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QANTAS ANNUAL REPORT 2012
Broadening our horizons

Table of contents

  • Page 1
    QANTAS ANNUAL REPORT 2012 Broadening our horizons

  • Page 2

  • Page 3
    Qantas Annual Report 006 008 010 012 018 028 037 065 138 153 CHAIRMAN'S REPORT CEO'S REPORT FINANCIAL PERFORMANCE BOARD OF DIRECTORS REVIEW OF OPERATIONS CORPORATE GOVERNANCE STATEMENT DIRECTORS' REPORT FINANCIAL REPORT SUSTAINABILITY REPORT FINANCIAL CALENDAR AND ADDITIONAL INFORMATION ...

  • Page 4
    002 QANTAS ANNUAL REPORT 2012 Broadening our horizons Building on unique Australian qualities - and the skills of its 33,600 people - the Qantas Group is broadening its horizons to secure a successful and profitable future.

  • Page 5
    003

  • Page 6
    ... QANTAS ANNUAL REPORT 2012 Heading For the Qantas Group, 2011/2012 was a year of transformation. We recorded an Underlying Profit Before Tax* despite significant challenges. We continued to build Qantas' strong domestic network, Jetstar and Qantas Frequent Flyer. And we launched a five-year plan...

  • Page 7
    ...with its own accountable CEO. With dedicated CEOs also in place for Jetstar and Qantas Frequent Flyer, the Group is now operating as a true multi-brand aviation business across different market segments and regions. In a fast-evolving global aviation marketplace, this approach positions the Group to...

  • Page 8
    ...the Jetstar brand demonstrates that Australian businesses can successfully establish themselves and grow in the region. The recently announced 10-year partnership between Qantas and Emirates will strengthen the Group in both Europe and Asia. Customers will gain access to Emirates' global network and...

  • Page 9
    007

  • Page 10
    ... airlines based in Singapore (Jetstar Asia) and Vietnam (Jetstar Pacific). Subject to regulatory approval, Jetstar Hong Kong will follow in 2013. The transformation journey In August 2011 we launched our five-year turnaround plan for Qantas' international network - the one weak part of the Group...

  • Page 11
    009

  • Page 12
    ...QANTAS ANNUAL REPORT 2012 The Qantas Group The Qantas Group reported an Underlying Profit Before Tax* of $95 million for 2011/2012. The Group's portfolio of businesses performed well in a challenging year of transformation to position it for a strong, sustainable future. As a result of record fuel...

  • Page 13
    ... of its international network. Domestically, Qantas performed strongly with higher Underlying EBIT* compared with 2010/2011. Significant progress was made in Qantas' five-year international turnaround plan. Jetstar Jetstar reported record Underlying EBIT* of $203 million. Revenue increased by...

  • Page 14
    ... in sales, marketing, IT, network planning, operations research, revenue management and fleet planning. Age: 46 General Peter Cosgrove, AC, MC FAICD Independent Non-Executive Director Peter Cosgrove was appointed to the Qantas Board in July 2005. He is a Member of the Safety, Health, Environment...

  • Page 15
    ...and Chief Executive Officer of America West Airlines. Mr Goodmanson was also previously Senior Vice President of Operations for Frito-Lay Inc. and was a Principal at McKinsey & Company Inc. He spent 10 years in heavy civil engineering project management, principally in South East Asia. Mr Goodmanson...

  • Page 16
    ... engineering firm, Egis Group. Earlier, Ms Namblard spent 19 years with Banque Nationale de Paris, holding roles in foreign exchange, debt and equity capital markets, mergers and acquisitions, and project finance. Ms Namblard has held numerous board positions in investee companies including South...

  • Page 17
    ... of the Business Council of Australia. Dr Schubert was also Managing Director and Chief Executive Officer of Pioneer International Limited from 1993 until 2000. Dr Schubert held various positions with Esso in Australia and overseas. In 1983, he was appointed to the Board of Esso Australia. In 1985...

  • Page 18

  • Page 19
    Review of Operations

  • Page 20
    ... execution of the Group's strategic objectives - Leading domestic market position - Jetstar growth in Asia, with successful launch of Jetstar Japan - Qantas International Transformation on track Underlying Performance Segment Performance Summary June 2012 $M June 2011 $M $M Change % Change Qantas...

  • Page 21
    ..., Qantas most on time major domestic airline for jet operations greater than 10,000 sectors. 9 2012 Australian Federation of Travel Agents National Industry Awards. 10 2012 Air Transport World (ATW) awards. 11 Large market corporate accounts. 12 Underlying operating expenses (excluding fuel), fuel...

  • Page 22
    ... of foreign exchange on cash Cash at period end Operating cash flows grew to $1,810 million for the year ended 30 June 2012, an increase of 2 per cent on the prior year result of $1,782 million. The Group achieved free cash flow of $206 million for the second half of 2011/2012. Investing cash flows...

  • Page 23
    ... 2012 Successful execution of the Group's strategic objectives continued Domestic strength - achieved through successful execution of multi brand strategy The multi brand strategy allowed the Group to position Qantas' domestic network as 'best for business and premium travel' supported by Jetstar...

  • Page 24
    ...large-market corporate accounts have been lost. QantasLink made a significant contribution to Qantas' domestic performance. Capacity growth of 7 per cent was supported by investment in new aircraft and enhanced scheduled network services. QantasLink was awarded 'Regional Airline of the Year' 2012 by...

  • Page 25
    ... services in late 2012/2013 (subject to regulatory approval). Jetstar's international network will leverage the growth of these Jetstar branded airlines to provide traffic flow between Australia and Asia and reinforce the Group's strong competitive position in the leisure travel markets across Asia...

  • Page 26
    ... 30 June 2012 from a profit of $323 million in the prior year. Underlying PBT Underlying PBT is a non-statutory measure, and is the primary reporting measure used by the Qantas Group's chief operating decision-making bodies, being the Executive Committee and the Board of Directors. The objective of...

  • Page 27
    ... property, plant & equipment - Net impairment and net losses on disposal of investments - Legal provisions Statutory PBT (5) - (19) 2 (22) (349) AASB 139 mark-to-market movements relating to other reporting periods All derivative transactions undertaken by the Qantas Group represent economic hedges...

  • Page 28

  • Page 29
    Corporate Governance Statement

  • Page 30
    ... Chief Financial Officer (CFO) - developing Board and Executive Management and succession planning - ensuring a clear relationship between performance and executive remuneration - monitoring the Qantas Group's system of risk management and internal compliance and control - ensuring that the market...

  • Page 31
    ... and development programs, flexible work arrangements and recruitment and selection processes. Qantas has established a Diversity Statement which is available in the Corporate Governance section on the Qantas website. The following diversity-related measurable objectives, supporting gender diversity...

  • Page 32
    ... process - privacy - equal employment opportunity The core elements of the Qantas Group Code of Conduct and Ethics are summarised in the Qantas Group Business Practices Document which is available in the Corporate Governance section on the Qantas website. Qantas' Employee Share Trading Policy...

  • Page 33
    ...at general meetings. The Qantas Shareholder Communications Policy is summarised in the Qantas Group Business Practices Document which is available in the Corporate Governance section on the Qantas website. Qantas makes all ASX announcements available on its website. In addition, shareholders who are...

  • Page 34
    032 QANTAS ANNUAL REPORT 2012 Corporate Governance Statement continued FOR THE YEAR ENDED 30 JUNE 2012 THE BOARD RECOGNISES AND MANAGES RISK Qantas is committed to embedding risk management practices to support the achievement of business objectives and fulfil corporate governance obligations. ...

  • Page 35
    ...-annual Financial and Corporate Governance Self Assessment Questionnaire (FCGSA Questionnaire). The FCGSA Questionnaire forms part of Qantas' corporate governance process which requires Senior Management to respond to questions relating to Qantas' finance and reporting, corporate governance and risk...

  • Page 36

  • Page 37
    Directors' Report Financial Report

  • Page 38
    ... 8. (Loss)/Earnings per Share 9. Dividends 10. Cash and Cash Equivalents 11. Receivables 12. Inventories 13. Assets and Liabilities Classified as Held for Sale 14. Other Current Assets 15. Investments Accounted for Using the Equity Method 16. Property, Plant and Equipment 17. Intangible Assets 18...

  • Page 39
    037 Directors' Report FOR THE YEAR ENDED 30 JUNE 2012 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 2012 and the ...

  • Page 40
    038 QANTAS ANNUAL REPORT 2012 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 DIRECTORSHIPS OF LISTED COMPANIES HELD BY MEMBERS OF THE BOARD AS AT 30 JUNE 2012 - FOR THE PERIOD 1 JULY 2009 TO 30 JUNE 2012 Leigh Clifford Alan Joyce Peter Cosgrove Patricia Cross Qantas Airways Limited ...

  • Page 41
    ... on governance and transactional matters - Admitted as a solicitor of the Supreme Court of NSW in 2006 DIRECTORS' INTERESTS AND BENEFITS Particulars of Directors' interests in the issued capital of Qantas at the date of this Report are as follows: Shares Directors 2012 Number 2011 Number Leigh...

  • Page 42
    040 QANTAS ANNUAL REPORT 2012 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Alan Joyce 2012 Number 2011 Number 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...

  • Page 43
    041 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Rights will be converted to Qantas shares to the extent performance hurdles have been achieved. The Rights do not allow the holder to participate in any share issue of Qantas. No dividends are payable on Rights. The fair value of ...

  • Page 44
    ... to Board or Committee fees paid to Non-Executive Directors in 2011/2012 and there will be no increase to these fees for 2012/2013. This has been an extremely challenging year for Qantas and for Qantas' shareholders. The impact of industrial action, our significant transformation agenda, fuel prices...

  • Page 45
    ... measures to the execution of the Qantas Group strategy Following this review, the Board set the following scorecard of performance conditions for the 2011/12 STIP: Strategic Objective Performance Measures Scorecard Weighting 1. Delivering sustainable returns to shareholders 2. Safety is always our...

  • Page 46
    ... for 2012/2013. Cash FAR (or Base Pay) is FAR less superannuation contributions (of $15,775). Annual Incentive - 2011/12 STIP Outcome One of the key remuneration decisions made by the Board each year is determining the outcome under the STIP. Based on performance against the financial, safety and...

  • Page 47
    ... the CEO resulting from performance in 2011/2012 outlined on page 44. These differences arise due to the accounting treatment of share-based payments (such as the STIP and LTIP). The statutory disclosures include an accounting remuneration value for: - Prior years' STIP awards Accounting standards...

  • Page 48
    ... YEAR ENDED 30 JUNE 2012 The Remuneration Report sets out remuneration information for Non-Executive Directors, the CEO and Executive Committee. The Key Management Personnel (KMP) for the 2011/2012 financial year includes some members of the Executive Committee. 1) EXECUTIVE REMUNERATION OBJECTIVES...

  • Page 49
    ... Financial Officer Bruce Buchanan CEO Jetstar Rob Gurney Group Executive Qantas Airlines Commercial Simon Hickey CEO Qantas Loyalty Jayne Hrdlicka6 Group Executive Strategy & Technology Lyell Strambi Group Executive Qantas Airlines Operations Total 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011...

  • Page 50
    ... a disconnect between reported remuneration and the corresponding years' financial and non-financial scorecard performance. In both 2009/2010 and 2010/2011 the Board made considered decisions to not pay a cash bonus and instead awarded entirely deferred STIP awards. Deferred shares granted under the...

  • Page 51
    049 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Remuneration Report (Audited) continued Statutory Table - CEO and Executive KMP Incentive Plan - Accounting Accrual Share-based Payments Accounting Accrual2 Base Pay - STIP Cash Cash FAR1 Bonus Non-Cash Benefits and Annual Leave PSP ...

  • Page 52
    ... and the opportunity for an annual review is included in the employment contracts of Executives at Qantas. An individual's FAR, being a guaranteed salary level, is not related to Qantas' performance in a specific year. Cash FAR, as disclosed in the remuneration tables, excludes superannuation (which...

  • Page 53
    ... our airline partnerships and alliances as well as transformation projects in Engineering and Catering. To support the strategic initiative of "Growing Jetstar in Asia", targets were set across key measures of operational performance in the Jetstar international and Jetstar Asia businesses as...

  • Page 54
    ... Safety The targets at a Group level involve reducing the Total Recorded Injury Frequency Rate by 10 per cent on the 2010/2011 result and also reducing the Lost Work Case Frequency Rate by eight per cent of our employees. Punctuality Punctuality is measured against on-time departures and arrivals...

  • Page 55
    ... for Qantas international punctuality were achieved. Customer satisfaction results were impacted by the industrial action, however, improved in the second half of 2011/2012. 5. Growing Jetstar in Asia Successful operational launch of Jetstar Japan, ahead of schedule. Jetstar Hong Kong strategic...

  • Page 56
    ...-based payments and accounting standards require that such payments are expensed over the required service period. Accordingly, a portion of the value of the 2011/12 STIP awards does not appear in the statutory remuneration table for the current year and will be disclosed as a share-based payment in...

  • Page 57
    ...Corporation), British Airways/Iberia (International Airlines Group), Cathay Pacific, Delta Airlines, Easyjet, Lufthansa, Ryanair, Singapore Airlines, Southwest Airlines, Tiger Airways, Virgin Australia. Air Asia was also included in the basket of Global Listed Airlines for awards made under the 2012...

  • Page 58
    056 QANTAS ANNUAL REPORT 2012 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Remuneration Report (Audited) continued Long Term Incentive Plan also referred to as the LTIP (continued) What are the performance hurdles for other LTIP awards made in earlier years? The performance hurdles...

  • Page 59
    ... notice plus six months' severance pay. Remuneration Mix The FAR and "at target" STIP and LTIP opportunities for each Executive are set with reference to external benchmark market data including comparable roles in other listed Australian companies and international airlines. The "at target" STIP...

  • Page 60
    ...continued Performance Related Remuneration Cash-Based Statutory Remuneration Mix FAR & Other % Cash Incentives % STIP Cash-settled % Equity-settled % LTIP Rights Awards % Alan Joyce Gareth Evans Bruce Buchanan Rob Gurney Simon Hickey Jayne Hrdlicka Lyell Strambi Qantas Financial Performance History...

  • Page 61
    ... Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Remuneration Report (Audited) continued 7) PERFORMANCE RELATED REMUNERATION Performance Remuneration Affecting Future Periods The fair value of share-based payments granted is amortised over the service period and therefore remuneration...

  • Page 62
    ... Financial Officer Bruce Buchanan CEO Jetstar Rob Gurney Group Executive Qantas Airlines Commercial Simon Hickey CEO Qantas Loyalty Jayne Hrdlicka Group Executive Strategy & Technology Lyell Strambi Group Executive Qantas Airlines Operations Total 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011...

  • Page 63
    ...FOR THE YEAR ENDED 30 JUNE 2012 Remuneration Report (Audited) continued Employee Share Trading Policy The Qantas Code of Conduct and Ethics contains Qantas' Employee Share Trading Policy. The Policy prohibits employees from dealing in Qantas securities (or securities of other listed entities) while...

  • Page 64
    062 QANTAS ANNUAL REPORT 2012 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 Remuneration Report (Audited) continued Remuneration for the Year Ended 30 June 2012 - Non-Executive Directors Short-Term Employee Benefits $'000 Cash FAR Non-Cash Benefits Sub-total Post-Employment Benefits...

  • Page 65
    063 Directors' Report continued FOR THE YEAR ENDED 30 JUNE 2012 ENVIRONMENTAL OBLIGATIONS The Qantas Group's operations are subject to a range of Commonwealth, State, Territory and international environmental legislation. The Qantas Group is committed to environmental sustainability with high ...

  • Page 66
    ...KPMG Sydney 14 September 2012 Duncan McLennan Partner Rounding Qantas is a company of a kind referred to in Australian Securities and Investments Commission (ASIC) Class Order 98/100 dated 10 July 1998. In accordance with the Class Order, amounts in this Directors' Report and the Financial Report...

  • Page 67
    065 Consolidated Income Statement FOR THE YEAR ENDED 30 JUNE 2012 Qantas Group Notes 2012 $M 2011 $M REVENUE AND OTHER INCOME Net passenger revenue Net freight revenue Other Revenue and other income EXPENDITURE Manpower and staff related Fuel Aircraft operating variable Depreciation and ...

  • Page 68
    ... QANTAS ANNUAL REPORT 2012 Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2012 Qantas Group 2012 $M 2011 $M Statutory (loss)/profit for the year Effective portion of changes in fair value of cash flow hedges, net of tax Transfer of hedge reserve to the Income Statement...

  • Page 69
    ...2012 $M 2011 $M CURRENT ASSETS Cash and cash equivalents Receivables Other financial assets Inventories Assets classified as held for sale Other Total current assets NON-CURRENT ASSETS Receivables Other financial assets Investments accounted for using the equity method Property, plant and equipment...

  • Page 70
    068 QANTAS ANNUAL REPORT 2012 Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2012 Qantas Group $M Issued Capital Treasury Shares Employee Compensation Reserve Hedge Reserve Foreign Currency Translation Reserve Retained Earnings Noncontrolling Interests Total Equity...

  • Page 71
    ... THE YEAR ENDED 30 JUNE 2012 Qantas Group $M Issued Capital Treasury Shares Employee Compensation Reserve Hedge Reserve Foreign Currency Translation Reserve Retained Earnings Noncontrolling Interests Total Equity Balance as at 1 July 2010 TOTAL COMPREHENSIVE INCOME FOR THE YEAR Statutory...

  • Page 72
    ... paid Dividends received from associates and jointly controlled entities Income tax (paid)/refunded Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment and intangible assets Payments for aircraft assigned to associates1 Interest paid...

  • Page 73
    ... shares are publicly traded on the Australian Securities Exchange (ASX) and which is subject to the operation of the Qantas Sale Act as described in the Corporate Governance Statement. The Consolidated Financial Statements for the year ended 30 June 2012 comprise Qantas and its controlled entities...

  • Page 74
    072 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 1. Statement of Significant Accounting Policies continued to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, ...

  • Page 75
    ... Consolidated Income Statement of changes in fair value of derivative financial instruments designated as hedges. At the inception of the transactions, the Qantas Group documents the relationship between hedging instruments and hedged items, including the risk management objective and strategy for...

  • Page 76
    074 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 1. Statement of Significant Accounting Policies continued Marketing revenue is measured as the difference between the cash received on issuance of a point and the redemption revenue. ...

  • Page 77
    ...of related infrastructure and intangible assets and compared to net cash flows for the CGU. Estimated net cash flows used in determining recoverable amounts are discounted to their net present value using a pre-tax discount rate that reflects current market assessments of the time value of money and...

  • Page 78
    ... rates and residual values are reviewed annually and reassessed having regard to commercial and technological developments, the estimated useful life of assets to the Qantas Group and the long-term fleet plan. Finance Leased and Hire Purchase Assets Leased assets under which the Qantas Group...

  • Page 79
    ... Consolidated Income Statement on a straight-line basis over the estimated useful life of three to 10 years. the amounts expected to be paid when they are settled and include related on-costs, such as workers compensation insurance, superannuation and payroll tax. Employee Share Plans The fair value...

  • Page 80
    ...QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 1. Statement of Significant Accounting Policies continued Defined Benefit Superannuation Plans The Qantas Group's net obligation with respect to defined benefit superannuation plans is calculated...

  • Page 81
    ... Statements. The Qantas Group's accounting policy utilises the 'corridor approach' to account for actuarial gains and losses with respect to defined benefit superannuation plans. Upon adoption of the amended AASB 119 for the 30 June 2014 Financial Statements, the opening balance sheet (30 June 2012...

  • Page 82
    ...Financial Statements. 2. Underlying PBT and Operating Segments (A) UNDERLYING PBT Underlying PBT is the primary reporting measure used by the Qantas Group's chief operating decision-making bodies, being the Executive Committee and the Board of Directors, for the purpose of assessing the performance...

  • Page 83
    ...Operating Segments continued (C) ANALYSIS BY OPERATING SEGMENT 2012 $M Qantas Jetstar Qantas Frequent Flyer Qantas Corporate/ Consolidated Freight Unallocated2 Eliminations Underlying REVENUE AND OTHER INCOME External segment revenue Intersegment revenue Total segment revenue and other income Share...

  • Page 84
    ... used by the Qantas Group's chief operating decision-making bodies, being the Executive Committee and the Board of Directors. The objective of measuring and reporting Underlying PBT is to provide a meaningful and consistent representation of the underlying performance of each operating segment...

  • Page 85
    083 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 2. Underlying PBT and Operating Segments continued The reconciliation of Underlying PBT to Statutory (loss)/profit before tax is detailed in the table below. Qantas Group 2012 $M 2011 $M Underlying PBT Ineffectiveness...

  • Page 86
    ... 2012 $M 2011 $M Net passenger and freight revenue Australia Overseas Total net passenger and freight revenue Other revenue/income Total revenue and other income Non-current assets by geographic areas Non-current assets which consist principally of aircraft supporting the Groups' global operations...

  • Page 87
    085 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 3. Other Revenue and Expenditure Qantas Group 2012 $M 2011 $M OTHER REVENUE Contract work revenue Passenger service fees Ancillary passenger revenue1 Frequent Flyer store and other redemption revenue Frequent Flyer ...

  • Page 88
    ... disposal of property, plant and equipment Net foreign currency gain/(losses) Non-aircraft operating lease rentals 1 During the year ended 30 June 2012 the Qantas Group changed its estimate of the discount rates used to calculate the present value of provisions and employee benefits resulting in an...

  • Page 89
    ... income tax expense Income tax (benefit)/expense using the domestic corporate tax rate of 30 per cent Add/(less) adjustments for non-deductible expenditure/(non-assessable income): Non-deductible/(non-assessable) share of net loss/(profit) of associates and jointly controlled entities Utilisation...

  • Page 90
    088 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 7. Auditor's Remuneration Qantas Group 2012 $000 2011 $000 AUDIT SERVICES Auditors of Qantas - KPMG Australia - Audit and review of Financial Report - Other regulatory audit services ...

  • Page 91
    ...No final dividend will be paid in relation to the year ended 30 June 2012. For the year ended 30 June 2012, $1 million dividends (2011: $1 million) were declared to non-controlling interest shareholders by non-wholly owned controlled entities. (B) FRANKING ACCOUNT Qantas Group 2012 $M 2011 $M Total...

  • Page 92
    090 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 11. Receivables Qantas Group 2012 $M 2011 $M CURRENT Trade debtors Trade Debtors Less: provision for impairment losses 798 4 794 Sundry debtors Total current receivables NON-CURRENT Other ...

  • Page 93
    ... YEAR ENDED 30 JUNE 2012 12. Inventories Qantas Group 2012 $M 2011 $M Engineering expendables Consumable stores Work in progress Total inventories 315 52 9 376 310 53 9 372 13. Assets and Liabilities Classified as Held for Sale Qantas Group 2012 $M 2011 $M Assets Property, plant and equipment...

  • Page 94
    ...QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 15. Investments Accounted for Using the Equity Method Qantas Group 2012 $M 2011 $M Share of net (loss)/profit of associates and jointly controlled entities Associates Jointly controlled entities...

  • Page 95
    093 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 15. Investments Accounted for Using the Equity Method continued Qantas Group 2012 $M 2011 $M RESULTS OF ASSOCIATES Revenues Expenditure (Loss)/profit before income tax expense Income tax expense Net (loss)/profit of ...

  • Page 96
    094 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 15. Investments Accounted for Using the Equity Method continued (B) INVESTMENTS IN JOINTLY CONTROLLED ENTITIES Details of interests in jointly controlled entities are as follows: Qantas Group...

  • Page 97
    095 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 16. Property, Plant and Equipment Qantas Group 2012 $M 2011 $M Freehold land - owned At cost Total freehold land Buildings - owned At cost Less: accumulated depreciation Buildings - leased At cost Less: accumulated ...

  • Page 98
    096 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 16. Property, Plant and Equipment continued Qantas Group 2012 $M 2011 $M Aircraft spare parts - owned At cost Less: accumulated depreciation Aircraft spare parts - leased At cost Less: ...

  • Page 99
    097 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 16. Property, Plant and Equipment continued Qantas Group 2012 $M Opening Net Book Value Additions1 Acquisition of Controlled Entity Disposal of Controlled Disposals Entity2 Transferred to Assets Classified as Transfers...

  • Page 100
    ...QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 17. Intangible Assets Qantas Group 2012 $M 2011 $M Goodwill At cost Total goodwill Airport landing slots At cost Total airport landing slots Software At cost Less: accumulated amortisation Total...

  • Page 101
    ... Additions Entity Entity2 Transferred to Assets Classified as Held for Transfers Sale Amortisation Qantas Group 2012 $M Other 3 Closing Net Book Value Reconciliations Goodwill Airport landing slots Software Brand names and trademarks Customer contracts/relationships Total intangible assets 2011...

  • Page 102
    ... the projected cash flows of Qantas and Jetstar CGUs, reflecting a market estimate of the weighted average cost of capital of the Qantas Group (2011: 10.5 per cent per annum for Qantas and Jetstar). The discount rates are based on the risk-free rate for the ten-year Australian Government Bonds...

  • Page 103
    ... in the Consolidated Income Statement 644 644 767 767 Qantas Group 2012 $M Opening Balance Recognised in Other Comprehensive Income Acquisition of Controlled Entity Disposal of Controlled Entity1 Closing Balance Reconciliations Inventories Property, plant and equipment and intangible assets...

  • Page 104
    ... losses - Singapore operations Tax losses - Hong Kong operations Total unrecognised deferred tax assets - tax losses 13 8 5 26 17 10 - 27 19. Payables Qantas Group 2012 $M 2011 $M Trade creditors Other creditors and accruals Total payables 645 1,231 1,876 597 1,141 1,738 20. Revenue Received...

  • Page 105
    ... to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 22. Provisions Qantas Group 2012 $M 2011 $M CURRENT Employee benefits - Annual leave - Long service leave - Redundancies, restructuring and other employee benefits Onerous contracts Make good on leased assets Insurance, legal...

  • Page 106
    ... cost of meeting the obligations under the contract exceeds the economic benefit expected to be received. The Qantas Group has raised this provision in respect of operating leases on premises. Make Good on Leased Assets The Qantas Group has leases that require the asset to be returned to the...

  • Page 107
    105 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 24. Share-based Payments The Deferred Share Plan (DSP) Terms and Conditions were approved by shareholders at the 2002 AGM. The DSP governed equity benefits to Executives within the Qantas Group made prior to 30 June ...

  • Page 108
    ... QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 24. Share-based Payments continued FAIR VALUE CALCULATION The estimated value of Rights granted with the Total Shareholder Return (TSR) performance hurdle component was determined at grant date...

  • Page 109
    ... and Consolidated Income Statement. (A) OTHER FINANCIAL ASSETS AND LIABILITIES Qantas Group 2012 $M 2011 $M NET OTHER FINANCIAL LIABILITIES Derivatives Designated as cash flow hedges Designated as fair value hedges De-designated derivatives Not qualifying for hedge accounting Net other financial...

  • Page 110
    ...: Qantas Group 2012 $M Less than 1 Year More than 5 Years 1 to 5 Years Total Contracts to hedge Future foreign currency receipts and payments Future aviation fuel payments Future interest payments Future capital expenditure payments Tax effect Total net gain included within hedge reserve 2011...

  • Page 111
    ... Qantas Group 2012 $M 2011 $M Statutory (loss)/profit for the year Add: depreciation and amortisation Add: dividends received from associates and jointly controlled entities Add: share-based payments Add: amortisation of deferred financing fees Add: net impairment of property, plant and equipment...

  • Page 112
    ... QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 26. Notes to the Cash Flow Statement continued (B) FINANCING FACILITIES The total amount of financing facilities available to the Qantas Group as at balance date is detailed below: Qantas Group...

  • Page 113
    ... Aviation Group. The purchase consideration, net of cash acquired, was $21 million. The fair value of the net assets acquired includes property, plant and equipment of $26 million, intangible assets of $4 million, interest-bearing liabilities of $18 million and net working capital and operating...

  • Page 114
    ... the Consolidated Financial Statements 185 528 365 1,078 8 1,070 3,597 171 527 404 1,102 7 1,095 3,895 616 1,569 342 2,527 632 1,718 450 2,800 The Qantas Group leases aircraft, buildings and plant and equipment under operating leases with expiry dates between one and 30 years. The Qantas Group has...

  • Page 115
    ... aircraft under long-term operating leases with rentals received monthly. (C) CAPITAL EXPENDITURE COMMITMENTS Capital expenditure commitments contracted but not provided for in the Consolidated Financial Statements, payable, in relation to: Assets to be operated by the Qantas Group: Not later...

  • Page 116
    ...on years of membership and salary levels. As at 30 June 2012 the total plan assets include shares in Qantas with a fair value of $9 million (2011: $18 million). Qantas Group 2012 $M 2011 $M CHANGES IN THE PRESENT VALUE OF DEFINED BENEFIT OBLIGATION Opening defined benefit obligation Current service...

  • Page 117
    ... 30. Superannuation continued Qantas Group 2012 $M 2011 $M EXPENSE RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT Current service cost Past service cost Interest cost Contributions by plan participants Expected return on plan assets Actuarial losses Total included in manpower and staff related...

  • Page 118
    ... ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 30. Superannuation continued Qantas Group 2012 $M 2011 $M 2010 $M 2009 $M 2008 $M HISTORICAL AMOUNTS Fair value of plan assets Present value of defined benefit obligation (Deficit)/surplus Experience...

  • Page 119
    ... Strategy & Technology (appointed as KMP effective 1 February 2011) Lyell Strambi, Group Executive Qantas Airlines Operations (B) REMUNERATION OF KEY MANAGEMENT PERSONNEL The aggregate remuneration of the KMP of the Qantas Group is set out below: Qantas Group 2012 $000 2011 $000 Short-term employee...

  • Page 120
    ... shares. (ii) Long Term Incentive Plan (LTIP) Key Management Personnel Opening Balance Number Granted Number Lapsed/ Forfeited Number Vested and Transferred Closing Balance Alan Joyce Bruce Buchanan Gareth Evans Rob Gurney Simon Hickey Jayne Hrdlicka Lyell Strambi 2012 Total 2011 Total 2012 Total...

  • Page 121
    ...Related Parties continued (iii) Performance Share Plan (PSP) Opening Balance Number Granted Number Forfeited Number Vested and Transferred Closing Balance Not Available to Call Available to Call Alan Joyce Bruce Buchanan Gareth Evans Rob Gurney Simon Hickey Lyell Strambi 2012 Total 2011 Total 2012...

  • Page 122
    120 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 31. Related Parties continued Key Management Personnel - Executives Interest in Shares as at Awarded as 30 June 2010 Remuneration Rights Converted to Shares Other Change1 Interest in Shares ...

  • Page 123
    ... the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 31. Related Parties continued Transactions and balances with associates and jointly controlled entities are included in the Consolidated Financial Statements as follows: Qantas Group Notes 2012 $M 2011 $M Revenue and other income...

  • Page 124
    ... ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 32. Consolidated Entities continued Qantas Group Ownership Interest Consolidated Entities Footnote ACN/ABN Country of 30 June 2012 30 June 2011 Incorporation % % TAA Aviation Pty. Ltd. In Tours Airline...

  • Page 125
    ... to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 32. Consolidated Entities continued Qantas Group Ownership Interest Consolidated Entities Footnote ACN/ABN Country of 30 June 2012 30 June 2011 Incorporation % % Express Freighters Australia (Operations) Pty Limited Qantas Road...

  • Page 126
    ... consolidate Newstar Investment Holdings Pte Ltd and its controlled entities in the Qantas Group Financial Statements. 6 This company was incorporated on 2 April 2012. 7 This company was incorporated on 6 September 2011. 8 Hangda Consulting (Shanghai) Co. Ltd changed its name to Hangda Ticket Agent...

  • Page 127
    ... jointly controlled entities Other investments Property, plant and equipment Intangible assets Other Total non-current assets Total assets Current liabilities Payables Revenue received in advance Interest-bearing liabilities Other financial liabilities Provisions Income tax liabilities Liabilities...

  • Page 128
    ... timing of cash flows, including estimated interest payments, of financial liabilities and derivative instruments. Contractual amount assumes current interest rates and foreign exchange rates. Qantas Group 2012 $M More than 5 Years Less than 1 Year 1 to 5 Years Total FINANCIAL LIABILITIES Trade...

  • Page 129
    ... hedged. For the year ended 30 June 2012, other financial assets and liabilities include fuel derivatives totalling $6 million (asset) (2011: $170 million (asset)). These are recognised at fair value in accordance with AASB 139. (iv) Sensitivity on Interest Rate, Foreign Exchange and Fuel Price Risk...

  • Page 130
    ... of travel agents through industry programs - 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 is...

  • Page 131
    ... Consolidated Balance Sheet in accordance with AASB 139. Carrying Amount Qantas Group Notes 2012 $M 2011 $M Fair Value 2012 $M 2011 $M Financial assets Cash and cash equivalents Trade debtors Sundry debtors Other loans Other financial assets Other investments Financial liabilities Trade creditors...

  • Page 132
    ... of dividend payments. The quantum and timing of this will depend on trading results, prevailing market conditions, the maintenance of an investment grade credit rating and the level of capital expenditure commitments. During the year ended 30 June 2012 the Qantas Group invested $2.3 billion (2011...

  • Page 133
    ...)/income for the year CONDENSED BALANCE SHEET Current assets Cash and cash equivalents Receivables Inventories Other Total current assets Non-current assets Receivables Property, plant and equipment Intangible assets Other Total non-current assets Total assets Current liabilities Payables Revenue...

  • Page 134
    132 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 36. Parent Entity Disclosures for Qantas Airways Limited (Qantas) continued Qantas 2012 $M 2011 $M CONDENSED CASH FLOW STATEMENT Net cash from operating activities Net cash used in investing...

  • Page 135
    ... Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 36. Parent Entity Disclosures for Qantas Airways Limited (Qantas) continued (C) FINANCING FACILITIES The total amount of financing facilities available to Qantas as at balance date is detailed below: Qantas 2012 $M 2011 $M FINANCING...

  • Page 136
    134 QANTAS ANNUAL REPORT 2012 Notes to the Financial Statements continued FOR THE YEAR ENDED 30 JUNE 2012 36. Parent Entity Disclosures for Qantas Airways Limited (Qantas) continued (D) CONTINGENT LIABILITIES Details of contingent liabilities are set out below. The Directors are of the opinion ...

  • Page 137
    ...Australian Accounting Interpretations) and the Corporations Regulations 2001; and (ii) Giving a true and fair view of the financial position of the Qantas Group as at 30 June 2012 and of its performance for the financial year ended on that date (b) There are reasonable grounds to believe that Qantas...

  • Page 138
    ... of the Qantas Group's financial position as at 30 June 2012 and of its performance for the year ended on that date (ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 (b) The Financial Report also complies...

  • Page 139
    ... Custodian Services Pty Limited 18. UBS Nominees Pty Ltd 19. UBS Wealth Management Australia Nominees Pty Ltd 20. BNP Paribas Noms Pty Ltd Total DISTRIBUTION OF ORDINARY SHARES Analysis of ordinary shareholders by size of shareholding: Number of Shares Ordinary Shares Held Number of Shareholders...

  • Page 140
    138 QANTAS ANNUAL REPORT 2012 Heading Sustainability is fundamental to the Qantas Group's performance FOR THE YEAR ENDED 30 JUNE 2012 "Financial sustainability is our core goal - building a strong, viable business capable of delivering superior returns for shareholders over the long term. But we ...

  • Page 141
    ... environmental performance to address long term business risks and exploit opportunities as we seek to continue to deliver financially superior and sustainable returns to our shareholders. RECOGNITION Dow Jones Sustainability Index World - Member of the World Index since 2011 - 1 of only 2 airlines...

  • Page 142
    ... Group's strategy to reduce carbon emissions and fleet renewal is our greatest opportunity to improve fuel efficiency. CORPORATE GOVERNANCE Corporate Governance is core to ensuring the creation, protection and enhancement of shareholder value. The Board maintains, and requires that Qantas Management...

  • Page 143
    ...is continually investing in aircraft, product, service and innovative technology to provide an exceptional experience for customers. PEOPLE The success of the Qantas Group is underpinned by our Employees being skilled, motivated and supported to do great things. ECONOMIC FINANCIAL SUSTAINABILITY We...

  • Page 144
    ..., Qantas Annual Report 2012 Sustainability Priorities detailed in the Qantas Sustainability Review 2012 Governance Corporate Governance Safety Business Resilience Group Security and Facilitation Group Audit and Risk Management Supply Chain Qantas Values Carbon Footprint Waste & Water Fleet Noise...

  • Page 145
    ...under the Group's Executive remuneration framework. Key Performance Indicators Unit 2012 2011 GRI Indicator Occupational health and safety Total Recordable Injury Frequency Rate (TRIFR)1 Lost Work Case Frequency Rate (LWCFR)1 Rate TRIFR LWCFR 35.5 11.6 34.3 9.6 LA7 1 In 2011/2012 Qantas expanded...

  • Page 146
    ... fuel efficient aircraft and engine technology, and process optimisation. In 2011/2012 Qantas and Jetstar became the first Australian airlines to operate commercial flights using sustainable aviation fuel. The Qantas Group is investing in newer, more fuel efficient aircraft which, in the long run...

  • Page 147
    ...at premium customers. Key Performance Indicators Unit 2012 2011 GRI Indicator Australian domestic on-time departures Qantas Airlines QantasLink Jetstar Qantas Group Australian domestic on-time arrivals Qantas Airlines QantasLink Jetstar Qantas Group Australian domestic cancellations Qantas Airlines...

  • Page 148
    ... all employees with equal access to the opportunities that are available at work, especially in the area of gender diversity. Key Performance Indicators Unit 2012 2011 GRI Indicator Percentage of women Percentage of women in senior positions Number of women Directors on the Qantas Board Percentage...

  • Page 149
    ... measure used by the Qantas Group's Executive Committee and the Board of Directors as the primary measure to assess the Group's financial performance. Key Performance Indicators Unit 2012 2011 GRI Indicator Underlying PBT $M 95 552 EC1 The Group's Underlying PBT of $95 million was achieved in...

  • Page 150
    ...the average passenger fleet age assists the Group to manage its long-term capital requirement. The Group's priority is renewal of its scheduled passenger aircraft fleet, which will directly improve customer experience and fuel efficiency. The Group's fleet strategy supports the Group's objectives of...

  • Page 151
    ... from an occupational injury or disease sustained or contracted while working for the Qantas Group in Australia and overseas. Scope: Employees and embedded contractors of wholly-owned entities of the Qantas Group. Aviation Fatality Fatal injuries as a result of being in Qantas Group aircraft or...

  • Page 152
    ...the financial year. Scope: The Qantas Airways Graduate Program. Number of full-time equivalent employees The total number of full-time equivalent (FTE) employees as at 30 June, reported in total for each segment of the Qantas Group in Australia and overseas. This is calculated using standard working...

  • Page 153
    ... and leased aircraft. The Qantas Group's scheduled passenger fleet does not include dedicated freighters and Network Aviation fleet. COMMUNITY National export revenue National export revenue is calculated as the number of inbound visitors brought to Australia by Qantas, Jetstar and Jetstar Asia for...

  • Page 154
    ...the design and implementation of Qantas' processes for developing, calculating, collecting, reporting, and aggregating the reported information in the Sustainability Section - Visits to specific sites and contractors, which were selected on the basis of a risk analysis including the consideration of...

  • Page 155
    ... SHARE REGISTRY Link Market Services Limited Level 12 680 George Street Sydney NSW 2000 Australia or Locked Bag A14 Sydney South NSW 1235 Australia Telephone 1800 177 747 (toll free within Australia) International +61 2 8280 7390 Facsimile +61 2 9287 0303 Email [email protected] STOCK EXCHANGE...

  • Page 156
    QANTAS AIRWAYS LIMITED ABN 16 009 661 901