Qantas 2014 Annual Report Download - page 6

Qantas’ Underlying Loss Before Tax of
$646 million was driven by the extremely
challenging operating conditions we
faced in 2013/2014. Demand was weak,
with cautious consumer spending and
lower business activity, especially in the
mining and government sectors.
The Statutory Loss After Tax of
$2.8billion reflects the costs associated
with the $2 billion accelerated Qantas
Transformation program – including
redundancies and fleet restructuring
costs – and the $2.6 billion non-cash
writedown of the Qantas International
fleet. This writedown was required by
accounting standards after our decision
to create a new holding structure and
corporate entity for Qantas International.
These numbers are confronting. But they
represent the year that is past.
Building Momentum
With our accelerated Qantas
Transformation program we are already
emerging as a leaner, more focused and
more sustainable Qantas Group.
Group comparable unit costs were
reduced by 3 per cent over the year, with
a 2 per cent reduction in the first half and
4 per cent in the second half.
Transformation benefits in 2013/2014
totalled $440 million, including
$204million in second-half benefits from
the accelerated Qantas Transformation
program. A further $900 million of
projects are in the implementation phase,
with more than $600 million of benefits to
be realised in 2014/2015.
There is a clear easing of both
international and domestic capacity
growth, which will stabilise the operating
environment.
We have now come through the worst and
we expect to report an Underlying Profit
Before Tax for the first half of 2014/2015,
subject to events beyond our control.
Customer Focus
While we are aggressively reducing costs,
we have made a deliberate choice to keep
investing in the core fleet, product and
service that make the Qantas and Jetstar
brands so strong and give us a yield
premium over the competition.
These investments include:
– New lounges in Singapore, Hong Kong
and Los Angeles;
– The upgrade of our entire Airbus A330
and Boeing 737-800 fleets;
– The ongoing introduction of the B787
Dreamliner on Jetstar international
routes;
– Innovative new Qantas Loyalty
initiatives, such as Qantas Cash and
the Aquire scheme for small-to-
medium enterprises; and
– A focus on on-time performance that
has seen Qantas Domestic lead the
competition for 18 months in a row.
Qantas and Jetstar received record
customer satisfaction and advocacy
scores in 2013/2014, and our customer
focus has been recognised with a string
of awards and accolades.
Looking Forward
The accelerated Qantas Transformation
program is based on a clear vision for the
Qantas Group as a 21st century aviation
business.
Our structure is now clearly aligned with
our strategy. As we move forward, we
will continue to reduce costs in Qantas
International and Qantas Domestic,
while lifting service to new levels. We will
realise the substantial value that exists
across the Jetstar Group of airlines, with
its extensive presence in the world’s
fastest-growing aviation markets. And
we will keep investing and innovating with
Qantas Loyalty, which continues to offer
major profitable growth opportunities.
Our people have responded to the
challenges we face with courage and
commitment, and it is thanks to their
efforts that we see a brighter future.
As we move forward,
we will continue to
reduce costs
in Qantas International
and Qantas Domestic,
as we lift service
to new levels.
CEO’S REPORT1
1 For explanations of non-statutory measures, see the Review of Operations section in this report.
2 Total annual cash benefit, realised one year after completion of initiative.
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QANTAS ANNUAL REPORT 2014