Qantas 2015 Annual Report Download - page 40

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QANTAS ANNUAL REPORT 2015
Additional Descriptions of STIP Scorecard Measures
Group
Profitability
Underlying PBT is the key budgetary and financial performance measure for the Qantas Group and therefore is
selected as the primary performance measure under the STIP. The objective of measuring and reporting Underlying
PBT is to provide a meaningful and consistent representation of the underlying performance of the Group.
The Underlying PBT target is based on the annual financial budget. 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 9 Financial Instruments which relate to
other reporting periods and items which are identified by management and reported to the chief operating decision-
making bodies, as not representing the underlying performance of the business. 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.
Qantas
Transformation
and the Cost
Agenda
The Qantas Transformation is targeting $2 billion of benefits by 2016/2017, with original cumulative target of $800
million of these benefits having been targeted to be achieved by 2014/2015. Realisation of benefits under the Qantas
Transformation has been selected as a performance measure under the STIP as the transformation initiatives are
driving sustainable change in the business and have been fundamental in returning the Qantas Group to profitability.
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 Group. These targets are derived from the annual
financial budget.
For Qantas International and Qantas Domestic, 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 Group Consolidated, Unit Cost performance is measured as controllable Unit Cost, which is calculated
as total expenses (excluding fuel and costs associated with minority investments in Jetstar-branded airlines in Asia)
per ASK.
To ensure that these measures focus on the underlying operating activities and efficiencies, they exclude the impact
of fuel price changes and items not included in Underlying PBT as described above.
Yield is a key area of focus for the Qantas International business and was selected as a key measure. Yield is
calculated as passenger revenue per ASK.
People and
Operational
Safety
As safety is always our first priority, the STIP scorecard includes an assessment of both operational and people
safety. In addition, 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 specific circumstances and following the recommendation of the Safety, Health,
Environment and Security Committee.
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 therefore targets were set across:
–Total Recorded Injury Frequency Rate
–Lost Work Case Frequency Rate
–Duration Rate
Operational safety performance is assessed against outcome-based measures (including operational occurrences
that pose a significant threat to the safety of employees and customers) and risk-based lead indicators commonly
associated with aviation industry accidents.
Customer Customer Service is measured against NPS targets.
This is a survey-based measure of how strongly our customers promote the services of our businesses in preference
to our direct competitors. Individual NPS targets are set for Qantas Domestic, Qantas International, Qantas Frequent
Flyer, Jetstar Australia Domestic, Jetstar Australia Long Haul, Jetstar Asia, Jetstar Japan and Jetstar Pacific.
Qantas Domestic targets being the most on-time major Australian domestic airline. Therefore a target comparing
on-time performance of Qantas Domestic to the on-time performance of its major Australian domestic competitor
is included as a STIP measure. As agreed with and reported to the Bureau of Infrastructure, Transport and Regional
Economics (BITRE), punctuality is measured as the number of flights operating on-time (on an on-time departure
basis) as a percentage of the total number of flights operated.
Strategic
Initiatives
To support the strategic initiatives of strengthening and growing Qantas Loyalty, STIP targets were set to grow Qantas
Loyalty EBIT as well as targets to develop and grow new business initiatives including Qantas Cash, Aquire and Red
Planet.
To support the strategic initiative of delivering on Jetstar opportunities and partnerships in Asia, EBIT targets and
strategic milestone targets were set for each of Jetstar Japan, Jetstar Hong Kong and Jetstar Pacific.