Qantas 2013 Annual Report Download - page 59

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QANTAS ANNUAL REPORT 2013
Enhancing alliances, launch of Emirates partnership
Qantas’ world leading airline partnership with Emirates was successfully launched on 31 March 2013.
The partnership delivers on Qantas’ outstanding customer product offering and enables Qantas to provide its customers with
98 weekly services between Australia and Dubai. Dubai’s 24 hour hub provides seamless connections to over 175 destinations
worldwide for Qantas customers. This has enabled the exit of loss making routes and the restructure of the Asian network.
The Qantas and Emirates partnership continues to expand with joint network bookings across the trans-Tasman available from
August 2013. Together, we will operate around 130 services per week from Auckland, Christchurch, Wellington and Queenstown
to Australian east coast cities – then onwards to more than 65 destinations in the Middle East, North Africa and Europe.
With increased dedicated capacity to Singapore and Hong Kong, enabling more same-day connectivity across Asia,
QantasInternational is well placed to better service the Asian market – the world’s fastest growing aviation market. Ongoing
enhancement to the Asian code shares, including the expansion of the China Eastern partnership, will also deliver improved
connectivity and reach into Asia.
The gateway strategy extends beyond the Emirates Partnership and Asia:
»Daily ying into Dallas Fort Worth, with connections to American Airlines’ US domestic network.
»Ongoing discussions with LATAM to strengthen Santiago as the gateway to South America, with TAM joining oneworld in 2014.
»Reafrming our partnership with South African Airways, opening up southern Africa via Johannesburg.
Qantas Transformation delivering benets
Qantas Transformation initiatives delivered benets of $428 million in 2012/2013. This is made up of $171 million from strategic
initiatives and additional benets of $257 million through operational initiatives to offset the impact of ination and improve unit cost.
The Qantas Transformation strategic initiatives delivered in 2012/2013 include:
»The exit of loss making routes.
»The completion of the reconguration program19 to improve product quality, consistency and eet economics of 12 A380-800
andnine B747-400 aircraft.
»The consolidation of engineering and catering facilities.
The Qantas transformation is expected to deliver cumulative strategic benets to Underlying EBIT of $300 million in 2013/2014.
Theaim is for Qantas International to be protable in 2014/2015 and Qantas Brands to sustainably achieve cost of capital in
the long-term.
Growing Qantas Loyalty
Qantas Loyalty is generating its next wave of growth through the launch of Qantas Cash, loyalty services, the Qantas Frequent
FlyerToolbar and continues to leverage its existing loyalty program expertise through management of new client programs.
Building Jetstar in Asia
Jetstar has positioned its highly recognised brand to benet from growth opportunities in the Asian market with the successful
launch of Jetstar Japan, the development of Jetstar Hong Kong20 and the completion of Jetstar Pacic’s eet renewal21. In March
2013 the Australian Competition and Consumer Commission granted approval to coordinate networks between the Asian-based
Jetstar-branded airlines.
Jetstar Japan successfully launched in July 2012 with investors Mitsubishi, Japan Airlines and Century Tokyo Leasing Corporation.
Since launch, it has carried 2 million passengers and is now the largest domestic low-cost carrier operating in Japan22. The eet
has grown to 13 aircraft and is expected to grow to 24 aircraft in the short to medium term. All of Jetstar Japan’s aircraft have been
sourced by Qantas, demonstrating the exibility of the Group’s eet plan in supporting the Asian strategy.
Jetstar Hong Kong’s application for regulatory approval is underway with China Eastern Airlines and the new local investor
Shun Tak Holdings. The airline has built up a local management team, started pilot and cabin crew recruitment as well as
advanced its AirOperators Certicate application. Regulatory approval is expected by end of calendar year 2013. The airline
is planned to growup to 18 aircraft within the medium term.
MATERIAL BUSINESS RISKS23
The aviation industry is subject to a number of inherent risks. These include, but are not limited to, exposure to changes in
economicconditions, signicant aviation incidents, changes in government regulations, fuel and foreign exchange volatility
andother exogenous events such as natural disasters, war or epidemic.
19 Last aircraft completed in July 2013.
20 Subject to regulatory approval.
21 Completed eet transformation replacing its 737-400 eet with A320-200 aircraft 18 January 2013.
22 Based on eet size and domestic ASKs as at 22 August 2013, compared to Peach and Air Asia Japan.
23 An expanded discussion of material business risks has been provided following the introduction of ASIC Regulatory Guide 247 on Presentation of an Operating and Financial Review
inMarch 2013.