Qantas 2009 Annual Report Download - page 13

There has never been a more challenging time for
the modern aviation industry. I am pleased to
report that the Qantas Group has been a standout
performer among world airlines, delivering a profit
and staying financially strong, while laying a
platform for prosperity when conditions improve.
Highlights
– Revenue of $14.6 billion
– Profit before tax of $181 million
– Earnings per share of 5.6 cents
– Operating cash flow of $1.1 billion
– Cash held at year end of $3.6 billion
– New financing in place of $3.4 billion
Global and Australian Context
With the onset of the global financial crisis
and prolonged economic downturn, a major
contraction has occurred in global aviation
demand, yields and capacity. The International
Air Transport Association forecasts at least
$US9 billion in industry net losses for calendar year
2009. Multiple airlines have collapsed since 2008.
Previously profitable airlines are now reporting
substantial profit declines and even losses.
H1N1 Influenza 09 has negatively affected Asian
markets. Protracted industrial action undertaken
by the Australian Licensed Aircraft Engineers
Association between May and July 2008 harmed
Qantas punctuality, productivity, costs and
reputation, and full recovery took many months.
Qantas Group Response
The Qantas Group has reacted quickly and
effectively to the economic downturn.
Group liquidity was increased with $3.4 billion
of new funding and future debt facilities, including
a $514 million capital raising. The capital
expenditure pipeline has been restructured with
US$7.9 billion of aircraft, at 2009 list prices,
deferred or cancelled over the next four years.
A robust operating cash flow has been secured
with innovative sales activity; consolidating flights
and switching capacity to Jetstar; substantial
enhancement of the Frequent Flyer program; and
an energetic focus on corporate account retention.
The cost base has been adjusted with capacity
reductions; grounding and reducing the utilisation
of the equivalent of ten aircraft; and working with
suppliers to identify savings. 590 management
positions have been removed, and the Group is on
track to remove the equivalent of a further 1,250
full time positions. Executive pay has been frozen.
People
This year the Qantas Group underwent major
change in its senior management, with the
appointment of Chief Executive Officer Alan Joyce
and a new management team. The team has
shown great resolve and judgement in addressing
the current difficult circumstances. I would also like
to acknowledge the hard work of all Qantas Group
employees throughout the year. It has been
immensely challenging, but our people have
responded superbly.
Outlook
The global economic outlook remains uncertain
and we are yet to see substantial improvements
in underlying business conditions. Many factors are
in play that could affect the timing of the recovery.
Uncertainty is also being created through
significant capacity increases, domestically and
internationally, by Qantas Group competitors,
some of whom enjoy very favourable taxation
and other arrangements.
With the interim dividend of 6 cents per share,
Qantas has paid out 100 per cent of full year profit
after tax. Under present circumstances, the Board
considers it prudent not to pay a final dividend, and
future dividends will be assessed against ongoing
earnings performance and capital requirements.
With the strengths of its two flying brands,
strong management, and dedicated people, the
Qantas Group is well-positioned to withstand this
period of downturn, and will be ready to grasp
opportunities fully during the eventual recovery.
With the stren
g
ths o
f
its
two fl
y
in
g
brands, stron
g
m
anagement, an
d
d
e
d
icate
d
p
eople, the Qantas Group
is well-
p
ositioned to withstand
this
p
eriod of downturn
.
Leigh Clifford, AO
Cha
irm
a
n
11 Qantas Annual Report 2009