets and liabilities include fuel derivatives totalling $840.4 million (asset) (2007: $129.3 million (asset)). These are recognised at fair value in accordance with AASB 139. The following table summarises the impact of reasonably possible changes in fuel...

  • Page 142
    ... travel agents through industry programs; and • other financial asset counterparties - the Qantas Group restricts its dealings to counterparties that have acceptable credit ratings. Should the rating of a counterparty fall below certain levels, internal policy dictates that approval by the Board...

  • Page 143
    ... Statements for the year ended 30 June 2008 33. Financial Risk Management continued Recognised financial assets and liabilities Carrying amount Net fair value 2007 $M 2008 $M 2007 $M For personal use only Qantas Group Financial assets Cash and cash equivalents Trade debtors Aircraft security...

  • Page 144
    ... use only The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on total gross assets (RoTGA), which is based on the Qantas Group cost of capital and is de...

  • Page 145
    ... of the Corporations Act 2001 from the Chief Executive Officer and the Chief Financial Officer for the year ended 30 June 2008. Signed in accordance with a Resolution of the Directors: Leigh Clifford Chairman 22 September 2008 Geoff Dixon Chief Executive Officer 143 Qantas Annual Report 2008

  • Page 146
    ... of changes in equity and cash ï¬,ow statements for the year ended on that date, a description of significant accounting policies and other explanatory notes 1 to 34 and the directors' declaration of both Qantas and the Qantas Group comprising Qantas and the entities it controlled at the year's end...

  • Page 147
    ... 2007, Qantas announced its intention to undertake an on-market buy-back of up to approximately 10 per cent of Qantas shares, the on-market buy-back was suspended on 28 April 2008. Prior to the suspension, Qantas bought back 91.1 million shares, or 4.6 per cent of issued capital, for approximately...

  • Page 148
    Qantas Group Five Year Summary for the year ended 30 June Share Information Dividends declared per share Share price - high Share price - low Share price - closing Weighted average number of ordinary shares (basic) Unit 2008 2007 2006 2005 2004 For personal use only cents $ $ $ M 35.0 6.05...

  • Page 149
    ... - Qantas - Jetstar Portfolio and service businesses - Airports, Catering and Flight Training - Engineering - Freight - Holidays - Frequent Flyer Corporate support Total Diversity of employees5 Number of women % Women % Women in senior positions6 % Part-time over 55 Average age Indigenous LA1 Years...

  • Page 150
    ... according to the March 2008, Tourism Australia's International Visitor Survey. This amount does not include the value of airfare and freight charges that foreigners pay to Qantas which also represent export revenue. 14 Calculated as 28,904,930 domestic passengers carried by Qantas for all ï¬,ights...

  • Page 151
    .... A disciplined, systematic ongoing process for achieving reliable, ethical and sustainable supply of externally purchased goods and services is essential: At the same time, reducing total costs and maintaining or improving levels of quality, service and technology are a key focus. Suppliers...

  • Page 152
    ... and internal control systems are included in a separate letter we have received from management. Review approach We have conducted an independent review of the Performance Data set out on pages 147 and 148 of the Report for the year ended 30 June 2008, for Qantas' Group operations in Australia and...

  • Page 153
    ..., Jetstar), Portfolio and Service Businesses (Airports, Catering and Flight Training, Engineering, Freight, Holidays and Frequent Flyer), Corporate Support (on page 147); • Number and Percentage of Full Time Equivalent female employees (on page 147); • Percentage of women in senior positions...

  • Page 154
    ... release of fuel to reduce the weight of the aircraft to the maximum landing weight. Fuel Spills The accidental spillage of aviation fuel material at airport sites. Full-time Equivalent Employees (FTE) Global Reporting Initiative (GRI) Goods and Services Tax (GST) 152 Qantas Annual Report 2008

  • Page 155
    ... 3339 www.qantas.com Qantas Share Registry Level 12 680 George Street Sydney NSW 2000 Australia or Locked Bag A14 Sydney South NSW 1235 Australia Freecall 1800 177 747 International (612) 8280 7390 Facsimile (612) 9287 0303 Email [email protected] Stock Exchange Australian Securities Exchange 20...

  • Page 156
    Qantas Qantas Airways Limited ABN 16 009 661 901 Qantas Centre Level 9, Building A 203 Coward Street Mascot NSW 2020 Australia Annual Report 2008 For personal use only Telephone (612) 9691 3636 Facsimile (612) 9691 3339 qantas.com