Qantas 2014 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2014 Qantas annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

44
QANTAS ANNUAL REPORT 2014
DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2014
REMUNERATION REPORT (AUDITED)
COVER LETTER TO THE REMUNERATION REPORT
Dear Shareholder,
Qantas is pleased to present its Remuneration Report for 2013/2014, which sets out remuneration information for the Chief
Executive Officer (CEO), direct reports to the CEO (Executive Management) and Non-Executive Directors.
This was an extremely challenging year for the aviation industry generally and for Qantas in particular. In addition to ongoing
record high fuel prices, the trend of intense competitive pressure and high capacity growth continued in both the international
and domestic markets, affecting earnings for all carriers.
In response to these fundamental changes in the market, the Group announced and began delivering an accelerated
transformation program, targeting $2 billion in cost reduction over three years.
The Group’s 2013/2014 financial results and remuneration outcomes reflect the challenging operating environment and the costs
associated with large-scale transformation. However, they should be seen in the context of a year in which Qantas took hard but
necessary decisions to strengthen its cost base and competitive position, looking towards the Group’s long-term future.
2013/2014 Remuneration Outcomes
The Board recognises that Management and all employees have performed very well in accelerating the transformation
agenda, in delivering record operational performance and in achieving high levels of customer satisfaction across all areas of
the business. Awards under the annual incentive would normally be determined based on performance against a “scorecard”
of financial and non-financial measures. Under the default design of the annual incentive, the performance against the non-
financial measures could trigger a partial award. However for 2013/2014, in light of the overall financial performance of the
Qantas Group, this would not have been appropriate and therefore the Board used its discretion to determine that no annual
incentives be awarded.
The Board has ensured that the pay outcomes for the Executive team are closely aligned with the financial performance for
theyear, as follows:
–A freeze on executive pay was in place throughout the year
–No awards were made under the annual incentive
–There was no vesting of awards under the Long Term Incentive Plan (LTIP)
In addition, the CEO elected to forego five per cent of his Base Pay and the Chairman elected to forego five per cent of his
Directors’ fee (both from 1 January 2014). For other Directors, their fees were increased by three per cent from 1 July 2013 (the
first fee increase since 1 July 2010). From 1 January 2014, they also elected to forego five per cent of their fees.
2014/2015 Executive Remuneration Framework
As part of a review of the Executive Remuneration Framework, the Board has changed the “pay mix” that will apply for
Executives for 2014/2015. This involves changing the relative weighting of incentive plan opportunities for Executives, with a
decrease in the weighting towards annual incentives and an increase in the weighting towards long-term incentives. This is a
pay mix change only and there is no increase in the “at target” pay for Executives.
In addition, participation in the 2015–2017 LTIP, which normally only applies to Senior Executives, will be extended to the
broader Management population. This will involve no increase to “at target” pay for each manager, as each manager’s LTIP
opportunity will be offset by a decrease in their annual incentive opportunity for 2014/2015.
This change in pay mix for 2014/2015 is a one-off change that aligns the entire Management team with the immediate priorities
of the transformation agenda, including the achievement of $2 billion in cost reductions over the next three years. The
performance period under the 2015–2017 LTIP is for this same three year period.
The Board remains committed to a remuneration framework that is aligned to the Qantas Group strategy, is performance
based, motivates and appropriately rewards Management, meets shareholders’ requirements and encourages decision
making that is focused on the longer-term.
Paul Rayner
Chairman, Remuneration Committee