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Tuesday, 30 May 2023

Qantas Unveils Details of Group Strategy Through 2030

(30/05/23)  Qantas has unveiled details of its strategy through to 2030, as the Australian carrier moves from recovery to renewal and growth.

At its first Investor Strategy Day since the COVID19 pandemic, members of the Group’s Management Committee outlined long-term plans across the key categories of customer experience, sustainability and people.

The group also disclosed plans for maintaining FY24 margin targets across its flying businesses and announced new earning targets through to FY30 for Qantas Loyalty and Project Sunrise.

Vanessa Hudson, Group CFO and CEO-designate, said, “We’re confident in reaching our FY24 margin targets and we’ve set some ambitious but achievable earnings goals beyond that, because we think ambition is key to long-term performance. All of the extra activity we have planned has to be underpinned by a focus on sustainability, particularly decarbonisation. We’re determined to be a leader in this space and that’s supported by the new commitments we’ve made today, as well as calling for more action industry-wide in the form of a sustainable aviation fuel mandate. Our long-term focus remains delivering for customers, employees and shareholders, and making sure we have a strong business that generates strong returns is the best way to enable that.”

Qantas A330s at Changi Airport in Singapore. Picture by Steven Howard of TravelNewsAsia.com Click to enlarge.
Qantas A330s at Changi Airport in Singapore. Picture by Steven Howard of TravelNewsAsia.com

Key highlights include:

- Detail on the ‘right aircraft, right route’ approach that underpins the current network and supports new next-generation fleet arriving from this year onwards (A220, B787 and A320-family).

- Plans for an overhauled Qantas app, launching towards the end of 2023, that will give customers more control over their bookings, introduction of baggage tracking and better integration of Qantas Loyalty.

- Changes to Qantas’ boarding process from October 2023 to improve on-time performance and to better recognise tiered Frequent Flyers, in response to customer feedback.

- Plans to significantly expand the current range of redemption options for Frequent Flyers.

- Continued investment in low fares, particularly by Jetstar, with around 10 million base fares under $100 offered this calendar year and 5 million reward seats via Qantas Loyalty.

- Launching a $400 million Climate Fund to accelerate progress towards the group’s sustainability targets. This includes a further $110 million investment in addition to the $290 million (comprised of joint funding by Qantas and Airbus) already committed. The fund will focus on stimulating production of Sustainable Aviation Fuel (SAF), high integrity offsets that deliver dividends for nature and carbon removal technology, as well as technologies that deliver on efficiency and waste reduction targets.

- Calling for the Australian Government to introduce a SAF blending mandate, similar to steps taken in other jurisdictions including the UK, Europe, US and Japan to help kickstart local production. The UK, Europe and Japan have set or proposed SAF mandates of between 5 and 10 per cent to be reached by the end of the decade and the US has set a 2030 production target of 3 billion gallons per year.

- Sharing benefits of recovery with all employees – including ~$11,500 in bonuses in FY23-24 plus ongoing improvement to staff travel benefits.

- Plans to grow by creating up to 8,500 operational roles in Australia by 2033 to support new aircraft, additional flying.

- Training and promotional opportunities unlocked by fleet growth, including via Pilot Academy and Engineering Academy. The group will deliver around 2 million training hours this year alone.

- Restoring ‘employer of choice’ status as the industry recovers. Over 160,000 applications received for 7,000 jobs across the group; attrition rates have declined from a peak of 18 per cent in December 2021 to an average of 5 per cent across the group (to as low as 2 per cent for pilots).

- Through cost and revenue improvements, sustain margins of 18% for Qantas Domestic, 15% for Jetstar Domestic from FY24 onwards.

- Qantas International margins to grow from ~5% pre-COVID to more than 8% in FY24, and up to 10-12% with Project Sunrise and evolution of freight.

- Through structural changes to eCommerce market and Qantas Freight business, targeting $250m in annual earnings contribution from FY30 onwards compared with FY19. Of this $250m p.a., $150m p.a. has already materialised, growing to another $100m p.a. by FY30.

- Introduction of A350 growth aircraft and Project Sunrise flying expected to deliver significant incremental earnings increase, reaching an estimated $400+ million EBIT per annum in first full year of having all 12 aircraft in service.

- Qantas Loyalty to reach its FY24 EBIT target of $500m-$600m, increasing to $800m-$1,000m by FY30. Key profit drivers will be continued expansion into hotels and holidays, more partnerships including ‘points burn’ opportunities with major retailers, diversification in financial services and growth of the existing Qantas Business Rewards program for SMEs.

- Targeting $300m p.a. in ongoing transformation, driven largely by new technology enabling better efficiency. This includes fleet renewal, better disruption management, and schedule and workforce planning.

“This is a structurally different business than it was before COVID, operating in markets that have also changed. We’re very well placed to take advantage of the opportunities that creates and the detail we’ve released today shows our strategy to do it,” said Qantas Group CEO, Alan Joyce. “New technology is central to our plan and the next-generation aircraft that have started arriving will transform our network over the next few years. We’ll be able to serve our customers better, reduce our cost base through lower running costs and carve out some new competitive advantages. Our revenue projections and track record for ongoing transformation show we can invest heavily in people and technology at the same time as generating strong returns for shareholders. That’s exactly the kind of national carrier we want to be.”

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