Qantas 2013 Annual Report Download - page 87

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QANTAS ANNUAL REPORT 2013
Annual Incentive
also referred to
as the Short Term
Incentive Plan
orSTIP
(continued)
With safety as the rst priority, the Board retains an overriding discretion to scale down the STIP (or reduce it
to zero) in the event of a material aviation safety incident. This is in addition to the Board’s overall discretion
over STIP awards. Any such decision would be made in light of the specic circumstances and following the
recommendation of the Safety, Health, Environment and Security Committee.
Additional descriptions of STIP scorecard measures
Underlying PBT
The Underlying PBT target is based on the annual nancial budget. 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 CEO, Executive Management 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 the Group. For reasons of commercial sensitivity, the annual Underlying PBT target is
not disclosed.
Underlying PBT is derived by adjusting Statutory PBT for the impacts of AASB 139 Financial Instruments:
Recognition and Measurement which relate to other reporting periods and identifying certain other items
which are not included in Underlying PBT.
Items which are identied by Management and reported to the chief operating decision-making bodies
as not representing the underlying performance of the business are not included in Underlying PBT. The
determination of these items is made after consideration of their nature and materiality and is applied
consistently from period to period.
Items not included in Underlying PBT primarily result from major transformational/restructuring initiatives,
transactions involving investments and impairment of assets outside the ordinary course of business.
Operating Cash Flow to Net Debt
The inclusion of the operating cash ow to net debt measure reects the Group’s goal of maintaining the
competitive advantage provided by an investment grade credit rating. The measure is calculated as the
Group’s operating cash ow divided by the Group’s net debt. The Group’s net debt includes interest-bearing
liabilities and the fair value of hedges related to debt less cash and aircraft security deposits and off-balance
sheet aircraft operating lease liabilities.
People and Operational Safety
The inclusion of safety targets reects that safety is always our rst priority. The Safety, Health, Environment
and Security Committee performs a combined assessment of people safety performance and operational
safety performance.
The objective of the people safety targets is to reduce employee injuries, and for 2012/2013 this involved:
»Reducing the Total Recorded Injury Frequency Rate by eight per cent on the 2011/2012 result
»Reducing the Lost Work Case Frequency Rate by 17 per cent on the 2011/2012 result, and also
»Reducing the Duration Rate by 15 per cent on the 2011/2012 result
Operational safety performance is assessed against outcome-based measures (including operational
occurrences that pose a signicant threat to the safety of employees and customers) and risk-based lead
indicators commonly associated with aviation industry accidents.
Unit Cost
Unit Cost remains an area of focus across the business and as a result, the STIP scorecard includes unit cost
targets for each of Qantas International, Qantas Domestic and Jetstar. These targets are derived from the
annual nancial budget.
For Qantas International and Qantas Domestic, Net Underlying Unit Cost performance is calculated as net
underlying expenditure (excluding fuel) divided by each business’ ASKs. Net underlying expenditure is
derived from passenger revenue less Underlying EBIT.
For Jetstar, Unit Cost performance is measured as controllable unit cost which is calculated astotal expenses
(excluding fuel) per ASK.
To ensure that these measures focus on the underlying operating activities and efciencies, they exclude the
impact of fuel price changes and restructuring charges.
Punctuality
As agreed with and reported to the Bureau of Infrastructure, Transport and Regional Economics (BITRE),
punctuality is measured as the number of ights operating on-time as a percentage of the number of ights
operated. Performance is assessed against targets that are based on on-time departures.