Q A N T A S A N N U A L R E P O R T 2 0 2 0
Recognising our 100-year history
From humble beginnings to becoming the national carrier,
Qantas has been part of Australia for 100 years in 2020.
While times have changed, the Qantas spirit remains the
same — and we’ll continue to close the tyranny of distance
for all the communities we serve.
In November 1920, World War One veterans Hudson Fysh
(left) and Paul McGinness (right) envisaged an air service
connecting Australia to the world, forming Queensland and
Northern Territory Aerial Services Ltd (Q.A.N.T.A.S) at Winton.
By 1947, the first Qantas Constellations were flying services from Sydney to
London — on what is still known as the Kangaroo Route — stopping at Darwin,
Singapore, Calcutta, Karachi, Cairo, Castel Benito and Rome, finishing in London.
In 1921, operations moved to Longreach with the first Qantas aircraft — an Avro 504K built in Sydney. QANTAS ANNUAL REPORT 2020
Contents
Five-year History
Chairman’s Report
CEO’s Report
Board of Directors
Review of Operations
Corporate Governance Statement
Directors’ Report
Financial Report
Shareholder Information
Financial Calendar and Additional Information
03
04
06
08
12
23
25
57
133
134
Arrival of the first international repatriation
flight from Wuhan, China in February 2020.
0101
Financial Snapshot1
$3.5 billion
CASH BALANCE
$1.1 billion
OPERATING CASH FLOW
$4.5 billion
TOTAL LIQUIDIT Y
$4.7 billion
NET DEBT
(net debt range: $4.5 to $5.6 billion)
Other Highlights
100+
INTERNATIONAL
REPATRIATION FLIGHTS
OPERATED ON BEHALF
OF AUSTRALIAN
GOVERNMENT
150,000
JETSTAR FARES
SOLD IN THREE DAYS
DURING BRIEF BORDER
REOPENING IN JUNE
91%
QANTAS LOYALTY
PROFITABILIT Y MAINTAINED
VS FY19 DESPITE COVID-19
1 Refer to the Review of Operations section in the Qantas Annual Report 2020 for definitions and explanations
of non-statutory measures. Unless otherwise stated, amounts are reported on an underlying basis.
02
QANTAS ANNUAL REPORT 2020 Five-year History1
FINANCIAL PERFORMANCE
Revenue and Other Income
Statutory (Loss)/Profit Before Tax
Statutory (Loss)/Profit After Tax
Underlying Profit Before Tax2
Underlying Earnings Before
Interest and Tax (EBIT)
Operating Margin
Underlying Earnings
per Share2
Statutory Earnings
per Share
Return on Invested Capital (ROIC)2
Share Price at 30 June
Dividend per Share4
Cash flow from operations
Net free cash flow2
Net on balance sheet debt
Net Debt2
Net capital expenditure2
Unit Revenue (RASK)2
Total unit cost2,3
Ex-fuel unit cost2,3
STATISTICS
Available Seat
Kilometres (ASKs)1
Revenue Passenger
Kilometres (RPKs)1
Passengers carried
Revenue Seat Factor
Aircraft at end of period
2020
14,257
(2,708)
(1,964)
124
395
2.8
5.9
(129.6)
5.8
3.78
–
1,083
(488)
3,173
4,734
1,571
8.99
(8.87)
(4.41)
2019
(restated)
2018
2017
2016
17,966
17,128
16,057
16,200
1,192
840
1,326
1,608
9.0
57.3
51.5
19.2
5.40
25
3,164
1,601
2,980
4,710
1,563
8.85
(7.97)
(4.23)
1,352
953
1,565
1,747
10.2
63.0
54.4
21.4
6.16
17
3,413
1,442
3,054
4,903
1,971
8.40
(7.37)
(5.37)
1,181
853
1,401
1,424
1,029
1,532
1,590
1,751
9.9
54.6
46.0
20.1
5.72
14
2,704
1,309
3,062
5,212
1,534
8.00
(7.07)
(5.03)
10.8
53.1
49.4
22.7
2.82
7
2,819
1,674
2,880
5,646
1,032
8.08
(7.05)
(4.79)
$M
$M
$M
$M
$M
%
cents
per share
cents
per share
%
$
cents
per share
$M
$M
$M
$M
$M
c/ASK
c/ASK
c/ASK
M
M
‘000
%
2020
2019
2018
2017
2016
111,870
151,430
152,428
150,323
148,691
92,027
127,492
126,814
121,178
119,054
40,475
55,813
55,273
53,659
52,681
82.3
314
84.2
314
83.2
313
80.6
309
80.1
303
1 2019 has been restated for the impact of the adoption of AASB 16 Leases and the IFRIC agenda decision in relation to fair value hedges.
2018 has been restated for the impact of AASB 15 Revenue from Contracts with Customers, however 2016 and 2017 continue to be reported
under previous accounting standards.
2 For non-statutory measures refer to the definitions in the Review of Operations.
3 The comparative period has been adjusted for foreign exchange movements to make it comparable to the current year. 2019 and 2020
reflect the foreign exchange rates as presented in the 2020 Annual Report. The same applies for 2018, 2017, 2016 which have been adjusted
for foreign exchange in line with the 2019, 2018 and 2017 Annual Report respectively. 2019 and 2020 have also been adjusted for the impact
of the sale of domestic terminal leases and depreciation and amortisation.
4 Dividend per share is calculated as the interim and final dividend in relation to the relevant financial year.
03
QANTAS ANNUAL REPORT 2020 Chairman’s Report
“Aviation is all about connecting
people and places, which is exactly
what the public health response to
COVID-19 is designed to avoid.”
The Qantas Group has seen many
challenges in its 100 years, but
none with the huge impact of the
COVID-19 crisis.
Aviation is all about connecting people
and places, which is exactly what the
public health response to COVID-19 is
designed to avoid. The impact this is
having on the global travel industry —
and on the Qantas Group — is clear.
In a matter of weeks from March
2020, we cancelled dividends,
grounded most of our aircraft and
stood down the majority of our people.
Annual executive bonuses were
cancelled, and the Board and Group
Management Committee showed
important leadership by taking no
salary for several months, then a
reduced salary for months after that.
Our revenue was $4 billion lower in
FY20 compared with the prior year,
with most of that fall happening
within three months. Passenger
numbers in that last quarter were
down 98 per cent.
With such a precipitous drop, it was
critical that we moved quickly to
protect our balance sheet. And, by
extension, to protect the future of
the company.
Sadly, at least 6,000 Qantas Group
employees will lose their jobs as a
result of this crisis. Thousands more
will be stood down for an extended
period, due to what IATA expects
could be several years of reduced
travel demand.
A large number of our people have
spent their whole careers at Qantas
and Jetstar. Generations of families
work here — sometimes, side-by-
side. Many describe the airline as
an extended family. So, while we
know job cuts and stand downs are
absolutely necessary, we also know
there is a significant human impact
that is deeply regrettable.
04
QANTAS ANNUAL REPORT 2020 In managing this crisis, we’re focused
on preserving as many jobs as
possible in the long term. That means
surviving through a period of far less
revenue and setting up the Group for
recovery in what we know will be a
different market post-COVID.
large transformation programs
in trying times. Alan Joyce and
his management team led one of
the most successful corporate
turnarounds in 2014 and he has
committed to stay on as Group CEO
to guide the post-COVID recovery.
People at Qantas often say the
national carrier shines brightest
when faced with a crisis. This year,
amidst all the challenges, we
operated over 100 overseas flights
on behalf of the Federal Government
to help bring Australians home —
including from several COVID hotspots
in the early stages of the pandemic.
Domestically, Qantas, QantasLink
and Jetstar helped run a network that
kept critical transport links across
Australia open.
In June, we announced a three-
year recovery plan — the Next 100
— to achieve that. It will carve out
$15 billion in costs, mostly through
reduced activity, and deliver $1 billion
a year in annual savings from FY23.
To enable the plan, we raised
$1.4 billion in an equity raising that
was strongly supported by major
shareholders in particular.
This support has two major
foundations. The first is the
fundamental importance of air
transport in a country as big as
Australia, and the established
position Qantas and Jetstar have
in that market. And the second
is a track record for delivering
On behalf of the Board, I’d like to
extend our sincere thanks to Alan
and the whole team who have
worked incredibly hard under
extraordinary circumstances to
guide this great company.
The challenges we face in FY21 are
substantial but we have plenty of
reasons to be optimistic. We know we
have the strength and the strategy
to get through this crisis, and to
deliver for our customers, people and
shareholders for many years to come.
Richard Goyder AO
05
QANTAS ANNUAL REPORT 2020 CEO’s Report
“This company was founded 100 years
ago in the wake of a world war and a
devastating pandemic. We know that
things will improve, and that the Qantas
Group will thrive when it does.”
This year was one of sharp contrasts.
For most of FY20, the Qantas Group
was focused on growth. We opened
our pilot academy in Queensland,
announced new routes and were
actively hiring new people. We
had completed historic non-stop
research flights from New York and
London direct to Sydney, and we
were preparing to order the aircraft
required to fly them commercially for
Project Sunrise.
Then came the worst trading
conditions in a century.
It was a sudden reversal of fortune
that has been very hard for our
people, customers and shareholders.
But the depth of the contrast points
to the fact we entered the COVID-19
crisis in a very strong position.
Perhaps the strongest of any airline
in the world.
After years of record profits, our
balance sheet is strong. That enabled
us to raise over $2 billion in debt in
addition to a $1.4 billion equity raising,
giving us the extra liquidity to make it
through to the other side of the crisis.
The Group’s strengths are also clear in
its FY20 performance.
Despite a 21 per cent drop in revenue,
the Group still posted a $124 million
Underlying Profit Before Tax. That was
largely due to our first half result —
which mostly unwound in the second
half — and the rapid action to control
costs as travel demand collapsed.
There were some bright spots in our
portfolio. Qantas Loyalty achieved
91 per cent of its profit from last year
and set a record level of member
satisfaction in the last, and most
challenging, quarter. Qantas Freight
has benefited from the increasing
shift to e-commerce. And our charter
flying for resources companies
performed strongly.
06
QANTAS ANNUAL REPORT 2020 This company was founded 100 years
ago in the wake of a world war and
a devastating pandemic. We know
that things will improve, and that the
Qantas Group will thrive when it does.
Alan Joyce AC
Support from the Australian
Government — for the aviation
industry and for the broader economy
— was a key feature of FY20. In
particular, JobKeeper provided a
crucial safety net for the thousands
of our people on stand down, and
continues to do so.
The impact of this crisis means the
Qantas Group will be smaller for
some time to come. The markets we
operate in will be different. And we’ll
need to rebuild our balance sheet.
For not the first time in our history,
we need to reinvent how we do things
— which will result in more difficult
decisions to ultimately protect the
company’s future.
Seeing so many people leave this
organisation, and many more stood
down from the jobs they love, has
been the hardest part of this crisis.
We continue to offer them as much
support as we can. One positive is the
feedback from other companies that
have offered secondary employment,
who describe the incredible
professionalism and resilience of
Qantas and Jetstar people. That spirit
runs throughout the Group and it’s
what will help us recover.
We have received incredible support
from our partners, suppliers and
customers. And also from the
communities we look forward to
getting back to serving in the future.
We thank them sincerely.
07
QANTAS ANNUAL REPORT 2020 Board of Directors
RICHARD GOYDER AO
ALAN JOYCE AC
BCom, FAICD
Chairman and Independent
Non-Executive Director
BApplSc (Phy) (Math) (Hons),
MSc (MgtSc), MA, FRAeS, FTSE
Chief Executive Officer
Richard Goyder was appointed to the
Qantas Board in November 2017 and as
Chairman in October 2018.
Alan Joyce was appointed Chief
Executive Officer and Managing
Director of Qantas in November 2008.
He is Chairman of the Nominations
Committee.
He is a Member of the Safety, Health,
Environment and Security Committee.
Mr Goyder is Chairman of Woodside
Petroleum Limited, the Australian
Football League Commission,
JDRF Australia, the West Australian
Symphony Orchestra, and the Channel
7 Telethon Trust. He is an honorary
Member of the Business Council of
Australia and a Fellow of the AICD.
Mr Goyder was the Managing Director
and CEO of Wesfarmers Limited from
July 2005 to November 2017. He also
previously held the roles of Finance
Director between 2002 and 2004, and
Deputy Managing Director and CFO
between 2004 and 2005.
Mr Goyder was also formerly Chairman
of the Australian B20 (the key business
advisory body to the World Economic
Forum that includes business leaders
from all G20 economies).
Age: 60
Mr Joyce is a Director of the Business
Council of Australia, a Member of the
International Air Transport Association’s
Board of Governors, having served
as Chairman from 2012 to 2013
and a Director of the Museum of
Contemporary Art Australia. He is also
a Director of a number of controlled
entities of the Qantas Group.
Mr Joyce was the Chief Executive
Officer of Jetstar from 2003 to 2008.
Before that, he spent over 15 years
in leadership positions with Qantas,
Ansett and Aer Lingus.
At both Qantas and Ansett, he led the
network planning, schedules planning
and network strategy functions. Mr
Joyce spent eight years at Aer Lingus,
where he held roles in sales, marketing,
IT, network planning, operations
research, revenue management and
fleet planning.
Age: 54
08
QANTAS ANNUAL REPORT 2020 Board of Directors continued
MAXINE BRENNER
JACQUELINE HEY
BELINDA HUTCHINSON AC
BA, LLB
BCom, Grad Cert (Mgmt), GAICD
BEc, FCA, FAICD
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Maxine Brenner was appointed to the
Qantas Board in August 2013.
Jacqueline Hey was appointed to the
Qantas Board in August 2013.
Belinda Hutchinson was appointed to
the Qantas Board in April 2018.
She is a Member of the Remuneration
Committee and the Audit Committee.
She is a Member of the Audit
Committee.
Ms Hey is Chair of Bendigo and
Adelaide Bank Limited, a Director of
AGL Energy Limited and Chairman
of its Safety, Customer & Corporate
Responsibility Committee. She is also a
Director of Cricket Australia.
Ms Hey was formerly a Director of the
Australian Foundation Investment
Company Limited from 2013 to 2019,
Melbourne Business School from 2013
to 2018, the Special Broadcasting
Service from 2011 to 2016 and a
Member of the ASIC Directory Advisory
Panel from 2013 to 2016.
Between 2004 and 2010, Ms Hey was
Managing Director of various Ericsson
entities in Australia and New Zealand,
the United Kingdom and Ireland, and
the Middle East. Her executive career
with Ericsson spanned more than
20 years in which she held finance,
marketing, sales and leadership roles.
Age: 54
Ms Brenner is a Director of Origin
Energy Limited, Orica Limited and
Growthpoint Properties Australia
Limited. She is a Member of the Council
of the University of New South Wales.
Ms Brenner was formerly a Managing
Director of Investment Banking at
Investec Bank (Australia) Limited. She
has extensive experience in corporate
advisory work, particularly in relation
to mergers and acquisitions, corporate
restructures and general corporate
activity. She also practised as a lawyer
with Freehill Hollingdale & Page (now
Herbert Smith Freehills), where she
specialised in corporate work, and
spent several years as a lecturer in the
Faculty of Law at both the University of
NSW and the University of Sydney.
Ms Brenner was also formerly the
Deputy Chairman of the Federal
Airports Corporation and a Director
of Neverfail Springwater Limited,
Bulmer Australia Limited and Treasury
Corporation of NSW. She also served
as a Member of the Australian
Government’s Takeovers Panel.
Age: 58
She is a Member of the Audit
Committee and the Safety, Health,
Environment and Security Committee.
Ms Hutchinson is currently Chancellor
of the University of Sydney, Chairman
of the Future Generation Global
Investment Company and Chairman of
Thales Australia.
She has over 30 years’ experience
in the financial services sector,
working in senior roles at Citibank
and Macquarie Group. Ms Hutchinson
also has extensive board experience.
She was formerly Chairman of QBE
Insurance Limited, a Director of Telstra
Corporation Limited, Coles Group
Limited, Crane Group Limited, Energy
Australia Limited, TAB Limited, Snowy
Hydro Trading Limited, Sydney Water
and AGL Energy.
Ms Hutchinson was awarded a
Companion of the Order of Australia
(AC) in 2020 in recognition of her
service to business, tertiary education
and scientific research, and for her
philanthropic endeavours to address
social disadvantage.
Age: 67
09
QANTAS ANNUAL REPORT 2020
Board of Directors continued
MICHAEL L’ESTRANGE AO
PAUL RAYNER
BA (Syd), MA (Oxon)
BEc, MAdmin, FAICD
TODD SAMPSON
MBA, BA(Hons)
Independent Non-Executive Director
Independent Non-Executive Director
Paul Rayner was appointed to the
Qantas Board in July 2008.
Todd Sampson was appointed to the
Qantas Board in February 2015.
He is a Member of the Remuneration
Committee.
Mr Sampson was Executive Chairman
of the Leo Burnett Group from
September 2015 to January 2017, and
National Chief Executive Officer from
2008 to 2015. He was also a Director
of Fairfax Media Limited from 2014 to
2018.
Mr Sampson has over 20 years’
experience across marketing,
communication, new media and digital
transformation. He has held senior
leadership and strategy roles for a
number of leading communication
companies in Australia and overseas,
including as Managing Partner for
D’Arcy, Strategy Director for The
Campaign Palace and Head of Strategy
for DDB Needham Worldwide.
Age: 50
He is Chairman of the Remuneration
Committee and a Member of the
Nominations Committee.
Mr Rayner is Chairman of Treasury Wine
Estates Limited, a Director of Boral
Limited and Chairman of its Audit and
Risk Committee, and a Director of the
Murdoch Children’s Research Institute.
Mr Rayner was formerly a Director of
Centrica plc from 2004 to 2014 and
Chairman of its Audit Committee from
2004 to 2013. From 2002 to 2008,
Mr Rayner was Finance Director of
British American Tobacco plc based in
London. Mr Rayner joined Rothmans
Holdings Limited in 1991 as its Chief
Financial Officer and held other senior
executive positions within the Group,
including Chief Operating Officer of
British American Tobacco Australasia
Limited from 1999 to 2001.
Previously, Mr Rayner worked for 17
years in various finance and project
roles with General Electric, Rank
Industries and the Elders IXL Group.
Age: 66
Independent Non-Executive Director
Michael L’Estrange was appointed to
the Qantas Board in April 2016.
He is a Member of the Remuneration
Committee and the Safety, Health,
Environment and Security Committee.
Mr L’Estrange was Head of the National
Security College at the Australian
National University from 2009 to 2015.
Prior to this, he was the Secretary of
the Department of Foreign Affairs and
Trade for almost five years and the
Australian High Commissioner to the
UK between 2000 and 2005. He served
as Secretary to Cabinet and was Head
of the Cabinet Policy Unit from 1996 for
more than four years and, prior to that,
as Executive Director of the Menzies
Research Centre.
He has been a Non-Executive Director
of Rio Tinto plc and Rio Tinto Limited
and a Director of the University of Notre
Dame, Australia since 2014. He was
appointed Deputy Chancellor of the
University of Notre Dame, Australia in
2017.
Mr L’Estrange studied at the University
of Sydney and later as a Rhodes
Scholar at Oxford University, where he
graduated with a Master of Arts with
First Class Honours.
Age: 67
10
QANTAS ANNUAL REPORT 2020 Board of Directors continued
ANTONY TYLER
BA (Jurisprudence)
BARBARA WARD AM
BEc, MPolEc
Independent Non-Executive Director
Independent Non-Executive Director
Antony Tyler was appointed to the
Qantas Board in October 2018.
Barbara Ward was appointed to the
Qantas Board in June 2008.
He is Chairman of the Safety, Health,
Environment and Security Committee
and a Member of the Nominations
Committee.
Mr Tyler was Director General and
Chief Executive of the International
Air Transport Association from 2011 to
2016. Prior to this, Mr Tyler spent over
30 years with Cathay Pacific Airways
Limited. His career includes several
management and executive roles
in Hong Kong, the UK, Italy, Japan,
Canada, the Philippines and Australia
before serving in the role of Chief
Executive Officer from 2007 to 2011.
He is a Non-Executive Director of
Bombardier Inc, BOC Aviation Limited
and Trans Maldivian Airways Limited
and a Fellow of the Royal Aeronautical
Society.
Age: 65
She is Chairman of the Audit
Committee, a Member of the Safety,
Health, Environment and Security
Committee and a Member of the
Nominations Committee.
Ms Ward is a Director of Ampol Limited
(formerly Caltex Australia Limited) and
a number of Brookfield Multiplex Group
companies.
She was formerly a Director of the
Commonwealth Bank of Australia, Lion
Nathan Limited, Multiplex Limited, Data
Advantage Limited, O’Connell Street
Associates Pty Ltd, Allco Finance Group
Limited, Rail Infrastructure Corporation,
Delta Electricity, Ausgrid, Endeavour
Energy and Essential Energy. She was
also Chairman of Country Energy,
NorthPower and HWW Limited, a Board
Member of Allens Arthur Robinson,
the Sydney Opera House Trust and the
Sydney Children’s Hospital Foundation,
and on the Advisory Board of LEK
Consulting.
Ms Ward was Chief Executive Officer
of Ansett Worldwide Aviation Services
from 1993 to 1998. Before that, Ms Ward
held various positions at TNT Limited,
including General Manager Finance,
and also served as a Senior Ministerial
Advisor to The Hon PJ Keating.
Age: 66
11
QANTAS ANNUAL REPORT 2020 Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations
For the year ended 30 June 2020
RESULTS HIGHLIGHTS
The Qantas Group applied AASB 16 Leases from 1 July 2019. The results for the 12 months ended 30 June 2019 have been restated
on the same basis for comparison purposes.
The Qantas Group reported an Underlying Profit Before Tax1 (Underlying PBT) of $124 million for the 12 months ended 30 June 2020,
a decrease of $1,202 million from the full year 2018/19 primarily due to the impact of COVID-19 in the second half. The Group’s
Statutory Loss Before Tax of $(2,708) million was down $3,900 million from the prior year. The Statutory Loss Before Tax for this
financial year included a net $2,832 million of costs, mostly non-cash, which were not included in Underlying PBT. Items outside of
Underlying PBT included asset impairments including the A380 fleet, Recovery Plan restructuring costs including redundancies, de-
designated hedging and costs such as those associated with transformation and discretionary non-executive employee bonuses. This
compares with $134 million of net costs that were not included in Underlying PBT in the prior year.
In the first half of 2019/20 the Qantas Group reported an Underlying PBT of $771 million, a decrease of only $4 million from the prior
year, as revenue strength offset temporary headwinds totalling $119 million including the impact of protests in Hong Kong, subdued
demand in global freight markets and other increases in costs associated with foreign exchange rates on non-fuel costs.
During the second half of 2019/20 the measures taken by governments across the world to slow the spread of COVID-19 severely
impacted airlines, as travel restrictions and border closures were imposed. Because of these measures, the Qantas Group suffered a
$3,967 million decline in total revenue as both domestic and international air travel was virtually halted in the fourth quarter. The Group
quickly shifted its focus to preserving liquidity, partially mitigating the 82 per cent fall in Total Revenue in the fourth quarter through a 75
per cent reduction in net operating expenses2, a good proxy for the Group’s operating cash costs. Due to the action taken, the Group
was able to reduce the combined impact of COVID-19 on the Group earnings for the 2019/20 financial year to $1,224 million3.
Despite the grounding of most of the domestic fleet in the fourth quarter, Group Domestic4 remained profitable, contributing Underlying
EBIT of $285 million to the Group’s overall result. The international businesses5 fell into an Underlying EBIT loss of $82 million as the
record result from the Freight business could not offset the losses from the passenger airlines which were driven by international border
closures.
Qantas Loyalty maintained its value proposition for its members and partners despite the grounding of the Group’s airlines and was the
largest contributor to the Group’s earnings.
The Financial metrics for the 2019/20 financial year are:
– Statutory Earnings Per Share was a loss of 129.6 cents per share, reflecting the Statutory Loss and the reduction in average shares
on issue from the off-market share buy-back conducted in the first half
– Return on Invested Capital (ROIC)6 of 5.8 per cent
– Operating cash flow of $1,083 million.
At the end of the first half of 2019/20, Net Debt7 was towards the bottom of the target range, the Group retained strong liquidity and had
an unencumbered aircraft asset base of $4.9 billion8. This put the Group in a strong financial position to weather the impacts of the
COVID-19 pandemic.
In the second half, the Group’s focus turned to safely hibernating the airlines, cutting costs and preserving liquidity. The Group’s
variable cost base adjusted as activity declined, with a commensurate reduction in fuel consumption costs, aircraft operating variable
and manpower costs as approximately 25,000 employees were stood down. Fixed costs and depreciation and amortisation non-cash
charges continued to impact the Group’s profitability.
1. Underlying Profit Before Tax (Underlying PBT) is the primary reporting measure used by the Qantas Group’s Chief Operating Decision-Making bodies (CODM), being the Chief
Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Group. The primary reporting measure of the
Qantas Domestic, Qantas International, Jetstar Group and Qantas Loyalty operating segments is Underlying Earnings Before Net Finance Costs and Income Tax Expense
(Underlying EBIT). The primary reporting measure of the Corporate segment is Underlying PBT as net finance costs are managed centrally. Refer to the reconciliation of
Underlying PBT to Statutory (Loss)/ Profit Before Tax on Page 20.
2. Net operating expenses is gross expenditure less depreciation and amortisation, on an underlying basis.
3. Underlying PBT for 2H20 compared to 2H19 excluding the movement of discount rate changes on provisions and depreciation/amortisation expense.
4. Group Domestic includes Qantas Domestic and Jetstar Domestic.
5.
International businesses or Group International includes Qantas International, Jetstar International Australian operations, Jetstar New Zealand (including Jetstar Regionals),
Jetstar Asia (Singapore), and the contributions from Jetstar Japan and Jetstar Pacific.
6. Return on Invested Capital is calculated as ROIC EBIT for the 12 months ended 30 June 2020, divided by the 12 month Average Invested Capital. ROIC EBIT is derived by
adjusting Underlying EBIT to account for leased aircraft as if they were owned and non-aircraft leases as if they were service costs. This is calculated as Underlying EBIT
excluding lease depreciation under AASB 16 and including notional depreciation for aircraft (to account for them as if they were owned aircraft) and the full cash payment for
non-aircraft leases (to account for them as service costs). Refer to Note 2 for detail.
7. Net Debt under the Group’s Financial Framework includes net on balance sheet debt and capitalised aircraft lease liabilities.
8. Based on Aircraft Value Analysis Company Limited (AVAC) market values as at 31 December 2019, representing 51 per cent of aircraft in the Group’s total fleet of 316.
12
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Review of Operations continued
For the year ended 30 June 2020
RESULTS HIGHLIGHTS (CONTINUED)
The impact of the government-imposed lockdowns, travel restrictions and border closures on the broader economy has been profound.
This prompted the Australian Government and to a lesser extent the various state governments to establish a series of measures to
support businesses and employees that have been severely affected. The Group and its employees benefited from a number of these
programs including:
– The Australian Aviation Financial Relief Package including the refunding and waiving of a range of government charges to the
aviation industry including fuel excise, Airservices Australia charges on domestic airline operations and domestic and regional
aviation security charges
– The JobKeeper Payment, intended to help keep more Australians in jobs and support affected businesses. The majority of the benefit
received by the Group was paid directly through to employees on stand down and the rest used to subsidise wages of those still
working.
In addition, the Australian Government commissioned Qantas to conduct various charter repatriation flights and rescue missions,
including to Wuhan, Tokyo, Hong Kong, London, Lima, Buenos Aires, Johannesburg, New Delhi and Chennai. Along with other
Australian domestic airlines, Qantas also performed several domestic, regional and international flights as part of the Minimum Viable
Network intended to maintain vital air transport links. Qantas also secured a contract to conduct freight services under the International
Freight Assistance Mechanism to ensure import and export freight routes remained open.
Liquidity was boosted by cutting capital expenditure outflows, cancelling shareholder distributions and sourcing additional funding through
$1.75 billion in new debt, with no financial covenants and $1.36 billion through a fully underwritten Institutional Placement initiated as
part of the Group’s Three-Year Recovery Plan. At 30 June 2020, cash and cash equivalents totalled $3.5 billion with total liquidity at
$4.5 billion including the undrawn revolving credit facilities. Net Debt was $4.7 billion towards the bottom of the Net Debt target of
$4.5 billion to $5.6 billion. Importantly, the Group maintained its investment grade credit rating of Baa2 from Moody’s Investor Services.
The Group’s usually strong cash flow generation ability was impacted by lower earnings and the working capital movements associated
with lower revenue received in advance, lower receivables, payables (including refunds) and hedge settlements. Net capital expenditure9
of $1.6 billion was invested in the business, skewed towards the first half, and $647 million of surplus capital was returned to shareholders
through $204 million of fully franked dividends and $443 million of off-market share buy-backs completed in the first half.
Giving consideration to the requirement to protect the strength of the balance sheet, maintain a minimum level of liquidity and the
uncertainty of the near-term outlook for the business, the Board has decided not to make further shareholder distributions until the
Group’s earnings and balance sheet have fully recovered in accordance with the Financial Framework. The off-market share buy-back
of up to $150 million and the interim dividend of $201 million announced in February 2020 were cancelled in March 2020 and revoked
in June 2020 respectively.
THREE-YEAR RECOVERY PLAN
The measures taken to cut costs and preserve liquidity through the fourth quarter ensured the Group was well positioned to launch
its Three-Year Recovery Plan to rightsize the business, restructure its cost base and recapitalise its balance sheet through the fully
underwritten Institutional Placement. A retail Share Purchase Plan was launched on 2 July 2020 consistent with listing requirements,
with the $71.7 million raised providing an additional liquidity buffer in the 2020/21 financial year.
The Recovery Plan is targeting a total of $15 billion in savings over the three years, including significant activity-based savings
associated with the reduced flying, rightsizing benefits and restructuring that are expected to deliver $1 billion in ongoing annual
savings from 2022/23.
Target
Key area of focus
Metrics
Timeframe
As at end of August 2020
Cost Savings
Restructuring benefits of $0.6b in FY21, $0.8b in FY22, $1b by FY23
FY23
On track to achieve FY21 target
6,000 FTE reduction
Group Unit Cost (ex-fuel and depreciation) 10% less than FY20
Deleverage the
Balance Sheet
Gross debt reduction of $1.75b
Net debt/ EBITDA <2.5 times
Cash Flow
Sustainable positive net free cash flow
FY21
FY23
FY23
FY22
On track
Restructuring in progress
Capital allocation is prioritising debt reduction
Net debt/EBITDA to peak in FY21
FY22 onwards
Negative net free cash flow in FY21 due to restructuring
expenses and payments for FY20 deferred payables
Flying activity is contribution positive (RASK-Variable cost/ASK >0)
From FY21
Capex for FY21 <$0.7b
Fleet Management Defer deliveries of A321neos and 787-9 aircraft
Retire 6 x 747s; 12 x A380s in long term storage
FY21
Jun-20
Dec-20
Disciplined restart of the network with flexibility to adjust
for border closures
Majority of expense is for capitalised maintenance
Complete
Complete
Maintain Customer Advocacy (NPS) premium to domestic competitor
Ongoing
Measured by Qantas customer research programs
Customer
and Brand
Maintain brand and reputation
Qantas Loyalty
Return to double digit growth
Employee
Engagement
Employee sentiment
Ongoing
FY22
Source – Qantas internal research and Corporate Trust
Research
Program enhancements underway to achieve growth
ambitions
Ongoing
Establishing formal monitoring system for recovery phase
9. Net Capital Expenditure is equal to net investing cash flows in the Consolidated Cash Flow Statement of $1,571 million. During the year ended 30 June 2020, there were no
new aircraft leases entered into and no returns of leased aircraft.
13
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Review of Operations continued
For the year ended 30 June 2020
FINANCIAL FRAMEWORK ALIGNED WITH SHAREHOLDER OBJECTIVES
Qantas’ Financial Framework aligns our objectives with those of our shareholders. With the aim of generating maintainable Earnings
Per Share (EPS) growth over the cycle, which in turn should generate Total Shareholder Returns (TSR) in the top quartile of the
ASX100 and a basket of global airlines10, the Financial Framework has three clear priorities and associated long-term targets:
1. Maintaining an Optimal Capital Structure
2. ROIC > WACC12 Through the Cycle
3. Disciplined Allocation of Capital
Minimise cost of capital by targeting
a net debt range of $4.5 billion to $5.6 billion11
Deliver ROIC > 10 per cent13
through the cycle
Grow Invested Capital with disciplined
investment, return surplus capital
MAINTAINABLE EPS14 GROWTH OVER THE CYCLE
TOTAL SHAREHOLDER RETURN IN THE TOP QUARTILE
Maintaining an Optimal Capital Structure
ROIC > WACC Through the Cycle
Disciplined Allocation of Capital
Maintainable EPS Growth Over the Cycle
The Group’s Financial Framework targets an optimal capital structure to achieve
the lowest cost of capital. This results in a net debt target range of $4.5 billion to
$5.6 billion, based on the Invested Capital as at 30 June 2020 of approximately
$6 billion. It is defined as net debt/ROIC EBITDA range of 2.0-2.5 times where
ROIC is fixed at 10 per cent. This capital structure optimises the Group’s cost of
capital and preserves financial strength with the objective of enhancing long-term
shareholder value. At 30 June 2020, net debt was $4.7 billion which is towards
the bottom of the net debt target range. The Group’s optimal capital structure is
consistent with investment grade credit metrics. The Group is rated Baa2 with
Moody’s Investor Services.
Return on Invested Capital (ROIC) for the 12 months to 30 June 2020 was 5.8 per
cent, below the Group’s target for value creation of 10 per cent. This was due primarily
to the impact of government-imposed travel restrictions and border closures impacting
earnings in the second half of the 2019/20 financial year.
The Qantas Group takes a disciplined approach to allocating capital with the aim
to grow Invested Capital and return surplus capital to shareholders where earnings
permit.
– $647 million was distributed to shareholders in the first half of 2019/20 through
$204 million fully franked dividends and an off-market share buy-back of $443
million. Distributions for the second half were cancelled as the Group took steps
to conserve cash.
Statutory Earnings Per Share was a loss of 129.6 cents, due to the significant
Statutory Loss After Tax and reduction in average shares from the off-market share
buy-back in the first half of 2019/20. The Group purchased 79.7 million shares or
5.1 per cent of issued capital for $443 million at an average price of $5.56.
10. Target Total Shareholder Returns within the top quartile of the ASX100 and the global listed airline peer group as stated in the 2019 Annual Report, with reference to the 2019-
2021 Long Term Incentive Plan (LTIP).
11. Based on the Invested Capital of approximately $6 billion as at 30 June 2020.
12. Weighted Average Cost of Capital, calculated on a pre-tax basis.
13. Target of greater than 10 per cent ROIC allows ROIC to be greater than pre-tax WACC through the cycle.
14. Earnings Per Share.
14
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
GROUP PERFORMANCE
Underlying PBT for 2019/20 was $124 million, including the impact government-imposed travel restrictions and border closures due
to the COVID-19 pandemic had on second half earnings. This was 91 per cent lower than the Underlying PBT of $1,326 million in
2018/19. Ticketed passenger revenue15 declined by 25 per cent as the airlines were virtually grounded during the fourth quarter. Net
freight revenue increased by $74 million as increased demand for freight in the second half coincided with a significant reduction in
available passenger aircraft bellyspace. Other revenue declined 21 per cent due primarily to the decrease in third-party service revenue
including catering, following the sale of the business as well as the impact of COVID-19. Actions taken to cut variable costs reduced
total underlying expenditure by $2.5 billion, which helped to partially offset the steep decline in revenue in the fourth quarter.
Group Underlying Income Statement Summary16
Net passenger revenue
Net freight revenue
Other revenue
Revenue and other income
Operating expenses (excluding fuel)
Fuel
Depreciation and amortisation16
Share of net (loss)/profit of investments accounted for under
the equity method
Total underlying expenditure
Underlying EBIT
Net finance costs
Underlying PBT
Operating Statistics
Available Seat Kilometres (ASK)17
Revenue Passenger Kilometres (RPK)18
Passengers carried
Revenue Seat Factor19
Operating Margin20
Unit Revenue (RASK)21
Total unit cost22
Normalised ex-fuel unit cost23
M
M
000
%
%
c/ASK
c/ASK
c/ASK
June
2020
$M
12,183
1,045
1,029
14,257
(8,893)
(2,895)
(2,021)
(53)
June
2019
(restated)
$M
15,696
971
1,299
17,966
(10,599)
(3,846)
(1,936)
23
(13,862)
(16,358)
395
(271)
124
June
2020
111,870
92,027
40,475
82.3
2.8
8.99
(8.87)
(4.41)
1,608
(282)
1,326
June
2019
(restated)
151,430
127,492
55,813
84.2
9.0
8.85
(7.97)
(4.23)
Change
Change
$M
(3,513)
74
(270)
(3,709)
1,706
951
(85)
(76)
2,496
(1,213)
11
(1,202)
Change
(39,560)
(35,465)
(15,338)
(1.9)pts
(6.2)pts
0.14
(0.90)
(0.18)
%
(22)
8
(21)
(21)
16
25
(4)
(330)
15
(75)
4
(91)
Change
%
(26)
(28)
(28)
n/a
n/a
1.5
(11.3)
(4.3)
Group capacity (ASK) decreased by 26 per cent mainly due to the grounding of the airlines in the fourth quarter, while demand
(measured by RPK) decreased by 28 per cent, resulting in a 1.9 percentage point decrease in Revenue Seat Factor. Group Unit
Revenue increased by 1.5 per cent from the prior year, with an increase24 of 2.8 per cent in the first half and a decline25 of 2.5 per cent
in the second half. The Group’s Total Unit Cost increased by 11.3 per cent as a result of higher fuel prices, foreign exchange impacts
and other costs.
TRANSFORMATION
In the fourth quarter, the focus shifted to preserving liquidity and transformation activities essentially ceased. The Group’s significant
track record in delivering transformation including $3.2 billion in benefits over the past five years give it confidence that it will deliver on
the Three-Year Recovery Plan initiated to assist the Group to recover from the consequences of COVID-19.
15. Uplifted passenger revenue included in net passenger revenue.
16. Underlying expenses differ from equivalent statutory expenses due to items excluded from Underlying PBT such as those items identified by Management as not representing
the underlying performance of the business. Refer to the reconciliation on page 20.
17. ASK – total number of seats available for passengers, multiplied by the number of kilometres flown.
18. RPK – total number of passengers carried, multiplied by the number of kilometres flown.
19. Revenue Seat Factor – RPKs divided by ASKs. Also known as seat factor, load factor or load.
20. Operating Margin is Group Underlying EBIT divided by Group total revenue.
21. Unit Revenue (RASK) is calculated as ticketed passenger revenue divided by Available Seat Kilometres (ASK).
22. Total Unit Cost is Underlying PBT less ticketed passenger revenue per ASK.
23. Normalised ex-fuel unit cost is measured as Underlying PBT less ticketed passenger revenue, fuel, depreciation and amortisation and share of profit/(loss) of investments
accounted for under the equity method, adjusted for the impact of changes in foreign exchange rates and the non-cash impact of discount rate changes on provisions per ASK
and normalised for the impact of the sale of domestic terminal leases.
24. Compared to the first half of 2018/19 financial year.
25. Compared to the second half of 2018/19 financial year.
15
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
CASH GENERATION
Cash Flow Summary
Operating cash flows
Investing cash flows
Net free cash flow
Financing cash flows
Cash at beginning of year
Effect of foreign exchange on cash
Cash at end of year
Debt Analysis
Net on balance sheet debt26
Capitalised aircraft lease liabilities27
Net Debt28
Net Debt/EBITDA29
June
2020
$M
1,083
(1,571)
(488)
1,853
2,157
(2)
3,520
June
2020
$M
3,173
1,561
4,734
2.2
June
2019
(restated)
$M
3,164
(1,563)
1,601
(1,150)
1,694
12
2,157
June
2019
Change
Change
$M
%
(2,081)
(8)
(2,089)
3,003
463
(14)
1,363
(66)
(1)
(130)
261
27
(117)
63
(restated)
Change
Change
$M
2,980
1,730
4,710
1.6
$M
193
(169)
24
0.6
%
6
(10)
1
38
$M
$M
times
Operating cash flows for 2019/20 were $1,083 million, $2,081 million lower than the prior year, reflecting the lower earnings and
working capital movements associated with lower revenue received in advance, lower receivables, payables (including refunds)
and hedge settlements.
Net capital expenditure of $1.6 billion was skewed to the first half and included investment in replacement fleet such as the final
delivery payments for three 787-9 Dreamliners for Qantas International, customer experience initiatives including lounges, the A380
reconfigurations and Wi-Fi installation on the Qantas Domestic fleet.
Net financing cash inflows of $1,853 million included $2,155 million draw down of debt, offset by scheduled debt repayments of
$625 million, dividends of $204 million and an off-market share buy-back totalling $443 million. Net proceeds from the fully underwritten
placement totalled $1,342 million.
At 30 June 2020, the Group’s unencumbered asset base had an approximate value of $2.5 billion30, including 46 per cent of the Group
fleet31, land, spare engines and other assets.
Qantas continues to retain significant flexibility in its financial position, funding strategies and fleet plan to ensure that it can respond
to changes in market conditions and earnings scenarios. At 30 June 2020, the Group’s leverage metrics were within investment grade
metrics Baa2, with Net Debt/EBITDA of 2.2 times.
26. Net on balance sheet debt includes interest-bearing liabilities and the fair value of hedges related to debt reduced by cash and cash equivalents.
27. Capitalised aircraft lease liabilities is a non-statutory measure. It is measured at fair value at the lease commencement date and remeasured over the lease term on a principal
and interest basis. Residual value of capitalised aircraft lease liability denominated in foreign currency is translated at a long-term exchange rate. Where leased aircraft were
classified as finance leases under the previous accounting standard (AASB 117), the capitalised amount and notional depreciation for ROIC is consistent with the recognised
accounting values.
28. Net debt is a non-statutory measure. It includes on balance sheet debt and capitalised aircraft lease liabilities under the Group’s Financial Framework.
29. Management’s estimate based on Moody’s methodology.
30. Aircraft valuations based on the average of AVAC and AVITAS market values 30 June 2020.
31. Based on number of aircraft as at 30 June 2020. The Group’s fleet totalled 314 aircraft including Jetstar Asia (Singapore) owned fleet and excludes Jetstar Pacific (Vietnam)
and Jetstar Japan.
16
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
FLEET
The determination of the optimal fleet age for the Qantas Group balances a number of factors and varies by fleet type, including the
availability of any new technology, the level of capacity growth required in the markets that it serves, the competitive landscape and
whether the investment is earnings accretive.
At all times, the Group retains significant flexibility to respond to changes in market conditions and the competitive landscape by
deploying several strategies including fleet redeployment, refurbishment, renewal and retirement.
In the first half of 2019/20, the Group took delivery of three additional 787-9 aircraft for Qantas International, taking that fleet to 11
aircraft, and retired one 747-400, while five Q300s and one A320-200 were transferred from Jetstar to QantasLink.
At 30 June 2020, the Qantas Group fleet32 totalled 314 aircraft.
Fleet Summary (Number of aircraft)
A380
747-400/400ER
A330-200/300
737-800
787-9
717-200
Q200/300/400
F100
A320-200
Total Qantas (including QantasLink and Network Aviation)
Q300
A320/A321-200
787-8
Total Jetstar Group
737-300/400F
767-300F
Total Freight
Total Group
June
2020
12
4
28
75
11
20
50
17
4
221
-
76
11
87
5
1
6
314
June
2019
12
7
28
75
8
20
45
17
2
214
5
78
11
94
5
1
6
314
Through the second half of 2019/20, the Group’s fleet strategy adjusted to the new demand environment post-COVID. The Group has
accelerated the retirement of the 747-400s, with all having left the fleet by the end of July 2020. The A380 fleet has been put into long-
term storage for the foreseeable future. Jetstar Asia’s fleet will reduce from 18 to 13 with a mixture of lease returns and aircraft
redeployment to Australia. Jetstar Group A320ceos continue to be transferred to QantasLink for redeployment into the growing
resources sector market in Western Australia.
SEGMENT PERFORMANCE
Segment Performance Summary
Qantas Domestic
Qantas International
Jetstar Group
Qantas Loyalty
Corporate
Unallocated/Eliminations
Underlying EBIT
Net finance costs
Underlying PBT
June
2020
$M
173
56
(26)
341
(134)
(15)
395
(271)
124
June
2019
(restated)
$M
778
323
400
376
(171)
(98)
1,608
(282)
1,326
Change
Change
$M
(605)
(267)
(426)
(35)
37
83
(1,213)
11
(1,202)
%
(78)
(83)
(107)
(9)
22
85
(75)
4
(91)
32. Includes Qantas Airways, Jetstar Australia and New Zealand, Jetstar Asia (Singapore), Qantas Freight and Network Aviation, and excludes aircraft operated by Jetstar Japan
and Jetstar Pacific (Vietnam).
17
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
QANTAS DOMESTIC
Metrics
ASKs
Seat factor
M
%
June 2020
June 2019
25,773
75.9
33,866
77.8
Change
(23.9%)
(1.9)pts
Qantas Domestic remained profitable despite the impact of government-imposed travel restrictions, reporting an Underlying EBIT of
$173 million, compared with $778 million in 2018/19.
The near record performance in the first half more than offset the second half underlying loss. Excluding the impact of depreciation
and amortisation the second half was profitable at an EBITDA level. As the travel restrictions took hold, Qantas Domestic experienced
a sharp decline in demand, with the airline virtually grounded in the fourth quarter. Flying was reduced to the government-sponsored
Minimum Viable Network to provide vital links to regional Australia and between capital cities. The high variable versus fixed cost
mix meant that as the fourth quarter ticketed passenger revenue decreased by 97 per cent, net operating expenses were able to be
reduced by 83 per cent. This variable cost base provides Qantas Domestic with the flexibility to respond to changing demand profiles
while minimising cash costs as the recovery unfolds.
To support the recovery of domestic travel, Qantas Domestic:
– Introduced a “Fly Well” program for the health and safety of our customers at each point of the journey
– Is adding capacity, routes and lounges as demand returns, including new regional routes to Ballina and Orange
– Is deploying further A320 capacity to Western Australia to support resources sector demand growth.
QANTAS INTERNATIONAL
Metrics
ASKs
Seat factor
M
%
June 2020
June 2019
50,484
84.1
69,571
86.0
Change
(27.4%)
(1.9)pts
Qantas International remained profitable, reporting an Underlying EBIT of $56 million for 2019/20 even as the international passenger
operations moved into losses as a result of international border closures. The result was supported by a record performance from
freight due to increased air freight demand while passenger aircraft bellyspace capacity remained constrained.
The impact of the grounding of the passenger fleet in the fourth quarter resulted in a 100 per cent decrease in ticketed passenger
revenue. Qantas International acted swiftly to mitigate the fall in revenue by reducing net operating expenses by 89 per cent. The
Australian Government engaged the Group to conduct charter repatriation and rescue flights, and along with the Minimum Viable
Network and International Freight Assistance Mechanism, this ensured that vital transport and freight links were maintained despite
the grounding of the passenger fleet.
The fleet plan for Qantas International has been realigned to the recovery profile:
– A321 freighter conversion is in progress, with first delivery expected in October 2020 to meet demand for increased dedicated
freighter capacity
– Deferred delivery of three 787-9 Dreamliners in line with the Group’s requirements
– A380 fleet moved to long-term storage in July 2020 for the foreseeable future
– Retirement of the remaining 747-400ER fleet early, completed in July 2020.
18
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Review of Operations continued
For the year ended 30 June 2020
JETSTAR GROUP
Metrics
ASKs
Seat factor
M
%
June 2020
June 2019
35,613
84.3
47,993
86.1
Change
(25.8%)
(1.8)pts
The Jetstar Group reported a small loss of $26 million at an Underlying EBIT level including the combined losses from Jetstar’s
International businesses.
The Jetstar Australia and New Zealand business was profitable despite the profound impact of travel restrictions due to COVID-19 and
the $33 million impact of industrial action. This was due to the large variable cost base of the Jetstar operations where net operating
expenses were reduced by 95 per cent in the fourth quarter as Ticketed Passenger Revenue declined by 99 per cent.
Jetstar’s Domestic business delivered an Underlying EBIT of $112 million, while the combined international business fell into losses of
$138 million driven by international border closures across the Jetstar Group’s airlines in Australia, New Zealand and Asia.
Jetstar’s airlines in Asia fell into losses as the impact of COVID-19 spread through South East Asia, Vietnam and Japan. The previously
announced exit of Jetstar Pacific is well advanced, with commercial functions transitioned and rebranding to Pacific Airlines and
reservation system cutover completed. Jetstar Asia’s fleet will be reduced from 18 to 13 with a mixture of lease returns and aircraft
redeployment to Australia, resulting in redundancies of 25 per cent of staff. Jetstar Japan is implementing its own restructuring program
and operated at approximately 75 per cent of its 2018/19 capacity during the August peak holiday period.
The New Zealand domestic operation was returning to near full capacity by the end of August 2020 but remains flexible to evolving
domestic travel restrictions in the country, providing confidence for Australian domestic leisure demand recovery when borders open.
QANTAS LOYALTY
Metrics
QFF members
June 2020
June 2019
M
13.4
12.9
Change
4.2%
Qantas Loyalty reported an Underlying EBIT of $341 million, after reporting a record first half of 2019/20. It provided an important
source of diversified earnings and positive cash flow as the Group’s airlines moved into hibernation. Second half revenue from points
sales to external partners and other non-airline revenue was down 13 per cent. Points earned from flying on the Group’s airlines
declined in the fourth quarter, reducing intercompany revenue, but had no impact on EBIT.
Qantas Loyalty experienced a short-term decline in points earned through credit card spend and engagement in travel-related products,
particularly in the fourth quarter. Meanwhile, the retail businesses such as Qantas Wine, Qantas Shopping and Qantas Store delivered
growth, supporting earnings diversification.
Despite the grounding of the airlines, the program maintained its relevance to both members and partners, achieving record customer
satisfaction in the fourth quarter, demonstrating the success of the program enhancements including tier status extension and increased
availability of Classic Reward seats to popular destinations, improving the redemption value proposition.
Demand for Qantas Points remains strong with expanded opportunities to earn ‘on the ground’ including the launch of the Afterpay
partnership and BP fuel partnership, with 500,000 members linking their accounts. Growth of new businesses and program launches
continue to diversify member offerings with the Points Club and Qantas Insurance expanding into car insurance through the year, and
the launch of home insurance expected in the next financial year.
19
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
RECONCILIATION OF UNDERLYING PBT TO STATUTORY PROFIT BEFORE TAX
The Statutory Loss Before Tax of $2,708 million for 2019/20 compares to a Statutory Profit Before Tax of $1,192 million for 2018/19.
Underlying PBT
Underlying PBT is the primary reporting measure used by the Qantas Group’s Chief Operating Decision-Making bodies (CODM), being
the Chief Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance
of the Group. The objective of measuring and reporting Underlying PBT is to provide a meaningful and consistent representation of the
underlying performance of each operating segment and the Qantas Group. The primary reporting measure of the Qantas Domestic,
Qantas International, Jetstar Group and Qantas Loyalty operating segments is Underlying EBIT. The primary reporting measure of the
Corporate segment is Underlying PBT as net finance costs are managed centrally.
Underlying PBT includes the impact of COVID-19 on the operating performance of the Group. Group Revenue for 2019/20 as
recognised within Underlying PBT is down $3.7 billion compared to 2018/19, which is consistent with the impact on Statutory Loss
primarily due to the impact of COVID-19.
Likewise, the impact of the decisive actions taken by the Group to mitigate the impact of COVID-19 including a reduction in flight capacity
domestically and internationally (including a reduction in costs from fuel and variable cost reductions), workforce stand downs and
operational cost-out measures have also been recognised in Underlying PBT. Government support to mitigate the impact of COVID-19
from travel restrictions and border closures including the Australian Aviation Financial Relief Package, JobKeeper Payment, Minimum
Viable Network flights and International Freight Assistance Mechanism payments, together with costs to operate or payments to
employees are also recorded in Underlying PBT.
Items which are identified by Management and reported to the CODM bodies as not representing the underlying performance of the
business are not included in Underlying PBT. 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 revenues or expenses relating to business activities in other reporting
periods, transformational/restructuring initiatives, transactions involving investments, impairments of assets and other transactions
outside the ordinary course of business.
The impact of COVID-19 and the Group’s Recovery Plan have resulted in items not included in Underlying PBT, including asset
impairments (including the A380 fleet), Recovery Plan restructuring costs including redundancies and de-designated hedging due
to significant decrease in flying activity. These are in addition to transformation costs directly incurred to enable the delivery of
transformation benefits.
Reconciliation of Underlying PBT to Statutory (Loss)/Profit Before Tax
Underlying PBT
Items not included in Underlying PBT
– Transformation costs and discretionary bonus for non-executive employees
– Recovery Plan restructuring costs
– Impairment/(reversal of impairment) of assets and related costs
– De-designation of fuel and foreign exchange hedges
– Net gain on disposal of assets
– Unrealised foreign exchange movements from the adoption of AASB 16 and the IFRIC Fair
Value hedging agenda decision
– Other
Total items not included in Underlying PBT
Statutory (Loss)/Profit Before Income Tax Expense
In the 2020 financial year, the items outside of Underlying PBT included:
Items Outside of Underlying PBT
Description
2020
$M
124
(191)
(642)
(1,428)
(571)
-
-
-
(2,832)
(2,708)
2019
(restated)
$M
1,326
(254)
-
39
-
192
(105)
(6)
(134)
1,192
Transformation costs and
discretionary bonus for non-
executive employees
$191 million including $161 million directly incurred to enable the delivery of transformation
benefits and $30 million of discretionary bonus for non-executive employees announced in
previous financial years.
Recovery Plan restructuring costs $642 million including people restructuring costs of $575 million and fleet restructuring costs of
$67 million resulting from the announced post-COVID Recovery Plan. People restructuring costs
primarily relate to the announced restructure, resulting in the reduction of around 6,000 roles.
Impairment of assets and related
costs
Impairments of assets and related costs includes:
– $1,087 million impairment of the Group’s A380 fleet, including related spares, inventories
and onerous contracts. With the impact of COVID-19 and the closure of international
borders, the Group’s A380 fleet is expected to be grounded for the foreseeable future
– $341 million of other impairments of assets.
De-designation of fuel and foreign
exchange hedges
$571 million of de-designated hedging resulting from significant decrease in flying activity in the
last quarter of the 2019/20 financial year and into the 2020/21 financial year.
Refer to Note 2(B) of the Financial Report for details of items not included in Underlying PBT.
20
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
MATERIAL BUSINESS RISKS
The aviation industry is subject to numerous inherent foreseeable risks that can impact operations if left untreated. In rare circumstances
‘black swan’ risk events can materialise, resulting in unexpected consequences such as those that the aviation industry is experiencing
due to COVID-19. The COVID-19 pandemic has impacted Qantas’ operations significantly, including its strategic and financial objectives.
Material business risks arising from COVID-19, notably liquidity risks, are being critically managed to ensure the ongoing sustainability
of the Group. To minimise this consequence, Management has established a Three-Year Recovery Plan to rightsize and transform the
Group in response to COVID-19 impacts to guide the Group’s recovery and return to growth. As the impact of COVID-19 evolves, the
Group continues to plan for a wide range of scenarios and risks.
Other inherent risks that can impact the Group’s operations include exposure to changes in economic conditions, changes in Government
regulations, fuel and foreign exchange volatility and other exogenous events such as aviation incidents, natural disasters, or international
conflicts.
General economic conditions post-crisis: As air travel is closely linked with economic growth, the Qantas Group’s operating and
financial performance is influenced by a variety of general economic and business conditions in Australia and overseas. A sustained
decline in consumer and business demand as part of a broader deterioration of economic conditions is likely to have a material adverse
effect on the financial condition and business of the Qantas Group.
COVID-19 has created considerable uncertainty and volatility surrounding these macroeconomic factors, and any further deterioration
may have a material adverse impact on the business, financial condition and prospects of the Qantas Group.
Human resources and industrial action risk: The Qantas Group operates in a highly regulated employment market and a portion of
the Qantas Group’s employees are represented by unions and are party to collective bargaining arrangements. Any significant
enterprise bargaining dispute between the Qantas Group and its employees, including in relation to the Recovery Plan could lead
employees to take industrial action, including work stoppages. This could disrupt the Qantas Group’s day-to-day operations as well as
lead to reputational damage.
The COVID-19 crisis has necessitated the standing down of a significant portion of employees. While the need to stand down
employees will decrease over time, any significant successful legal challenge to the Qantas Group’s ability to stand down employees
could likely have a material adverse effect on the Qantas Group’s financial performance and condition.
The Qantas Group also has certain Key Management Personnel whose institutional knowledge, expertise, relationships and experience
are considered important to the continued success of the business. The loss of key personnel could adversely impact the Qantas
Group’s business and future performance.
Further, given employee costs represent a significant component of the Qantas Group’s operating expenses, increases in labour costs
(whether as a result of enterprise agreement negotiations, union action or otherwise) would likely have a material adverse effect on the
Qantas Group’s financial performance and condition.
Customer risk: The ongoing success of the Qantas Group depends to a large degree on customer satisfaction and loyalty, particularly
in light of the significant competition for passengers that characterises the aviation industry.
The significant financial and operational challenges posed by COVID-19, the impact of the pandemic on the travel industry and the
response of the Qantas Group to these challenges could also impact customer satisfaction and loyalty. In particular, a diminution of
customer satisfaction due to the cancellation and refund policies of the Qantas Group in the context of COVID-19 may impact the
Qantas Group’s reputation and its ability to attract customers in the future.
In addition, the Qantas Group is vulnerable to longer-term changes in consumer preferences in relation to its service offerings, the
markets in which it operates, and consumer sentiment towards leisure travel. Any failure by the Qantas Group to predict or respond
to such changes in a timely and cost-effective manner may adversely impact the Qantas Group’s future operating and financial
performance.
Competitive intensity: Ordinarily, the international and domestic aviation markets in which the Qantas Group operates are highly
competitive, and growth in market capacity ahead of underlying demand impacts profitability on an industry-wide basis. Its competitors
include many major foreign airlines (including government-owned or controlled airlines), some with more financial resources or lower
cost structures than Qantas. This competition may increase with the expansion of existing airlines, the consolidation of existing airlines
and/or the creation of alliances between airlines, or new airlines entering the market.
Australia’s aviation policies favour the creation of a more competitive environment, including more liberal rights of entry into Australian
domestic and international markets. These policies have attracted offshore competitors (predominantly state-sponsored airlines) to the
Australian international aviation market, which has further increased competition for passengers on international routes.
Additionally, the Qantas Group ordinarily faces high levels of price competition in the markets in which it operates, which places
significant pressure on the Qantas Group to price match by offering heavily discounted fares. Aggressive pricing by competitors
seeking to gain market share can materially adversely affect the Qantas Group’s revenues and yield performance. The financial impact
of any discounting of fares as a result of competitive pressures is exacerbated by the high fixed costs and low profit margins that
characterise the aviation industry. The combined effect of these factors may have a material adverse effect on the revenue and
financial condition of the Qantas Group.
21
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Review of Operations continued
For the year ended 30 June 2020
MATERIAL BUSINESS RISKS (CONTINUED)
Reputational and brand risk: The Qantas brand carries significant commercial value and the continued success of the Qantas Group
relies on the maintenance of a positive reputation and brand recognition among customers, suppliers, strategic partners and governments.
Any negative publicity (for example, due to a safety incident, labour dispute, regulatory investigation or public customer complaint) may
damage Qantas’ reputation and have a negative impact on its business operations and financial performance.
Fuel and foreign exchange volatility: The Qantas Group is subject to fuel and foreign exchange risks. These risks are an inherent
part of the operations of an airline. The continued focus on forecasting and the operational agility of our aviation operations are supporting
the Group to manage the residual uncertainty. Accordingly, the size of the Group’s fuel and foreign exchange risk will vary in line with
operational changes. The Qantas Group manages fuel and foreign exchange risks through a comprehensive hedging program. Qantas
will continue to hedge its fuel and foreign exchange risk in line with this program. In early April, the Qantas Group closed out its over-
hedged position through to September 2020, which significantly lowered the exposure to further hedging losses in the short-term. The
Qantas Group has some fuel hedging arrangements beyond September 2020 in the form of outright options with a base layer of collars.
The collars remain subject to market price movements. There are no margin call obligations on the Qantas Group’s hedging position.
Cyber security and data governance: The global cyber and privacy landscape is constantly evolving and at the same time, data
governance has become an important function for many organisations including the Qantas Group. Qantas remains focused on embedding
cyber security, privacy and data governance into business processes, taking a security and privacy by design approach and creating a
cybersafe and privacy orientated culture that builds on an established safety culture. The Group is also enhancing its Data Governance
Framework to ensure ethical and commercial data risks are managed in addition to data protection and privacy. Qantas has a defined
Risk and Control Framework, aligned with industry standards, which is designed to protect the confidentiality, integrity, availability and
privacy of data and to maintain compliance with regulatory requirements. The Qantas Group's cyber security and data privacy-related
controls operate to reduce the likelihood and severity of cyber security and data privacy related incidents and related impacts. The
Group’s cyber and data privacy risks are continuously monitored by the Group Cyber and Privacy Committee and are subject to
independent assurance including for material third-party suppliers.
Key business partners and alliances: The Qantas Group has relationships with a number of key business partners. In order to continue
to maximise mutual benefit from both a financial and customer proposition perspective, governance structures are in place to track and
report performance against common strategic objectives. The Qantas Group continues to proactively build relationships with existing
and new industry partners through ongoing dialogue with relevant authorities and stakeholder groups.
Risk of increase in airport services-related costs or change in availability of airport facilities: The Qantas Group is exposed to
the risk of increases in airport services-related costs (including air traffic control, airport, transit, take-off and landing fees and security
charges). The availability and cost of airport facilities are fundamental to the ability of the Qantas Group to operate.
These costs represent a significant portion of the Qantas Group’s operating costs and have a financial impact on its operations. Most
Australian airports are privately owned and owners have flexibility to increase charges to airlines. There can be no assurance that
major airport operators will not continue to increase their fees or that the Qantas Group will not incur new costs in Australia or elsewhere
(for example, additional fees assessed against environmental criteria such as emissions levels or noise pollution). Further, it is likely
that security and health measures around the world will continue to be increased in response to the COVID-19 experience and the
perceived threat of terrorism, which may lead to increases in airport clearance and security charges. To the extent that the Qantas
Group is unable to pass on any fee increases to its customers, these developments could have a material adverse effect on the Qantas
Group’s operational results and financial position.
In addition, health concerns during the COVID-19 crisis and in the period following it are likely to impact the availability of airport slots
and facilities in ways that are difficult to predict. This, too, could have a material adverse effect on the Qantas Group’s operations and
Recovery Plan.
Climate change: The Qantas Group is subject to short-term and long-term climate-related physical and transition risks. These risks are
an inherent part of the operations of an airline and are managed by undertaking scenario analysis, strengthening governance, technology,
operational and market-based controls, including proactive consideration of how changing factors (including global climate policies)
impact the proximity of climate-related risks. The Qantas Group has also set ambitious but achievable targets to reduce our emissions
by capping emissions at 2020 levels and achieving net-zero emissions by 2050, while also investing in the development of sustainable
aviation fuels. The Qantas Group is responding to increased demand for transparency on identification and management of climate-
related risks by aligning our corporate disclosures with the Taskforce on Climate-Related Financial Disclosures (TCFD), including
further developing and disclosing findings from the scenario analysis first undertaken during the year ending 30 June 2020. These
disclosures are available at https://www.qantas.com/au/en/qantas-group/acting-responsibly/our-planet.html.
An overview of the Group Risk Management Framework is contained in the Qantas Group Business Practices Document available at
www.qantas.com.au.
22
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Corporate Governance Statement
For the year ended 30 June 2020
OVERVIEW
Corporate governance is core to ensuring the creation, protection
and enhancement of shareholder value. The Board maintains,
and requires that Qantas Management (Management) maintains,
the highest level of ethics at all times.
THE BOARD IS STRUCTURED TO ADD VALUE
The Qantas Board currently has 10 Directors. Nine Directors are
Independent Non-Executive Directors elected by shareholders.
The Qantas CEO, who is an Executive Director, is not regarded
as independent.
The Board comprises a majority of Independent Non-Executive
Directors who, together with the Executive Director, have an
appropriate balance of skills, knowledge, experience, independence
and diversity to enable the Board as a collective to effectively
discharge its responsibilities.
The Board has endorsed the ASX Corporate Governance
Principles and Recommendations (ASX Principles) 3rd Edition
throughout 2019/20, and at the date of this Statement has
considered, and in essence adopted, the 4th Edition ASX
Principles.
Accordingly, Qantas Airways Limited (Qantas) has disclosed its
2020 Corporate Governance Statement in the Corporate
Governance section on the Qantas website. As required, Qantas
has also lodged its Corporate Governance Statement with the
ASX.
Following is a summary of the key aspects of the Corporate
Governance Statement.
THE BOARD LAYS SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT
The Board has adopted a formal Charter, which is available in
the Corporate Governance section on the Qantas website.
The Board is responsible for setting and reviewing the strategic
direction of Qantas and monitoring the implementation of that
strategy by Management.
The CEO is responsible for the day-to-day management of
the Qantas Group with all powers, discretions and delegations
authorised, from time to time, by the Board.
The Company Secretary is accountable directly to the Board,
through the Chairman, on all matters to do with the proper
functioning of the Board.
Details of the current Directors, their qualifications, skills,
experience and tenure are set out on pages 8 to 11 of the Qantas
Annual Report 2020.
The Board has four committees:
– Audit Committee
– Nominations Committee
– Remuneration Committee
– Safety, Health, Environment and Security Committee.
Each of these committees assists the Board with specified
responsibilities that are set out in the Committee Charters,
as delegated and approved by the Board.
Membership of and attendance at 2019/20 Board and Committee
meetings is detailed on page 26 of the Qantas Annual Report 2020.
THE BOARD PROMOTES ETHICAL AND RESPONSIBLE
DECISION-MAKING
The Board has established a corporate governance framework,
comprising Non-Negotiable Business Principles (Principles) and
Group Policies, which forms the foundation for the way in which
Qantas and its controlled entities (Qantas Group or Group)
undertakes business. The Principles and Group Policies,
including the Qantas Group Code of Conduct and Ethics, are
detailed in the Qantas Group Business Practices document. This
framework is supported by a rigorous Whistleblower Program, which
provides a protected disclosure process for all Disclosing
Persons.
The Qantas Group Employee Share Trading Policy sets out
guidelines designed to protect the Qantas Group Directors and
its employees from intentionally or unintentionally breaching the
law. The Qantas Group Employee Share Trading Policy prohibits
employees from dealing in the securities of any Qantas Group
listed or unlisted entity while in possession of material non-public
information.
In addition, certain nominated Qantas Group employees are also
prohibited from entering into any hedging or margin lending
arrangement or otherwise granting a charge over the securities
of any Qantas Group listed or unlisted entity, where control of
any sale process relating to those securities may be lost.
23
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Corporate Governance Statement continued
For the year ended 30 June 2020
THE BOARD SAFEGUARDS THE INTEGRITY OF
CORPORATE FINANCIAL REPORTING
The Board and the Audit Committee closely monitor the
independence of the external auditor. Regular reviews occur
of the independence safeguards put in place by the external
auditor. Qantas rotates the lead external audit partner every five
years and imposes restrictions on the employment of personnel
previously employed by the external auditor. Qantas last rotated
its lead external audit partner during the 2016/17 year.
Policies are in place to restrict the type of non-audit services
which can be provided by the external auditor and a detailed
review of non-audit fees paid to the external auditor is undertaken
on a half-yearly basis.
At each meeting, the Audit Committee meets privately with
Executive Management without the external auditor, and with the
internal and external auditors without Executive Management.
THE BOARD MAKES TIMELY AND BALANCED DISCLOSURE
Qantas is committed to ensuring that trading in its shares takes
place in an orderly and informed market, by having transparent
and consistent communication with all shareholders. Qantas
has an established process to ensure that it complies with its
continuous disclosure obligations at all times, including a bi-
annual confirmation by all Executive Management that the
areas for which they are responsible have complied with the
Group’s Continuous Disclosure Policy.
Qantas proactively communicates with its shareholders via the
ASX and its web-based Newsroom, with all materials released by
the Group being made available to all shareholders at the same
time. Additionally, Qantas actively conveys its publicly-disclosed
information and seeks the views of its shareholders, large and
small, in a number of forums, including at the Annual General
Meeting (AGM), the Qantas Investor Day and, as is common
practice among its major listed peers, through periodic meetings
with current and potential institutional shareholders.
THE BOARD RESPECTS THE RIGHTS OF SHAREHOLDERS
Qantas has a Shareholder Communications Policy which
promotes effective two-way communication with shareholders and
the wider investment community, and encourages participation at
general meetings.
Shareholders also have the option to receive communications
from, and send communications to, Qantas and its Share Registry
electronically, including email notifications of significant market
announcements.
The external auditor attends the AGM and is available to answer
shareholder questions that are relevant to the audit.
THE BOARD RECOGNISES AND MANAGES RISK
Qantas is committed to embedding risk management practices
to support the achievement of business objectives and fulfil
corporate governance obligations. The Board is responsible for
reviewing and overseeing the risk management strategy for
the Qantas Group and for ensuring the Qantas Group has an
appropriate corporate governance structure. Within that overall
strategy, Management has designed and implemented a risk
management and internal control system to manage Qantas’
material business risks.
During 2019/20, the two Board committees responsible for
oversight of risk-related matters, the Audit Committee and the
Safety, Health, Environment and Security Committee, undertook
their annual review of the effectiveness of Qantas’ implementation
of its risk management system and internal control framework.
The internal audit function is carried out by Group Audit and Risk
and is independent of the external auditor. Group Audit and Risk
provides independent, objective assurance and consulting
services on Qantas’ system of risk management, internal control
and governance.
The Audit Committee approves the Group Audit and Risk Internal
Audit Charter, which provides Group Audit and Risk with full
access to Qantas Group functions, records, property and
personnel, and establishes independence requirements. The
Audit Committee also approves the appointment, replacement
and remuneration of the internal auditor. The internal auditor has
a direct reporting line to the Audit Committee and also provides
reporting to the Safety, Health, Environment and Security
Committee.
THE BOARD REMUNERATES FAIRLY AND RESPONSIBLY
The Qantas Executive remuneration objectives and approach are
set out below.
Information about remuneration of Executive Management is
disclosed to the extent required, together with the process for
evaluating performance, in the Remuneration Report from page
30 to 54 of the Qantas Annual Report 2020.
Qantas Non-Executive Directors are entitled to statutory
superannuation and certain travel entitlements (accrued during
service) that are reasonable and standard practice in the aviation
industry. Non-Executive Directors do not receive any
performance-based remuneration (see pages 52 to 53 of the
Qantas Annual Report 2020).
24
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report
For the year ended 30 June 2020
The Directors of Qantas Airways Limited (Qantas) present
their Report, together with the Financial Statements of the
consolidated entity comprising Qantas and its controlled entities
(Qantas Group) and the Independent Audit Report, for the year
ended 30 June 2020. In compliance with the provisions of the
Corporations Act 2001, the Directors’ Report is set out below.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In the opinion of the Directors, there were no other significant
changes in the state of affairs of the Qantas Group that occurred
during the financial year under review that are not otherwise
disclosed in this report.
REVIEW OF OPERATIONS
A review of, and information about, the Qantas Group’s operations,
including the results of those operations during the year, together
with information about the Qantas Group’s financial position,
appear on pages 12 to 22.
Details of the Qantas Group’s strategies, prospects for future
financial years and material business risks have been included in
the Review of Operations to the extent that their inclusion is not
likely to result in unreasonable prejudice to the Qantas Group. In
the opinion of the Directors, detail that could be unreasonably
prejudicial to the interests of the Qantas Group, for example,
information that is commercially sensitive, confidential or could give
a third party a commercial advantage, has not been included.
EVENTS SUBSEQUENT TO BALANCE DATE
Refer to page 104 for events which occurred subsequent to
balance date. Other than the matters disclosed on page 104,
since the end of the year and to the date of this Report no other
matter or circumstance has arisen that has significantly affected
or may significantly affect the Qantas Group’s operations, results
of those operations or state of affairs in future years.
DIRECTORS
The Directors of Qantas during the year were:
Richard Goyder AO
Alan Joyce AC
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson AC
Michael L’Estrange AO
Paul Rayner
Todd Sampson
Antony Tyler
Barbara Ward AM
Richard Goodmanson (retired 25 October 2019)
Details of the Directors’ qualifications, experience and any special
responsibilities, including Qantas committee memberships, are
set out on pages 8 to 11.
PRINCIPAL ACTIVITIES
The principal activities of the Qantas Group during the year were
the operation of international and domestic air transportation
services, the provision of freight services and the operation of
a frequent flyer loyalty program.
DIVIDENDS AND OTHER SHAREHOLDER DISTRIBUTIONS
During the year, the Directors paid a fully franked final dividend of
$204 million (13 cents per ordinary share) in relation to the year
ended 30 June 2019.
In addition, during the year ended 30 June 2020, the Group
completed an off-market share buy-back of 79.7 million shares
at a buy-back price of $5.56 per ordinary share. Of the amount
paid, $1.19 was paid as a return of capital and $4.37 was paid as
a fully franked dividend.
25
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
DIRECTORS’ MEETINGS
The number of Directors’ meetings held (including meetings of Committees of Directors) and attendance of Directors during 2019/20 is
as follows:
Qantas Board
Scheduled
Meetings
Un-Scheduled
Meetings
Sub-Committee
Meetings1
Audit
Committee2
Safety, Health,
Environment
and Security
Committee2
Remuneration
Committee2
Nominations
Committee2
Directors
Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3
Richard Goyder4
Alan Joyce
Maxine Brenner
Richard
Goodmanson6
Jacqueline Hey
Belinda
Hutchinson
Michael
L’Estrange
Paul Rayner
Todd Sampson
Antony Tyler7
Barbara Ward
7
7
7
3
7
7
7
7
7
7
7
7
7
7
35
7
7
7
7
7
7
7
13
13
13
1
12
13
13
13
13
15
13
13
13
13
13
13
13
13
13
13
13
13
3
3
-
-
-
-
-
-
-
-
3
3
-
-
-
-
-
-
-
-
3
3
-
-
4
-
4
4
-
-
-
-
4
-
-
4
-
4
4
-
-
-
-
4
-
3
-
1
-
3
3
-
-
3
3
-
3
-
15
-
3
3
-
-
3
3
-
-
4
-
-
4
4
4
-
-
-
-
4
-
-
4
4
4
-
-
2
-
-
1
-
-
-
2
-
1
2
2
-
-
15
-
-
-
2
-
15
2
1. Sub-Committee meetings convened for specific Board-related business.
2. All Directors are invited to, and regularly attend, committee meetings in an ex officio capacity. The above table reflects the attendance of a Director only where he or she is a
member of the relevant committee.
3. Number of meetings held and requiring attendance.
4. The Chairman attends all committee meetings.
5. Number of meetings held during the period that the Director held office.
6. Mr Goodmanson retired as a Non-Executive Director on 25 October 2019.
7. Mr Tyler was appointed Chair of the Safety, Health, Environment & Security Committee on 25 October 2019 and a Member of the Nominations Committee on 18 February 2020.
DIRECTORSHIPS OF LISTED COMPANIES HELD BY MEMBERS OF THE BOARD AS AT 30 JUNE 2020
– FOR THE PERIOD 1 JULY 2017 TO 30 JUNE 2020
Richard Goyder
Qantas Airways Limited
Woodside Petroleum Ltd
Current, appointed 17 November 2017
Current, appointed 1 August 2017
Alan Joyce
Qantas Airways Limited
Current, appointed 28 July 2008
Maxine Brenner
Jacqueline Hey
Qantas Airways Limited
Origin Energy Limited
Orica Limited
Growthpoint Properties Australia Limited
Current, appointed 29 August 2013
Current, appointed 15 November 2013
Current, appointed 8 April 2013
Current, appointed 19 March 2012
Qantas Airways Limited
AGL Energy Limited
Bendigo and Adelaide Bank Limited
Australian Foundation Investment Company
Current, appointed 29 August 2013
Current, appointed 21 March 2016
Current, appointed 5 July 2011
Ceased, appointed 31 July 2013 and ceased 18 January 2019
Belinda Hutchinson Qantas Airways Limited
AGL Energy Limited
Current, appointed 12 April 2018
Ceased, appointed 22 December 2010 and ceased
12 December 2018
Michael L’Estrange Qantas Airways Limited
Rio Tinto Limited
Rio Tinto plc
Paul Rayner
Qantas Airways Limited
Treasury Wine Estates Limited
Boral Limited
Current, appointed 7 April 2016
Current, appointed 1 September 2014
Current, appointed 1 September 2014
Current, appointed 16 July 2008
Current, appointed 9 May 2011
Current, appointed 5 September 2008
Todd Sampson
Qantas Airways Limited
Fairfax Media Limited
Current, appointed 25 February 2015
Ceased, appointed 29 May 2014 and ceased 7 December 2018
26
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
DIRECTORSHIPS OF LISTED COMPANIES HELD BY MEMBERS OF THE BOARD AS AT 30 JUNE 2020
– FOR THE PERIOD 1 JULY 2017 TO 30 JUNE 2020 (CONTINUED)
Antony Tyler
Qantas Airways Limited
Current, appointed 26 October 2018
Barbara Ward
Qantas Airways Limited
Ampol Limited (formerly Caltex Australia Limited)
Brookfield Capital Management Limited1
Current, appointed 19 June 2008
Current, appointed 1 April 2015
Current, appointed 1 January 2010
1. Responsible entity for the Brookfield Prime Property Fund and the Multiplex European Property Fund, both of which were listed Australian registered managed investment
schemes until they delisted on 3 July 2017 and 17 September 2015 respectively.
QUALIFICATIONS AND EXPERIENCE OF EACH PERSON WHO IS A COMPANY SECRETARY OF QANTAS AS AT 30 JUNE 2020
Andrew Finch –
Company Secretary
– BCom, LLB (UNSW), LLM (Hons I) (USyd), MBA (Exec) (AGSM)
– Appointed as Company Secretary on 31 March 2014
– Joined Qantas on 1 November 2012
– 2002 to 2012 – Mergers and Acquisitions Partner at Allens, Sydney (previously Allens Arthur
Robinson and Allen & Hemsley)
– 1999 to 2001 – Managing Associate at Linklaters, London
– 1993 to 1999 – Various roles at Allens, Sydney including Senior Associate (1997 to 1999) and
Solicitor (1993 to 1997)
– Admitted as a solicitor of the Supreme Court of NSW in 1993
Nicole Malone –
Company Secretary
– BEc/LLB (Hons I) (UAdel), BCL (Oxon)
– Appointed as a Company Secretary on 18 February 2020
– Joined Qantas on 6 December 2010
– Admitted as a solicitor of the High Court of Australia and the Supreme Court of Victoria in 2006 and
Benjamin Elliott –
Company Secretary
the Supreme Court of NSW in 2011
– 2007 to 2010 – Solicitor at Baker & McKenzie
– BBC, GIA (Affiliate)
– Appointed as a Company Secretary on 18 February 2020
– Joined Qantas on 14 August 2013
– 2018 to 2020 – Manager, Group Secretariat
– 2014 to 2018 – Manager, Corporate Governance
– 2013 to 2014 – Manager, Public Company
27
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Directors’ Report continued
For the year ended 30 June 2020
DIRECTORS’ INTERESTS AND BENEFITS
Particulars of Directors’ interests in the issued capital of Qantas at the date of this Report are as follows:
Directors
Richard Goyder
Alan Joyce
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson
Michael L’Estrange
Paul Rayner
Todd Sampson
Antony Tyler
Barbara Ward
1. As at 30 August 2019.
Rights held in trust under the Non-Executive Director Fee Sacrifice Share Acquisition Plan1:
Directors
Belinda Hutchinson
Paul Rayner
Todd Sampson
Number of Shares
2020
20191
139,433
130,000
2,892,475
2,728,924
39,498
47,603
25,633
24,445
30,065
38,170
16,200
15,012
297,342
287,909
23,528
52,000
54,127
7,095
-
44,694
Number of Rights
2020
8,432
8,020
4,010
20192
-
-
-
1. Refer to page 52 for information regarding the operation of the Non-Executive Director Fee Sacrifice Share Acquisition Plan.
2. The Non-Executive Director Fee Sacrifice Share Acquisition Plan was introduced in December 2019.
In addition to the direct interests shown, indirect interests in Qantas shares held in trust on behalf of Mr Joyce are as follows:
Deferred shares held in trust under:
2017/18 Short Term Incentive Plan
2018/19 Short Term Incentive Plan
Rights granted under:
2018-2020 Long Term Incentive Plan
2019-2021 Long Term Incentive Plan
2020-2022 Long Term Incentive Plan
Total Rights
Number of Shares
2020
2019
-
154,118
97,768
97,768
Number of Rights
2020
2019
687,0001
651,0002
743,0003
687,000
651,000
-
2,081,000
1,338,000
1. Mr Joyce offered and the Board agreed to defer the decision of whether his Rights will be forfeited or allowed to convert to shares until at least August 2021.
2. Shareholders approved the award of these Rights on 26 October 2018. Performance hurdles will be tested as at 30 June 2021 to determine whether any Rights vest to
Mr Joyce.
3. Shareholders approved the award of these Rights on 25 October 2019. Performance hurdles will be tested as at 30 June 2022 to determine whether any Rights vest to
Mr Joyce.
28
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Directors’ Report continued
For the year ended 30 June 2020
PERFORMANCE RIGHTS
Performance Rights are awarded to select Qantas Group Executives under the Qantas Long Term Incentive Plan (LTIP). Refer to
pages 44 to 45 for further details.
The following table outlines the movements in Rights during the year:
Performance Rights Reconciliation
Rights outstanding as at 1 July
Rights granted
Rights forfeited
Rights exercised
Rights outstanding as at 30 June
Number of Rights
2020
2019
12,699,500
15,121,500
4,086,000
3,602,500
(1,175,189)
(1,278,263)
(6,003,175)
(4,746,237)
9,607,1361
12,699,5001
1. The movement of Rights outstanding as at 30 June 2020 to the date of this Report is explained in the footnotes below.
Rights will be converted to Qantas shares to the extent performance hurdles have been achieved. The Rights do not allow the holder to
participate in any share issue of Qantas. No dividends are payable on Rights. The fair value of Rights granted is calculated at the date
of grant using a Monte Carlo model and/or Black-Scholes model.
The following Rights were outstanding at 30 June 2020:
Number of Rights
Testing
Period
Grant Date
Value at
Grant Date
2020
Net Vested
2020
Unvested
2020
Total
2019
Net Vested
2019
Unvested
2019
Total
30 Jun 191 5 Sep 16
$1.96
30 Jun 191 21 Oct 16
$1.95
-
-
-
-
-
-
-
4,858,000
4,858,000
-
1,172,000
1,172,000
30 Jun 202 5 Sep 17
$2.98
-
2,241,000
2,241,000
-
2,569,500
2,569,500
30 Jun 202 27 Oct 17
$3.30
-
728,500
728,500
-
728,500
728,500
30 Jun 21
5 Sept 18
$3.35
-
2,274,000
2,274,000
-
2,678,500
2,678,500
30 Jun 21
26 Oct 18
$2.33
-
693,000
693,000
30 Jun 22
4 Oct 19
$4.06
-
2,927,636
2,927,636
30 Jun 22
26 Oct 19
$3.59
-
743,000
743,000
-
-
-
693,000
693,000
-
-
-
-
-
9,607,136
9,607,136
- 12,699,500 12,699,500
Name
2017–2019
Long Term
Incentive Plan
2017–2019
Long Term
Incentive Plan
2018–2020
Long Term
Incentive Plan
2018–2020
Long Term
Incentive Plan
2019–2021
Long Term
Incentive Plan
2019–2021
Long Term
Incentive Plan
2020–2022
Long Term
Incentive Plan
2020–2022
Long Term
Incentive Plan
Total
1. Following the testing of performance hurdles as at 30 June 2019 and the Board’s approval of the 2017-2019 vesting outcome on 21 August 2019, 100 per cent of Rights vested
and converted to shares after the release of the 2018/19 full-year financial results.
2. Following the testing of performance hurdles as at 30 June 2020 and the Board’s approval of the 2018-2020 vesting outcome on 19 August 2020, 50 per cent of Rights vested
and converted to shares after the release of the 2019/20 full-year financial results for Executives other than the CEO. For the CEO, the CEO offered, and the Board agreed, to
defer the decision until at least August 2021 as to whether his Rights will be forfeited or allowed to convert to shares.
29
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED)
REMUNERATION REPORT
Statutory Remuneration Disclosures for 2019/20
Remuneration Outcomes for 2019/20
Remuneration Governance
Remuneration Report Summary
Executive Remuneration Structure
Cover Letter to the Remuneration Report
1
2
3
4
5
6
7
8
9
10 Equity Instruments
11 Non-Executive Director Fees
Qantas Financial Performance History
Annual Incentive Outcome 2019/20 STIP
Long Term Incentive Outcome 2018-2020
Summary of Key Contract Terms as at 30 June 2020
31
32
37
39
40
41
47
49
49
50
50
52
30
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
COVER LETTER TO THE REMUNERATION REPORT
Dear Shareholder,
The Remuneration Report sets out remuneration information for the Chief Executive Officer (CEO), direct reports to the
CEO (Executive Management) and Non-Executive Directors. It describes the Qantas Executive Remuneration Framework
(Remuneration Framework) and pay outcomes for 2019/20, and the intended Remuneration Framework in 2020/21, in a simple and
transparent way.
The impact of COVID-19 on our industry has been extraordinary. Our recovery, and the recovery of the aviation industry, is expected
to be long and challenging. Qantas is well placed to respond to these challenges, and we have begun implementing our Three-Year
Recovery Plan. The plan creates the platform for our future profitability, long-term shareholder value and preservation of as many jobs
as possible.
Remuneration Outcomes in 2019/20
During March 2020, Qantas updated the ASX and the media on the impact of COVID-19 on our business and our people. This
included announcing that:
– The CEO and Executive Management would take no Base Pay for the remainder of 2019/20;
– Non-Executive Directors would take no fees for the remainder of 2019/20; and
– Annual incentives would not be paid for 2019/20.
In relation to the 2018-2020 Long Term Incentive Plan (LTIP), the performance condition against the ASX100 peer group was not
achieved. However, Qantas’ three-year relative Total Shareholder Return (TSR) performance against the airline peer group was
ranked 1st of the 18 airlines, resulting in partial vesting.
Consequently, for Executive Management, 50 per cent of Rights vested and converted to shares, with the remaining Rights lapsing. I
would note, however, that the sum total of forgone Base Pay for Executive Management (excluding the CEO) to 30 June
2020, was greater than the sum total of the value of the 2018-2020 LTIP vested outcome for Executive Management.
In relation to the 2018-2020 LTIP for the CEO, the CEO offered and the Board agreed to defer the decision until at least August 2021
as to whether his Rights will be forfeited or allowed to convert to shares.
As a result of these decisions, the CEO’s total pay outcome for 2019/20 is 83 per cent lower than in 2018/19. A detailed explanation
of the CEO’s pay for 2019/20 is provided in the Remuneration Report.
These decisions are reflected in this year’s Remuneration Report.
Remuneration Framework Review – 2020/21
The Board has structured the Remuneration Framework for 2020/21 to appropriately support the longer-term nature of the Recovery
Plan. In doing so, the Board has made the following two changes to the Remuneration Framework for the 2020/21 year only:
– 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; and
– Aligning STIP Scorecard performance measures for 2020/21 with the Qantas Group strategic priorities in rebuilding the business.
At the request of the Board, the CEO has agreed to stay for the next three years as the Recovery Plan is implemented. This further
aligns with the changes to the weighting from short term towards long-term incentives for 2020/21.
In addition, the Board has approved that effective 1 July 2020:
– The CEO will continue to take no Base Pay in July and will forgo 35 per cent of Base Pay from 1 August 2020 until 31 October
2020;
– The Chairman will continue to take no fees in July and will forgo 35 per cent of fees from 1 August 2020 until 31 October 2020;
– Executive Management will take a 15 per cent reduction in Base Pay until 31 October 2020; and
– Non-Executive Directors will take a 15 per cent reduction in fees until 31 October 2020.
The CEO, Executive Management and Non-Executive Directors will return to full pay from 1 November 2020.
Furthermore, Ms Hudson commenced in her Key Management Personnel (KMP) role, as Chief Financial Officer, on 1 October 2019
and her Base Pay was set at a level below her predecessor as she was new to the role. Consistent with the approach taken with
members of Executive Management to date, and following a very strong performance by Ms Hudson in her role, her Base Pay was
realigned and increased to $1,020,000 with effect from 1 July 2020.
The Qantas Board remains committed to a Remuneration Framework that supports business objectives, operates sustainably and is
market competitive. I invite you to review the 2020 Remuneration Report.
Paul Rayner
Chairman, Remuneration Committee
31
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
1 REMUNERATION REPORT SUMMARY
The objectives of, and approach to, Qantas’ Executive Remuneration Framework are summarised as follows:
Remuneration Objectives
Remuneration Effectiveness
– Supports Business Objectives: Encourages the pursuit of
growth and the success of Qantas. Aligned with Qantas’
purpose, values, strategy and risk appetite. Aligned with
shareholder requirements.
– Operates Sustainably: Encourages sound management of
financial and non-financial risks. Encourages good conduct
and discourages misconduct. Considers cost and
reputational factors and complies with relevant laws and
regulations.
– Market Competitive: Attracts, motivates and appropriately
rewards a capable management team.
– Oversight: Remuneration governance roles clearly defined
for the Board; Remuneration Committee; Safety, Health,
Environment and Security Committee; Audit Committee; and
the Board’s independent remuneration consultant (EY).
– Structure: Design elements that reward for performance, but
also protect against unintended or unjustified pay outcomes.
– Operation: Demonstrated history of aligning remuneration
outcomes with performance, appropriate application of Board
discretion and adjusting remuneration outcomes based on
individual performance and conduct.
– Quantum: Remuneration decisions made with reference to
comparable roles in other listed Australian companies.
A more detailed description is provided on pages 37 to 38.
The structure of the Executive Remuneration Framework is as follows:
Base Pay
Fixed salary inclusive of superannuation
Annual Incentive
Also referred to as the
Short Term Incentive Plan
(or STIP)
– An annual incentive opportunity
– Balanced scorecard
–
(financial + non-financial measures)
Individual performance
(achievements and conduct)
– Delivered 2/3rds cash and 1/3rd shares
Long Term Incentive
Also referred to as the
Long Term Incentive Plan
(or LTIP)
– Awards of Rights
– Qantas’ 3-year TSR performance relative to:
– A global airline peer group
– ASX100 companies
– Rights may convert to shares on vesting
Cash
Cash
Shares
Deferral Period
Additional Lock
Performance
Restriction
50% Rights may vest, subject to Qantas’ TSR
performance relative to ASX100 companies
50% Rights may vest, subject to Qantas’ TSR
performance relative to airline peers
Performance
Year 1
Year 2
Year 3
l
C
a
w
b
a
c
k
a
p
p
l
i
e
s
Additional Lock
Additional Lock
Restriction
Year 4
32
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
2019/20 ANNUAL INCENTIVE PLAN
Annual Incentive – Structure
Also referred to as the Short Term Incentive Plan (or STIP).
The STIP is an annual incentive opportunity where an
Executive may receive an award that is a combination of a
cash bonus and an award of restricted shares if the plan’s
performance conditions are achieved.
Purpose
Reward for individual and Qantas Group
performance, aligned with annual
performance objectives.
Target and
Maximum
Opportunity
Business
Performance
% of Base Pay
CEO
Target
Maximum
100%
200%
Executive
KMP
80%
160%
STIP Scorecard:
– A single Qantas Group Scorecard that
applies to the CEO and Executive
Management
– A balanced set of financial and non-
financial measures.
Individual
Performance
Individual Performance Factor (IPF):
– Delivery against individual objectives
– Behaviour and how it aligns to the Qantas
Group beliefs.
STIP Formula Base
Pay
x
Target
Opportunity
x
STIP
Scorecard
Outcome
x
IPF
Delivery
Disclosure
Board
Discretion
Cash: 2/3rds
Shares: 1/3rd with 2-year deferral period and
an additional 1-year trading restriction, during
which shares cannot be traded and are
subject to clawback.
In addition to required statutory disclosures,
Qantas chooses to disclose the full value of
each year’s STIP award (in years where the
STIP award is made), disclosing both:
– The value of cash awards made
– The full value of restricted shares that
were awarded (notwithstanding that these
shares are still subject to a 2-year deferral
period).
The Board retains discretion over any awards
made under the STIP.
Previously, the Board has applied its discretion
in circumstances where, although scorecard
measures had been achieved or exceeded,
the Board deemed it more appropriate to
make a nil or reduced award under the STIP
or to deliver a higher proportion of an award
in Qantas shares.
Annual Incentive Outcomes for 2019/20
2019/20 STIP
Outcome
The Board exercised its discretion and
made no awards under the 2019/20 STIP.
2019/20 STIP
Scorecard
While the Board sees the balanced
scorecard approach as an important design
element of the STIP, it recognises that the
overall STIP outcome must be considered
in the context of the severe impact of
COVID-19 on Qantas’ operations and
financial position.
Therefore, in March 2020 the Board
determined that no awards be made under
the 2019/20 STIP.
Prior to the severe impact of COVID-19 on
our business, the STIP Scorecard was
tracking for a strong overall outcome with
financial measures forecast to be above
threshold and/or target. As at 31 December
2019, the STIP Scorecard was tracking to
achieve an outcome of 88 per cent.
The COVID-19 pandemic resulted in a
dramatic decline in traveller demand,
triggering a drastic reduction in flying.
Therefore, the financial target components
of the STIP Scorecard were not met.
There was good performance against non-
financial components of the STIP
Scorecard, including measures of
Operational Safety, Workplace Safety and
Customer performance. This performance
would have resulted in a partial award
under the 2019/20 STIP (estimated at 31
per cent). However, the Board applied its
discretion and determined the STIP
Scorecard outcome to be zero.
2019/20 STIP Scorecard:
Strategic Objective
Group Profitability
Workplace and Operational Safety
Customer
Weighting
(target)
Outcome
50%
15%
15%
Maximise Our Leading Domestic Position 10%
Transformation and Growth
STIP Scorecard Outcome
10%
100%
0%
Target achieved or exceeded
Partial achievement against targets
No achievement against targets
Further detail on the STIP is provided on pages 42 to 43.
33
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
LONG TERM INCENTIVE PLAN
Long Term Incentive – Structure
Long Term Incentive Outcomes for 2019/20
Also referred to as the Long Term Incentive Plan (or LTIP).
The LTIP is a 4-year plan that involves an upfront award of a
fixed number of Rights. If performance and service conditions
are achieved over a 3-year period, Rights vest and convert to
Qantas shares. The vested shares are then subject to a 1-
year trading restriction during which the shares cannot be
traded and are subject to clawback.
Purpose
Reward for longer-term Qantas Group
performance.
Target
Opportunity
and
Allocation
Methodology
The number of Rights awarded under the
LTIP has been calculated applying a face
value methodology. The number of Rights
awarded is the maximum number of Rights
that may vest and convert to Qantas shares.
The target opportunity for the CEO and
Executive KMP is as follows:
Target Opportunity CEO Executive KMP
% of Base Pay on a
face value basis
185%
95%
The number of Rights awarded is determined
by applying the following formula:
Base
Pay
x
Target
Opportunity
Face Value
of Right
Business
Performance
Qantas’ 3-year Total Shareholder Return
(TSR) performance relative to:
– A global airline peer group
– ASX100 companies.
Delivery
Disclosure
Historic LTIP
awards
(prior to 1 July
2019)
If performance and service conditions
are achieved, Rights vest and convert to
Qantas shares. A 1-year trading restriction
on vested shares applies, during which the
shares cannot be traded and are subject to
clawback.
In addition to the required statutory
disclosures, Qantas chooses to disclose the
full value of LTIP awards that vest during
the year, disclosing the value of the LTIP
awards based on the share price at the end
of the performance period.
Prior to 1 July 2019, the LTIP was a 3-year
plan, as follows:
– A 3-year performance period
– If performance and service conditions
are achieved, Rights vest and convert to
Qantas shares with no further
restrictions.
The 2018-2020 LTIP operated on this basis.
Further detail on the LTIP is provided on pages 44 to 45.
34
2018-2020
LTIP –
Achievement
of
Performance
Conditions
LTIP
Outcomes
Longer term
TSR
Performance
Qantas and the aviation industry have been
disproportionately impacted by COVID-19.
However, Qantas continued to outperform its
industry peers and competitors.
Qantas’ 3-year relative TSR performance
was ranked:
– 1st in the airline peer group –
performance condition fully achieved
– 68th in the ASX100 – performance
condition not achieved.
Based on this performance, 50 per cent
vesting was achieved.
Notwithstanding that the LTIP performance
conditions were partially achieved, the CEO
offered and the Board agreed to defer the
decision until at least August 2021 as to
whether his Rights will be forfeited or
allowed to convert to Shares. Therefore, the
CEO’s LTIP outcome in 2019/20 is nil.
For Executive Management, 50 per cent of
Rights awarded under the 2018-2020 LTIP
vested and converted to shares.
The TSR performance of Qantas (and the
aviation industry as a whole) has been
disproportionately impacted by COVID-19.
Prior to COVID-19, Qantas had achieved
continued longer-term share price growth,
resulting in top quartile relative TSR
performance against the airline peer group
and ASX100 group over multiple rolling
3-year periods. Given the impact of COVID-
19 on the aviation industry, Qantas’ TSR
performance over the current 3-year
performance period (to 30 June 2020) is
below median compared to other ASX100
companies. However, Qantas continues to
outperform its airline peers, achieving top
quartile relative TSR performance for the
fifth consecutive rolling 3-year period.
QANTAS AND AIRLINE PEERS – 3-YEAR TSR PERFORMANCE1
QANTAS ROLLING 3-YEAR RELATIVE TSR PERFORMANCE1 HISTORY
LTIP Period
2018-2020
2017-2019
2016-2018
2015-2017
2014-2016
2013-2015
Airline Peer Group
Top quartile
Top quartile
Top quartile
Top quartile
Top quartile
Above median
ASX100 Peer Group
Below Median
Top quartile
Top quartile
Top quartile
Top quartile
Top quartile
1.
TSR performance, applying the LTIP performance test methodology (which
applies the average closing share price over the six months preceding the test
date of 30 June 2020).
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
REMUNERATION OUTCOMES FOR THE CEO IN 2019/20
CEO Remuneration Outcomes – Key Points
The CEO remuneration outcomes reflect the commitment from the CEO and Board to ensure that remuneration outcomes reflect the
prevailing economic challenges that Qantas, its shareholders, customers and employees are experiencing.
The CEO’s total pay outcome for 2019/20 was 83 per cent lower than 2018/19. The CEO’s pay outcome for 2019/20 is as follows:
– Zero Base Pay from 1 April 2020
– Zero Annual Incentive award
– Zero vesting under the Long Term Incentive Plan.
Base Pay
The CEO did not receive a Base Pay increase during 2019/20.
In addition, the CEO elected to forgo 100 per cent of Base Pay
from 1 April 2020 to 30 June 2020.
Base Pay (cash) is $1,606,497 (Base Pay of $2,170,000 less
Base Pay forgone $542,500 less superannuation contributions
of $21,003).
Annual Incentive – 2019/20 STIP
The Board applied its discretion and determined that the
2019/20 STIP Scorecard Outcome was zero.
As result, the CEO received no award under the 2019/20 STIP.
The STIP Scorecard Outcome is detailed on page 47.
Long Term Incentive – 2018-2020 LTIP
Qantas’ TSR performance over the 3-year performance period
was better than all other airlines that comprise the airline peer
group of the 2018-2020 LTIP.
This would have permitted 50 per cent of the CEO’s Rights to
vest and convert to Qantas shares. However, the CEO offered
and the Board agreed to defer the decision until at least August
2021 as to whether his Rights will be forfeited or allowed to
convert to Shares. As result, the CEO’s LTIP outcome for
2019/20 was zero.
Remuneration Outcomes for the CEO for 2019/20
The remuneration outcomes for the CEO in 2019/20 are
detailed in the following table. These outcomes are aligned with
Qantas’ performance during 2019/20.
CEO Remuneration Outcomes1,2
Base Pay (cash)
STIP – cash bonus
STIP – share-based
LTIP
Other
Total
2020
$’000
1,606
-
-
-
138
1,744
2019
$’000
2,149
1,172
586
6,329
(239)
9,997
2020 vs
2019 %
change
(25%)
(100%)
(100%)
(100%)
n/a
(83%)
1. Detail of non-statutory remuneration methodology is explained on page 41 & 46.
2. A reconciliation of remuneration outcomes to statutory remuneration disclosures
is provided on page 41.
CEO REMUNERATION OUTCOMES – BASE PAY (CASH)
CEO REMUNERATION OUTCOMES – ANNUAL INCENTIVE
CEO REMUNERATION OUTCOMES – LONG TERM INCENTIVE
Statutory Remuneration Disclosures
The statutory remuneration disclosures for the CEO are
prepared in accordance with Australian Accounting Standards.
The statutory disclosures differ from the remuneration outcomes
for the CEO due to the accounting treatment of share-based
payments for the STIP and LTIP.
CEO Statutory Remuneration
Base Pay (cash)
STIP – cash bonus
STIP – share-based
LTIP
Other
Total
2020
$’000
1,606
-
603
2,411
138
4,758
2019
$’000
2,149
1,172
1,206
2,277
(239)
6,565
CEO Remuneration Outcomes History (2010/11 to 2019/20)
Qantas’ incentive awards are designed to align Executive remuneration outcomes with business performance. This alignment is
demonstrated each year in the variability in the history of the incentive plan outcomes for the CEO, which reflect business performance.
Underlying PBT ($M)
ROIC %1
2011
$552
2012
$95
2013
$186
2014
($646)
(1.5%)
2015
$975
16.2%
2016
$1,532
22.7%
2017
$1,401
20.1%
20182
$1,565
21.4%
20193
$1,326
19.2%
2020
$124
5.8%
1. ROIC % information is only available from 2013/14.
2. The Group adopted AASB 15 Revenue from Contracts with Customers effective 1 July 2018 using the full retrospective method of adoption. 2018 has been restated.
3. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value
hedges (“IFRIC Fair Value hedging agenda decision”) retrospectively. 2019 has been restated.
35
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
CHANGES TO THE REMUNERATION FRAMEWORK FOR 2020/21
The impact of COVID-19 on the aviation industry has been particularly severe and the industry’s recovery is expected to be long and
challenging1. The Board has structured the Remuneration Framework for 2020/21 aligned to Management’s implementation of its
Recovery Plan as follows:
Pay Mix Change for Executives for 2020/21
The Board has changed the pay mix that will apply for Executives for 2020/21. This involves changing the relative weighting of incentive
plan ‘at target’ opportunities for Executives, with a decrease in the weighting toward annual incentives and an increase in weighting
toward long-term incentives. This is a pay mix change only and there is no increase in the total target pay for each Executive.
In addition, participation in the 2021-2023 LTIP, which normally applies to Senior Executives only, will be extended to a broader
management population (Executives). This will involve no increase to total target pay for each Executive, as each Executive’s LTIP
opportunity will be offset by a reduction in their annual incentive opportunity for 2020/21.
This one-off change aligns the broader Management team with the immediate priorities of the post COVID-19 Recovery Plan.
In this context, at the Board’s request, the CEO has agreed to continue in his position and lead the Recovery Plan for the next three years.
For the CEO, the pay remix involves:
– Decreasing his target STIP opportunity for 2020/21 to 50 per cent of Base Pay (2019/20: 100 per cent of Base Pay)
– Increasing his target LTIP opportunity for 2020/21 to 235 per cent of Base Pay (2019/20: 185 per cent of Base Pay)
Shareholder approval will be sought at the 2020 Annual General Meeting for the CEO’s award of 1,349,000 Rights under the 2021-2023
LTIP.
STIP Scorecard for 2020/21
Each year, the Board aligns the performance measures that comprise the STIP Scorecard with the Qantas Group’s strategic priorities.
For 2020/21, this involved aligning these performance measures with the key financial, operational and safety measures supporting
the Recovery Plan. For 2020/21, the Board selected cash preservation and Recovery Plan metrics as the key financial performance
measures for the Qantas Group, with a weighting of 50 per cent of the STIP Scorecard. In addition, the maximum STIP Scorecard
outcome was reduced from 175 per cent to 150 per cent for 2020/21. Therefore, for the CEO, assuming a maximum STIP Scorecard
outcome of 150 per cent and an indicative IPF of 1.2, the maximum STIP award for 2020/21 would be 90 per cent of Base Pay.
The Board believes that these changes to the Remuneration Framework appropriately support the Qantas Group’s key business
objectives for 2020/21.
1.
International Air Transport Association (IATA) Press release, 9 June 2020
CHANGES TO THE REMUNERATION FRAMEWORK IMPLEMENTED FOR 2019/20
As disclosed in the 2019 Remuneration Report, the Board made a number of changes to the structure of the Remuneration Framework
effective from 1 July 2019.
These changes, individually and collectively, provide an avenue for Directors and Executives to have financial exposure should financial
or non-financial risks materialise, as well as an enhanced ability to clawback remuneration for Executives (both the ability to clawback
and quantum of equity available for clawback).
Minimum Shareholding Guidelines
While formal shareholding guidelines had not previously applied, Directors and Executive Management have held material holdings in
Qantas shares. Notwithstanding this, the following shareholding guidelines were introduced:
Individual
Non-Executive Directors
CEO
Executive Management
Guideline1
1 times base fee
1.5 times Base Pay
0.75 times Base Pay
1. Value of shareholding to be acquired over a maximum 5-year timeframe.
Additional Trading Restriction Period on STIP and LTIP
An additional 1-year trading restriction is to apply to vested STIP shares and Rights that vest and convert to shares under the LTIP
(commencing with the 2019/20 STIP and 2020-2022 LTIP). The additional trading restriction applies both during employment and post-
cessation of employment. These shares are not forfeited on cessation of employment but are subject to clawback.
Approach to Clawback
The clawback policy has been expanded to give the Board broader circumstances in which clawback may be applied. This applies in
cases of financial misstatement, fraud, dishonesty and misconduct, with application on both the individual who committed the misconduct
and those accountable for those individuals. The additional 1-year trading restriction also provides an enhanced mechanism to enable
clawback of vested equity. When combined with the performance periods and the existing deferral period, this provides a 4-year period
under both the STIP and LTIP where clawback could be enforced.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
REMUNERATION REPORT FOR 2019/20
The Remuneration Report sets out remuneration information for the CEO, Executive Management and Non-Executive Directors.
Section 300A of the Corporations Act 2001 requires disclosure of remuneration information for KMP, with KMP defined in Australian
Accounting Standard AASB 124 Related Party Disclosures as those persons having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.
CEO and Executive KMP (and their statutory remuneration disclosures) are listed on page 40. Non-Executive Director KMP (and their
statutory remuneration disclosures) are listed on page 53.
2 REMUNERATION GOVERNANCE
The objectives of Qantas’ Executive Remuneration Framework are to:
– Support Business Objectives by:
– Encouraging the pursuit of growth and the success of Qantas
– Aligning with Qantas’ purpose, values, strategy and risk appetite
– Aligning with shareholder requirements.
– Operate Sustainably by:
– Encouraging the sound management of financial and non-financial risks
– Encouraging good conduct and discouraging misconduct
– Considering cost and reputational factors and complying with relevant laws and regulations.
– Be Market Competitive to attract, motivate and appropriately reward a capable management team.
These objectives are achieved by the Board applying the following robust approach to remuneration governance and effectiveness,
described below across the areas of oversight, structure, operation and quantum:
Oversight
The remuneration governance role of the Board; the Remuneration Committee; the Safety, Health, Environment
and Security Committee; the Audit Committee; and the Board’s independent remuneration consultant (EY) are
clearly defined.
The Remuneration Committee (a committee of the Board, whose members are detailed on pages 8 to 11) has
the role of reviewing and making recommendations to the Board on specific remuneration matters at Qantas. The
Committee makes recommendations it believes are appropriate from the perspective of business performance,
individual performance and conduct, risk, governance, quantum and market conditions.
The Safety, Health, Environment and Security Committee and the Audit Committee have appropriate input into
remuneration decision making. The Chairs of both committees regularly attend Remuneration Committee meetings
and provide input into remuneration decision making. A member of the Remuneration Committee is also a member
of the Safety, Health, Environment and Security Committee and the Audit Committee.
During 2019/20, the Remuneration Committee re-appointed EY as its remuneration consultant. The Remuneration
Committee has established protocols in relation to the appointment and use of remuneration consultants to support
compliance with the Corporations Act 2001, which are incorporated into the terms of engagement with EY.
The Remuneration Committee did not seek a formal remuneration recommendation (as defined in the Corporations
Act 2001) during 2019/20.
Structure
The Framework has design elements that protect against the risk of unintended and unjustified pay outcomes.
These design elements include:
– Diversity in incentive plan performance measures, which as a suite of measures cannot be directly and
imprudently influenced by any individual employee
– Individual performance being defined and assessed in terms of both achievements and conduct
– The Board retaining discretion over remuneration outcomes
– Clear maximum values specified for scorecard outcomes under the STIP and a challenging vesting scale under
the LTIP
– Diversity of the timeframes within which performance is measured, with performance under the STIP being
measured over one year and performance under the LTIP being measured over three years
– Deferral of a portion of awards under the STIP for two years, with an additional one-year trading restriction
providing alignment with shareholder interests
– Deferral of Rights that vest and convert to shares under the LTIP, with shares being subject to a one-year
trading restriction to provide further alignment with shareholder interests.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
– Clawback being available in the event of serious misconduct, breach of obligations to the Group or a material
misstatement in Qantas’ Financial Statements. The Board may:
– Determine that an Executive forgoes some or all awards otherwise due under the STIP;
– Deem some or all STIP shares which are subject to a deferral period and/or additional one-year trading
restriction be forfeited;
– Cause some or all LTIP Rights which have not yet vested to lapse or LTIP Rights which have vested and
converted to shares that are subject to a trading restriction be forfeited; and/or
– In the case of serious misconduct, cancel any post-employment benefits for the relevant employee(s) where
possible.
Operation
The Qantas Board has a demonstrated history of aligning remuneration outcomes with performance. The Board
has applied its discretion in the past to ensure remuneration outcomes are appropriate and has adjusted individual
remuneration outcomes based on performance and conduct.
Examples of where the Board has applied its discretion, including 2019/20, are provided on page 42.
Quantum
Base Pay and incentive plan opportunities are set with reference to external market data, including comparable
roles in other listed Australian companies. Remuneration is benchmarked against ASX50 companies and a
revenue-based peer group of other listed Australian companies.
The Board believes these are the appropriate benchmarks, as these are the comparator groups whose roles best
mirror the size, complexity and challenges in managing Qantas’ businesses and are also the peer groups with
which Qantas competes for executive talent.
EMPLOYEE SHARE TRADING POLICY
The Qantas Code of Conduct and Ethics contains Qantas’ Employee Share Trading Policy (Policy). The Policy prohibits employees
from dealing in Qantas securities (or securities of other listed or unlisted entities) while in possession of material non-public information
relevant to the entity.
In addition, nominated employees (including the CEO and Executive Management) and Non-Executive Directors are:
– Prohibited from dealing in Qantas securities (or the securities of any Qantas Group listed entity) during defined closed periods
– Required to comply with ‘request to deal’ procedures prior to dealing in Qantas securities (or the securities of any Qantas Group
listed entity) outside of defined closed periods
– Prohibited from hedging or entering into any margin lending arrangement, or entering into any other encumbrances over the
securities of Qantas (or the securities of any Qantas Group listed entity) at any time.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
3 REMUNERATION OUTCOMES FOR 2019/20
The following table summarises the remuneration decisions and outcomes for the CEO and Executive KMP for the year ended 30 June
2020. The remuneration outcomes detailed in this table are better aligned to the current year performance and are therefore particularly
useful in understanding current year pay and its alignment with performance, in comparison to the statutory remuneration disclosures.
In regards to the 2018-2020 LTIP, the performance measures being Qantas’ TSR relative to companies with ordinary shares included
in the ASX100 and an airline peer group (Global Listed Airlines), were tested as at 30 June 2020. Qantas’ three-year relative TSR
performance was ranked 1st in the airline peer group and 68th in the ASX100. Based on this performance, 50 per cent vesting was
achieved. Notwithstanding that the LTIP conditions were partially achieved, the CEO offered and the Board agreed to defer the
decision until at least August 2021 as to whether his Rights will be forfeited or allowed to convert to shares. Therefore, the CEO’s LTIP
outcome in 2019/20 is nil. For Executive Management, 50 per cent of Rights awarded under the 2018-2020 LTIP vested and converted
to shares, with the remaining Rights lapsing. The total value of the vested LTIP awards for Executive Management, excluding the CEO,
was less than the total Base Pay foregone in 2019/20.
Remuneration Outcomes Table – CEO and Executive KMP1
$’000s
Current Executives
Alan Joyce
Chief Executive Officer
Andrew David
CEO Qantas Domestic
Gareth Evans
CEO Jetstar Group
Vanessa Hudson7,8
Chief Financial Officer from
1 October 2019
Tino La Spina
CEO International from 1 October 2019
Chief Financial Officer to
30 September 2019
Olivia Wirth
CEO Qantas Loyalty
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Base Pay
(Cash)2
STIP Cash
Bonus3
STIP
Deferred
Award3
LTIP4,5
Other
Benefits6
1,606
2,149
749
999
795
1,060
576
n/a
749
999
635
846
5,110
6,053
-
1,172
-
397
-
467
-
n/a
-
419
-
375
-
-
586
-
198
-
233
-
n/a
-
209
-
187
-
2,830
1,413
-
6,329
314
1,582
333
1,917
66
n/a
314
1,582
141
699
1,168
12,109
138
(239)
50
96
86
61
169
n/a
97
21
145
110
685
49
Total
1,744
9,997
1,113
3,272
1,214
3,738
811
n/a
1,160
3,230
921
2,217
6,963
22,454
1. Detail of non-statutory remuneration methodology is explained on pages 41 and 46.
2. Base Pay (Cash) is Base Pay less superannuation contributions. (Superannuation is reported in Other Benefits.)
3. The full value of STIP awards made to each Executive during the 2018/19 financial year is calculated by adding the STIP Cash Bonus and the STIP Deferred Award. For
2019/20 the value is nil as no award was made.
4. LTIP awards vested in 2019/20 at 50% for Executive Management other than the CEO. The total value of these vested LTIP awards for Executive Management, excluding the
CEO, was less than their total FAR foregone in 2019/20. The CEO offered and the Board agreed to defer the decision until at least August 2021 as to whether his Rights will be
forfeited or allowed to convert to shares. LTIP awards vested in 2018/19 at 100%.
5. The number of Rights vested multiplied by the Qantas share price of $3.78 at 30 June 2020, as at the end of the performance period (2019: 30 June 2019).
6. Other Benefits are detailed on page 46.
7. 2019/20 remuneration reflects the full-year remuneration for Ms Hudson. This differs to the Statutory Remuneration disclosure, which includes only the remuneration for the
period of time in a key management role for Ms Hudson (1 October 2019 to 30 June 2020).
8. Superannuation benefits are provided through a defined benefit superannuation plan. The amount disclosed has been measured in accordance with AASB 119 Employee
Benefits.
39
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
4 STATUTORY REMUNERATION DISCLOSURES FOR 2019/20
The statutory remuneration disclosures for the year ended 30 June 2020 are detailed below. These are prepared in accordance with
Australian Accounting Standards and differ from the 2019/20 remuneration outcomes on page 39. These differences arise due to the
accounting treatment of share-based payments for the STIP and LTIP. The statutory disclosures include an accounting remuneration
value for:
– Prior years’ STIP awards
Accounting standards require STIP remuneration to be expensed (and therefore included as statutory remuneration) in financial
years which differ from the year of scorecard performance.
Despite no awards being made under the 2019/20 STIP, a value for STIP awards is still required to be included in the statutory
remuneration table. This is due to the fact that deferred shares granted under the 2017/18 STIP and 2018/19 STIP have a future
service period, during which the recipient must remain employed by the Group for the awards to vest. Therefore, the 2019/20
statutory remuneration table includes a value for part of those prior year STIP awards.
– LTIP awards that have not vested
Accounting standards require LTIP remuneration to be expensed (and therefore included as statutory remuneration) notwithstanding
that the Rights have not met the performance hurdles and have lapsed.
The performance measures for the 2018-2020 LTIP, being Qantas’ TSR relative to companies with ordinary shares included in
the ASX100 and an airline peer group (Global Listed Airlines), were tested as at 30 June 2020. Qantas’ three-year relative TSR
performance was ranked 1st in the airline peer group and 68th in the ASX100. Based on this performance, 50 per cent vesting
was achieved. Notwithstanding that the LTIP conditions were partially achieved, the CEO offered and the Board agreed to defer the
decision until at least August 2021 as to whether his Rights will be forfeited or allowed to convert to Shares. . For Executive
Management, 50 per cent of Rights awarded under the 2018-2020 LTIP vested and converted to shares, with the remaining Rights
lapsing.
Additionally, LTIP awards that will be assessed for vesting in future years are expensed over the three-year testing period.
Therefore, the statutory disclosures include an accounting value for part of the 2019-2021 and the 2020-2022 LTIP awards.
Statutory Remuneration Table – CEO and Executive KMP
Incentive Plan –
Accounting Accrual
Equity-Settled
Share-Based
Payments
Other Benefits
Base Pay
(Cash)1,2
STIP
Cash
Bonus1
STIP
Deferred
Shares
LTIP
Rights
Sub-
Total
Non-Cash
Benefits1,3
Post-
Employment
Benefits4
Other
Long-Term
Benefits5
Sub-
Total
$’000s
Current Executives
Alan Joyce
Chief Executive Officer
Andrew David
CEO Qantas Domestic
Gareth Evans
CEO Jetstar Group
Vanessa Hudson6,7
Chief Financial Officer from
1 October 2019
Tino La Spina
CEO International
from 1 October 2019
Chief Financial Officer
to 30 September 2019
Olivia Wirth
CEO Qantas Loyalty
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
1,606
2,149
749
999
795
1,060
384
n/a
749
-
1,172
603
1,206
2,411
2,277
-
397
-
467
-
n/a
192
351
227
421
78
n/a
583
529
621
590
218
n/a
4,620
6,804
1,524
2,276
1,643
2,538
680
n/a
-
201
583
1,533
2019
999
419
361
529
2,308
2020
2019
2020
2019
635
846
4,918
6,053
-
375
-
2,830
171
312
1,472
2,651
420
302
4,836
4,227
1,226
1,835
11,226
15,761
28
41
54
30
21
33
36
n/a
35
67
94
87
268
258
53
51
50
48
50
48
105
n/a
52
48
51
48
361
243
Total
4,758
6,565
1,574
2,373
1,729
2,599
820
n/a
57
(331)
138
(239)
(54)
19
15
(20)
(1)
n/a
50
97
86
61
140
n/a
10
97
1,630
(95)
20
2,328
-
(24)
27
(451)
145
111
656
50
1,371
1,946
11,882
15,811
1. Short-term employee benefits include Base Pay (cash), STIP cash bonus and non-cash benefits.
2. Base Pay (Cash) is Base Pay less superannuation contributions. (Superannuation is reported in Post-Employment Benefits).
3. Non-Cash Benefits includes the value of travel benefits whilst employed and other minor benefits.
4. Post-Employment Benefits includes superannuation and an accrual for post-employment travel of $31,000 for Mr Joyce and $35,000 for each other Executive (2019: $30,000
for Mr Joyce and $27,000 for each other Executive).
5. Other Long-Term Benefits includes movement in annual leave and long service leave balances. The accounting value of other long-term benefits may be negative, for example
where an Executive’s annual leave balance decreases as a result of taking more annual leave than they accrue during the current year.
6. 2019/20 remuneration reflects the period of time in a key management role for Ms Hudson (1 October 2019 to 30 June 2020).
7. Superannuation benefits are provided through a defined benefit superannuation plan. The amount disclosed has been measured in accordance with AASB 119 Employee
Benefits.
On 24 August 2020, the Group announced a reduction to its Group Management Committee as it continues to respond to the
expanding COVID-19 crisis with the CEO of Qantas International, Mr La Spina, leaving the Group in light of what is likely to be the
extended grounding of this part of the airline.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
A reconciliation of the CEO’s remuneration outcome to the statutory disclosures is detailed below as an example.
CEO’s Statutory Remuneration Disclosure to Remuneration Outcome for 2019/20
Reconciliation
($’000s) Description
Statutory Remuneration Disclosure
4,758
Accounting value of share-based payments
– Less: Accounting value for STIP share awards
– Less: Accounting value for LTIP share awards
(603)
(2,411)
The Statutory Remuneration Disclosure includes the accounting value
of share-based payments. Accounting standards require share-based
payments to be amortised over the relevant performance and service
periods. For 2019/20, the Statutory Remuneration Disclosure includes:
– A value resulting from the expense of deferred shares from the
2017/18 and 2018/19 STIP awards. No value was included for the
2019/20 STIP as the CEO did not receive an award under the
2019/20 STIP.
– A value resulting from the expense of LTIP Rights from the 2018-
2020, 2019-2021 and 2020-2022 LTIP awards. Statutory
remuneration includes the full expense of LTIP Rights irrespective of
whether performance conditions are achieved or expected to be
achieved. For the 2018-2020 LTIP the CEO offered and the Board
agreed to defer the decision until at least August 2021 as to
whether his Rights will be forfeited or allowed to convert to
Shares. The CEO’s LTIP outcome in 2019/20 is nil but a value is
still included as statutory remuneration. If Rights convert to shares,
the value of the award of the 2018-2020 LTIP will be disclosed in
the Remuneration Outcome for that year. Testing for the 2019-
2021 and 2020-2022 LTIP awards will be undertaken as at 30
June 2021 and 30 June 2022 respectively to determine whether
the CEO receives any shares under these awards.
Current year STIP share awards and vesting of
LTIP awards
– Add: 2019/20 STIP share awards
– Add: 2018–2020 LTIP vesting
In a year where STIP share awards are made or LTIP awards vest,
the Remuneration Outcomes disclosure includes:
– The full value of STIP shares awarded even though these awards
are still subject to a two-year deferral period and an additional
one-year trading restriction.
-
-
– The full value of the shares that vested under the LTIP even
where these shares are subject to an additional one-year trading
restriction.
No awards were made to the CEO in 2019/20 and therefore these
values are nil.
Remuneration Outcome – Total
1,744
5 EXECUTIVE REMUNERATION STRUCTURE
The Qantas Executive Remuneration Framework, as it applies to the CEO and Executive Management, is summarised on pages 32 to
35. Additional detail on the structure and operation of each element of the framework is provided below.
Base Pay
(also referred to
as Fixed Annual
Remuneration)
Base Pay is a guaranteed salary level, inclusive of superannuation. Each year, the Remuneration Committee
reviews the Base Pay for the CEO and Executive Management. An individual’s Base Pay, being a guaranteed
salary level, is not related to Qantas’ performance in a specific year.
Base Pay (Cash), as disclosed in the remuneration tables, excludes superannuation (which is disclosed as Post-
Employment Benefits) and includes salary sacrifice components such as motor vehicles.
In performing a Base Pay review, the Board makes reference to external market data including comparable roles
in other listed Australian companies. Remuneration is benchmarked against ASX50 companies and a revenue-
based peer group of other listed Australian companies. The Board believes these are the appropriate benchmarks,
as these are the comparator groups whose roles best mirror the size, complexity and challenges in managing
Qantas’ businesses and are also the peer groups with whom Qantas competes for executive talent.
There was no increase to the Base Pay of the CEO and other Executive Management during 2019/20. In addition,
the CEO and Executive Management elected to forego 100 per cent of their Base Pay from 1 April 2020 to 30 June
2020. It is not expected that the Base Pay of the CEO and other Executive Management will change for 2020/21,
except for Ms Hudson.
Ms Hudson commenced in her KMP role on 1 October 2019 and her Base Pay was set at a level below her
predecessor as she was new to the role. Consistent with the approach taken with members of Executive
Management to date and following a very strong performance by Ms Hudson in her role, Ms Hudson’s Base Pay
was realigned and increased to $1,020,000 with effect from 1 July 2020.
The Base Pay for each Executive KMP is outlined on page 49.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Annual Incentive
STIP Overview
Calculation of
STIP Awards
‘Target’
Opportunity
Performance
Conditions –
STIP Scorecard
Performance
Conditions –
Individual
Performance
Factor (IPF)
Board
Discretion
The STIP is the annual incentive plan for members of Qantas Executive Management. Each year, these Executives
may receive an award that is a combination of cash and restricted shares to the extent that the plan’s performance
conditions are achieved.
STIP awards are calculated as follows:
STIP
Award
=
Base Pay
X
‘Target’
Opportunity
X
STIP Scorecard
Outcome
X
Individual Performance
Factor
Each STIP participant has a ‘Target’ STIP Opportunity expressed as a percentage of Base Pay, as follows:
– For the CEO, 100 per cent of Base Pay
– For Executive Management, 80 per cent of Base Pay.
The Board sets a scorecard of performance conditions for the 2019/20 STIP (the STIP Scorecard).
The STIP Scorecard contains a mix of Group financial and non-financial measures.
Underlying PBT is the key budgetary and financial performance measure for the Qantas Group and is therefore
the key performance measure in the STIP Scorecard, with a weighting of 50 per cent.
Other financial and non-financial measures comprise the remaining 50 per cent of the STIP Scorecard. The Board
sets targets for each STIP Scorecard measure. At the end of the financial year, the Board assesses performance
against each measure and determines the overall STIP Scorecard outcome.
A detailed description of the STIP Scorecard measures and the 2019/20 STIP Scorecard outcome is provided on
pages 47 to 48.
An individual’s performance is recognised via an IPF. The IPF is a measure of individual performance that
assesses:
– What an individual has achieved
– How they went about it (their conduct and behaviours).
An individual’s behaviour is assessed against the Qantas Group Beliefs. The Qantas Group Beliefs are:
– Everyone has the right to return home safely
– Customers determine our success
– Being a fit, agile and diverse organisation drives innovation and simplicity
– Working together in an inclusive manner always delivers the optimal Group outcome
– Each employee deserves respect, trust and good leadership.
IPFs are generally in the range of 0.8 to 1.2. However, in the case of under-performance the IPF may be zero. In
exceptional circumstances the IPF may be as high as 1.5.
Board discretion is a key element of the design of the STIP.
While the Board sees the STIP Scorecard approach as an important design element of the STIP, it also recognises
that remuneration outcomes must be considered in the context of Qantas’ overall business performance, the
operating environment and non-financial considerations. Circumstances may occur where scorecard measures
have been achieved or exceeded, but in the view of the Board it is more appropriate to make no award under the
STIP or to deliver a higher proportion of an award in Qantas shares. Likewise, there may be circumstances where
performance is below an agreed target where the Board may determine that it is appropriate to pay a partial STIP
award. This circumstance has not occurred.
Therefore, each year the Board considers whether to apply its discretion. The Board may determine that:
– No award be made (as it did in 2011/12 and 2013/14)
– Only a partial award be made (as it did in 2010/11 and 2012/13)
– Any award will be entirely deferred and/or delivered in Qantas shares (as it did in 2010/11)
– A higher proportion of the award be made in Qantas shares (as it did in 2016/17)
– Any award be reduced (as it did in 2018/19).
For 2019/20, the Board exercised discretion not to make any awards under the 2019/20 STIP.
Delivery of
STIP Awards
No awards were made under the 2019/20 STIP. In a year where STIP awards are made, 2/3rds of the STIP award
would be paid as a cash bonus, with the remaining 1/3rd deferred into Qantas shares.
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
STIP Award
Deferral and
Trading
Restriction
No awards were made under the 2019/20 STIP. In a year where STIP awards are made, any shares awarded
would be subject to:
– A two-year deferral period; and
– A one-year trading restriction. The trading restriction would apply to these shares both during employment and
post-cessation of employment (shares subject to the trading restriction are not forfeited on cessation of
employment, but are subject to clawback).
The additional trading restriction strengthens the ability to clawback vested equity, if required.
Maximum and
Minimum STIP
Outcome
The maximum outcome under the STIP is capped at 200 per cent of Base Pay for the CEO and 160 per cent of
Base Pay for other Executive Management.
The minimum outcome is nil, which would occur if the threshold level of performance is missed on each STIP
measure, if an individual’s performance does not warrant an award, or if the Board determines that no award be
made.
Practically, for 2020/21, should the STIP Scorecard produce a maximum outcome of 150 per cent, and assuming
the CEO’s IPF and each of Executive Management’s IPFs were indicatively 1.2, then the maximum outcome under
the STIP for 2020/21 would be approximately 90 per cent of Base Pay for the CEO and 72 per cent of Base Pay for
other Executive Management.
Cessation of
Employment
(plans prior to 1
July 2019)
In general, Executives ceasing employment during the year forfeit any right to participate in that year’s STIP and
forfeit any shares awarded under prior year STIPs that are subject to a deferral period.
In limited circumstances (for example, retirement, employer-initiated terminations (with no record of poor
performance), death or total and permanent disablement), the Board may:
– For the current year STIP, make a pro-rated award that has regard to actual performance against the
performance measures (as determined by the Board following the end of the performance period), and the
portion of the performance period that the Executive served
– For shares awarded under prior year STIPs that are subject to a deferral period, remove that restriction.
Cessation of
Employment
(current plan)
In general, where an Executive resigns, is terminated for cause or is terminated in other circumstances involving
unacceptable performance or conduct, they forfeit any right to participate in that year’s STIP and forfeit any shares
awarded under prior year STIPs that are subject to a deferral period.
For shares subject to the additional trading restriction, forfeiture does not apply. That is, for any shares awarded
under prior year STIPs where the deferral period has been served, but the shares are subject to the additional
trading restriction, the Executive retains those shares subject to the additional trading restriction.
The additional trading restriction strengthens the ability to clawback vested equity, if required.
In limited circumstances (for example, retirement, employer-initiated terminations (with no record of poor
performance), death or total and permanent disablement):
– For the current year STIP, the Executive will receive a pro-rated award based on the actual performance against
the performance measures (as determined by the Board following the end of the performance period), and the
portion of the performance period that the Executive served
– For shares awarded under prior year STIPs that are subject to a deferral period, allow the Executive to continue
to hold those shares. The original deferral period and additional trading restriction continue to apply and these
shares are subject to clawback.
On cessation of employment, a tax liability arises on shares that are subject to a deferral period or trading
restriction, notwithstanding that those trading restrictions continue to apply. Accordingly, a portion of the shares
may be released to assist with funding the tax liability that arises for the Executive.
Disclosure
In addition to required statutory disclosures, Qantas chooses to disclose the full value of each year’s STIP award in
the Remuneration Outcomes Table on page 39. This involves disclosing both:
– The value of cash awards made
– The full value of restricted shares that were awarded (notwithstanding that these shares are still subject to a
two-year deferral period) and a one-year trading restriction.
No awards were made under the 2019/20 STIP and therefore the value for the 2019/20 STIP is nil.
Disclosure of STIP awards in the Statutory Remuneration Table on page 40 is based on the requirements of the
Corporations Act 2001 and applicable Australian Accounting Standards. The STIP awards are disclosed as either:
– A cash incentive for any cash bonus paid
– A share-based payment for any component awarded in deferred shares.
Where share-based STIP awards involve deferral over multiple reporting periods, they are reported against each
period in accordance with accounting standards.
43
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Long Term Incentive Plan (LTIP)
LTIP Overview
The LTIP is a four-year plan that involves an upfront award of a fixed number of Rights over Qantas Shares. If
performance and service conditions are achieved over a three-year period, Rights vest and convert to Qantas
shares. The vested shares are then subject to a one-year trading restriction during which the shares cannot be
traded and are subject to clawback.
If the three-year performance conditions or service conditions are not met, the Rights lapse.
Performance
Conditions
The performance measures for each of the 2018-2020 LTIP (tested at 30 June 2020), 2019-2021 LTIP (to be
tested at 30 June 2021) and 2020-2022 LTIP (to be tested at 30 June 2022) are Qantas’ TSR compared to:
– A global airline peer group
– ASX100 companies.
Up to 50 per cent of the total number of Rights granted may vest based on Qantas’ TSR performance in
comparison to the global airline peer group, and up to 50 per cent of the total number of Rights granted may vest
based on Qantas’ TSR performance in comparison to the ASX100 companies.
These Rights will only vest in full if Qantas’ TSR performance ranks at or above the 75th percentile compared to
both the global airline peer group and the ASX100 companies. At the end of the performance period, the TSR
performance of Qantas and each comparator company is determined based on their average closing share price
over the final six months of the performance period.
Qantas’ Financial Framework also targets top quartile TSR performance relative to global airline peers and
ASX100 companies. Therefore, relative TSR performance against these peer groups has been chosen as the
performance measure for the LTIP for alignment.
The peer groups selected provide a comparison of relative shareholder returns relevant to most Qantas investors:
– The global airline peer group was chosen for relevance to investors, including investors based outside Australia,
with a primary interest in the aviation industry sector
– The ASX100 peer group was chosen for relevance to investors with a primary interest in the equity market for
major Australian listed companies (of which Qantas is one).
The vesting scale for both the ASX100 and the global listed airline peer groups is as follows:
Qantas’ TSR Performance Relative to Each Peer Group
Vesting Scale
Below 50th percentile
50th to 75th percentile
Above 75th percentile
Nil vesting
Linear scale: 50 per cent to 100 per cent vesting
100 per cent vesting
The ASX100 peer group comprises those companies that make up the S&P/ASX100 Index at the commencement
of the performance period.
The global listed airline peer group has been selected with regard to its representation of Qantas’ key markets, full-
service and value-based airlines and the level of government involvement. For each of the 2018-2020 LTIP, 2019-
2021 LTIP and 2020-2022 LTIP, the global listed airline peer group comprised: Air Asia, Air France/KLM, Air New
Zealand, All Nippon Airways, American Airlines, Cathay Pacific, Delta Airlines, Deutsche Lufthansa, easyJet,
International Consolidated Airlines Group, Japan Airlines, LATAM Airlines Group, Ryanair, Singapore Airlines,
Southwest Airlines, United Continental and Virgin Australia.
Review of
Performance
Conditions
The Remuneration Committee regularly reviews the appropriateness of the performance measures. This includes
considering other measures such as Return on Invested Capital. In 2019/20, the Remuneration Committee
determined that the current measures remained the most appropriate. These measures are aligned with returns
achieved for shareholders and are consistent with the Group Financial Framework.
Vesting of
LTIP Award
If performance and service conditions are achieved over a three-year period, Rights vest and convert to Qantas
shares.
Any shares awarded under the LTIP will be subject to a one-year trading restriction.
Shares subject to the trading restriction are not forfeited on cessation of employment but are subject to clawback.
The additional trading restriction strengthens the ability to clawback vested equity, if required.
Trading
Restriction
(commencing
with 2020-2022
LTIP)
44
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Cessation of
Employment
(plans prior to
1 July 2019)
In general, any Rights which have not vested are forfeited if the Executive ceases employment with the Qantas
Group.
In limited circumstances approved by the Board (for example, retirement, employer-initiated terminations (with no
record of poor performance), death or total and permanent disablement), a deferred cash payment may be made.
This payment is determined with regard to the value of the LTIP Rights which would have vested and converted to
shares had they not lapsed, and the portion of the performance period that the Executive served prior to cessation
of employment.
The Board retains discretion to determine otherwise in appropriate circumstances, which may include retaining
some or all of the LTIP Rights.
Cessation of
Employment
(commencing
with 2020-2022
LTIP)
In general, when an Executive resigns, is terminated for cause or is terminated in other circumstances involving
unacceptable performance or conduct, any Rights which have not vested will be forfeited. For any shares awarded
under the LTIP that are now subject to an additional trading restriction, the Executive will continue to hold those
shares and the additional trading restriction continues to apply. That is, forfeiture does not apply to those shares
during the trading restriction period. These shares are subject to clawback.
On cessation of employment, a tax liability arises on shares that are subject to the one-year trading restriction,
notwithstanding that the trading restriction continues to apply. Accordingly, a portion of the shares may be released
to assist with funding the tax liability that arises for the Executive.
In limited circumstances (for example, retirement, employer-initiated terminations (with no record of poor
performance), death or total and permanent disablement), Rights will remain on foot on a pro-rata basis and may
vest at the end of the performance period, subject to the satisfaction of the relevant performance and service
conditions of the LTIP. Any shares allocated following vesting of the LTIP will be subject to a trading restriction.
Allocation
Methodology
The number of Rights granted to the CEO and Executive Management under the LTIP is calculated on a face
value basis. This number of Rights is the maximum that may vest at the end of the performance period.
The ‘Target’ LTIP opportunity for the CEO and other Executive KMP is provided on a face value basis in the
Summary of Key Contract Terms on page 49.
Allocation
Methodology
Used in 2019/20
Award to the
CEO
At each year’s AGM, Qantas seeks shareholder approval for any award of Rights to the CEO. At the 2019 AGM,
shareholders approved an award of 743,000 Rights to the CEO (under the 2020-2022 LTIP), being the maximum
number of Rights that may vest and convert to shares.
The Notice of Meeting for the 2019 AGM set out the proposed number of LTIP Rights to be granted to the CEO on
a face value basis as follows:
Change of
Control
Disclosure
Number of Rights awarded
=
Base Pay x ‘Target’ LTIP Opportunity
Face Value (Share Price) as at 30 June 2019
743,000 Rights awarded
=
$2,170,000 x 185%
$5.40
In the event of a change of control, the Board determines whether the LTIP Rights vest or otherwise.
In addition to the required statutory disclosures, Qantas chooses to disclose the full value of LTIP awards that vest
during the year in the Remuneration Outcomes Table on page 39. The full value is equal to the number of Rights
vested, multiplied by the Qantas share price at the end of the performance period, even where these shares are
subject to an additional one-year trading restriction.
The statutory remuneration disclosure amortises the accounting value of LTIP awards over the relevant performance
and service period as per the accounting standards. The accounting value for the LTIP awards does not have
regard to whether performance conditions were achieved.
45
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Other Benefits
Non-Cash
Benefits
Non-cash benefits, as disclosed in the remuneration tables, include travel entitlements while employed and other
minor benefits.
Travel
Travel concessions are provided to permanent Qantas employees, consistent with practice in the airline industry.
Travel at concessionary prices is on a sub-load basis; that is, subject to considerable restrictions and limits on
availability. The policy includes specified direct family members or a nominated travel companion.
In addition to this, and consistent with practice in the airline industry, the CEO and Executive Management and
their eligible beneficiaries are entitled to a number of trips for personal purposes at no cost to the individual.
Post-employment travel concessions are also available to all permanent Qantas employees who qualify by
achieving a service condition. The CEO and Executive Management and their eligible beneficiaries are also
entitled to a number of free trips for personal purposes after ceasing employment. An estimated present value of
these entitlements accrues over the service period of the individual and is disclosed as a post-employment benefit.
Superannuation Superannuation includes statutory and salary sacrifice superannuation contributions and is disclosed as a post-
employment benefit.
Other
Long-Term
Benefits
The movement in accrual of annual leave and long service leave is included in Other Long-Term Benefits. The
accounting value of other long-term benefits may be negative, for example, where an Executive’s annual leave
balance decreases as a result of taking more annual leave than they accrued during the year.
46
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
6 ANNUAL INCENTIVE OUTCOME 2019/20 STIP
The Board determined that despite good performance against the non-financial components of the STIP Scorecard that would have
permitted a partial award under the 2019/20 STIP (as outlined in the table below), the Group’s financial position did not warrant any
awards. Therefore, the Board applied its discretion and determined the STIP Scorecard outcome to be zero.
Nonetheless, in the interests of transparency, the table below summarises performance versus target against each scorecard category
under the 2019/20 STIP. In some instances, full-year outcomes were not available as measurement was impractical during the period
of significantly reduced flying. In these instances, the Board assessed performance based on year to date results.
Actual
Outcome Comment
Prior to the impact of COVID-19, the Underlying PBT target was
forecast to be achieved in full.
As a result of the impact of COVID-19 on the business, the
Underlying PBT threshold as set by the Board was not achieved.
Workplace Safety targets overall were achieved.
Operational Safety performance continued to remain strong.
Overall, there was an at target outcome to the STIP Scorecard under
the Workplace and Operational Safety measure.
Target or threshold performance was achieved by Qantas
International, Qantas Domestic and Qantas Frequent Flyer, with
above target performance achieved by QantasLink. However, Jetstar
Australia Domestic’s and Jetstar Australia Long-Haul’s NPS
performance was below threshold.
Based on outperforming Virgin’s on-time performance, the target for
this measure was assessed as partially achieved.
Overall, there was a partial contribution to the STIP Scorecard under
the Customer measure.
Qantas Domestic and Jetstar maintained the Group’s network
advantage in the Australian domestic market, with an at target
outcome to the STIP Scorecard.
Prior to the impact of COVID-19, the Group Domestic Profit Margin
target was forecast to be exceeded. As a result of the impact of
COVID-19 on the business, the Group Domestic Profit Margin
threshold was not achieved.
The Transformation and Growth category of the STIP Scorecard
comprised of financial measures. This scorecard category was on
track to achieve an at target outcome. However, due to the impact of
COVID-19 on the business, there was nil achievement for this
category and therefore nil contribution to the STIP Scorecard.
Scorecard
Category/
Strategic
Objective
Measures
Scorecard
Weighting
‘Target’
(Range of
Outcomes)
Group
Profitability
Underlying Profit
Before Tax (PBT)
50%
(0-100%)
Workplace and
Operational
Safety
Workplace Safety
measures
15%
(0-22.5%)
Customer
Board’s
assessment of
Operational Safety
Net Promoter
Score (NPS)
Punctuality
15%
(0-22.5%)
Maximise our
Leading
Domestic
Position
Transformation
and Growth
10%
(0-15%)
10%
(0-15%)
Australian
Domestic network
advantage
Combined Qantas
Domestic and
Jetstar Domestic
Profit Margin: EBIT
per ASK
Transformation
benefits
Qantas Loyalty
Underlying EBIT
Jetstar in Asia:
Underlying EBIT
for Jetstar Asia
and Jetstar Japan
Qantas
Distribution
Platform benefit
American Airlines
Joint Business
revenue
2019/20 STIP Scorecard Outcome
100%
(0-175%)
0%
Zero outcome reflects exercise of Board’s discretion
KEY:
Target achieved
or exceeded
Partial achievement
against targets
No achievement
against targets
47
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Additional Descriptions of 2019/20 STIP Scorecard Measures
Group
Profitability
Underlying PBT was the primary financial performance measure for the Qantas Group for 2019/20 and is
therefore 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 items which do not represent the underlying
performance of the business (such as transformational/restructuring initiatives, transactions involving
investments, impairment of assets and other transactions outside the ordinary course of business).
The determination of these items is made after consideration of their nature and materiality and is applied
consistently from period to period. These items are excluded both when setting the STIP profit target and when
determining the profit outcome. As a result, Executives are neither advantaged nor disadvantaged as a result of
these items being excluded.
Workplace and
Operational
Safety
As safety is always our first priority, the STIP Scorecard includes an assessment of both Workplace and
Operational safety. In addition, the Board retains an overriding discretion to scale down the STIP outcome (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 considering the specific circumstances and
following the recommendation of the Safety, Health, Environment and Security Committee.
The Safety, Health, Environment and Security Committee performs an assessment of both Workplace Safety
performance and Operational Safety performance.
The objective of the Workplace Safety targets is to reduce employee injuries. Targets were therefore set across:
– Total Recordable Injury Frequency Rate
– Lost Work Case Frequency Rate
– Short Term Impairment Injury Frequency Rate
– Long Term Impairment Injury Frequency 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, such as flight data trends, Technical Dispatch
Reliability and reporting rates.
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. Individual
NPS targets are set for Qantas International, Qantas Domestic, QantasLink, Qantas Frequent Flyer, Jetstar
Australia Domestic and Jetstar Australia Long-Haul.
On-time departures for Qantas Domestic and QantasLink continue to be a particular area of focus and is
therefore 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.
Maximise our
Leading Domestic
Position
Maintaining a market-leading Australian Domestic profit margin is core to Qantas’ success. Therefore, a
combined Qantas Domestic and Jetstar Domestic Profit Margin measured as EBIT per ASK was selected as a
STIP Scorecard measure. This focuses on profitability irrespective of capacity levels.
Maintaining our Australian domestic network advantage balances the long-term domestic network advantage with
short-term profitability. This measure aligns maintaining the leading premium domestic network and the leading
price-sensitive domestic network via measures of peak-hour frequency and capacity positions across key routes
and ports. For reasons of commercial sensitivity, these targets are not disclosed.
Transformation
and Growth
Continuing to transform the business remains a strategic priority. Therefore, a transformation benefit target is
included as a performance measure.
To support the strategic initiative of growing diversified earnings, a STIP target was set to grow Qantas Loyalty EBIT.
Growing in Asia and profitably growing Jetstar Japan are key areas of focus. Therefore, a target measuring
Jetstar Asia’s and Jetstar Japan’s Underlying EBIT is included as a STIP measure.
To support the successful introduction of the Qantas Distribution Channel, which provides agents with direct access
to sell Qantas product, STIP measures were set that align with the benefits to be achieved.
To support the establishment of the expanded codeshare relationship between Qantas and American Airlines, a
revenue growth measure was selected as a STIP Scorecard measure.
48
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
7 LONG TERM INCENTIVE OUTCOME 2018-2020
Prior to COVID-19, Qantas’ TSR Performance was positive. As at 30 June 2020, Qantas’ TSR Performance was -11%.
The three-year performance measures under the 2018-2020 LTIP are Qantas’ TSR compared to:
– A global airline peer group
– ASX100 companies.
The airline industry was severely and disproportionately impacted by COVID-19 and therefore Qantas’ TSR performance versus other
ASX100 companies was below median.
Qantas continues to be the best airline of companies in the global airline peer group, continuing to outperform competitors and peers
with top quartile relative TSR performance versus airline peer group companies for five straight rolling three-year periods.
Based on this performance, 50 per cent vesting was achieved.
Qantas’ Three-Year TSR Performance1 vs Peer Groups (%)
1. TSR performance, applying the LTIP performance test methodology (which applies the average closing share price over the six months preceding the test date of 30 June 2020).
8 SUMMARY OF KEY CONTRACT TERMS AS AT 30 JUNE 2020
Contract Details
Alan Joyce4
Andrew David5
Gareth Evans5 Vanessa Hudson5
Tino La Spina5
Olivia Wirth5
Base Pay per contract
$2,170,000
$1,020,000
$1,081,000
$850,000
$1,020,000
$867,000
Base Pay - 1 April
2020 - 30 June 2020
Actual Base Pay1
Pay Mix:
– STIP ‘Target’2
– LTIP ‘Target’2,3
$0
$0
$0
$0
$0
$0
$1,627,500
$765,000
$810,750
$637,500
$765,000
$650,250
100%
185%
80%
95%
80%
95%
80%
95%
80%
95%
80%
95%
An annual benefit of trips for these Executives and eligible beneficiaries during employment,6 at no cost to
the individual, is as follows:
4 long-haul
12 short-haul
2 long-haul
6 short-haul
2 long-haul
6 short-haul
2 long-haul
6 short-haul
2 long-haul
6 short-haul
2 long-haul
6 short-haul
The same benefit is provided for use post-employment, based on the period of service in an Executive
Management role within the Qantas Group.
Notice
Employment may be terminated by either the Executive or Qantas by providing six months’ written notice.7
Each Executive’s contract includes a provision that limits any termination payment to the statutory limit
prescribed under the Corporations Act 2001.
Severance
A severance payment of six months’ Base Pay applies where termination is initiated by Qantas.7
1. Actual Base Pay is the Base Pay per contract less the three months of zero pay from 1 April 2020 to 30 June 2020.
2. Opportunity expressed as a percentage of Base Pay.
3. Rights awarded on a face value basis.
4. Target Remuneration Mix for the CEO for 2019/20 was Base Pay 26%, Annual Incentive 26% and Long Term Incentive (on a face value basis) 48%. With Long Term Incentive
valued on a fair value basis, the pay mix was Base Pay 33%, Annual Incentive 33%, Long Term Incentive 33%.
5. Target Remuneration Mix for Executive KMP for 2019/20 was Base Pay 36%, Annual Incentive 29% and Long Term Incentive (on a face value basis) 35%. With Long Term
Incentive valued on a fair value basis, the pay mix was Base Pay 43%, Annual Incentive 35%, Long Term Incentive 22%.
6. These benefits are not cumulative and lapse if they are not used during the calendar year in which the entitlements arise.
7. Other than for misconduct or unsatisfactory performance.
49
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Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
9 QANTAS FINANCIAL PERFORMANCE HISTORY
To provide further context on Qantas’ performance, the following graphs outline a five-year history of key financial metrics.
Return on Invested Capital1,2 (ROIC%)
Underlying Profit before Tax1,2,3 ($M)
Operating Cash Flow1 ($M)
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value
hedges (“IFRIC Fair Value hedging agenda decision”) retrospectively. 2019 has been restated.
2. The Group adopted AASB 15 Revenue from Contracts with Customers effective 1 July 2018 using the full retrospective method of adoption. 2018 has been restated.
3. Underlying Profit Before Tax (Underlying PBT) is the primary reporting measure used by the Qantas Group’s Chief Operating Decision-Making bodies, being the Chief
Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Group. Statutory (Loss)/Profit After Tax for
2019/20 was ($1,964) million (Restated 2019: $840 million; 2018: $953 million; 2017: $853 million; and 2016: $1,029 million).
Qantas’ Five-Year TSR Performance
10 EQUITY INSTRUMENTS
The following tables set out the holdings of equity instruments granted as remuneration.
Shares Awarded Under the Short Term Incentive Plan
The following table details shares awarded under the Short Term Incentive Plan that are subject to a deferral period.
Short Term Incentive Plan
1 July 2019
Commenced
as KMP
Granted1,2
Vested and
Transferred
Forfeited
30 June 2020
Number of Shares
Alan Joyce
Andrew David
Gareth Evans
Vanessa Hudson3
Tino La Spina
Olivia Wirth
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
501,130
837,750
142,616
212,493
170,838
266,089
n/a
n/a
145,120
217,947
124,706
187,494
-
-
-
-
-
-
52,894
n/a
-
-
-
-
97,768
(347,012)
154,118
(490,738)
33,088
50,080
38,963
58,706
-
n/a
34,926
52,584
31,250
43,057
(92,536)
(119,957)
(112,132)
(153,957)
n/a
n/a
(92,536)
(125,411)
(81,649)
(105,845)
-
-
-
-
-
-
-
n/a
-
-
-
-
251,886
501,130
83,168
142,616
97,669
170,838
52,894
n/a
87,510
145,120
74,307
124,706
1. Shares awarded under the 2017/18 STIP awards (granted 31 August 2018) were delivered to participants in deferred shares that are subject to a two-year deferral period. The
deferral period on these shares applied throughout 2019/20.
2. Shares awarded under the 2018/19 STIP awards (granted 30 August 2019) were delivered to participants in deferred shares that are subject to a two-year deferral period. The
deferral period on these shares applied throughout 2019/20.
3. Ms Hudson commenced as a KMP on 1 October 2019.
50
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Rights Awarded Under the Long Term Incentive Plan
The following table details Rights awarded under the Long Term Incentive Plan that are subject to performance hurdles that are yet to
be tested and vested Rights that have not yet converted into shares.
Long Term Incentive Plan
Alan Joyce
Andrew David
Gareth Evans
Vanessa Hudson5
Tino La Spina
Olivia Wirth
1 July 2019
2,510,000
2,806,000
616,500
696,000
697,500
809,500
n/a
n/a
616,500
696,000
337,500
308,500
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Number of Rights
Commenced
as KMP
Granted1,2
Vested and
Transferred3
Lapsed/
Forfeited
-
-
-
-
-
-
743,000
(1,172,000)
651,000
(947,000)
179,500
(293,000)
157,500
(237,000)
190,000
(355,000)
166,500
(278,500)
97,000
149,500
n/a
n/a
n/a
n/a
-
-
-
-
179,500
(293,000)
157,500
(237,000)
152,500
(129,500)
133,500
(104,500)
-
-
-
-
-
-
-
n/a
-
-
-
-
30 June 20204
2,081,000
2,510,000
503,000
616,500
532,500
697,500
246,500
n/a
503,000
616,500
360,500
337,500
1. Rights under the 2020-2022 LTIP were granted on 25 October 2019 to Mr Joyce (following approval by shareholders at the 2019 AGM) and 4 October 2019 for other Executives
and will be tested against the performance hurdles as at 30 June 2022. The number of Rights granted was determined using the face value of a Right on 30 June 2019 of $5.40,
being the start of the performance period. The fair value of a Right on the grant date was $3.59 for Mr Joyce and $4.06 per Right for other Executives.
2. Rights under the 2019-2021 LTIP were granted on 26 October 2018 to Mr Joyce (following approval by shareholders at the 2018 AGM) and 5 September 2018 for other
Executives and will be tested against the performance hurdles as at 30 June 2021. The number of Rights granted was determined using the face value of a Right on 30 June
2018 of $6.16, being the start of the performance period. The fair value of a Right on the grant date was $2.33 for Mr Joyce and $3.35 per Right for other Executives.
3. 100% of Rights under the 2017-2019 LTIP (granted on 21 October 2016 to Mr Joyce and 5 September 2016 for other Executives) vested following the testing of performance
hurdles as at 30 June 2019 and the Board’s approval of the 2017-2019 LTIP vesting outcome on 21 August 2019.
4. Rights under the 2018-2020 LTIP (granted on 27 October 2017 to Mr Joyce and 5 September 2017 for Other Executives) are included in the 30 June 2020 balance. The
number of Rights granted was determined using the face value of a Right on 30 June 2017 of $5.72, being the start of the performance period. The fair value of a Right on the
grant date was $3.30 for Mr Joyce and $2.98 per Right for other Executives. For Executive Management, 50% of these Rights vested following the testing of performance
hurdles as at 30 June 2020 and the Board’s approval of the 2018-2020 LTIP vesting outcome on 19 August 2020. The CEO offered and the Board agreed to defer the decision
until at least August 2021 as to whether his Rights will be forfeited or allowed to convert to shares.
5. Ms Hudson commenced as a KMP on 1 October 2019.
Equity Holdings and Transactions
Executive KMPs or their related parties directly, indirectly or beneficially held shares in the Qantas Group as detailed in the table below:
Key Management
Personnel – Executives
Interest in Shares
1 July 2019
Commenced as
KMP
Awarded as
Remuneration1
Rights
Converted
to Shares
Other
Changes2
Interest in Shares
30 June 2020
Alan Joyce
Andrew David
Gareth Evans
Vanessa Hudson3
Tino La Spina
Olivia Wirth
3,230,054
499,573
507,641
-
-
-
n/a
58,568
263,009
124,706
-
-
97,768
1,172,000
(1,519,012)
2,980,810
33,088
38,963
-
34,926
31,250
293,000
(742,493)
355,000
(355,000)
-
-
293,000
(245,536)
129,500
(211,149)
83,168
546,604
58,568
345,399
74,307
1. Shares awarded under the 2017/18 STIP are subject to a deferral period until after the release of the 2019/20 full-year financial results. Shares awarded under the 2018/19
STIP are subject to a deferral period until after the release of the 2020/21 full-year financial results.
2. Other changes include shares purchased, sold, and forfeited, and on cessation as KMP.
3. Ms Hudson commenced as a KMP on 1 October 2019.
Other than share-based payment compensation, all equity instrument transactions between the Executive KMP, including their related
parties, and Qantas during the year have been on an arm’s length basis.
51
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Performance Remuneration Affecting Future Periods
The fair value of share-based payments granted is amortised over the service period, therefore remuneration in respect of these
awards may be reported in future years. The following table summarises the maximum value of the awards that will be reported in the
statutory remuneration tables in future years, assuming all performance conditions are met. The minimum value of these awards is nil,
should performance conditions not be satisfied.
Future Expense by Plan
Future Expense by Financial Year
STIP Awards
LTIP Awards
Executives
Alan Joyce
Andrew David
Gareth Evans
Vanessa Hudson
Tino La Spina
Olivia Wirth
2017/18
$’000
2018/19
$’000
2019/20
$’000
2018-2020
$’000
2019-2021
$’000
2020-2022
$’000
Total
$’000
2021
$’000
2022
$’000
2023
$’000
Total
$’000
52
17
20
9
18
14
216
73
86
59
77
69
-
-
-
-
-
-
133
26
28
5
26
12
625
194
205
77
194
164
2,040 3,066
1,848
1,061
157
3,066
499
528
415
499
424
809
867
565
814
683
502
541
322
507
422
268
285
211
269
229
39
41
32
38
32
809
867
565
814
683
11 NON-EXECUTIVE DIRECTOR FEES
Non-Executive Director fees are determined within an aggregate Non-Executive Directors’ fee pool limit. An annual total fee pool of
$3 million (excluding industry standard travel entitlements received) was approved by shareholders at the 2016 AGM. Total Non-Executive
Directors’ remuneration (excluding industry standard travel entitlements received and other non-cash benefits) for the year ended
30 June 2020 was $1.92 million (2019: $2.67 million), which is within the approved annual fee pool. Non-Executive Directors’ remuneration
reflects the responsibilities of Non-Executive Directors. Fees are benchmarked against Non-Executive Director fees of ASX50 companies
and revenue-based peer groups. Non-Executive Director fees remained unchanged in 2019/20. From 1 April 2020 to 30 June 2020, all
Non-Executive Directors elected to forego 100 per cent of their fees.
Board Fees – per contract
Board
Committees1
Chair2
Member
Chair
$610,000
$158,000
$63,500
Board Fees – 1 April 2020 to 30 June 2020
$0
$0
$0
Member
$31,750
$0
Actual Board Fees3
$457,500
$118,500
$47,625
$23,813
1. Committees are the Audit Committee, Remuneration Committee, Nominations Committee and Safety, Health, Environment and Security Committee.
2. The Chairman does not receive any additional fees for serving on or chairing any Board Committee.
3. Actual Board Fees is the Board Fees per agreement less the three months of zero pay from 1 April 2020 to 30 June 2020.
Non-Executive Directors do not receive any performance-related remuneration. Overseas-based Non-Executive Directors are paid
a travel allowance when travelling on international journeys of greater than six hours to attend Board and committee meetings or
Board-related activities requiring participation of all Directors.
In December 2019, a Non-Executive Director Fee Sacrifice Share Acquisition Plan was introduced whereby Non-Executive Directors
can elect to sacrifice a percentage of their Board or Board and Committee fees in return for a grant of Rights to the equivalent value of
the same number of Qantas ordinary shares. Each Right granted will convert automatically to one fully-paid Qantas ordinary share at
the Conversion Date, which is six months from the Grant Date subject to remaining as a Non-Executive Director on the Conversion
Date. The plan is designed to provide Non-Executive Directors the opportunity to build their shareholding in a tax effective manner and
to further align their interests with the interests of shareholders. The plan commenced in March 2020, but following approval from the
Board, each participating Non-Executive Director elected to withdraw as a result of the Board’s decision to receive nil fees from 1 April
2020 to 30 June 2020.
All Non-Executive Directors and eligible beneficiaries receive travel entitlements. The Chair and eligible beneficiaries are each entitled
to four long-haul trips and 12 short-haul trips each calendar year and all other Non-Executive Directors and eligible beneficiaries are
each entitled to three long-haul trips and nine short-haul trips each calendar year. These flights are not cumulative and lapse if they are
not used during the calendar year in which the entitlement arises.
Post-employment, the Chair and eligible beneficiaries are each entitled to two long-haul trips and six short-haul trips for each year of
service and all other Non-Executive Directors and eligible beneficiaries are each entitled to one long-haul trip and three short-haul trips
for each year of service. The accounting value of the travel benefit is captured in the remuneration table (as a non-cash benefit for travel
during the year and as a post-employment benefit).
52
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Remuneration for 2019/20 – Non-Executive Directors
$’000
Richard Goyder
Chair
Maxine Brenner
Non-Executive Director
Richard Goodmanson1,2
Non-Executive Director
up to 26 October 2019
Jacqueline Hey
Non-Executive Director
Belinda Hutchinson
Non-Executive Director
Michael L'Estrange
Non-Executive Director
Paul Rayner
Non-Executive Director
Todd Sampson
Non-Executive Director
Antony Tyler2,3
Non-Executive Director
from 26 October 2018
Barbara Ward
Non-Executive Director
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Short-Term Employee Benefits
Post-Employment Benefits
Base Pay
(Cash)
Non-Cash
Benefits Sub-Total Superannuation
Travel
Sub-Total
Total
442
457
152
202
94
283
130
173
152
196
152
184
175
233
130
173
186
150
198
264
1,811
2,315
37
72
57
131
-
14
11
10
51
56
11
10
24
51
106
70
-
-
39
23
336
437
479
529
209
333
94
297
141
183
203
252
163
194
199
284
236
243
186
150
237
287
2,147
2,752
16
19
14
19
-
-
12
16
14
19
14
17
15
21
12
16
-
-
16
21
113
148
29
36
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
45
55
26
31
12
12
24
28
26
31
26
29
27
33
24
28
12
12
28
33
524
584
235
364
106
309
165
211
229
283
189
223
226
317
260
271
198
162
265
320
137
144
250
292
2,397
3,044
1. Mr Goodmanson retired as a Director on 25 October 2019.
2. Mr Goodmanson and Mr Tyler each received a travel allowance of $10,000 and $25,000 respectively during 2019/20 (2019: $30,000 for Mr Goodmanson and $25,000 for Mr
Tyler). These amounts were included in their Base Pay (Cash).
3. 2018/19 remuneration reflects the period served by Mr Tyler as a Non-Executive Director from 26 October 2018 to 30 June 2019.
53
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
REMUNERATION REPORT (AUDITED) (CONTINUED)
Equity Holdings and Transactions
Non-Executive Director KMP or their related parties directly, indirectly or beneficially held shares in the Qantas Group as detailed in the
table below:
Key Management Personnel – Non-Executive Directors
Richard Goyder
Maxine Brenner
Richard Goodmanson2
Jacqueline Hey
Belinda Hutchinson
Michael L’Estrange
Paul Rayner
Todd Sampson
Antony Tyler
Barbara Ward
Interest in
Shares as at
30 June 2019
130,000
30,065
18,870
38,170
16,200
15,012
287,909
7,095
-
44,694
Other
Changes1
Ceased as
Director
Interest in
Shares as at
30 June 2020
-
-
-
-
-
-
-
7,000
52,000
-
-
-
(18,780)
-
-
-
-
-
-
-
130,000
30,065
n/a
38,170
16,200
15,012
287,909
14,095
52,000
44,694
1. Other Changes includes shares purchased and sold.
2. Mr Goodmanson retired as a Director on 25 October 2019.
All equity instrument transactions between the Non-Executive Director KMP, including their related parties, and Qantas during the year
have been on an arm’s length basis.
Loans and Other Transactions with Key Management Personnel
No KMP or their related parties held any loans from the Qantas Group during or at the end of the year ended 30 June 2020 or prior year.
A number of KMPs and their related parties have transactions with the Qantas Group. All transactions are conducted on normal
commercial arm’s length terms.
54
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Directors’ Report continued
For the year ended 30 June 2020
ENVIRONMENTAL OBLIGATIONS
The Qantas Group’s operations are subject to a range of Commonwealth, State, Territory and international environmental legislation.
The Qantas Group is committed to environmental sustainability with high standards for environmental performance. The Board places
particular focus on the environmental aspects of its operations through the Safety, Health, Environment and Security Committee, which
is responsible for monitoring compliance with these regulations and reporting to the Board.
The Directors are satisfied that adequate systems are in place for the management of the Qantas Group’s environmental exposures
and environmental performance. The Directors are also satisfied that relevant licences and permits are held and that appropriate
monitoring procedures are in place to ensure compliance with those licences and permits. Any significant environmental incidents are
reported to the Board.
INDEMNITIES AND INSURANCE
Under the Qantas Constitution, Qantas indemnifies, to the extent permitted by law, each Director and Company Secretary of Qantas
against any liability incurred by that person as an officer of Qantas.
The Directors and the Company Secretaries listed on pages 26 to 27 and individuals who formerly held any of these positions have the
benefit of the indemnity in the Qantas Constitution. Members of Qantas’ Executive Management team and certain former members of
the Executive Management team have the benefit of an indemnity to the fullest extent permitted by law and as approved by the Board.
In respect of non-audit services, KPMG, Qantas’ auditor, has the benefit of an indemnity to the extent KPMG reasonably relies on any
information provided by Qantas which is false, misleading or incomplete. No amount has been paid under any of these indemnities
during 2019/20 or to the date of this Report.
Qantas has insured against amounts which it may be liable to pay on behalf of Directors and officers or which it otherwise agrees to
pay by way of indemnity.
During the year, Qantas paid a premium for Directors’ and Officers’ liability insurance policies, which cover all Directors and officers of
the Qantas Group. Details of the nature of the liabilities covered, and the amount of the premiums paid in respect of the Directors’ and
Officers’ insurance policies, are not disclosed, as disclosure is prohibited under the terms of the contracts.
NON-AUDIT SERVICES
During the year, Qantas’ auditor, KPMG, performed certain other services in addition to its statutory duties. The Directors are satisfied
that:
a. The non-audit services provided during 2019/20 by KPMG as the external auditor were compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001
b. Any non-audit services provided during 2019/20 by KPMG as the external auditor did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
– KPMG services have not involved partners or staff acting in a managerial or decision-making capacity within the Qantas Group or
being involved in the processing or originating of transactions
– KPMG non-audit services have only been provided where Qantas is satisfied that the related function or process will not have a
material bearing on the audit procedures
– KPMG partners and staff involved in the provision of non-audit services have not participated in associated approval or
authorisation processes
– A description of all non-audit services undertaken by KPMG and the related fees has been reported to the Board to ensure
complete transparency in relation to the services provided
– The declaration required by section 307C of the Corporations Act 2001 confirming independence has been received from KPMG.
A copy of the lead auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on
page 56.
Details of the amounts paid to KPMG for audit and non-audit services provided during the year are set out in Note 28 to the Financial
Statements.
55
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Directors’ Report continued
For the year ended 30 June 2020
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
To: The Directors of Qantas Airways Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2020, there
have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit;
and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Sydney
18 September 2020
Andrew Yates
Partner
KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with
KPMG International Cooperative (‘KPMG International’), a
Swiss entity.
Limited liability by a scheme approved
under Professional Standards
Legislation
Rounding
Qantas is a company of a kind referred to in Australian Securities and Investments Commission (ASIC) Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that Instrument, amounts in this Directors’ Report and the
Financial Report have been rounded to the nearest million dollars unless otherwise stated.
Signed pursuant to a Resolution of the Directors:
Richard Goyder
Chairman
Alan Joyce
Chief Executive Officer
18 September 2020
18 September 2020
56
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Financial Report
For the year ended 30 June 2020
FINANCIAL STATEMENTS
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
NOTES TO THE FINANCIAL STATEMENTS
Operating Segments, Underlying Profit Before Tax and Return on Invested Capital
Leases
Intangible Assets
Other Expenditure
Net Finance Costs
Earnings Per Share
Revenue and Other Income
Depreciation and Amortisation
Income Tax Benefit/(Expense)
Net Gain on Disposal of Assets
Statement of Compliance and Basis of Preparation
Investments Accounted For Under The Equity Method
1
2
3
4
5
6
7
8
9
10 Dividends and Other Shareholder Distributions
11 Receivables
12
Inventories
13 Assets Classified as Held For Sale
14
15 Property, Plant and Equipment
16
17
18 Deferred Tax Assets/(Liabilities)
19 Other Assets
20 Revenue Received in Advance
21 Net on Balance Sheet Debt
22 Provisions
23 Capital
24 Government Grants and Assistance
25
26 Share-based Payments
27
28 Auditor’s Remuneration
29 Notes to the Consolidated Cash Flow Statement
30 Superannuation
31 Deed of Cross Guarantee
32 Related Parties
33 Parent Entity Disclosures – Qantas Airways Limited
34 Contingent Liabilities
35 Post-Balance Date Events
36 Material Business Risks
37 Summary of Significant Accounting Policies
38 New Standards and Interpretations Adopted by the Group
39 New Standards and Interpretations not yet Adopted by the Group
Financial Risk Management
Impairment/(Reversal Of Impairment) of Assets and Related Costs
Directors’ Declaration
Independent Auditor’s Report
58
59
60
61
63
64
68
72
73
73
73
74
74
74
76
76
77
77
77
78
79
80
81
82
82
83
84
84
85
86
90
91
97
97
98
100
102
102
104
104
105
107
118
123
124
125
57
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Income Statement
For the year ended 30 June 2020
REVENUE AND OTHER INCOME
Net passenger revenue
Net freight revenue
Other revenue and income
Revenue and other income
EXPENDITURE
Manpower and staff-related
Aircraft operating variable
Fuel
Depreciation and amortisation
Share of net loss/(profit) of investments accounted for under the equity method
Impairment/(reversal of impairment) of assets and related costs
De-designation of fuel and foreign exchange hedges
Redundancies and related costs
Net gain on disposal of assets
Other
Expenditure
Statutory (loss)/profit before income tax expense and net finance costs
Finance income
Finance costs
Net finance costs
Statutory (loss)/profit before income tax expense
Income tax benefit/(expense)
Statutory (loss)/profit for the year
Attributable to:
Members of Qantas
Non-controlling interests
Statutory (loss)/profit for the year
Notes
4(B)
5
14
25
27(C)
6
7
8
8
8
9
2020
$M
2019
(restated)1
$M
12,183
15,696
1,045
1,029
971
1,299
14,257
17,966
3,646
3,520
2,895
2,045
53
1,456
571
565
(7)
1,950
16,694
(2,437)
33
(304)
(271)
(2,708)
744
(1,964)
(1,964)
-
(1,964)
4,268
4,010
3,846
1,996
(23)
(39)
-
65
(225)
2,594
16,492
1,474
47
(329)
(282)
1,192
(352)
840
840
-
840
51.5
51.3
EARNINGS PER SHARE ATTRIBUTABLE TO MEMBERS OF QANTAS
Basic Earnings Per Share (cents)
Diluted Earnings Per Share (cents)
3
3
(129.6)
(129.6)
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
58
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2020
Statutory (loss)/profit for the year
Items that are or may be subsequently reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges, net of tax
Transfer of effective hedging gains from hedge reserve to the Consolidated Income Statement, net of
tax2
De-designation of fuel and foreign exchange hedges to the Consolidated Income Statement, net of tax
Recognition of effective cash flow hedges on capitalised assets, net of tax
Net changes in hedge reserve for time value of options, net of tax
Foreign currency translation of controlled entities
Foreign currency translation of investments accounted for under the equity method
Share of other comprehensive loss of investments accounted for under the equity method
Items that will not subsequently be reclassified to profit or loss
Defined benefit actuarial losses, net of tax
Fair value (losses)/gains on investments, net of tax
Other comprehensive loss for the year
Total comprehensive (loss)/income for the year
Attributable to:
Members of Qantas
Non-controlling interests
Total comprehensive (loss)/income for the year
2020
$M
2019
(restated)1
$M
(1,964)
840
(205)
(123)
425
(42)
(232)
(9)
11
(6)
(40)
(16)
(237)
(2,201)
(2,201)
-
(2,201)
51
(249)
-
(13)
(47)
5
13
(6)
(121)
4
(363)
477
477
-
477
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
2. These amounts were allocated to revenue of $10 million (2019: nil), fuel expenditure of ($129) million (2019: ($356) million), foreign exchange gains of ($57) million (2019: nil) and
income tax expense of $53 million (2019: $107 million) in the Consolidated Income Statement.
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
59
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Balance Sheet
As at 30 June 2020
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other financial assets
Inventories
Assets classified as held for sale
Income tax receivable
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Investments accounted for under the equity method
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Income tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Retained earnings
Equity attributable to members of Qantas
Non-controlling interests
Total equity
21(A)
11
27(B), (C)
12
13
9(D)
19
11
27(B), (C)
14
15
16(A)
17
18
19
20
21(B)
16(B)
27(C)
22
9(D)
20
21(B)
16(B)
27(C)
22
18
23(A)
23(B)
2020
$M
3,520
522
216
306
58
137
193
4,952
124
139
59
11,726
1,440
1,050
167
369
15,074
20,026
2,351
2,784
868
524
238
1,539
-
8,304
99
2,256
5,825
1,318
47
651
-
10,196
18,500
1,526
3,104
(51)
(173)
(1,357)
1,523
3
1,526
2019
(restated)1
$M
2,157
1,101
334
364
1
-
231
4,188
77
184
217
12,776
1,419
1,225
-
449
16,347
20,535
2,366
4,414
610
459
89
967
113
9,018
-
1,466
4,527
1,293
48
475
694
8,503
17,521
3,014
1,871
(152)
111
1,181
3,011
3
3,014
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
60
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
30 June 2020
$M
Issued
Capital
Treasury
Shares
Employee
Compensation
Reserve
Hedge
Reserve
Foreign
Currency
Translation
Reserve
Other
Reserves1
Retained
Earnings
(restated)2
Non-
controlling
Interests
Total
Equity
(restated)2
Balance as at 1 July 2019
1,871
(152)
101
36
2
(28)
1,181
3
3,014
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR
Statutory loss for the year
Other comprehensive (loss)/income
Effective portion of changes in
fair value of cash flow
hedges, net of tax
Transfer of effective hedging
gains from hedge reserve to
the Consolidated Income
Statement, net of tax
De-designation of fuel and
foreign exchange hedges to
the Consolidated Income
Statement, net of tax
Recognition of effective cash
flow hedges on capitalised
assets, net of tax
Net changes in hedge reserve
for time value of options, net
of tax
Defined benefit actuarial
losses, net of tax
Foreign currency translation
of controlled entities
Foreign currency translation
of investments accounted for
under the equity method
Fair value losses on
investments, net of tax
Share of other comprehensive
loss of investments accounted
for under the equity method
Total other comprehensive
(loss)/income
Total comprehensive
(loss)/income for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY IN EQUITY
Contributions by and distributions to owners
Share buy-back
Capital raising
Dividends paid
Treasury shares acquired
Share-based payments
Shares vested and transferred
to employees
Total contributions by and
distributions to owners
Total transactions with
owners
(95)
1,328
-
-
-
-
-
-
-
(5)
-
106
1,233
101
1,233
101
-
-
-
-
28
(75)
(47)
(47)
-
(205)
(123)
425
(42)
(232)
-
-
-
-
(6)
(183)
(183)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9)
11
-
-
2
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(40)
-
-
(16)
-
(56)
(1,964)
-
-
-
-
-
-
-
-
-
-
-
(56)
(1,964)
-
-
-
-
-
-
-
-
(348)
-
(204)
-
-
(22)
(574)
(574)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,964)
(205)
(123)
425
(42)
(232)
(40)
(9)
11
(16)
(6)
(237)
(2,201)
(443)
1,328
(204)
(5)
28
9
713
713
Balance as at 30 June 2020
3,104
(51)
54
(147)
4
(84)
(1,357)
3
1,526
1. Other reserves as at 30 June 2020 includes the Defined Benefit Reserve of ($73) million and the Fair Value Reserve of ($11) million.
2. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
61
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Statement of Changes in Equity continued
For the year ended 30 June 2020
30 June 2019
$M
Issued
Capital
Treasury
Shares
Employee
Compensation
Reserve
Hedge
Reserve
Foreign
Currency
Translation
Reserve
Other
Reserves1
Retained
Earnings
(restated)2
Non-
controlling
Interests
Total
Equity
(restated)2
Balance as at 1 July 2018
2,508
(115)
106
300
(16)
89
709
3
3,584
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
Statutory profit for the year
Other comprehensive income/(loss)
Effective portion of changes in
fair value of cash flow hedges,
net of tax
Transfer of hedging gains
from hedge reserve to the
Consolidated Income
Statement, net of tax
Recognition of effective cash
flow hedges on capitalised
assets, net of tax
Net changes in hedge reserve
for time value of options, net
of tax
Defined benefit actuarial
losses, net of tax
Foreign currency translation
of controlled entities
Foreign currency translation
of investments accounted for
under the equity method
Fair value gains on
investments, net of tax
Share of other comprehensive
loss of investments accounted
for under the equity method
Total other comprehensive
(loss)/income
Total comprehensive
(loss)/income for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY IN EQUITY
Contributions by and distributions to owners
Share buy-back
Dividends paid
Treasury shares acquired
Share-based payments
Shares vested and transferred
to employees
Total contributions by and
distributions to owners
Total transactions with
owners
(637)
-
-
-
-
-
-
(98)
-
61
(637)
(37)
(637)
(37)
-
-
-
49
(54)
(5)
(5)
-
51
(249)
(13)
(47)
-
-
-
-
(6)
(264)
(264)
-
-
-
-
-
-
-
-
-
-
-
-
-
5
13
-
-
18
18
-
-
-
-
-
-
-
-
-
-
-
-
(121)
-
-
4
-
(117)
840
-
-
-
-
-
-
-
-
-
-
(117)
840
-
-
-
-
-
-
-
-
(363)
-
-
(5)
(368)
(368)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
840
51
(249)
(13)
(47)
(121)
5
13
4
(6)
(363)
477
(637)
(363)
(98)
49
2
(1,047)
(1,047)
Balance as at 30 June 2019
1,871
(152)
101
36
2
(28)
1,181
3
3,014
1. Other reserves as at 30 June 2019 includes the Defined Benefit Reserve of ($33) million and the Fair Value Reserve of $5 million.
2. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
62
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Consolidated Cash Flow Statement
For the year ended 30 June 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash payments to suppliers and employees (excluding cash payments to employees
for redundancies and related costs and discretionary bonus payments to non-
executive employees)
Cash generated from operations
Cash payments to employees for redundancies and related costs
Discretionary bonus payments to non-executive employees
Interest received
Interest paid (interest-bearing liabilities)
Interest paid (lease liabilities)
Dividends received from investments accounted for under the equity method
Australian income taxes paid
Foreign income taxes paid
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment and intangible assets
Interest paid and capitalised on qualifying assets
Payments for investments held at fair value
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of a controlled entity
Proceeds from disposal of shares in associate
Payments for investments accounted for under the equity method
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for share buy-back
Proceeds from share-issuance
Payments for treasury shares
Proceeds from interest-bearing liabilities
Repayments of interest-bearing liabilities
Repayments of lease liabilities
Dividends paid to shareholders
Aircraft lease refinancing
Notes
2020
$M
2019
(restated)1
$M
14,460
19,050
(12,870)
(15,425)
16(B)
9(D)
9(D)
29
8
10(B)
21(D)
21(D)
16(B)
10(A)
1,590
(58)
(6)
29
(146)
(82)
15
(255)
(4)
1,083
3,625
(58)
(25)
41
(161)
(101)
11
(156)
(12)
3,164
(1,549)
(1,944)
(48)
(22)
50
-
-
(2)
(42)
(60)
333
139
11
-
(1,571)
(1,563)
(443)
1,342
(5)
2,155
(625)
(367)
(204)
-
1,853
1,365
2,157
(2)
3,520
(637)
-
(98)
1,137
(733)
(368)
(363)
(88)
(1,150)
451
1,694
12
2,157
Net cash from/(used in) financing activities
Net increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
21(A)
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
63
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements
For the year ended 30 June 2020
1 STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION
(A) REPORTING ENTITY
Qantas Airways Limited (Qantas) is a for-profit company limited by shares, incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange (ASX) and which is subject to the operation of the Qantas Sale Act 1992.
The Consolidated Financial Statements for the year ended 30 June 2020 comprise Qantas and its controlled entities (together referred
to as the Qantas Group) and the Qantas Group’s interest in investments accounted for under the equity method.
Qantas has six subsidiaries that are material to the Qantas Group in 2020 and 2019. The parent has majority voting rights in respect of
each of the material subsidiaries. Materiality has been assessed based on the expected long-term contribution of statutory profit/(loss)
to the Qantas Group.
The Consolidated Financial Statements of Qantas for the year ended 30 June 2020 were authorised for issue in accordance with a
resolution of the Directors on 18 September 2020.
i. Statement of Compliance
The Consolidated Financial Statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board and the Corporations Act 2001.
The Consolidated Financial Statements also comply with International Financial Reporting Standards (IFRSs) and interpretations
(IFRICs) adopted by the International Accounting Standards Board (IASB).
The Consolidated Financial Statements have been prepared on a going concern basis, which assumes the Group will be able to meet
its obligations as and when they fall due.
ii. Basis of Preparation
The Consolidated Financial Statements are presented in Australian dollars (AUD), which is the functional currency of the Qantas Group,
and have been prepared on the basis of historical cost except for the following material items in the Consolidated Balance Sheet:
– Derivatives at fair value through profit and loss and investments at fair value through other comprehensive income are measured at
fair value
– Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell
– Net defined benefit asset/(liability) is measured at fair value of plan assets less the present value of the defined benefit obligation.
Qantas is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. In
accordance with that Instrument, all financial information presented has been rounded to the nearest million dollars, unless otherwise
stated. In addition, all financial information presented is representative of the Qantas Group, unless otherwise stated.
(B) NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP
The accounting policies adopted in the preparation of the Consolidated Financial Statements are consistent with those followed in the
preparation of the Group’s Annual Consolidated Financial Statements for the year ended 30 June 2019, except for the below which
have been adopted from 1 July 2019 including restatement of comparative reporting periods:
– AASB 16 Leases
– IFRIC agenda decision in relation to the treatment of fair value hedges of foreign currency risk and non-financial assets (IFRIC Fair
Value hedging agenda decision).
The nature and effect of these changes are disclosed in Note 38.
In addition, the Group adopted AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19 Related Rent Concessions,
which amends AASB 16 and became effective from 1 June 2020. The amendment provides practical relief to lessees when accounting
for rent concessions directly resulting from COVID-19, by allowing entities to elect not to account for COVID-19 related rent concessions
as modifications under AASB 16. The Group elected to apply the lessee practical expedient, with the impact outlined within Note 16. As
a result, COVID-19 related rental waivers are recognised as negative variable lease payments within Other Expenses. Changes in
scheduled lease payments due to rent deferrals have been recognised within Lease Liabilities.
(C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Consolidated Financial Statements requires Management to make judgements, estimates and assumptions that
affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. It also requires the directors
to exercise their judgment in the process of applying the Group’s accounting policies. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis for making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis, as appropriate to the particular circumstances. Revisions to
accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Judgements made
by Management in the application of AASBs, that have a significant effect on the Consolidated Financial Statements and estimates with
a significant risk of material adjustment in future periods (with the exception of those arising from the adoption of AASB 16 Leases and
the IFRIC Fair Value hedging agenda decision as outlined above) are included in the following notes:
– Note 1(D) – Impact of COVID-19 on Financial Reporting
– Note 25 – Impairment/(Reversal of impairment) of Assets and Related Costs
– Note 27(C) – Derivatives and Hedging Instruments
– Note 30 – Superannuation
– Note 37(D) – Summary of significant accounting policies (Revenue)
– Note 37(M) – Summary of significant accounting policies (Provisions)
64
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Notes to the Financial Statements continued
For the year ended 30 June 2020
1 STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION (CONTINUED)
(D) IMPACT OF COVID-19 ON FINANCIAL REPORTING
The impact of COVID-19 on the Qantas Group has been unprecedented. The section below outlines key areas of impact relevant to the
Consolidated Financial Statements for the year ended 30 June 2020. Additional information on how the Group has been impacted by
and is responding to COVID-19 is provided in the Review of Operations on pages 12 to 22.
i. Overview of COVID-19 Impact on the Qantas Group and the Group’s Recovery Plan
The measures taken by Governments across the world to slow the spread of COVID-19 severely impacted airlines as travel restrictions
and border closures were imposed. These travel restrictions, and the resulting decrease in demand has resulted in significant capacity
reductions domestically and internationally. The Group took immediate and decisive action to mitigate the impact of COVID-19,
including a reduction in flight capacity (domestic and international), workforce stand downs, operational cost-out measures, capital
expenditure deferrals and cancellation of proposed shareholder distributions.
Governments worldwide have announced relief packages to support affected businesses, including specifically the aviation industry, to
mitigate the impact of COVID-19. The Australian Aviation Financial Relief package was introduced to provide refunds or waivers of a
range of Government changes on the aviation industry. The JobKeeper Payment was introduced to help keep Australians in jobs and
support affected businesses.
In addition, the Australian Government commissioned Qantas to conduct various charter repatriation flights and rescue flights. Along
with other Australian domestic airlines, Qantas also operated domestic, regional and international flights as part of the Minimum Viable
Network intended to maintain vital air transport links. Qantas also secured a contract to conduct freight services under the International
Freight Assistance Mechanism to ensure import and export freight routes remained open.
In addition to operational responses, the Group boosted liquidity by cutting capital expenditure, cancelling shareholder distributions and
sourcing additional funding through $1.75 billion in new debt, with no financial covenants, and a $1.36 billion fully underwritten
Institutional Placement. Refer to the Capital Structure and Liquidity section below for further details.
Recovery Plan
In June 2020, the Group announced a three-year plan to accelerate the recovery from the COVID-19 crisis and create a stronger
platform for future profitability, long-term shareholder value and to preserve as many jobs as possible.
The immediate focus of the plan is to:
– Rightsize the Group’s workforce, fleet and other costs according to demand projections, with the ability to scale up as flying returns
– Restructure to deliver ongoing cost savings and efficiencies across the Group’s operations in a changing market
– Recapitalise through an equity raising to strengthen the Group’s financial resilience to recovery and the opportunities it presents.
The plan is designed to account for the uncertainties associated with the crisis, preserving as many key assets and skills as the Group
can reasonably carry to support the eventual recovery. COVID-19 represents the biggest challenge ever faced by global aviation and
the Group’s response to the crisis is scaled accordingly.
Key actions of the plan include:
– Reducing the Group’s pre-crisis workforce by at least 6,000 roles across all parts of the business
– Continuing the stand down for 20,000 employees, particularly those associated with international operations, until flying returns to
normal
– Retiring Qantas’ six remaining 747s immediately, six months ahead of schedule
– Grounding up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet. The majority are
expected to ultimately go back into service but some leased aircraft may be returned at the end of their current lease term. The
Group’s A380 fleet (12 aircraft) will be grounded for the foreseeable future
– A321neo and 787-9 fleet deliveries have been deferred to minimise capital expenditure.
65
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Notes to the Financial Statements continued
For the year ended 30 June 2020
1 STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION (CONTINUED)
(D) IMPACT OF COVID-19 ON FINANCIAL REPORTING (CONTINUED)
ii. Capital Structure and Liquidity
The Qantas Group’s Financial Framework is designed to achieve top quartile Total Shareholder Return relative to the ASX100 and
global airline peers. The Framework’s key elements are to:
– Maintain an optimal capital structure that minimises the cost of capital by holding an appropriate level of Net Debt1. The appropriate
level of net debt reflects the Qantas Group’s size, measured by Invested Capital. This is consistent with investment grade credit
metrics
– Deliver ROIC that exceeds the weighted average cost of capital through the cycle
– Make disciplined capital allocation decisions between reinvestment, debt reduction and distribution of surplus capital to shareholders
while maintaining an optimal capital structure.
Surplus capital is determined on a forward-looking basis, which is the difference between the projected net debt position and the target
net debt position whilst ROIC remains above 10 per cent.
The Qantas Group maintains access to a broad range of debt markets, both secured and unsecured. The Qantas Group maintains a
prudent liquidity policy that ensures adequate coverage of liquidity requirements while considering a range of adverse scenarios.
The Group responded quickly to increase liquidity following the impact of COVID-19 on the business, raising $1.75 billion in new debt
funding between 31 December 2019 and 30 June 2020. The Group continues to have no financial covenants on the new debt raising.
In March 2020, the Group cancelled the off-market share buy-back announced in February 2020, which preserved $150 million in cash.
In June 2020, the Group revoked the interim dividend, announced in February 2020 and deferred in March 2020, avoiding cash outflow
of $201 million. Decisions on future shareholder distributions will continue to be made in line with the Group’s Financial Framework.
On 25 June 2020, the Group announced a fully underwritten Institutional Placement (Placement) to raise approximately $1.36 billion
and a non-underwritten retail Share Purchase Plan for eligible existing shareholders.
The Placement was completed prior to 30 June 2020 with 372.7 million shares (approximately 25 per cent increase to total shares
on issue) issued at $3.65 per share. This transaction was recorded in Issued Capital and received in Cash within the Consolidated
Balance Sheet for the year ended 30 June 2020.
Proceeds from the equity raising will be used to accelerate the Group’s recovery, strengthen its balance sheet and position it to
capitalise on opportunities aligned with its strategy.
As at 30 June 2020, including the completion of the underwritten Placement, the Group’s available liquidity was $4.5 billion, including
$3.5 billion of cash and cash equivalents and $1 billion undrawn facility.
As at 30 June 2020, Net Debt (as measured by the Group’s Financial Framework) was $4.7 billion with no major debt maturities until
June 2021 and no financial covenants on its debt.
Subsequent to year end, the retail Share Purchase Plan was completed resulting in the issuance of 22.5 million shares at $3.18 per
share (totalling $71.7 million). This transaction will be recognised within the 2020/21 financial year. The Group also completed the debt
raising of a 10-year, $0.5 billion unsecured bond issue as part of its ongoing management of its debt maturity profile. The proceeds will
strengthen short-term liquidity and be used to pay $0.4 billion in bonds due to expire in June 2021.
The Group continues to hold an investment grade credit rating from Moody’s (Baa2).
At the present time, the Group continues to consider that COVID-19 will not impact the Group’s ability to continue as a going concern or
to pay its debt as and when they become due and payable.
1. Net debt includes on balance sheet debt and capitalised aircraft lease liabilities under the Group’s Financial Framework. Capitalised aircraft lease liabilities are measured at fair
value at the lease commencement date and remeasured over lease term on a principal and interest basis. Residual value of capitalised aircraft lease liabilities denominated in
foreign currency is translated at the long-term exchange rate.
66
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Notes to the Financial Statements continued
For the year ended 30 June 2020
1 STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION (CONTINUED)
(D) IMPACT OF COVID-19 ON FINANCIAL REPORTING (CONTINUED)
iii. Impact on Accounting Judgements and Estimates
COVID-19, together with the Group’s immediate actions and responses and the strategy within the Recovery Plan have influenced
certain accounting judgements and estimates impacting the Consolidated Financial Statements for the year ended 30 June 2020.
The Group’s Recovery Plan has been the primary reference where forward assumptions are required to support judgements and
estimates, in addition to any previously existing sources of information.
Given the significance of the impact of COVID-19 on the Group, the judgements and estimates informed by the Recovery Plan are in
some circumstances materially different from judgements made in previous financial years. There are uncertainties about future
economic and market conditions which will impact the assumptions in the Recovery Plan.
The Recovery Plan assumptions have impacted key judgements and estimates within the following areas of the Financial Report:
Area of Annual Report
Impact on Judgements and Estimates
Impairment Testing
The Recovery Plan informed forecast cash flows used in the determination of the recoverable
amounts of cash generating units (CGUs) using the Value in Use method.
The Recovery Plan informed other asset specific impairments where assets will be idle or abandoned.
The carrying value of investments has also been significantly impacted by COVID-19, requiring
judgement of recoverable amounts.
Fleet Strategy
Refer to Note 25 for further details on impairment testing.
The Recovery Plan informed judgements around fleet strategy during the three-year plan. This has
included around 100 aircraft to be grounded for up to 12 months (some for longer, including the
A380 fleet which will be grounded for the foreseeable future), early retirement of the 747 fleet,
deferral of A321neo and 787-9 fleet deliveries and assumptions around aircraft lease returns
provisions.
Provision for redundancies The Recovery Plan informed the recognition of redundancy provisions as at 30 June 2020 for the
Refer to Note 1(D)(i) for further information.
restructuring announced on 25 June 2020.
Refer to Note 22 for further details on redundancies.
Hedge designation and
hedge accounting
The Recovery Plan informed key inputs to hedging designation and hedge accounting requirements
including forecast fuel consumption and forecast income and expenditure denominated in foreign
currencies.
Provision for Employee
Entitlements
The Recovery Plan informed judgements around the expected pattern of usage of leave provisions,
which impacted the measurement of provisions for annual leave and long-service leave.
Refer to Note 27(C) for details on hedge designation and hedge accounting.
Refer to Note 22 for further details on provisions for Employee Entitlements.
Balance Sheet Presentation The Recovery Plan informed assumptions around the presentation of refund liabilities as payables,
current or non-current treatment of Qantas Points and revenue received in advance.
Revenue Recognition
(Impact of breakage
Assumptions)
The significant impact of COVID-19 together with strategies within the Recovery Plan informed
assumptions around customer and member behaviour and customer engagement strategies which
impacted assumptions around breakage.
Income Tax
The Recovery Plan informed judgement around the recognition and recoverability of a net deferred
tax asset relating to income tax losses.
Refer to Note 9 for details on Income Tax and Note 18 Deferred Tax Assets.
67
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Notes to the Financial Statements continued
For the year ended 30 June 2020
2 OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL
(A) OPERATING SEGMENTS
The Qantas Group comprises the following operating segments:
QANTAS
GROUP
Qantas
Domestic
Qantas
International
Jetstar
Group
Qantas
Loyalty
Corporate
Passenger Flying Businesses and Air Cargo
and Express Freight Businesses
Customer Loyalty
Recognition Programs
Centralised Management
and Governance
i. Underlying EBIT
Underlying EBIT is the primary reporting measure used by the Qantas Group’s Chief Operating Decision Making Bodies (CODM), being
the Chief Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance
of Qantas Domestic, Qantas International, Jetstar Group, and Qantas Loyalty operating segments. The primary reporting measure of
the Corporate segment is Underlying PBT, as net finance costs are managed centrally and are not allocated to the Qantas Domestic,
Qantas International, Jetstar Group or Qantas Loyalty operating segments.
Underlying EBIT is calculated using a consistent methodology as Underlying PBT as outlined below (refer to section B) but excluding
the impact of net finance costs.
ii. Analysis by Operating Segment
2020
$M
REVENUE AND OTHER INCOME
Qantas
Domestic
Qantas
International
Jetstar
Group
Qantas
Loyalty Corporate
Unallocated/
Eliminations1 Consolidated
External segment revenue and other income
4,334
5,849
2,897
1,106
Inter-segment revenue and other income
338
228
109
118
Total segment revenue and other income
4,672
6,077
3,006
1,224
Share of net (loss)/profit of investments
accounted for under the equity method
Underlying EBITDA
Depreciation and amortisation2
Underlying EBIT
Net finance costs
Underlying PBT
ROIC %3
3
3
(59)
-
896
(723)
173
841
421
(785)
(447)
56
(26)
390
(49)
341
64
(793)
(729)
-
(15)
-
(15)
7
-
7
-
(117)
(17)
(134)
(271)
(405)
14,257
-
14,257
(53)
2,416
(2,021)
395
(271)
124
5.8%
1. Unallocated/Eliminations represents unallocated and other businesses of the Qantas Group that are not considered to be reportable segments including consolidation elimination
entries. It also includes the impact of discount rate changes on provisions (refer to Note 7) and changes in presentation of income/expenses where the determination of whether the
Group is acting as principal or agent is made on consolidation.
2. Depreciation and amortisation differs from the depreciation and amortisation recognised in the Consolidated Income Statement due to items not included in Underlying PBT. Refer
to Note 2(B).
3. ROIC % represents Return on Invested Capital (ROIC) EBIT divided by Average Invested Capital. Refer to Note 2(C).
68
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
2 OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(A) OPERATING SEGMENTS (CONTINUED)
2019 (restated)1
$M
REVENUE AND OTHER INCOME
Qantas
Domestic
Qantas
International
Jetstar
Group
Qantas
Loyalty Corporate
Unallocated/
Eliminations2 Consolidated
External segment revenue and other income
5,730
7,125
3,823
1,488
Inter-segment revenue and other income
368
295
138
166
Total segment revenue and other income
6,098
7,420
3,961
1,654
Share of net profit of investments accounted
for under the equity method
8
9
6
-
Underlying EBITDA
Depreciation and amortisation3
Underlying EBIT
Net finance costs
Underlying PBT
ROIC %4
1,503
(725)
778
1,045
836
(722)
(436)
323
400
414
(38)
376
4
-
4
-
(156)
(15)
(171)
(282)
(453)
(204)
(967)
17,966
-
(1,171)
17,966
-
(98)
-
(98)
23
3,544
(1,936)
1,608
(282)
1,326
19.2%
1. The Group adopted AASB 16 Leases effective 1 July 2019 using the full retrospective method of adoption and adopted the IFRIC agenda decision in relation to fair value hedges
("IFRIC Fair Value hedging agenda decision") retrospectively. The comparative period presented above has been restated accordingly. Refer to Note 38 for further information.
2. Unallocated/Eliminations represents unallocated and other businesses of the Qantas Group which are not considered to be reportable segments including consolidation elimination
entries. It also includes the impact of discount rate changes on provisions (refer to Note 7) and changes in presentation of income/expenses where the determination of whether the
Group is acting as principal or agent is made on consolidation.
3. Depreciation and amortisation differs from the depreciation and amortisation recognised in the Consolidated Income Statement due to items not included in Underlying PBT. Refer
to Note 2(B).
4. ROIC % represents Return on Invested Capital (ROIC) EBIT divided by Average Invested Capital. Refer to Note 2(C).
Passenger revenue primarily arises within the Qantas Domestic, Qantas International and Jetstar Group segments. Freight revenue
primarily arises within Qantas International, except when belly space is utilised in Qantas Domestic and Jetstar Group.
Marketing revenue and redemption revenue in relation to the issuance and redemption of Qantas Points is recognised within the
Qantas Loyalty segment. Marketing revenue on inter-segment Qantas Point issuances is eliminated on consolidation. Redemption
revenue arising from Qantas Group flight redemptions is recognised within Net Passenger Revenue on consolidation. The inter-
segment arrangements with Qantas Loyalty are not designed to derive a net profit from inter-segment Qantas Point issuances and
redemptions.
Redemption revenue in relation to products provided by suppliers outside the Group, such as Qantas Store redemptions and other
carrier redemptions is recognised in the Consolidated Income Statement net of related costs, as the Group is an agent. For the
purposes of segment reporting, the Qantas Loyalty segment reports these redemptions on a gross basis. Adjustments are made within
consolidation eliminations to present these redemptions on a net basis at a Group level within Other Revenue and Income.
(B) UNDERLYING PROFIT BEFORE TAX (UNDERLYING PBT) AND RECONCILIATION TO STATUTORY PROFIT BEFORE TAX
Underlying PBT is a non-statutory measure and is the primary reporting measure used by the CODM for the purpose of assessing the
performance of the Group. The objective of measuring and reporting Underlying PBT is to provide a meaningful and consistent
representation of the underlying performance of each operating segment and the Qantas Group.
Underlying PBT includes the impact of COVID-19 on the operating performance of the Group. Group Revenue for 2019/20, as
recognised within Underlying PBT, is down $3.7 billion compared to 2018/19, consistent with Statutory Loss primarily due to the
impact of COVID-19.
Likewise, the impact of the decisive actions taken by the Group to mitigate the impact of COVID-19 including a reduction in flight
capacity domestically and internationally (including reductions in costs from fuel and variable costs), workforce stand downs and
operational cost-out measures have also been recognised in Underlying PBT. Government support to mitigate the impact of COVID-19
from travel restrictions and border closures including the Australian Aviation Financial Relief Package, JobKeeper Payment, Minimum
Viable Network flights and International Freight Assistance Mechanism payments, together with costs to operate or payments to
employees are also recorded in Underlying PBT.
Items which are identified by Management and reported to the CODM bodies as not representing the underlying performance of the
business are not included in Underlying PBT. 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 revenues or expenses relating to business activities in other reporting
periods, transformational/restructuring initiatives, transactions involving investments, impairments of assets and other transactions
outside the ordinary course of business.
69
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
2 OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(B) UNDERLYING PROFIT BEFORE TAX (UNDERLYING PBT) AND RECONCILIATION TO STATUTORY PROFIT BEFORE TAX
(CONTINUED)
The impact of COVID-19 and the Group’s Recovery Plan have resulted in items not included in Underlying PBT, including asset
impairments (including the A380 fleet), Recovery Plan restructuring costs including redundancies and de-designated hedging due
to a significant decrease in flying activity. These are in addition to transformation costs directly incurred to enable the delivery of
transformation benefits.
RECONCILIATION OF UNDERLYING PBT TO STATUTORY (LOSS)/PROFIT BEFORE TAX
Underlying PBT
Items not included in Underlying PBT
– Transformation costs and discretionary bonus for non-executive employees
– Recovery Plan restructuring costs
– (Impairment)/reversal of impairment of assets and related costs
– De-designation of fuel and foreign exchange hedges
– Net gain on disposal of assets
– Unrealised foreign exchange movements from the adoption of AASB 16 and the IFRIC Fair value
hedging agenda decision
– Other
Total items not included in Underlying PBT
Statutory (Loss)/Profit Before Income Tax Expense
In the 2020 financial year, the items outside of Underlying PBT included:
Item Outside of
Underlying PBT
Description
2020
$M
2019
(restated)
$M
124
1,326
(191)
(642)
(1,428)
(571)
-
-
-
(2,832)
(2,708)
(254)
-
39
-
192
(105)
(6)
(134)
1,192
Transformation costs
and discretionary
bonuses for non-
executive employees
$191 million including redundancy and related costs of $44 million, fleet restructuring costs of $62 million
(primarily related to costs for the introduction of the 789 Dreamliners and retirement of the 747 fleet), other
upfront costs of $55 million directly incurred to enable the delivery of transformation benefits and $30 million
of discretionary bonuses to non-executive employees which will be paid to non-executive employees after
the employees’ post-wage freeze collective agreement is voted upon and approved.
Recovery Plan
restructuring costs
$642 million including people restructuring costs of $575 million and fleet restructuring costs of $67 million
resulting from the announced COVID-19 Recovery Plan. People restructuring costs include redundancy
costs and the remeasurement of employee entitlement provisions due to rightsizing and restructuring
strategies in the Recovery Plan. Fleet restructuring costs resulted from changes to fleet strategy as a result
of the Recovery Plan.
Impairment of assets
and related costs
Impairments of assets and related costs includes:
– $1,087 million impairment of the Group’s A380 fleet, including related spares, inventories and onerous
contracts. With the impact of COVID-19 and the closure of international borders, the Group’s A380 fleet
is expected to be grounded for the foreseeable future
– $23 million impairment relating to the early retirement of the Group’s 747 fleet
– $150 million impairment of property, plant and equipment, intangible assets and other assets not
expected to be recovered in the Recovery Plan
– $25 million impairment of the Group’s investment in Jetstar Pacific
– $73 million impairment of Goodwill and indefinite lived intangible assets in Jetstar Asia
– $70 million impairment of the Group’s investment in Helloworld.
Refer to Note 25 for details on impairment of assets and related costs.
The Group hedges fuel price risk in accordance with the Treasury Risk Management Policy. Hedge
accounting is applied when the requirements of AASB 9 Financial Instruments are met. Where the forecast
fuel purchase transaction is no longer expected to occur, then hedge accounting is discontinued
prospectively, and the amount accumulated in equity is reclassified to the Consolidated Income Statement.
The significant decrease in flying activity in the last quarter of the 2019/20 financial year and into the
2020/21 financial year has resulted in hedge accounting being discontinued where forecast fuel purchases
are no longer expected to occur. De-designation of fuel and foreign exchange hedges of $571 million has
been recognised immediately in the Consolidated Income Statement. Refer to Note 27 for further details on
de-designation of fuel and foreign exchange hedges.
De-designation of fuel
and foreign exchange
hedges
70
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
2 OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(B) UNDERLYING PROFIT BEFORE TAX (UNDERLYING PBT) AND RECONCILIATION TO STATUTORY PROFIT BEFORE TAX
(CONTINUED)
The 2019 financial year included the following items (restated where relevant for the adoption of AASB 16 and the IFRIC Fair Value
hedging agenda decision):
Items Outside of
Underlying PBT
Description
Transformation costs
and discretionary
bonuses for non-
executive employees
$254 million included redundancy and related costs of $65 million, fleet restructuring costs of $107 million
(primarily related to costs for the introduction of the 789 Dreamliners and retirement of the 747 fleet), other
upfront costs of $55 million directly incurred to enable the delivery of transformation benefits and $27 million
of discretionary bonuses to non-executive employees which will be paid to non-executive employees after
the employees post-wage freeze collective agreement is voted upon and approved.
Reversal of
impairment of
associate
$39 million relating to the Group’s investment in Helloworld Travel Limited. The reversal of the impairment
has been recognised as an item outside of Underlying PBT consistent with the treatment of the original
impairment.
Net gain on disposal
of assets
Net gain on disposal of assets of $192 million is comprised of:
– Net gain on disposal of a controlled entity of $47 million arising from the sale of the Qantas Catering
business
– Net gain on disposal of Airport Terminal assets of $141 million primarily relating to the gain on disposal
of Melbourne Domestic Terminal assets
– Net gain on partial disposal of associate of $4 million relating to the Group’s investment in Helloworld
Travel Limited. The Group sold 2 million shares for $5.50 per share in September 2018.
Unrealised foreign
exchange movements
from the adoption of
AASB 16 and the
IFRIC Fair Value
hedging agenda
decision
Following the adoption of AASB 16 and the IFRIC Fair Value hedging agenda decision, the Group put in
place accounting hedge designations to manage the foreign exchange movements of foreign currency by
designating foreign currency interest-bearing liabilities and lease liabilities as the hedging instrument in a
cash flow hedge relationship. In accordance with AASB 9, these designations apply prospectively from 1
July 2019. For comparative periods before the designation (which have been restated for the adoption of
AASB 16 and the IFRIC Fair Value hedging agenda decision) the foreign exchange movements were
recognised immediately in the Consolidated Income Statement. As the difference between reporting
periods arose due to the timing of accounting hedge designations, the impact on the Consolidated Income
Statement in the comparative period has been recognised outside of Underlying PBT to ensure
comparability.
(C) RETURN ON INVESTED CAPITAL
Return on Invested Capital (ROIC %) is a non-statutory measure and is the primary financial return measure of the Group. ROIC % is
calculated as Return on Invested Capital EBIT (ROIC EBIT) divided by Average Invested Capital.
i. ROIC EBIT
ROIC EBIT is derived by adjusting Underlying EBIT for the period to exclude leased aircraft depreciation under AASB 16 and include
notional depreciation for these aircraft to account for them as if they were owned.
In addition, for non-aircraft leases, ROIC EBIT is reduced for the full lease payments rather than depreciation under AASB 16 to
account for these items as a service cost. The objective of these adjustments is to show an EBIT result which is indifferent to the
financing or ownership structure of aircraft assets and that treats non-aircraft leases as a service cost rather than a debt repayment.
ROIC EBIT
Underlying EBIT
Add back: Lease depreciation under AASB 16
Less: Notional depreciation1
Less: Cash expenses for non-aircraft leases
ROIC EBIT
2020
$M
395
402
(108)
(225)
464
2019
(restated)
$M
1,608
351
(114)
(187)
1,658
1. For calculating ROIC, capitalised leased aircraft are included in the Group's Invested Capital at the AUD market value (referencing AVAC) at the date of commencing operations at
the prevailing AUD/USD rate. This value is depreciated notionally in accordance with the Group's accounting policies, with the calculated depreciation reported above known as
notional depreciation. Where leased aircraft were classified as finance leases under the previous accounting standard (AASB 117), the capitalised amount and notional depreciation
for ROIC is consistent with the recognised accounting values.
71
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
2 OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(C) RETURN ON INVESTED CAPITAL (CONTINUED)
ii. Average Invested Capital
The objective of the Group's Financial Framework is to show Invested Capital which is indifferent to financing or ownership structures
of aircraft assets (leased versus owned). Invested Capital includes the net assets of the business other than cash, debt, other financial
assets/(liabilities), tax balances and right of use assets (leased aircraft, property and other assets measured under AASB 16).
To account for the capital invested in leased aircraft, Invested Capital includes an amount representing the capitalised value of leased
aircraft assets as if they were owned. Invested Capital includes the full capital held in leased aircraft, which is a non-statutory adjustment,
as in accordance with Australian Accounting Standards (AASB 16 Leases) right of use assets are only measured with reference to the
lease term.
Average Invested Capital is equal to the average of the monthly Invested Capital for the year.
INVESTED CAPITAL
Receivables (current and non-current)
Inventories
Other assets (current and non-current)
Investments accounted for under the equity method
Property, plant and equipment
Intangible assets
Assets classified as held for sale
Payables (current and non-current)
Provisions (current and non-current)
Revenue received in advance (current and non-current)
Capitalised aircraft leased assets1
Invested Capital as at 30 June
Average Invested Capital for the year ended 30 June
2020
$M
646
306
562
59
11,726
1,050
58
(2,450)
(2,190)
(5,040)
1,301
6,028
8,055
2019
(restated)
$M
1,178
364
680
217
12,776
1,225
1
(2,366)
(1,442)
(5,880)
1,424
8,177
8,631
1. For calculating ROIC, capitalised leased aircraft are included in the Group's Invested Capital at the AUD market value (referencing AVAC) at the date of commencing operations at
the prevailing AUD/USD rate. This value is notionally depreciated in accordance with the Group's accounting policies with the calculated depreciation reported above known as
notional depreciation. The carrying value (AUD market value less accumulated notional depreciation) is reported within Invested Capital as capitalised aircraft leased assets. Where
leased aircraft were classified as finance leases under the previous accounting standard (AASB 117), the capitalised amount and notional depreciation for ROIC is consistent with
the recognised accounting values.
iii. ROIC %
ROIC %1
1. ROIC % is calculated as Return on Invested Capital EBIT (ROIC EBIT) divided by Average Invested Capital for the year.
iv. ROIC (Statutory EBIT) %
ROIC (Statutory EBIT) %1
2020
%
5.8
2019
(restated)
%
19.2
2020
%
(29.4)
2019
%
17.7
1. ROIC (Statutory EBIT) % is calculated by replacing Underlying EBIT with Statutory EBIT, maintaining a consistent methodology to ROIC % as outlined in Section C (i) to (iii).
v. Underlying Earnings Per Share
Underlying Earnings Per Share1
2020
cents
5.9
2019
(restated)
cents
57.3
1. Underlying Earnings Per Share is calculated as Underlying PBT less tax expense (based on the Group’s effective tax rate of (27.5%) (2019: 29.5%) divided by the weighted
average number of shares outstanding during the year, excluding unallocated treasury shares.
3 EARNINGS PER SHARE
Basic Earnings Per Share1
Diluted Earnings Per Share2
2020
cents
(129.6)
(129.6)
2019
(restated)
cents
51.5
51.3
1. Weighted average number of shares used in basic Earnings Per Share calculation of 1,516 million (2019: 1,631 million) excludes unallocated treasury shares.
2. Weighted average number of shares used in basic and diluted Earnings Per Share calculation is the same for financial year 2019/20. Weighted average number of shares used in
diluted Earnings Per Share calculation of 1,516 million (2019: 1,639 million) excludes unallocated treasury shares and prior year also includes the effect of share Rights expected to
vest (using treasury stock method).
72
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
3 EARNINGS PER SHARE (CONTINUED)
Statutory (loss)/profit attributable to members of Qantas
NUMBER OF SHARES
Issued shares as at 1 July
Shares bought back and cancelled
Capital raising
Issued shares as at 30 June
Weighted average number of shares for the year
4 REVENUE AND OTHER INCOME
(A) REVENUE AND OTHER INCOME BY GEOGRAPHIC AREA
Net passenger and freight revenue
Australia
Overseas
Total net passenger and freight revenue
Other revenue and income
Total revenue and other income
$M
(1,964)
Number
M
1,571
(80)
373
1,864
1,518
$M
840
Number
M
1,684
(113)
-
1,571
1,634
2020
$M
2019
$M
9,262
3,966
13,228
1,029
14,257
11,897
4,770
16,667
1,299
17,966
Net passenger and freight revenue is attributed to a geographic region based on the point of sale and where not directly available, on a
pro-rata basis. Other revenue and income is not allocated to a geographic region as it is impractical to do so.
(B) OTHER REVENUE AND INCOME
Frequent Flyer marketing revenue and other Qantas Loyalty businesses
Qantas Store and other redemption revenue1,2
Third Party services revenue
Other income
Total other revenue and income
2020
$M
467
96
263
203
2019
(restated)
$M
481
99
350
369
1,029
1,299
1. Frequent Flyer redemption revenue excludes redemptions on Qantas Group flights which are reported as Net Passenger Revenue in the Consolidated Income Statement.
2. Where the Group acts as an agent for redemptions, an adjustment is made within consolidation eliminations to present these redemptions on a net basis.
5 DEPRECIATION AND AMORTISATION
Property, plant and equipment
Right of use assets
Intangible assets
Total depreciation and amortisation
6 NET GAIN ON DISPOSAL OF ASSETS
Net gain on disposal of property, plant and equipment
Net gain on disposal of Airport Terminal Assets
Net gain on partial disposal of associate
Net gain on disposal of a controlled entity
Total net gain on disposal of assets
Note
15
16
17
2020
$M
1,446
402
197
2,045
2020
$M
(7)
-
-
-
(7)
2019
(restated)
$M
1,481
351
164
1,996
2019
(restated)
$M
(33)
(141)
(4)
(47)
(225)
73
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
7 OTHER EXPENDITURE
Commissions and other selling costs
Computer and communication
Capacity hire (excluding lease components)
Property occupancy and utility expenses
Marketing and advertising
Discretionary bonus to non-executive employees
Discount rate changes impact on provisions
Other
Total other expenditure
8 NET FINANCE COSTS
FINANCE INCOME
Interest income on financial assets measured at amortised cost
Unwind of discount on receivables
Total finance income
FINANCE COSTS
Interest expense on financial liabilities measured at amortised cost
Interest expense on leases
Interest paid and capitalised on qualifying assets1
Total finance costs on financial liabilities
Unwind of discount on provisions and other liabilities
Employee benefits
Other liabilities and provisions
Total unwind of discount on other liabilities and provisions
Total finance costs
Net finance costs
2020
$M
506
489
268
176
160
30
7
314
2019
(restated)
$M
733
488
312
218
199
27
92
525
1,950
2,594
2020
$M
29
4
33
(223)
(96)
48
(271)
(15)
(18)
(33)
(304)
(271)
2019
(restated)
$M
42
5
47
(233)
(101)
42
(292)
(20)
(17)
(37)
(329)
(282)
Note
16(B)
1. The borrowing costs are capitalised using the average interest rate for the year applicable to the Qantas Group’s debt facilities throughout the year, being 4.9 per cent (2019:
5.5 per cent).
9
INCOME TAX BENEFIT/(EXPENSE)
(A) INCOME TAX RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT
Current income tax expense
Current income tax – Australia
Current income tax – foreign
Total current income tax expense
Deferred income tax benefit/(expense)
Origination and reversal of temporary differences
Benefit/(utilisation) of tax losses
Current year deferred income tax benefit/(expense)
Adjustments for the prior year
Total deferred income tax benefit/(expense)
Total income tax benefit/(expense) in the Consolidated Income Statement
74
2020
$M
-
(4)
(4)
675
86
761
(13)
748
744
2019
(restated)
$M
(253)
(5)
(258)
(75)
(3)
(78)
(16)
(94)
(352)
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
9
INCOME TAX BENEFIT/(EXPENSE) (CONTINUED)
(B) RECONCILIATION BETWEEN INCOME TAX AND STATUTORY (LOSS)/PROFIT BEFORE INCOME TAX
Statutory (loss)/profit before income tax benefit/(expense)
Income tax benefit/(expense) using the domestic corporate tax rate of 30 per cent
Adjusted for:
Differences in (loss)/income from investments accounted for under the equity method
Non-deductible losses for foreign branches
Non-deductible losses for controlled entities
Write-down of investments and non-deductible CGU impairments
Non-assessable gain on property, plant and equipment
Other net non-assessable items
Under provision from prior periods
Income tax benefit/(expense)
(C) INCOME TAX RECOGNISED DIRECTLY IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Income tax on:
Cash flow hedges
Defined benefit actuarial losses
Fair value gains on investments
Income tax benefit recognised directly in the Consolidated Statement of Comprehensive Income
(D) RECONCILIATION OF INCOME TAX BENEFIT/(EXPENSE) TO INCOME TAX RECEIVABLE/(PAYABLE)
2020
$M
76
17
(2)
91
Income tax benefit/(expense)
Adjusted for temporary differences
Receivables
Inventories
Investments accounted for under the equity method
Property, plant and equipment and intangible assets
Right of use assets
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial assets/(liabilities)
Provisions
Other items
Temporary differences
Adjustments for the prior year
Tax on taxable income
Tax losses utilised (Australian)
Tax losses recognised (Australian)1
Tax instalments paid2
Income tax receivable/(payable)3
2020
$M
744
29
(2)
(23)
(352)
(4)
14
(80)
(15)
(16)
20
(219)
(27)
(675)
13
82
-
(86)
141
137
2020
$M
(2,708)
812
2019
(restated)
$M
1,192
(358)
(20)
(5)
(19)
(29)
-
6
(1)
744
3
(9)
(8)
-
27
9
(16)
(352)
2019
(restated)
$M
111
52
(2)
161
2019
(restated)
$M
(352)
(4)
(5)
12
119
(8)
26
(17)
68
4
(72)
(34)
(14)
75
16
(261)
3
-
145
(113)
1. A deferred tax asset of $86 million has been recognised for income tax losses and is expected to be recovered in future periods.
2. Australian income tax payments in the Consolidated Cash Flow Statement total $255 million, comprising $141 million Australian income tax instalments referable to 2019/20 and
$114 million referable to 2018/19. In addition, the Group paid $4 million in foreign income taxes.
3. The financial year 2019/20 net income tax receivable of $137 million is made up of $141 million receivable for Australian income tax and $4 million payable for overseas income tax.
Income tax paid and payable was less than 30 per cent of the Qantas Group’s Statutory (Loss)/Profit Before Tax due to temporary
differences of $(675) million (2019: $75 million) that result in differences between taxable income and Statutory (Loss)/Profit Before
Tax. These differences will reverse in future periods.
75
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
10 DIVIDENDS AND OTHER SHAREHOLDER DISTRIBUTIONS
2019 final dividend
Amount per
Ordinary Share
cents
13.0
Franked Amount per
Ordinary Share
cents
13.0
Dividend
Declared
$M
204
Payment
Date
September 2019
(A) DIVIDENDS DECLARED AND PAID
During the year ended 30 June 2020, the Group paid a fully franked dividend of 13 cents per ordinary share, totalling $204 million on 23
September 2019.
(B) OTHER SHAREHOLDER DISTRIBUTIONS
During the year ended 30 June 2020, the Group completed an off-market share buy-back of $443 million, which was announced in
August 2019. The Group purchased 79.7 million ordinary shares on issue at a discounted share price of $5.56 (market price $6.47 at
14 per cent buy-back discount).
In February 2020, the Group announced a fully franked dividend of 13.5 cents per ordinary share and an off-market share buy-back of
up to $150 million. To preserve liquidity in response to the impact of COVID-19, the off-market share buy-back was subsequently
cancelled in March 2020 and the interim dividend was subsequently revoked in June 2020.
(C) FRANKING ACCOUNT
Total franking account balance at 30 per cent
2020
$M
-
2019
$M
113
The above amount represents the balance of the franking account as at 30 June, after taking into account adjustments for:
– Franking credits that will arise from the payment of income tax payable for the current year
– Franking credits that will arise from the receipt of dividends recognised as receivables at the year end
– Franking credits that may be prevented from being distributed in subsequent years.
Franking debits equal to the expected Australian income tax refund of $141 million that will be received during financial year 2020/21.
As such, expected future income tax payments and/or receipt of future franked dividends will need to exceed $141 million to generate a
positive franking credit balance that could be distributed to shareholders. The ability to utilise the franking credits is dependent upon
there being sufficient available profits to declare dividends.
11 RECEIVABLES
Trade receivables
Less provision for impairment losses
Total trade receivables
Sundry receivables
Finance lease receivable1
Total other receivables
Total receivables
2020
$M
2019
(restated)
$M
Current Non-current
Total
Current Non-current
Total
335
(17)
318
202
2
204
522
-
-
-
101
23
124
124
335
(17)
318
303
25
328
646
889
(4)
885
216
-
216
1,101
-
-
-
77
-
77
77
889
(4)
885
293
-
293
1,178
1. The Group has subleased property and classified the sublease as a finance lease. The subleased portion of the right of use asset was derecognised and the Group recognised a
finance lease receivable (net investment in the finance lease). The interest income recognised on the net investment in the finance lease was $0.5 million (2019: nil).
The ageing of trade receivables, net of provision for expected credit losses, at 30 June was1:
Not past due
Past due 1–30 days
Past due 31–120 days
Past due 121 days or more
Total trade receivables
2020
$M
191
86
4
37
318
2019
(restated)
$M
777
56
36
16
885
1. The Group assesses at each reporting date whether the carrying value of financial assets is impaired. Where necessary, a provision for expected credit losses (ECL) is recognised,
depending on whether there has been a significant increase in credit risk, including risk of default occurring since initial recognition. Refer to Note 37(G) for the Group’s accounting
policy.
76
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
12 INVENTORIES
Engineering expendables1
Consumables stores
Work in progress
Total inventories
2020
$M
256
50
-
306
2019
$M
312
49
3
364
1. During the year, an impairment of $66 million in Engineering expendables was recognised in relation to the Group’s A380 inventories. Refer to Note 25 for more information.
13 ASSETS CLASSIFIED AS HELD FOR SALE
Assets held for sale relates to aircraft and engines of $58 million (2019: $1 million).
The fair value measurement for property, plant and equipment classified as held for sale has been categorised under the fair value
hierarchy as Level 2. Refer to Note 37(C) for a definition of the fair value hierarchy.
2020
$M
Aircraft and engines
Total assets classified as held for sale
2019
$M
Aircraft and engines
Catering business disposal group
Total assets classified as held for sale
Opening Net
Book Value
Transferred from
Property, Plant and
Equipment
1
1
71
71
Opening Net
Book Value
1
53
54
Disposals
(14)
(14)
Disposals
-
(53)
(53)
Closing Net
Book Value
58
58
Closing Net
Book Value
1
-
1
14 INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
Ownership interest in investments accounted for under the equity method
Fiji Resorts Limited
Hallmark Aviation Services L.P.
HT & T Travel Philippines, Inc.
Holiday Tours and Travel (Thailand) Ltd.
Holiday Tours and Travel Vietnam Co. Ltd.
Holiday Tours and Travel (GSA) Ltd.
Helloworld Travel Limited
Jetstar Japan Co. Ltd.1
Jetstar Pacific Airlines Aviation Joint Stock Company
PT Holidays Tours & Travel
1. Based on voting rights.
$M
Balance as at 1 July
Additions/(disposals)
Dividends received
Share of net (loss)/profit
Share of reserves and other movements
(Impairment)/reversal of impairment1
Balance as at 30 June
June 2020
%
June 2019
%
21
49
28
37
37
37
15
33
30
37
2020
$M
217
2
(15)
(53)
3
(95)
59
21
49
28
37
37
37
15
33
30
37
2019
(restated)
$M
166
(7)
(11)
23
7
39
217
Note
25(C)
1. The Group recognised an impairment of $70 million in relation to its investment in Helloworld Ltd (ASX: HLO) including the Group’s share of impairment loss on Goodwill and other
non-current assets recognised by Helloworld for the year ended 30 June 2020. The recoverable amount of the Group’s investment in Helloworld was determined with reference to
the volume weighted average price (VWAP) in the last quarter of the 2019/20 financial year. The Group also recognised an impairment of $25 million in relation to its investment in
Jetstar Pacific due to the announced exit of the business reducing the carrying value of Jetstar Pacific to nil.
77
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
15 PROPERTY, PLANT AND EQUIPMENT
$M
Freehold land
Buildings
Leasehold
improvements
Plant and equipment
Aircraft and engines
Aircraft spare parts
Aircraft deposits
Total property, plant
and equipment
2020
$M
Freehold land
Buildings
Leasehold
improvements
Plant and equipment
Aircraft spare parts
Aircraft deposits
Total property, plant
and equipment
2019
(restated)
$M
Freehold land
Buildings
Leasehold
improvements
2020
$M
Accumulated
Depreciation and
Impairment
-
(215)
(873)
(1,043)
(11,943)
(432)
-
At Cost
49
288
1,082
1,437
21,728
886
762
Net Book
Value
49
73
209
394
9,785
454
762
2019 (restated)
$M
Accumulated
Depreciation and
Impairment
-
(212)
(840)
(1,075)
(12,242)
(382)
-
At Cost
49
289
1,052
1,493
22,989
872
783
Net Book
Value
49
77
212
418
10,747
490
783
26,232
(14,506)
11,726
27,527
(14,751)
12,776
Opening
Net Book
Value
Cash
Additions1
Aircraft
Lease
Refinancing Disposals Transfers2
Transferred
(to)/from
Assets
Classified as
Held for Sale Depreciation
Impair-
ment Other3
Closing
Net
Book
Value
49
77
212
418
490
783
-
-
74
55
982
76
254
-
-
-
-
-
-
-
-
-
-
-
(8)
(14)
(1)
-
(23)
-
-
(3)
2
230
(4)
(241)
(16)
-
-
-
-
-
(4)
-
-
(34)
(41)
-
-
1
49
73
209
(65)
-
(8)
394
(72)
(1,300)
(921)
133 9,785
1
-
(43)
(40)
-
-
(25)
(34)
454
762
(71)
(1,446) (1,002)
67 11,726
Aircraft
Lease
Refinancing Disposals Transfers2
Transferred
(to)/from
Assets
Classified as
Held for Sale Depreciation
Impair-
ment Other3
Closing
Net
Book
Value
12,776
1,441
Opening
Net Book
Value
Cash
Additions1
49
79
392
-
-
37
-
-
-
-
88
-
-
-
-
-
-
(91)
(10)
(45)
(4)
(1)
-
8
244
-
(246)
(4)
-
-
-
-
-
-
-
-
-
(4)
(38)
(58)
(1,338)
(43)
-
(1,481)
-
-
-
-
-
-
-
-
-
2
49
77
(78)
212
(2)
418
19 10,747
(26)
(16)
490
783
(101) 12,776
Plant and equipment
408
107
Aircraft and engines
10,624
1,114
Aircraft spare parts
Aircraft deposits
Total property, plant
and equipment
474
665
86
380
12,691
1,724
88
(141)
Aircraft and engines
10,747
1. Additions includes capitalised interest of $42 million (2019: $37 million).
2. Transfers includes transfers between categories of property, plant and equipment and transfers from/(to) other balance sheet accounts.
3. Other includes non-cash movements, movements in accrued payments for property, plant and equipment (2020: $113 million, 2019: $15 million) and disposals where the proceeds
have not yet been received (2020: nil), 2019: ($78 million).
(A) AIRCRAFT BY GEOGRAPHIC AREA
Aircraft supporting the Group’s global operations are primarily located in Australia, with the exception of those aircraft which are
currently in storage overseas.
(B) SECURED ASSETS
Certain aircraft and engines act as security against related financing facilities. Under the terms of certain financing facilities entered into
by the Qantas Group, the underwriters to these agreements have a fixed charge over certain aircraft and engines to the extent that debt
has been issued directly to those underwriters. The total carrying amount of assets under pledge is $6,326 million (2019: $5,277 million).
78
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
15 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(C) CAPITAL EXPENDITURE COMMITMENTS
The Group’s capital expenditure commitments as at 30 June 2020 are $9,028 million (2019: $9,550 million). The Group has certain
rights within its aircraft purchase contracts which can defer the capital expenditure commitments.
The Group’s capital expenditure commitments are predominantly denominated in US dollars. Commitments reported above are translated
to the Group’s Australian dollar presentational currency at the 30 June 2020 closing exchange rate of $0.69 (30 June 2019: $0.69).
16 LEASES
(A) RIGHT OF USE ASSETS
$M
Aircraft
Property
Other
Total right of use assets
2020
$M
Aircraft
Property
Other
Total right of use assets
2020
$M
Accumulated
Depreciation and
Impairment
(1,994)
(845)
(186)
(3,025)
At Cost
2,604
1,527
334
4,465
Opening
Net Book
Value
Additions/
modifications/
remeasurements
2019
$M
Accumulated
Depreciation
and Impairment
(1,781)
(737)
(110)
(2,628)
At Cost
2,465
1,377
205
4,047
Net Book
Value
610
682
148
1,440
Transfers1 Depreciation
Other2
684
640
95
1,419
147
177
129
453
-
(25)
-
(25)
(214)
(127)
(61)
(402)
(7)
17
(15)
(5)
Net Book
Value
684
640
95
1,419
Closing Net
Book Value
610
682
148
1,440
1. Transfers includes transfers from/(to) lease receivables where the Group is a sub-lessor.
2. Other movements include foreign exchange movements, changes in the measurement of make good assets and the impairment of other right of use assets, mainly supporting the
Group's A380 fleet of $14 million.
2019
$M
Aircraft
Property
Other
Total right of use assets
Opening
Net Book
Value
Additions/
modifications/
remeasurements
785
582
81
1,448
88
172
35
295
Transfers Depreciation
Other1
-
-
-
-
(215)
(114)
(22)
(351)
26
-
1
27
Closing Net
Book Value
684
640
95
1,419
1. Other movements include foreign exchange movements and changes in the measurement of make good assets.
(B) LEASE LIABILITIES
Aircraft
Property
Other
Total lease liabilities
2020
$M
Aircraft
Property
Other
2020
$M
2019
$M
Current
Non-current
Total
Current
Non-current
282
163
79
524
491
740
87
773
903
166
1,318
1,842
260
156
43
459
570
669
54
1,293
Total
830
825
97
1,752
Opening
Balance
Additions/
modifications/
remeasurements
Lease
Repayments1
Interest
Foreign
Exchange
Other2
Closing
Balance
830
825
97
147
177
129
453
(242)
(142)
(65)
(449)
36
55
5
96
2
2
-
4
-
(14)
-
(14)
773
903
166
1,842
Total lease liabilities
1,752
1. Lease repayments of $449 million includes $367 million principal repayments and $82 million interest repayments. The lease repayments exclude deferred lease repayments of
$60 million which represents $14 million of interest accrued and $46 million of principal.
2. Other movements include rental waivers of $13 million and gains on early termination of leases.
79
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
16 LEASES (CONTINUED)
(B) LEASE LIABILITIES (CONTINUED)
2019
$M
Aircraft
Property
Other
Total lease liabilities
Opening
Balance
Additions/
modifications/
remeasurements
Lease
Repayments1
Interest
Foreign
Exchange
Other2
Closing
Balance
917
766
83
1,766
88
172
35
295
(275)
(166)
(28)
(469)
46
52
3
101
54
9
4
67
1. Lease repayments of $469 million includes $368 million principal repayments and $101 million interest repayments.
2. Other movements relate to gains on early termination of leases.
(C) RECOGNISED WITHIN OTHER EXPENSES IN THE CONSOLIDATED INCOME STATEMENT
Lease expense for short-term leases
Variable lease expenses not included in lease liabilities
Rental waivers
17 INTANGIBLE ASSETS
-
(8)
-
(8)
2020
$M
5
-
13
830
825
97
1,752
2019
(restated)
$M
19
12
-
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
2020
$M
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
2019
$M
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
2020
$M
Accumulated
Amortisation
and Impairment
Net Book
Value
-
-
(1,281)
-
(4)
-
(1,285)
162
35
685
1
-
167
1,050
At Cost
162
35
1,966
1
4
167
2,335
2019
$M
Accumulated
Amortisation
and Impairment
Net Book
Value
-
-
(1,081)
-
(3)
-
209
35
826
28
1
126
At Cost
209
35
1,907
28
4
126
2,309
(1,084)
1,225
Opening Net
Book Value
Cash
Additions1
Transfers2 Amortisation
Impairment
Other3
Closing Net
Book Value
209
35
826
28
1
126
1,225
-
-
150
-
-
41
191
-
-
1
-
-
-
1
-
-
(197)
-
-
-
(47)
-
(97)
(26)
-
-
(197)
(170)
-
-
2
(1)
(1)
-
-
162
35
685
1
-
167
1,050
Opening Net
Book Value
Cash
Additions1
Transfers2 Amortisation
Impairment
Other3
Closing Net
Book Value
207
35
757
26
1
87
1,113
-
-
240
-
-
39
279
-
-
(7)
-
-
-
-
-
(164)
-
-
-
(7)
(164)
-
-
-
-
-
-
-
2
-
-
2
-
-
4
209
35
826
28
1
126
1,225
1. Additions includes capitalised interest of $6 million (2019: $5 million).
2. Transfers includes transfers between categories of intangible assets and transfers from/(to) other balance sheet accounts.
3. Other includes foreign exchange movements and movements in accrued payments for intangible assets.
80
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
18 DEFERRED TAX ASSETS/(LIABILITIES)
Deferred tax assets/(liabilities)
(A) RECONCILIATION OF DEFERRED TAX ASSETS/(LIABILITIES)
2020
$M
167
2019
(restated)
$M
(694)
2020
$M
Receivables
Inventories
Investments accounted for under the equity method
Property, plant and equipment and intangible assets
Right of use assets
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial assets/(liabilities)
Provisions
Other items
Tax value of recognised tax losses
Total deferred tax (liabilities)/assets
2019 (restated)
$M
Receivables
Inventories
Investments accounted for under the equity method
Property, plant and equipment and intangible assets
Right of use assets
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial assets/(liabilities)
Provisions
Other items
Tax value of recognised tax losses
Total deferred tax assets/(liabilities)
Opening
Balance
(restated)
Recognised in the
Consolidated
Income Statement
Recognised
in Other
Comprehensive
Income
Recognised
in Retained
Earnings
Closing
Balance
(29)
(15)
(26)
(1,668)
(426)
48
785
(142)
526
(97)
403
(53)
-
(694)
(29)
2
23
352
4
(14)
80
15
16
(20)
219
27
86
761
-
-
-
-
-
-
-
-
-
76
-
15
-
91
-
-
-
-
-
-
-
-
-
-
-
9
-
9
(58)
(13)
(3)
(1,316)
(422)
34
865
(127)
542
(41)
622
(2)
86
167
Opening
Balance
(restated)
Recognised in the
Consolidated
Income Statement
Recognised
in Other
Comprehensive
Income
Recognised
in Retained
Earnings
Closing
Balance
(33)
(20)
(14)
(1,549)
(434)
74
768
(74)
530
(280)
369
(119)
3
(779)
4
5
(12)
(119)
8
(26)
17
(68)
(4)
72
34
14
(3)
(78)
-
-
-
-
-
-
-
-
-
111
-
50
-
161
-
-
-
-
-
-
-
-
-
-
-
2
-
2
(29)
(15)
(26)
(1,668)
(426)
48
785
(142)
526
(97)
403
(53)
-
(694)
2019
$M
(10)
(10)
10
-
-
81
2020
$M
-
-
-
(86)
(86)
(B) QANTAS GROUP CARRIED FORWARD TAX LOSSES
Tax losses available to be utilised in current year
Total tax losses brought forward
Tax losses utilised against current taxable income
Tax losses recognised1
Tax losses carried forward to be utilised in future years
1. A deferred tax asset of $86 million has been recognised for income tax losses and is expected to be recovered in future periods.
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
18 DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)
(C) UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised with respect to the following items:
Tax losses – New Zealand
Tax losses – Singapore
Tax losses – Hong Kong
Total unrecognised deferred tax assets
19 OTHER ASSETS
2020
$M
21
33
13
67
2019
$M
21
18
12
51
2020
$M
2019 (restated)
$M
Notes
Current Non-current
Total
Current Non-current
Total
Prepayments
Net defined benefit asset
30(B)
Other assets
Total other assets
121
-
72
193
2221
28
119
369
343
28
191
562
156
-
75
231
221
107
121
449
1. Other assets include incremental costs of obtaining a contract. Refer to note 37(D)(v) for the Group’s accounting policy.
20 REVENUE RECEIVED IN ADVANCE
2020
$M
2019 (restated)
$M
Current Non-current
Total
Current Non-current
Unavailed passenger revenue
Unredeemed Frequent Flyer revenue
Other revenue received in advance
2,031
617
136
-
2,200
56
2,031
2,817
192
3,167
1,060
187
Total revenue received in advance
2,784
2,256
5,040
4,414
-
1,402
64
1,466
377
107
196
680
Total
3,167
2,462
251
5,880
Unavailed passenger revenue relates to sales to passengers in advance of the date of passenger travel. The balance includes tickets
relating to travel with a travel date subsequent to year end and tickets which have been transferred to a travel credit as a result of flight
cancellations from border closures and other restrictions due to the impact of COVID-19. Tickets generally expire either, within 12 months
after the planned travel date, if they are not used within that time period or on the date of planned travel, depending on the terms and
conditions. At the time of travel, revenue is also recognised in respect of tickets that are not expected to be used. Unused tickets are
recognised as revenue using estimates based on the terms and conditions of the ticket, experience, historical and expected future
trends.
Travel credits are available to be used for future flights and in certain circumstances are eligible for refund. Where customers have
made refund claims by 30 June 2020 these are no longer classified as unavailed passenger revenue and are reported as payables in
the Consolidated Balance Sheet. Further refund claims are expected, given that the Group’s forecast flight schedule remains severely
restricted. Notwithstanding that travel credits may not be expected to be utilised in the next 12 months, unavailed passenger revenue is
classified as current on the basis that the Group does not have an unconditional right to defer usage of the ticket for at least 12 months.
Unredeemed Frequent Flyer revenue relates to performance obligations associated with Qantas Points which have been issued, but
not redeemed. Qantas Points are issued by the Group as part of the Qantas Frequent Flyer program or are sold to third parties such as
credit cards providers, who issue them as part of their loyalty programs. Unredeemed Frequent Flyer revenue is classified as either
current or non-current based on the Group’s expectation of redemption patterns by members within the next 12 months under the
Recovery Plan. The non-current amount of Unredeemed Frequent Flyer revenue will be materially recognised as revenue over seven
years. Significant changes in Qantas Points expected to expire unredeemed are recognised within Other Revenue and Income using
estimates based on the terms and conditions of the Frequent Flyer program, experience, historical and expected future trends.
Other revenue received in advance primarily relates to prepaid Qantas Club revenue, revenue collected on behalf of other airlines,
unavailed cargo revenue and incentives or grants the Group has received but are recognised over time. Other revenue is classified as
current where it is expected to be recognised or transferred to another carrier within the next 12 months. For further details on the
Group’s revenue recognition policy, see note 37(D).
As at 30 June 2019, the Group had $4,414 million of current revenue received in advance which represented the Group’s best estimate
of the amount to be recognised as revenue in financial year 2019/20. Determining the amount of revenue actually recognised during
the year in relation to balances deferred at 30 June 2019 is inherently difficult in particular due to the impact of COVID-19 travel
restrictions and cancellations. In addition, customers have the ability to change travel dates or request refunds in relation to certain fare
types and Qantas Points are treated as fungible in nature. Total Revenue for the Group for financial year 2019/20 has decreased by 21
per cent from 2018/19 primarily due to the impact of COVID-19.
82
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Notes to the Financial Statements continued
For the year ended 30 June 2020
21 NET ON BALANCE SHEET DEBT
(A) CASH AND CASH EQUIVALENTS
Cash balances
Cash at call
Short-term money market securities and term deposits
Total cash and cash equivalents
2020
$M
249
733
2,538
3,520
2019
$M
318
309
1,530
2,157
Cash and cash equivalents comprise cash at bank and cash on hand, cash at call and short-term money market securities and term
deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
Short-term money market securities of $76 million (2019: $234 million) held by the Qantas Group are pledged as collateral under the
terms of certain operational financing facilities when underlying unsecured limits are exceeded. The collateral cannot be sold or
repledged in the absence of default by the Qantas Group.
(B) INTEREST-BEARING LIABILITIES
Bank loans – secured
Bank loans – unsecured
Other loans – secured
Other loans – unsecured
Total interest-bearing liabilities
2020
$M
2019 (restated)
$M
Current Non-current
Total
Current Non-current
362
-
110
396
868
1,742
2,104
320
2,615
1,148
5,825
320
2,725
1,544
6,693
259
-
104
247
610
867
318
2,217
1,125
4,527
Total
1,126
318
2,321
1,372
5,137
Certain current and non-current interest-bearing liabilities relate to specific financing of aircraft and engines and are secured by the
aircraft to which they relate (refer to Note 15).
(C) UNDRAWN FACILITIES
At 30 June 2020, the Group has an undrawn Revolving Credit Facility of $1,000 million (2019: $1,000 million).
(D) ANALYSIS OF CHANGES IN NET ON BALANCE SHEET DEBT
2020
$M
Interest-bearing
liabilities
Opening
Balance
Debt
Repayment
Debt
Drawdown
5,137
(625)
2,155
Cash
(2,157)
625
(2,155)
Net on balance
sheet debt
2,980
-
-
Foreign
exchange,
Mark to Market
& Non-cash
Movements
Shareholder
Distributions
Treasury
Shares
Equity
Raising
Other
Net Cash
Movement
Closing
Balance
26
2
28
-
647
647
-
-
-
6,693
5
(1,342)
855
(3,520)
5
(1,342)
855
3,173
2019
(restated)
$M
Interest-bearing
liabilities
Opening
Balance
Debt
Repayment
Debt
Drawdown
4,655
(733)
1,137
Cash
(1,694)
733
(1,137)
Net on balance
sheet debt
2,961
-
-
Foreign
exchange,
Mark to Market
& Non-cash
Movements
Aircraft
Lease
Refinancing
Shareholder
Distributions
Treasury
Shares
Other
Net Cash
Movement
Closing
Balance
78
(12)
66
-
88
88
-
1,000
1,000
-
98
98
-
5,137
(1,233)
(2,157)
(1,233)
2,980
83
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
22 PROVISIONS
Annual leave
Long service leave
Redundancies and other employee benefits1
Total employee benefits
Onerous contracts
Make good on leased assets
Insurance, legal and other
Total other provisions
Total provisions
2020
$M
2019 (restated)
$M
Current Non-current
Total
Current Non-current
Total
351
469
569
1,389
65
23
62
150
1,539
-
61
-
61
4
469
117
590
651
351
530
569
1,450
69
492
179
740
348
410
140
898
-
16
53
69
2,190
967
-
49
-
49
2
324
100
426
475
348
459
140
947
2
340
153
495
1,442
1. Redundancies and other employee benefits include $519 million relating to Recovery Plan restructuring costs announced in June 2020.
Reconciliations of the carrying amounts of each class of provision, other than employee benefits, are set out below:
2020
$M
Onerous contracts
Make good on leased assets
Insurance, legal and other
Total other provisions
Opening
Balance
(restated)
2
340
153
495
Provisions
Made
Provisions
Utilised
Unwind of
Discount
Other
Closing
Balance
691
164
60
293
(1)
-
(37)
(38)
-
(5)
(1)
(6)
(1)
(7)
4
(4)
69
492
179
740
1. During the year, an onerous provision of $69 million was recognised in relation to the Group’s A380 contractual commitments as part of the impairment assessment. Refer to
Note 25 for more information.
23 CAPITAL
(A) ISSUED CAPITAL
Opening balance: 1,570,505,939 (2019: 1,683,567,880) ordinary shares, fully paid
Shares bought back during the period: 79,712,857 (2019: 113,061,941) ordinary shares
Capital raising: 372,698,270 (2019: nil) ordinary shares
Closing balance: 1,863,491,352 (2019: 1,570,505,939) ordinary shares
2020
$M
1,871
(95)
1,328
3,104
2019
$M
2,508
(637)
-
1,871
On 26 June 2020, the Group completed a fully underwritten Institutional Placement of 372.7 million new shares to institutional investors
at a price of $3.65 per placement share. The shares were issued on 1 July 2020.
Subsequent to year end, the Group completed a Share Purchase Plan resulting in the issuance of 22.5 million shares at $3.18 per
share totalling $71.7 million. This will be recognised in Issued Capital in the 2020/21 financial year.
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ meetings. In the event of wind-up, Qantas ordinary shareholders rank after all creditors and are fully entitled to any
residual proceeds on liquidation.
(B) TREASURY SHARES
Treasury shares consist of shares held in trust for Qantas employees in relation to equity compensation plans. As at 30 June 2020,
9,299,475 (2019: 24,609,551) shares were held in trust and classified as treasury shares.
(C) CAPITAL MANAGEMENT
The Qantas Group’s Financial Framework is designed to achieve top quartile Total Shareholder Return relative to the ASX100 and
global airline peers. The Framework’s key elements are to:
– Maintain an optimal capital structure that minimises the cost of capital, by holding an appropriate level of net debt. The appropriate
level of net debt reflects the Qantas Group’s size, measured by Invested Capital. This is consistent with investment grade credit
metrics
– Deliver ROIC that exceeds the weighted average cost of capital through the cycle
– Make disciplined capital allocation decisions between reinvestment, debt reduction and distribution of surplus capital to shareholders
while maintaining an optimal capital structure.
Surplus capital is determined on a forward basis, being the difference between the projected net debt position and the target net debt
position whilst ROIC remains above 10 per cent. The Qantas Group maintains access to a broad range of debt markets, both secured
and unsecured. The Qantas Group maintains a prudent liquidity policy that ensures adequate coverage of liquidity requirements while
considering a range of adverse scenarios.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
23 CAPITAL (CONTINUED)
(C) CAPITAL MANAGEMENT (CONTINUED)
Net Debt1
Net Debt/EBITDA3
Return on Invested Capital (%)
Net capital expenditure4
Shareholder distributions
Metric
$4.5B to $5.6B2
2020
$4.7B
2019
(restated)
$4.7B
<2.5 times
2.2 times
1.6 times
ROIC > WACC
5.8 per cent 19.2 per cent
$1.57B
$0.6B
$1.56B
$1.0B
1. Net debt is a non-statutory measure which includes on balance sheet debt and capitalised aircraft lease liabilities under the Group’s Financial Framework. Capitalised aircraft lease
liabilities are measured at fair value at the lease commencement date and remeasured over the lease term on a principal and interest basis. The residual value of the capitalised
aircraft lease liability denominated in a foreign currency is translated at the long-term exchange rate.
2. Target net debt range of $4.5 billion to $5.6 billion is based on Invested Capital of $6 billion (2019: target debt range of $5.2 billion to $6.5 billion). The Group is towards the bottom
of the target net debt range.
3. Net Debt/EBITDA is a non-statutory measure which is Management’s estimate based on Moody’s methodology.
4. Net capital expenditure is a non-statutory measure which is equal to net investing cash flows included in the Consolidated Cash Flow Statement of $1.57 billion (2019: $1.56 billion).
During the year ended 30 June 2020, there were no new aircraft leases entered into and no returns of leased aircraft.
24 GOVERNMENT GRANTS AND ASSISTANCE
To mitigate the impacts of COVID-19, Governments have provided businesses, and specifically the aviation sector, with various support
packages in the form of rebates and other financial assistance. The Group has recognised government grants and assistance where
there is reasonable assurance that the Group will comply with all the associated conditions and that the grants/assistance will be received.
Packages
Description
Minimum Viable Network
and Government
Repatriation Flights
Recognised within Net
Passenger Revenue
International Freight
Assistance Mechanism
Recognised within Net
Freight Revenue
JobKeeper Payment
Recognised within
manpower and staff-related
expenses
Singapore Job
Support Scheme
Recognised within
manpower and staff-related
expenses
Australian Airline
Financial Relief Package1
Recognised within Aircraft
Operating Variable
expenses
New Zealand Aviation
Relief Package
Recognised within Aircraft
Operating Variable
expenses
This package is underwritten by the Australian Government. The Group operated a series of domestic,
regional and international flights on behalf of the Australian Government to maintain critical links that
had been made commercially unviable by COVID-related travel restrictions. The international network
included flights to London, Los Angeles, Auckland and Hong Kong. Within Australia it includes a
baseline network of domestic passenger flights servicing the most critical metropolitan and regional
routes while providing freight belly space capacity. In addition, the Australian Government
commissioned Qantas to conduct various charter repatriation flights and rescue flights. The Minimum
Viable Network and government repatriation flights were operated on a fee-for-service basis, with fare
revenue offsetting the cost to the taxpayer. Income of $192 million was recognised in the Consolidated
Income Statement. The costs to operate these flights were recognised primarily in manpower and staff-
related costs, aircraft operating variable, fuel, depreciation and amortisation and other expenses.
This mechanism is intended to restore critical global supply chains which have been heavily impacted
by COVID-19 containment measures around the world and ensures exporters maintain connectivity to
strategic markets. On 3 July 2020, the government announced an extension of the program to the end
of 2020. Income of $20 million was recognised in the Consolidated Income Statement. The costs to
operate these flights were recognised primarily in manpower and staff-related costs, aircraft operating
variable, fuel, depreciation and amortisation and other expenses.
This payment is intended to help keep more Australians in jobs and support businesses affected by the
significant economic impact of COVID-19. The existing JobKeeper Payment will remain in place until
27 September 2020. On 21 July 2020, the government announced the extension of the JobKeeper
payment to 28 March 2021 at modified rates and eligibility. The JobKeeper payment is recorded net of
manpower related expenses. As one of the most heavily impacted companies, the Qantas Group
collected $267 million in JobKeeper payments, the majority of which was paid directly to employees on
stand down and the rest used to subsidise wages of those still working.
The Job Support Scheme provides wage support to employers, helping enterprises retain their local
employees (Singapore citizens and permanent residents) during this period of economic uncertainty.
Payments under the scheme offset and protected local employees' wages of $5 million.
Includes the refunding and ongoing waiving of a range of government charges on the industry including
aviation fuel excise, Airservices Australia charges on domestic airline operations and domestic and
regional aviation security charges. Applicable charges applying to flights between 1 February 2020 and
31 December 2020 are eligible for consideration in accordance with the eligibility criteria and related
information set out in the grant opportunity guidelines. Under this package, the Group received direct
benefits of $36 million in the financial year.
Includes financial support to airlines to pay passenger-based government charges and to cover
Airways related fees from 1 March 2020 to 31 August 2020 in response to the COVID-19 crisis.
Benefits of $5 million were recognised in the Consolidated Income Statement, offsetting related costs.
1. The Australian Airline Financial Relief Package also provided support to other suppliers of the Group (including government-owned corporations). As a result of this support, the
providers have provided waivers to the Group of $52 million up to 30 June 2020.
85
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Notes to the Financial Statements continued
For the year ended 30 June 2020
25 IMPAIRMENT/(REVERSAL OF IMPAIRMENT) OF ASSETS AND RELATED COSTS
(A) IMPAIRMENT TESTING OF CASH GENERATING UNITS
Given the significant impact of COVID-19, Management has assessed that there are indicators of impairment of the Group’s CGUs and
has undertaken the following:
– Reassessed the identification of the Group’s CGUs
– Completed an impairment test of the Group’s CGUs
– Tested specific individual assets for impairment where they are not expected to contribute to the cash flows of the CGUs under the
Recovery Plan.
i. Reassessment of Identification of CGUs
The identification of an asset’s CGU is a critical judgement in performing an impairment test. CGUs are the lowest identifiable group of
assets that generate largely independent cash inflows and are determined based on how performance is monitored and how decisions
to acquire and dispose of the Group’s assets and operations are made.
Given the significant impacts of COVID-19, Management reviewed the identification of CGUs with regards to airlines within the Jetstar
Group. The closure of international borders and different considerations for re-opening, together with differences in the recovery profile
for each individual airline has impacted the Group’s assessment of the smallest identifiable group of assets that generate largely
independent cash inflows. As a result, the Group has assessed Jetstar Japan, Jetstar Asia, Jetstar Pacific and Jetstar Australia/New
Zealand as separate CGUs in the 2019/20 financial year.
The identified CGUs by Operating Segment for the 2019/20 financial year and for the 2018/19 financial year are outlined in the table
below.
Operating Segment
Qantas Domestic
Qantas International
Jetstar Group
CGUs Identified
Financial year 2019/20
CGUs Identified
Financial year 2018/19
Qantas Domestic CGU
Qantas Domestic CGU
Qantas International CGU
Qantas Freight CGU
Jetstar Asia CGU
Jetstar Pacific CGU
Jetstar Japan CGU
Jetstar Australia/New Zealand CGU
Qantas International CGU
Qantas Freight CGU
Jetstar Group CGU
Qantas Loyalty
Qantas Loyalty CGU
Qantas Loyalty CGU
Impairment Testing
ii.
AASB 136 Impairment of Assets requires the assessment at the end of each reporting period as to whether there is any indication that
an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. The recoverable
amount of an asset is the higher of its fair value less costs of disposal and its value in use.
The recoverable amount is determined for an individual asset where possible; otherwise, the recoverable amount of the CGU to which
the asset belongs to shall be determined.
Value in use is the present value of the future cash inflows expected to be derived from an asset or CGU.
Fair value less costs of disposal is the price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date, less the incremental costs directly attributed to disposal.
Where the carrying value of the asset exceeds its recoverable amount, the carrying amount of the asset is reduced to its recoverable
amount through the recognition of an impairment loss.
Impairment Test of Individual Assets (where not expected to contribute to the cash flows of the CGUs under the Recovery Plan)
Aircraft and related spares, inventory and contractual commitments
With the impact of COVID-19 and the closure of international borders, the Group’s A380 fleet is expected to be grounded for the
foreseeable future. The A380 fleet, however, does not meet the requirements to be classified as Assets Held for Sale as they are not
available for sale. Given the significant uncertainty around the return to service of the fleet, the cash flows of the Qantas International
CGU within the Recovery Plan do not include cash flows relating to the A380 assets. The A380 fleet has therefore been tested for
impairment outside of the Qantas International CGU.
The recoverable amount of the A380 fleet was determined using a fair value less costs of disposal model. The fair value less costs of
disposal was estimated based on valuations provided by two external and independent aircraft valuers (AVAC and AVITAS), translated
at 30 June 2020 AUD/USD exchange rates. The Group has made necessary adjustments to these valuations for the level of maintenance
life remaining on the aircraft.
The recoverable amount of the A380 fleet, including spares and inventory and the impact of onerous contractual obligations is below
their carrying value. The carrying value has been impaired to the recoverable amount.
The Group has also announced the early retirement of the remaining 747 fleet. The 747 fleet has been recognised as Assets Held for
Sale as at 30 June 2020 and impaired to their fair value less cost to sell as their sale is highly probable.
The impaired carrying value of the A380 fleet and the 747 fleet are not allocated to the Qantas International CGU and therefore have
no further impact on the assessment of impairment for the remaining Qantas International CGU assets outlined below.
86
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Notes to the Financial Statements continued
For the year ended 30 June 2020
25 IMPAIRMENT/(REVERSAL OF IMPAIRMENT) OF ASSETS AND RELATED COSTS (CONTINUED)
(A) IMPAIRMENT TESTING OF CASH GENERATING UNITS (CONTINUED)
Impairment Testing (continued)
ii.
Property, Plant & Equipment and Intangible Assets under construction
The Group’s response to COVID-19 within the Recovery Plan has included a reduction in forward capital expenditure. This has
changed previous assumptions with regards to Property, Plant & Equipment and Intangible Assets under construction. Where the
Group is no longer expected to complete Property, Plant & Equipment and Intangible Assets under construction and these assets have
no alternative use under the Recovery Plan, these assets are tested for impairment separately. Where the definition of an ‘asset’ under
AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets is no longer met, or the recoverable amount is below the
carrying value, an impairment has been recognised.
Impairment Test of CGUs
The impairment test for CGUs includes the allocation of assets to identified CGUs and the determination of the recoverable amount of
the CGU based on their value in use. Outlined below are the significant assumptions applied in the determination of recoverable
amount.
Significant
Assumption
Calculation of
Recoverable
Amount
How it was Determined
The recoverable amounts of CGUs were determined based on their value in use. The value in use was
determined by discounting the future cash flows forecast in the Recovery Plan.
Individual Assets
Tested Separately
Assets that have been tested for impairment individually are not allocated to CGUs. As outlined above, the
impaired carrying value of the A380 fleet and 747 fleet are not allocated to the Qantas International CGU and
therefore have not impacted the assessment of impairment for the remaining Qantas International CGU assets.
Recovery Plan
Period of Cash
Flows Forecast
Cash Flows
The Group’s Recovery Plan was developed with reference to expected demand scenarios domestically and
internationally. The Recovery Plan includes the strategy to rightsize and restructure the business to accelerate
recovery and to partially offset revenue lost as a result of the impact of COVID-19. The Recovery Plan targets
$15 billion in benefits over three years comprising:
– $2.4 billion of restructuring benefits, with some benefits to continue to flow in future years
– Initial $2.6 billion rightsizing initiatives to reduce the workforce and supplier costs whilst activity is low
– $4.0 billion in direct savings as a result of activity reductions
– $6.0 billion of activity-based fuel savings
The long-term annual ongoing restructuring benefit to the Group of the Recovery Plan is estimated to be $1
billion from FY23 onwards. The Group estimates total costs of $1 billion to deliver the ongoing restructuring
and rightsizing benefits.
The restructuring plan includes a range of capital expenditure and fleet decisions to improve cash flow such as:
– Qantas’ A380 fleet (12 aircraft) will be grounded for the foreseeable future
– A321neo and 787-9 fleet deliveries have been deferred to meet the Group’s requirements
The Group’s Recovery Plan is a three-year plan. For the purposes of performing an impairment test under
AASB 136, the Group has made adjustments to the Recovery Plan as necessary for committed
transformation initiatives at 30 June 2020. The third year of the Recovery Plan has been used to inform the
determination of the terminal year. Given the uncertainty of the impact and timing of COVID-19, the Group
has adjusted the cash flow forecast under the Recovery Plan for these uncertainties rather than adjusting
the discount rate.
Cash flows were projected based on the Board-approved Recovery Plan. To determine the terminal values
for each CGU, a constant growth rate of 2.5 per cent per annum was used by Management where
appropriate. This assumption is considered reasonable by Management, as it does not exceed the long-term
average growth rate for the industry. Cash outflows include capital and maintenance expenditure for the
purchase of aircraft and other property, plant and equipment. These cash outflows do not include capital
expenditure that enhances the current performance of assets and related cash flows have been treated
consistently.
Impact of COVID-19
on Substantial
Operations
As the impact of COVID-19 continues to evolve, it is extremely challenging to predict the full extent and
duration of the impact on the Group’s operations.
Under the Group’s Recovery Plan, the Group has assumed that domestic operations will recover to their pre-
COVID-19 levels by the end of 2020/21 financial year. International recovery is anticipated to be slower, with
only approximately 50 per cent of pre-COVID-19 capacity expected in the 2021/22 financial year. Changes
in the duration and impact of COVID-19 may change these assumptions.
Discount Rate
A pre-tax discount rate of 10 per cent per annum has been used in discounting the projected cash flows of
the CGUs, reflecting a market estimate of the weighted average cost of capital of the Qantas Group
(2019: 10 per cent per annum). Given the uncertainty of the impact and timing of COVID-19, the Group has
adjusted the cash flows under the Recovery Plan for these uncertainties rather than the discount rate.
87
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Notes to the Financial Statements continued
For the year ended 30 June 2020
25 IMPAIRMENT/(REVERSAL OF IMPAIRMENT) OF ASSETS AND RELATED COSTS (CONTINUED)
(A) IMPAIRMENT TESTING OF CASH GENERATING UNITS (CONTINUED)
ii.
Impairment Testing (continued)
Significant
Assumption
How it was Determined
Foreign exchange
rate used
AUD/USD: 0.69
Sensitivity to
Significant Changes
in Assumptions
Pre-COVID-19, the Group was reporting ROIC in excess of the Group’s Weighted Average Cost of Capital.
For example, the 12-month ROIC as at 31 December 2019 was 19.6 per cent, and as at 30 June 2019 was
19.2 per cent, compared to the Group’s WACC of 10 per cent. This, combined with an assessment of other
factors under AASB 136, evidenced that pre-COVID-19 there were no indicators of impairment of the Group’s
CGUs.
Sensitivity to changes in cash flows (CGUs other than Jetstar CGUs in Asia)
The terminal year in the impairment test is informed by reference to pre-COVID-19 performance of the CGUs
and has the most material impact on the determination of the recoverable amount and of the surplus between
the recoverable amount and carrying value of CGUs. The earlier years in the Recovery Plan, while impacting
the measurement of the recoverable amount, do not materially impact the surplus identified.
As such, reasonable possible changes in the short-term to the timing of domestic and international recovery
are unlikely to result in impairment of the CGUs, assuming that the overall recovery expectations of returning
to pre-COVID-19 levels remain. The terminal value cash flow is in excess of the break-even cash flow and
reasonable possible changes in this assumption do not result in impairment.
Sensitivity to changes in cash flows (Jetstar CGUs in Asia)
As outlined below, the Group recognised impairment of the Goodwill and indefinite lived intangible assets in
the Jetstar Asia CGU. This impairment resulted from the recoverable amount being below the carrying value
of assets allocated to the CGU. Reasonable possible changes in forecast cash flows would further reduce the
estimated recoverable amount below the remaining carrying value of the CGU. Goodwill and indefinite lived
intangible assets have been fully impaired, so any further impairment would be assessed for allocation to
Property, Plant & Equipment. AASB 136 requires that any allocation of CGU impairment should not reduce
the asset below its individual fair value less costs of disposal. Given the remaining Property, Plant &
Equipment assets in this CGU, any allocation of impairment under these sensitivity scenarios would not be
expected to be material to the Group.
The carrying values of the Jetstar Pacific and Jetstar Japan CGUs at 30 June 2020 are nil.
(B) CARRYING VALUE OF GOODWILL AND INDEFINITE LIVED INTANGIBLE ASSETS1
The following CGUs have goodwill and other intangible assets with indefinite useful lives as follows:
Goodwill
Qantas Domestic
Qantas Loyalty
Qantas Freight
Jetstar Group
Jetstar Australia and New Zealand
Jetstar Asia
Total goodwill
Other intangible assets with indefinite useful lives
Qantas International
Jetstar Group
Jetstar Australia and New Zealand
Jetstar Asia
Total other intangible assets with indefinite useful lives
2020
$M
2019
$M
10
12
49
n/a
91
-
162
35
n/a
1
-
36
10
12
49
138
n/a
n/a
209
35
28
n/a
n/a
63
1. Upon reassessing CGUs, the Goodwill of the Jetstar Group CGU in 2019 of $138 million was allocated to Jetstar Australia and New Zealand ($91 million) and to Jetstar Asia ($47
million). The other intangible assets with indefinite useful lives of the Jetstar Group CGU in 2019 ($28 million) was allocated to Jetstar Australia and New Zealand ($1 million) and
Jetstar Asia ($27 million). Refer to Note 25(C) for the subsequent impairment of Jetstar Asia CGU after foreign exchange movements.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
25 IMPAIRMENT/(REVERSAL OF IMPAIRMENT) OF ASSETS AND RELATED COSTS (CONTINUED)
(C) RESULTS OF THE GROUP’S IMPAIRMENT TEST
Impairment of Individual Assets (where not expected to contribute to the cash flows of the CGUs under the Recovery Plan)
i.
The Group recognised an impairment of $1,254 million (2019: nil) in respect of identified specific assets and liabilities which do not
contribute to the cash flows of the Group’s CGUs under the Group’s Recovery Plan. The remaining carrying value of these assets is not
included in the assets and liabilities of the CGU impairment tests. As a result of the impairment recognised in respect of the A380s the
remaining carrying value of the aircraft and engines (including related engineering spares and inventory) is $611 million at 30 June 2020.
ii. CGU Impairments
The Group recognised an impairment of $73 million (2019: nil) in respect of the Goodwill and indefinite lived intangible assets recognised
in the Jetstar Asia CGU. The Group recognised an impairment of $25 million in relation to its investment in Jetstar Pacific due to the
announced exit of the business reducing the carrying value of Jetstar Pacific to nil.
No impairment was recognised within the Qantas Domestic, Qantas International, Qantas Loyalty, Qantas Freight, Jetstar Australia/
New Zealand and Jetstar Japan CGUs during the year ended 30 June 2020 (2019: nil).
iii. Other Impairments
Investments accounted for under the equity method
The Group recognised an impairment of $70 million in relation to its investment in Helloworld Ltd (ASX: HLO) due to the significant and
prolonged impact of COVID-19 on the business. This includes the Group’s share of impairment loss on Goodwill and other non-current
assets recognised by Helloworld for the year ended 30 June 2020. The recoverable amount was determined with reference to the volume
weighted average price (VWAP) in the last quarter of the 2019/20 financial year.
Other
The Group recognised an impairment related to other assets of $34 million.
iv. Summary of Impairments and Liabilities recognised
2020
$M
2019
$M
Impairment of individual assets and recognition of liabilities which do not contribute to the
Group’s Recovery Plan
Impairment of A380s, related spares and inventory
Impairment of 747s on transfer to Assets Held for Sale
Impairment of property, plant and equipment under construction and recognition of exit costs
Impairment of software intangible assets under construction
Impairment of software intangibles
Total specific asset impairments
Onerous contractual commitments relating to A380s
Total onerous contractual commitments
Total specific asset impairment and recognition of liabilities which do not contribute to the
Group’s Recovery Plan
CGU Impairment
Jetstar Asia Goodwill
Jetstar Asia indefinite lived intangible assets
Investment in Jetstar Pacific accounted for under the equity method
Total CGU Impairment
Other Impairment/(reversal) of impairment
Impairment/(reversal) of impairment in Helloworld accounted for under the equity method
Other
Total other impairment
Total impairment/(reversal of impairment) of assets and related costs1
1,018
23
47
40
57
1,185
69
69
1,254
47
26
25
98
70
34
104
1,456
-
-
-
-
-
-
-
-
-
-
-
-
(39)
-
(39)
(39)
1. Total impairment of assets and related costs have been recognised in Property, Plant and Equipment of $1,002 million, Intangible assets of $170 million, Investments accounted for
under the equity method of $95 million, Inventories of $66 million, Other Assets of $19 million, Right of Use Assets of $14 million, Receivables of $13 million and Provisions of $77 million.
89
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
26 SHARE-BASED PAYMENTS
The Group provides benefits to Executives of the Group in the form of share-based payments, whereby Executives render services in
exchange for Rights over shares. The total equity-settled share-based payment expense for the year was $28 million (2019: $49 million).
The total cash-settled share-based payment expense for the year was $0.35 million (2019: $3 million). Further details regarding the
operation of equity plans for Executives are outlined in the Remuneration Report from pages 30 to 54.
(A) LONG TERM INCENTIVE PLAN (LTIP)
Generally, participation in the LTIP is limited to Senior Executives of the Qantas Group in key roles or other participants who have been
identified as high potential Executives. All Rights are redeemable on a one-for-one basis for Qantas shares, subject to the achievement
of performance hurdles. Dividends are not payable on the Rights. For more information on the operation of the LTIP, see pages 44 to 45.
Performance Rights Reconciliation
Rights outstanding as at 1 July
Rights granted during the year
Rights forfeited during the year
Rights exercised during the year
Rights outstanding as at 30 June
Rights exercisable as at 30 June
2020
2019
Number of
Rights
Number of
Rights
12,699,500
15,121,500
4,086,000
3,602,500
(1,175,189)
(1,278,263)
(6,003,175)
(4,746,237)
9,607,136
12,699,500
-
-
The Rights outstanding as at 30 June 2020 included 2,969,500 Rights under the 2018-2020 LTIP. 1,134,203 Rights vested and converted
to shares and 1,148,297 Rights forfeited following the testing of performance hurdles as at 30 June 2020 and after applying service
conditions and the Board’s approval of the 2018-2020 LTIP vesting outcome on 21 August 2020. As noted in the Remuneration Report
on page 31, the Board has agreed with the CEO to defer the decision as to whether his Rights will be forfeited or allowed to convert
to shares until at least August 2021. Therefore 687,000 Rights under the 2018-2020 LTIP remain unvested.
The Rights outstanding as at 30 June 2019 included 6,030,000 Rights under the 2017-2019 LTIP. 6,003,175 Rights vested and
converted to shares and 26,825 Rights forfeited following the testing of performance hurdles as at 30 June 2019 and after applying
service conditions and the Board’s approval of the 2017-2019 LTIP vesting outcome on 21 August 2019.
i. Fair Value Calculation
The estimated value of Rights granted was determined at grant date using a Monte Carlo model. The weighted average fair value of
Rights granted during the year was $3.97 (2019: $3.14).
Inputs into the Models
Rights granted
Weighted average share value
Expected volatility
Dividend yield
Risk-free interest rate
2020
2019
25 October 2019
4 October 2019
26 October 2018
5 September 2018
743,000
3,343,000
726,000
2,876,500
$6.25
25.0%
4.4%
0.70%
$6.37
25.0%
4.3%
0.60%
$5.23
25.0%
4.2%
2.0%
$6.25
25.0%
3.6%
2.0%
The expected volatility was determined having regard to the historical volatility of Qantas shares and the implied volatility on exchange
traded options. The risk-free rate was the yield on an Australian Government Bond at the grant date matching the remaining useful
lives of the plans. The yield is converted into a continuously compounded rate in the model. The expected life assumes immediate
exercise after vesting.
(B) SHORT TERM INCENTIVE PLAN (STIP)
For details on the operation of the STIP see pages 42 to 43. There were 369,196 awards of Qantas shares made under the 2018/19
STIP during the year ended 30 June 2020 (2019: 613,888 awards under the 2017/18 STIP).
(C) MANAGER INCENTIVE PLAN (MIP)
The MIP is the annual incentive plan for the broader Management group. Each year, to the extent that the plan’s performance conditions
are achieved, this group may receive an award that is a combination of cash and restricted shares. The scorecard performance outcomes
are the same as those for STIP. For scorecard performance outcomes, refer to the details of the operation of the STIP on pages 42 to
43. The CEO retains discretion over any awards made under the MIP. There were 4,278,606 awards of Qantas shares made under the
2018/19 MIP during the year ended 30 June 2020 (2019: 5,992,430 awards under the 2017/18 MIP).
90
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT
(A) RISKS
The Qantas Group is subject to financial risks which are an inherent part of the operations of an airline. The Qantas Group manages
these risk exposures using various financial instruments, governed by a set of policies approved by the Board. The Qantas Group’s
policy is not to enter into, issue or hold derivative financial instruments for speculative trading purposes.
The Qantas Group uses different methods to assess and manage different types of financial risk to which it is exposed. These methods
include correlations between risk types, sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and ageing
analysis and sensitivity analysis for liquidity and credit risk. A summary of these risks has been presented below:
Risk
Nature of Risk
Management of Risk
Liquidity Risk
Difficulty in meeting financial
liability obligations.
Remaining within optimal capital structure, targeting a minimum liquidity
level, ensuring long-term commitments are managed, maintaining access
to a variety of additional funding sources and managing maturity profiles.
Interest Rate
Risk
Foreign Exchange
Risk
Fuel Price Risk
Credit Risk
Fluctuations in the fair value or
future cash flows of a financial
instrument because of changes in
market interest rates.
Fluctuations in the fair value of
future cash flows or
assets/liabilities denominated in a
currency other than AUD because
of changes in foreign exchange
rates.
Exposure of future AUD fuel to
unfavourable USD-denominated
price movements and foreign
exchange movements.
Potential loss from a transaction in
the event of a default by a
counterparty during the term or
on settlement of a transaction.
Floating versus fixed rate debt framework, interest rate swaps, forward
rate agreements and options.
Forward foreign exchange contracts, currency options, cross-currency
swaps and designation of non-derivative foreign currency liabilities in a cash
flow hedge relationship.
USD price – options and swaps on jet kerosene, gasoil and crude oil.
Foreign exchange risk – foreign exchange contracts and currency options.
Trade Debtor counterparties – Use of International Air Transport
Association (IATA) clearing mechanism which undertakes its own credit
review of members, and stringent credit policies where the Group provides
credit to customers directly.
Other financial asset counterparties – transact only with counterparties
that have acceptable credit ratings and counterparty limits.
i. Liquidity Risk
Nature of the risk:
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with its financial liabilities.
Liquidity risk management:
The Qantas Group manages liquidity risk by targeting a minimum liquidity level, ensuring long-term commitments are managed with
respect to forecast available cash inflows, maintaining access to a variety of additional funding sources, including commercial paper
and standby facilities, managing maturity profiles and maintaining an unencumbered pool of assets. Qantas may from time to time seek
to purchase and retire outstanding debt through cash purchases in open market transactions, privately negotiated transactions or
otherwise. Any such repurchases would depend on prevailing market conditions, liquidity requirements and possibly other factors.
The impact of COVID-19 has seen the Qantas Group take swift action to boost liquidity by unlocking value in the Group’s
unencumbered asset base and accessing a variety of funding sources, while also maintaining minimal refinancing risk with no major
maturities until June 2021.
The Group responded quickly to increase liquidity by raising $1.75 billion in new secured debt funding since 31 December 2019. The
Group continues to have no financial covenants while raising new debt at competitive rates with long tenors.
In March 2020, the Group cancelled the off-market share buy-back announced in February 2020, which preserved $150 million in cash.
In June 2020, the Group revoked the interim dividend, announced in February 2020 and deferred in March 2020, avoiding cash outflow
of $201 million.
On 25 June 2020, the Group announced a fully underwritten Institutional Placement (Placement) to raise approximately $1.36 billion
and a non-underwritten retail Share Purchase Plan for eligible existing shareholders.
As at 30 June 2020, including the completion of the underwritten Placement, the Group’s available liquidity was $4.5 billion, including
$3.5 billion of cash and cash equivalents and $1 billion in standby facilities maturing in financial year 2022/23 and 2023/24. In addition
to this, the Group maintains an unencumbered asset base of approximately $2.5 billion, including 46 per cent of the Group’s fleet, land,
spare engines and other assets.
91
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT (CONTINUED)
(A) RISKS (CONTINUED)
i. Liquidity Risk (continued)
Subsequent to year end, the retail Share Purchase Plan was completed resulting in the issuance of 22.5 million shares at $3.18 per
share (totalling $71.7 million). The Group also completed the debt raising of a 10-year, $0.5 billion in unsecured bonds as part of ongoing
management of its debt maturity profile. The proceeds will strengthen short-term liquidity and be used to pay $0.4 billion in bonds due
to expire in June 2021. The Group continues to have no financial covenants on any of its debt. These transactions will be recognised
within the 2020/21 financial year.
The following table summarises the contractual timing of cash flows, including estimated interest payments, of financial liabilities and
derivative instruments. The contractual amount assumes current interest rates and foreign exchange rates. The amounts disclosed in
the table are undiscounted.
2020
$M
Financial liabilities
Payables
Lease liabilities1
Bank loans – secured2
Bank loans – unsecured2
Other loans – secured2
Other loans – unsecured2
Derivatives – inflows
Derivatives – outflows
Net other financial assets/liabilities – inflows
Less Than
1 Year
2 to 3 Years
4 to 5 Years
More Than
5 Years
2,351
516
407
4
165
487
(1)
5
18
99
773
648
8
726
390
-
2
10
-
311
512
333
440
297
-
-
-
-
578
757
-
1,820
669
-
-
-
Total
2,450
2,178
2,324
345
3,151
1,843
(1)
7
28
Total financial liabilities
3,952
2,656
1,893
3,824
12,325
1. This represents the Group’s contractual undiscounted cash flows relating to leases.
2. Recognised financial liability maturity values are shown pre-hedging.
2019 (restated)
$M
Financial liabilities
Payables
Lease liabilities1
Bank loans – secured2
Bank loans – unsecured2
Other loans – secured2
Other loans – unsecured2
Derivatives – inflows
Derivatives – outflows
Less Than
1 Year
2 to 3 Years
4 to 5 Years
More Than
5 Years
2,366
478
295
9
164
340
(6)
16
(256)
3,406
-
812
505
18
470
818
(3)
7
(47)
2,580
-
342
351
18
813
285
-
-
-
-
531
72
334
1,341
196
-
-
-
1,809
2,474
Total
2,366
2,163
1,223
379
2,788
1,639
(9)
23
(303)
10,269
Net other financial assets/liabilities – inflows
Total financial liabilities
1. This represents the Group’s contractual undiscounted cash flows relating to leases.
2. Recognised financial liability maturity values are shown pre-hedging.
Interest Rate Risk
ii.
Nature of the risk:
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Qantas Group has exposure to movements in interest rates arising from its portfolio of interest rate sensitive
assets and liabilities, which are predominantly in AUD and USD currencies. These principally include corporate debt, leases and cash.
Management of interest rate risk:
The Qantas Group manages interest rate risk by using a floating versus fixed rate debt framework. The relative mix of fixed and floating
interest rate funding is managed by using interest rate swaps, forward rate agreements and options. As at 30 June 2020, interest-bearing
liabilities amounted to $6,693 million (2019: $5,137 million). The fixed/floating split is 40 per cent and 60 per cent respectively (2019:
56 per cent and 44 per cent). As noted in Note 23(C), the Group manages its exposure to interest rate risk with reference to the
Group’s Financial Framework where the fixed/floating ratio is measured against Net Debt. The Group’s Net Debt is a non-statutory
measure and includes on balance sheet debt, cash and capitalised aircraft lease liabilities. The ratio of fix/floating on Net Debt is 78 per
cent and 22 per cent respectively, which assumes cash is treated as floating. As at 30 June 2020, other financial assets and liabilities
included derivative financial instruments relating to debt obligations and future interest payments totalling $7 million (liability) (2019:
$17 million (liability)). These are recognised at fair value.
92
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT (CONTINUED)
(A) RISKS (CONTINUED)
Interest Rate Risk (continued)
ii.
Sensitivity to interest rate risk:
$M
100bps increase in interest rates2
Variable rate interest-bearing instruments (net of cash)
Derivatives designated in a cash flow hedge relationship
100bps decrease in interest rates2
Variable rate interest-bearing instruments (net of cash)
Derivatives designated in a cash flow hedge relationship
1. Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2. Sensitivity analysis assumes hedge designations as at 30 June 2020 remain unchanged.
Profit Before Tax
Equity (Before Tax)1
2020
2019
2020
2019
(8)
-
8
-
(5)
-
5
-
-
1
-
-
-
2
-
(2)
Under AASB 16, interest rate movements on lease liabilities are treated as modifications against the corresponding right of use asset
and lease liability. As such, there is no immediate impact to the Consolidated Income Statement or Other Comprehensive Income and
as a result, interest rate movements on lease liabilities are not included as an interest rate sensitivity.
iii. Foreign Exchange Risk
Nature of the risk:
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that
is not the functional currency of the Group. The Group operates internationally and is exposed to foreign exchange risk, primarily the
US dollar. The source and nature of this risk arises from operations, capital expenditure and revaluation risk. The revaluation risk
primarily exists in interest bearing liabilities, lease liabilities and other financial assets and liabilities. The Group hedges foreign
exchange risk with the objective of minimising volatility of the Australian currency cost of highly probable forecast purchases and
disposals of property, plant and equipment and other revenue and operating expenditures. Foreign exchange losses/(gains) for the
year ended 30 June 2020 was ($46) million (2019: $130 million).
Management of foreign exchange risk:
Forward foreign exchange contracts and currency options are used to hedge a portion of net foreign currency exposures in accordance
with Qantas Group policy. Net foreign currency exposures, including foreign currency purchases and disposals of property, plant and
equipment, may be hedged out to two years within specific parameters. Any hedging outside these parameters requires approval by
the Board. For the year ended 30 June 2020, other financial assets and liabilities included derivative financial instruments relating to
the hedging of future capital expenditure payments totalling $15 million (net asset) (2019: $16 million (net asset)) and relating to the
hedging of future operating expenditure payments totalling $15 million (net asset) (2019: nil). These are recognised at fair value.
Non-derivative financial liabilities including interest-bearing liabilities and lease liabilities are designated in a cash flow hedge
relationship to hedge forecast foreign currency revenue. These interest-bearing liabilities and lease liabilities have a maturity between
one and 7 years. To the extent a foreign exchange gain or loss is incurred, and the cash flow hedge is deemed effective, this is
deferred until the revenue is realised. As at 30 June 2020, total unrealised foreign exchange losses on hedges of revenue designated
to non-derivative financial liabilities was $3 million (2019: nil).
Sensitivity to foreign exchange risk:
$M
20% movement in Foreign Exchange Risk2,3
20% (2019: 20%) USD depreciation
20% (2019: 20%) USD appreciation
Profit Before Tax
Equity (Before Tax)1
2020
(68)
99
2019
(restated)
(249)
379
2020
(373)
610
2019
(restated)
(114)
156
1. Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2. Sensitivity analysis assumes hedge designations as at 30 June 20 remain unchanged. Sensitivity analysis on foreign currency pairs of 20 per cent represent recent volatile market
conditions.
3. Sensitivity analysis includes foreign currency interest-bearing liabilities, lease liabilities and derivatives.
Following the adoption of AASB 16 and the IFRIC Fair Value hedging agenda decision, the Group put in place accounting hedge
designations to manage the foreign exchange movements of foreign currency revenue by designating foreign currency interest-bearing
liabilities and lease liabilities as the hedging instrument in a cash flow hedge relationship. The effective portion of the foreign exchange
revaluation of the hedging instrument is recognised in Other Comprehensive Income and is recycled to the Consolidated Income
Statement within Net Passenger Revenue when the hedged item is realised. In accordance with AASB 9, these designations apply
prospectively from 1 July 2019. For comparative periods before the designation (which have been restated for the adoption of AASB 16
and the IFRIC Fair Value hedging agenda decision), the foreign exchange movements were recognised immediately in the
Consolidated Income Statement within Other Expenses.
93
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT (CONTINUED)
(A) RISKS (CONTINUED)
iv. Fuel Price Risk
Nature of the risk:
Exposure of future AUD fuel costs to unfavourable USD-denominated price and foreign exchange movements.
Management of future AUD fuel costs risk:
The Qantas Group uses options and swaps on jet kerosene, gasoil and crude oil to hedge exposure to movements in the USD price of
aviation fuel. Qantas considers the crude component to be a separately identifiable and measurable component of aviation fuel. In
identifying this component, the Group considers long-term correlation levels between crude hedging products and the underlying jet
fuel exposure. The foreign exchange risk in the total fuel cost is separately hedged using foreign exchange contracts and currency
options. Hedging is conducted in accordance with Qantas Group policy. Fuel consumption out to two years may be hedged within
specific parameters, with any hedging outside these parameters requiring approval by the Board. For the year ended 30 June 2020,
other financial assets and liabilities included fuel and foreign exchange derivatives totalling $57 million (net liability) (2019: $286 million
(net asset)). These are recognised at fair value.
Sensitivity to foreign exchange and fuel price risk:
$M
20% movement in AUD fuel costs2
20% (2019: 20%) USD depreciation, 20% (2019: 20%) increase per
barrel in fuel indices
20% (2019: 20%) USD appreciation, 20% (2019: 20%) decrease per
barrel in fuel indices
Profit Before Tax
Equity (Before Tax)1
2020
2019
2020
2019
41
(29)
-
-
30
42
322
93
1. Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2. Sensitivity analysis assumes hedge designations as at 30 June 2020 remain unchanged. Sensitivity analysis on foreign currency pairs and fuel indices of 20 per cent represent
recent volatile market conditions. Sensitivity analysis assumes an offset between USD and fuel price indices based on observed market movements.
v. Credit Risk
Nature of the risk:
Credit risk is the potential loss from a transaction in the event of default by the counterparty during the term of the transaction or on
settlement of the transaction. The Group has credit exposure in respect of trade receivables and other financial instruments in the
ordinary course of business. The maximum exposure to credit risk is represented by the carrying value of financial assets.
Management of credit risk:
The Qantas Group conducts transactions with the following major types of counterparties:
– Trade debtor counterparties: The credit risk is the recognised amount, net of any impairment losses. As at 30 June 2020, trade
debtors amounted to $318 million (2019: $885 million). The Qantas Group has credit risk associated with travel agents, codeshare
partners, industry settlement organisations, and credit provided to direct customers, such as large airline, loyalty and freight
corporate customers. A significant proportion of receivables are settled through the International Air Transport Association (IATA)
clearing mechanism which undertakes its own credit review of members The Qantas Group minimises this credit risk through the
application of stringent credit policies and accreditation of travel agents through industry programs
– Other financial asset counterparties: The Qantas Group restricts its dealings to counterparties that have acceptable credit ratings.
Should the rating of a counterparty fall below certain levels, internal policy dictates that approval by the Board is required to maintain the
level of the counterparty exposure. Alternatively, Management may consider closing out positions with the counterparty or novate
open positions to another counterparty with acceptable credit ratings
The Qantas Group minimises the concentration of credit risk by undertaking transactions with a large number of customers and
counterparties in various countries in accordance with Board-approved policy. As at 30 June 2020, the credit risk of the Qantas Group
to counterparties in relation to other financial assets, cash and cash equivalents, and other financial liabilities amounted to $3,311 million
(2019: $2,125 million). Refer to Note 27(C) for offsetting disclosures of contractual arrangements. The Qantas Group’s credit exposure
in relation to these assets is with counterparties that have a minimum credit rating of A-/A3, unless individually approved by the Board.
94
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT (CONTINUED)
(B) FAIR VALUE
The fair value of cash, cash equivalents and non-interest-bearing financial assets and liabilities approximates their carrying value
due to their short maturity. The fair value of financial assets and liabilities is determined by valuing them at the present value of future
contracted cash flows. The fair value of forward foreign exchange and fuel contracts is determined as the unrealised gain/loss at balance
date by reference to market exchange rates and fuel prices. The fair value of interest rate swaps is determined as the present value
of future contracted cash flows. Cash flows are discounted using standard valuation techniques at the applicable market yield, having
regard to the timing of the cash flows. The fair value of options is determined using standard valuation techniques. Other financial
assets and liabilities represent the fair value of investments and derivative financial instruments recognised on the Consolidated
Balance Sheet. Refer to Note 37(C) for a definition of the fair value hierarchy.
June 2020
Carrying Amount Held at
June 2019 (restated)
Carrying Amount Held at
Fair Value
Through
Profit And
Loss
Fair Value
Through Other
Comprehensive
Income3
Amortised
Cost
Fair
Value
Fair Value
Through
Profit And
Loss
Fair Value
Through Other
Comprehensive
Income
Amortised
Cost
Fair
Value
-
-
251
251
-
-
285
285
-
-
104
104
-
-
-
-
3,520 3,522
646
-
646
355
4,166 4,523
2,450 2,450
6,693 7,450
-
285
9,143 10,185
-
-
422
422
-
-
137
137
-
-
96
96
-
-
-
-
2,157
2,162
1,178
1,178
-
518
3,335
3,858
2,366
2,366
5,137
5,607
-
137
7,503
8,110
$M
Cash and cash equivalents
Receivables
Other financial assets1
Financial asset
Payables
Interest-bearing liabilities2
Other financial liabilities1
Financial liabilities
1. Other financial assets and liabilities represents the fair value of equity investments and derivative financial instruments recognised on the Consolidated Balance Sheet. Derivative
financial instruments have been measured at fair value using Level 2 inputs in estimating their fair values. Equity instruments have been measured at fair value using Level 1 or
Level 2 inputs in estimating their fair value.
2. The fair value of interest-bearing liabilities is calculated as the present value of outstanding contractual cashflows discounted at a risk-free rate.
3. As at 30 June 2020, $96 million of the $104 million of other financial assets relates to the Group’s investment in Alliance Airlines Limited (ASX: AQZ) which has been accounted for
as an investment held at fair value through other comprehensive income under AASB 9.
During the year, the Group recognised fair value changes in relation to listed and unlisted equity investments, net of tax in Other
Comprehensive Income of ($16) million (2019: $4 million). The Group recognised fair value changes, net of tax of $7 million (2019:
$3 million) in respect of listed equity investment using Level 1 inputs. The Group recognised fair value changes, net of tax of ($23) million
(2019: $1 million) in respect of unlisted equity investments using Level 2 inputs.
(C) DERIVATIVES AND HEDGING INSTRUMENTS
The following section summarises derivative financial instruments in the Consolidated Financial Statements:
Type of Hedge
Description
Derivative
Cash Flow Hedges
A derivative or financial instrument to
hedge the exposure to variability in cash
flows attributable to a particular risk
associated with an asset, liability or
forecast transaction.
Exchange derivative contracts to hedge future AUD fuel costs and
foreign currency operational payments (forwards, swaps or
options).
Interest rate derivative contracts to hedge future interest
payments (forwards, swaps or options).
Foreign exchange derivative contracts to hedge future capital
expenditure payments (forwards or options).
The Group’s derivative assets and liabilities as at 30 June 2020 are detailed below:
$M
Derivative assets
Designated as cash flow hedges
De-designated derivatives
Total other financial assets
Derivative liabilities
Designated as cash flow hedges
De-designated derivatives
Total other financial liabilities
Net other financial assets/(liabilities)
2020
2019
Current
Non-current1
Total
Current
Non-current1
Total
66
150
216
(95)
(143)
(238)
(22)
35
-
35
(47)
-
(47)
(12)
101
150
251
(142)
(143)
(285)
(34)
334
-
334
(89)
-
(89)
245
88
-
88
(48)
-
(48)
40
422
-
422
(137)
-
(137)
285
1. Other financial assets in the balance sheet also includes investments in equity instruments of $104 million (2019: $96 million) recognised at fair value through other comprehensive
income (refer to note 27(B)).
95
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
27 FINANCIAL RISK MANAGEMENT (CONTINUED)
(C) DERIVATIVES AND HEDGING INSTRUMENTS (CONTINUED)
i. Offsetting
The Group enters into contractual arrangements such as the International Swaps and Derivatives Association (ISDA) Master Agreement
where, upon the occurrence of a credit event (such as default), a termination value is calculated and only a single net amount is
payable in settlement of all transactions that are capable of offset under the contractual terms. The ISDA agreements do not meet
the criteria for offsetting in the Consolidated Balance Sheet and consequently, financial assets and liabilities are recognised gross.
This is because the Group does not have any current legally enforceable right to offset recognised amounts, because the right to offset
is enforceable only on the occurrence of future events. The amounts shown as financial assets and financial liabilities would each have
been $185 million lower (2019: $119 million lower) in the event of the right to offset being currently enforceable.
ii. Hedge Reserve
The effective portion of the cumulative net change in the fair value of derivative financial instruments designated as a cash flow hedge
and the cumulative change in fair value arising from the time value of options are included in the hedge reserve. These options relate
entirely to transaction-related hedged items. For further information on accounting for derivative financial instruments as cash flow
hedges, refer to Note 37(C). For the year ended 30 June 2020, $122 million (2019: $41 million) is expected to be released to the
Consolidated Income Statement within one year and $25 million (2019: $(5) million) after one year. Other financial assets and liabilities
represent the fair value of derivative financial instruments recognised on the Consolidated Balance Sheet. Refer to Note 37(C) for a
definition of the fair value hierarchy.
iii. De-designated Hedging
The Group has applied judgement referencing inputs of the Recovery Plan in assessing whether hedged forecast transactions are still
expected to occur. Given the significant decrease in flying activity in the last quarter of the 2019/20 financial year, which is expected to
continue into the 2020/21 financial year, $571 million of hedge losses were de-designated and recognised immediately in the Consolidated
Income Statement. The amount recognised in the Consolidated Income Statement includes foreign exchange movements since de-
designation. Prospective changes in fair value of de-designated hedging will be accounted for through the Consolidated Income Statement.
Where hedging has been closed out with deferred settlement terms, this is reflected in the current and non-current payables balance.
Any further decline in forecast flying activity and fuel consumption will result in deferred hedge gains and losses to be de-designated
and released to the Consolidated Income Statement when the forecast transaction is no longer probable.
(D) HEDGE ACCOUNTING
Nominal
Amount of
Hedging
Instrument
and Hedged
Item
M
Carrying Amount
of the Hedging
Instrument1,2
Assets Liabilities
Change in
Value of the
Hedging
Instrument
Used for
Calculating
Hedge
Ineffective-
ness
Change in
Value of the
Hedged Item
used for
Calculating
Hedge
Ineffective-
ness
Change in
Value of the
Hedging
Instrument
Recognised
in Other
Comprehen-
sive Income
Hedge
Ineffective-
ness
Recognis-
ed in Profit
or Loss
Amount
Reclassi-
fied
from the
Cash Flow
Hedge
Reserve to
Profit or
Loss
De-
designated
Cash Flow
hedges
Reclassi-
fied to
Profit or
Loss3
Hedge Rates
$M
$M
$M
$M
$M
$M
$M
$M
$M
17 Barrels
566 USD
777 USD
566 USD
AUD/Barrel
59–102
AUD/USD
0.65-0.77
AUD/USD
0.69
AUD/USD
0.67– 0.74
100 AUD
Fixed
4.45%–5.99%
68
(131)
(371)
371
(371)
15
(1)
57
(57)
57
-
(1,098)
(14)
14
18
(3)
27
(27)
(14)
27
-
(7)
8
(8)
8
-
-
-
-
-
128
(603)
57
(3)
(10)
(1)
-
-
-
-
As at
30 June 2020
Cash flow
hedges
AUD fuel costs
(up to 3 years)
Operational
expenditure
(up to 2 years)
Revenue
(up to 7 years)
Capital
expenditure
(up to 2 years)
Interest
(up to 2 years)
1. Derivative cash flow hedging instruments are located within the Other Financial Assets and Other Financial Liabilities on the Consolidated Balance Sheet and include costs of
hedging. The carrying amount of the hedging instrument is presented in AUD where the hedged item equals the nominal amount of the hedging instrument.
2. The revenue hedging instrument is a non-derivative financial liability with the carrying amount presented in USD and is located within Interest-bearing Liabilities and Lease
Liabilities.
3. $571 million of hedge losses were de-designated and recognised to the Consolidated Income Statement for the year ended 30 June 2020. This includes $607 million released from
Hedge Reserve and ($36 million) of foreign exchange movements since de-designation.
96
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
28 AUDITOR’S REMUNERATION
AUDIT AND AUDIT-RELATED SERVICES
Audit and review of Financial Report
Regulatory assurance services
Total audit and audit-related services
OTHER SERVICES
Other assurance services
Taxation services
Due diligence services
Other non-audit services2
Total other services
Total auditor’s remuneration
2020
$’000
3,625
65
3,690
323
153
113
71
660
4,350
2019
(restated)1
$’000
3,256
49
3,305
348
496
-
1,014
1,858
5,163
1. The categorisation of auditor’s remuneration is based on recommendations from Australian Securities and Investments Commission (ASIC). Comparative information has been
restated to align with the current year categorisation.
2. In 2019, other non-audit services include fees of $995,000 related to KPMG’s acquisition of a service provider to the Group in 2017 with services continuing into 2019. These
services were discontinued from 1 July 2019.
29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
RECONCILIATION OF STATUTORY (LOSS)/PROFIT FOR THE YEAR TO NET CASH FROM OPERATING ACTIVITIES
$M
Statutory (loss)/profit for the year
Adjusted for:
Depreciation and amortisation
Impairment/(reversal of impairment) of assets and related costs
Hedging-related activities
Share of net loss/(profit) of investments accounted for under the equity method
Share-based payments
Amortisation of deferred financing fees and lease benefits
Net gain on disposal of assets
Discount rate changes impact on provisions
Other items
Dividends received from investments accounted for under the equity method
Changes in other items:
Receivables
Inventories
Other assets
Payables
Revenue received in advance
Provisions
Deferred tax assets/liabilities and tax payable/receivable
Net cash from operating activities
Notes
5
25(C)
14
26
6
7
14
2020
(1,964)
2019
(restated)
840
2,045
1,456
419
53
28
15
(7)
7
(49)
15
531
(24)
112
(196)
(955)
608
(1,011)
1,083
1,996
(39)
(89)
(23)
49
14
(225)
92
116
11
(177)
(55)
(136)
203
384
20
183
3,164
97
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
30 SUPERANNUATION
The Qantas Superannuation Plan (QSP) is a hybrid defined benefit/defined contribution fund with multiple divisions that commenced
operation in June 1939. In addition to the QSP, there are a number of small overseas defined benefit plans. The Qantas Group makes
contributions to defined benefit plans that provide defined benefit amounts for employees upon retirement. Under the plans, employees
are entitled to retirement benefits determined, at least in part, by reference to a formula based on years of membership and salary levels.
The defined benefit plans are legally separated from the Qantas Group. Responsibility for governance of the plans, including investment
decisions and plan rules, rests solely with the Trustee of the plan. The Trustee of the QSP is a corporate trustee which has a Board
comprising five company-appointed Directors and five member-elected Directors.
The QSP’s defined benefit plan exposes the Group to a number of risks, the most significant of which are detailed below:
– Investment risk: The investment strategy of the QSP’s defined benefit plan is to progressively de-risk the defined benefit investment
portfolio as the plan’s funding position improves over time. If the plan assets underperform expectations, the Group may be required
to provide additional funding to the plan
– Interest rate risk: Changes in bond yields, such as a decrease in corporate bond yields, will increase defined benefit liabilities
through the discount rate assumed
– Inflation risk: The defined benefit liabilities are linked to salary inflation, and higher inflation will lead to higher liabilities.
(A) FUNDING
Employer contributions to the defined benefit plans are based on recommendations by the plans’ actuaries. It is estimated that
$79 million of normal employer contributions will be paid by the Qantas Group to its defined benefit plans in 2020/21 (2019/20:
$82 million).
The QSP has in place an Additional Funding Plan (AFP), agreed in 2019, which addresses the requirements of APRA Prudential
Standards. The determination of Qantas’ additional employer contributions under the AFP is triggered if the quarterly determination of
the Defined Benefit Vested Benefits Index (DB VBI) indicates that the DB VBI has been below 100 per cent for two consecutive
quarters, or the value of the DB VBI has fallen from a value in excess of 100 per cent at the previous quarter, to a value that is less
than 96 per cent. The DB VBI is the ratio of the QSP’s assets attributable to the defined benefit liabilities to the total defined benefit
amount that the QSP would be required to pay if all members were to voluntarily leave the plan on the funding valuation date.
Additional benefit payment top-up contributions may also be payable if after two consecutive quarters, the DB Retrenchment Benefits
Index is less than 100 per cent, the DB VBI is below 105 per cent, and retrenchments occur that place a greater than VBI level of
funding strain on the Plan assets. The last additional contribution required under the AFP was paid by Qantas in December 2016. The
QSP’s financial position is monitored by the Trustee each quarter.
(B) MOVEMENT IN NET DEFINED BENEFIT (ASSET)/LIABILITY
Balance as at 1 July
Included in the Consolidated Income Statement
Current service cost
Past service cost
Interest expense/(income)
Contributions by plan participants
Losses on curtailments2
Present Value
of Obligation
$M
Fair Value of
Plan Assets
$M
Net Defined Benefit
(Asset)/Liability1
$M
2020
2019
2020
2019
2020
2019
2,392
2,176
(2,499)
(2,468)
(107)
(292)
127
-
71
-
-
119
1
88
-
3
-
-
(72)
(22)
-
-
-
(95)
(22)
-
Total amount included in manpower and staff-related expenditure
198
211
(94)
(117)
Included in the Consolidated Statement of Comprehensive
Income
Return on plan assets, excluding interest income
Losses from change in demographic assumptions
(Gains)/losses from change in financial assumptions
Experience losses
Exchange differences on foreign plans
Total amount recognised in other comprehensive income
Contributions by employer
Benefit payments
Assets distributed/liabilities extinguished on settlements
-
37
(43)
14
1
9
-
-
-
216
9
4
229
-
(157)
(152)
-
(72)
50
(52)
-
-
-
(2)
48
(82)
157
-
-
-
-
(4)
(56)
(82)
152
72
Balance as at 30 June
2,442
2,392
(2,470)
(2,499)
(28)
(107)
1. The net defined benefit asset is included in non-current other assets (refer to Note 19).
2. The Group has recognised a provision of $5 million for losses on curtailments in 2019/20 due to the recognised redundancy provisions as at 30 June 2020.
98
127
-
(1)
(22)
-
104
50
37
(43)
14
(1)
57
(82)
-
-
119
1
(7)
(22)
3
94
(52)
-
216
9
-
173
(82)
-
-
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
30 SUPERANNUATION (CONTINUED)
(C) PLAN ASSETS
The major categories of plan assets as a percentage of total plan assets of the Group’s defined benefit plans are as follows:
Australian equity1,2
Global equity1
– United States
– Europe
– Japan
– Other
Private equity
Fixed interest1
– Government bonds
– Other
Credit1
– Corporate debt
– Other
Hedge funds
Property and infrastructure
Timberland
Cash and cash equivalents1
Total
1. The majority of these plan assets have a quoted market price in an active market.
2. As at 30 June 2020, QSP assets in shares of Qantas Airways Limited (ASX:QAN) are $3,493,454 (2019: $4,451,637).
2020
%
13
2019
%
14
10
3
2
3
3
13
12
10
6
6
5
2
11
4
2
3
4
13
7
8
4
10
5
2
12
100
13
100
The Trustee of the QSP is responsible for setting the investment strategy and objectives for the QSP’s assets to support the defined
benefit liabilities. The QSP does not use any asset-liability matching strategies. It utilises traditional investment management
techniques to manage the defined benefit assets.
(D) ACTUARIAL ASSUMPTIONS AND SENSITIVITY
The significant actuarial assumptions (expressed as weighted averages per annum) were as follows:
Discount rate
Future salary increases1
2020
%
3
3
2019
%
3
3
1. For the 30 June 2020 actuarial calculation, salary increases of 3 per cent in years 1 to 4 and 2 per cent for the remaining duration of the plan were assumed (30 June 2019: salary
increases of 3 per cent in years 1 to 5 and 2.5 per cent for the remaining duration of the plan were assumed).
The weighted average duration of the QSP’s defined benefit obligation as at 30 June 2020 was 11 years (2019: 10 years). The
sensitivity of the defined benefit obligation to changes in the significant assumption is as follows:
Impact on Defined Benefit Obligation
30 June 2020
30 June 2019
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Increase in
Assumption
Decrease in
Assumption
Discount rate
Future salary increase
1%
1%
Decrease by 10.9%
Increase by 12.9% Decrease by 10.4%
Increase by 12.3%
Increase by 10.5% Decrease by 9.1%
Increase by 9.9%
Decrease by 8.7%
Defined Contribution Fund
A defined contribution expense of $183 million has been recognised for the year ended 30 June 2020 (2019: $196 million).
99
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
31 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned companies) instrument 2016/785 (Instrument), the wholly-owned entities identified
below are relieved from the Corporations Act 2001 requirements for preparation, audit, distribution and lodgement of Financial
Statements and Directors’ Reports:
AAL Aviation Limited
Airlink Pty Ltd
Network Aviation Holdings Pty Ltd
Qantas Ground Services Pty Ltd
Network Aviation Pty Ltd
Qantas Group Flight Training
(Australia) Pty Ltd
Australian Air Express Pty Ltd
Network Holding Investments Pty Ltd
Qantas Group Flight Training Pty Ltd
Australian Airlines Limited
Network Turbine Solutions Pty Ltd
Qantas Information Technology Limited
Australian Regional Airlines Pty Ltd
Osnet Jets Pty Ltd
Qantas Road Express Pty Ltd
Eastern Australia Airlines Pty Ltd
Q H Tours Limited
Qantas Ventures Limited
Express Freighters Australia (Operations)
Pty Ltd
Qantas Asia Investment Company Pty Ltd
QF Cabin Crew Australia Pty Ltd
Express Freighters Australia Pty Ltd
Qantas Courier Limited
Regional Airlines Charter Pty Ltd
Impulse Airlines Holdings Pty Ltd
Qantas Domestic Pty Ltd
Sunstate Airlines (Qld) Pty Ltd
Jetstar Airways Pty Ltd
Qantas Freight Enterprises Limited
The Network Holding Trust
Jetstar Asia Holdings Pty Ltd
Qantas Frequent Flyer Limited
The Network Trust
Jetstar Group Pty Ltd
Jetstar Services Pty Ltd
Qantas Frequent Flyer Operations Pty Ltd
Vii Pty Limited
Qantas Group Accommodation Pty Ltd
It is a condition of the Instrument that Qantas and each of the controlled entities eligible to obtain relief under the Instrument enter into a
Deed of Cross Guarantee (Deed). Under the Deed, Qantas guarantees to each creditor payment in full of any debt upon the winding up
under certain provisions of the Corporations Act 2001 of any of the controlled entities that are party to the Deed. If the winding up
occurs under other provisions of the Corporations Act 2001, Qantas will only be liable if, six months after a resolution or order for the
winding up of the controlled entity, any debt of a creditor of that controlled entity has not been paid in full. Each controlled entity that is
party to the Deed has given similar guarantees in the event that Qantas is wound up.
Qantas and its eligible controlled entities first entered into a Deed on 4 June 2001. Subsequently, additional controlled entities became
party to the Deed by way of Assumption Deeds dated 17 June 2002, 26 June 2006, 29 June 2007, 30 June 2008, 29 June 2009,
16 June 2010, 25 November 2010, 4 April 2011, 13 October 2011, 20 November 2012, 26 November 2015, 26 June 2017 and
2 November 2017.
The Consolidated Condensed Income Statement and Consolidated Condensed Balance Sheet for Qantas and each of its controlled
entities that are party to the Deed are set out below. The principles of consolidation are:
– Transactions, balances and unrealised gains and losses on transactions between entities that are party to the Deed are eliminated
– Investments in entities that are not party to the Deed are carried at cost less any accumulated impairment
– Dividends received from entities that are not party to the Deed are recognised as income.
(A) CONSOLIDATED CONDENSED INCOME STATEMENT
Revenue and other income
Expenditure
Impairment of assets and related costs
Statutory (loss)/profit before income tax expense and net finance costs
Finance income
Finance costs
Net finance costs
Statutory (loss)/profit before income tax expense
Income tax benefit/(expense)
Statutory (loss)/profit for the year
Retained earnings as at 1 July
Dividends paid
Share buy-back
Shares vested and transferred to employees
Retained earnings as at 30 June
100
2020
$M
2019
(restated)
$M
13,882
17,467
(14,743)
(15,988)
(1,575)
(2,436)
21
(281)
(260)
(2,696)
745
(1,951)
1,060
(204)
(348)
(22)
(71)
1,408
21
(293)
(272)
1,136
(351)
785
643
(363)
-
(5)
(1,465)
1,060
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
31 DEED OF CROSS GUARANTEE (CONTINUED)
(B) CONSOLIDATED CONDENSED BALANCE SHEET
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other financial assets
Inventories
Assets classified as held for sale
Income tax receivables
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Investments in subsidiaries
Investments accounted for under the equity method
Property, plant and equipment
Right of use assets
Intangible assets
Deferred tax assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Income tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Retained earnings
Equity attributable to members of Qantas
Non-controlling interests
Total equity
2020
$M
3,472
1,354
216
306
58
137
179
5,722
515
139
7
59
11,664
1,389
1,029
166
446
15,414
21,136
3,059
2,764
989
518
238
1,522
-
9,090
99
2,256
6,283
1,317
47
627
-
10,629
19,719
1,417
3,104
(51)
(171)
(1,465)
1,417
-
1,417
2019
(restated)
$M
2,065
2,056
340
364
1
-
214
5,040
662
179
163
104
12,706
1,350
1,129
-
446
16,739
21,779
3,216
4,216
801
451
87
942
113
9,826
-
1,466
5,106
1,291
48
456
698
9,065
18,891
2,888
1,871
(152)
109
1,060
2,888
-
2,888
101
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
32 RELATED PARTIES
(A) REMUNERATION OF KEY MANAGEMENT PERSONNEL
The aggregate remuneration of the KMP of the Qantas Group is set out below:
Short-term employee benefits
Post-employment benefits1
Other long-term benefits2
Share-based payments
2020
$’000
7,333
611
27
6,308
14,279
2019
$’000
13,111
604
(454)
6,535
19,796
1. Post-employment benefits include superannuation and post-employment travel benefit.
2. Other long-term benefits include movements in annual leave and long service leave balances. The accounting value of other long-term benefits may be negative, for example
where an Executive’s annual leave balance decreases as a result of taking more than the 20 days’ annual leave they accrue during the year.
Further details in relation to the remuneration of KMP are included in the Directors’ Report from pages 30 to 54.
(B) OTHER RELATED PARTY TRANSACTIONS – ASSOCIATES
Transactions with associates are conducted on normal terms and conditions.
Transactions between the Qantas Group and associates include:
– The Qantas Group provides airline seats on domestic and international routes to Helloworld Ltd for sale through its travel
agency network
– The Qantas Group sells Qantas Points to Helloworld Ltd and purchases vouchers from Helloworld Ltd for the Qantas Store
– The Qantas Group has established business service agreements with Jetstar-branded airlines in Japan and Vietnam for the
provision of business services to enable a consistent customer experience for the Jetstar brand. The business service agreement
with the entity in Vietnam has been terminated subsequent to 30 June 2020 and the Jetstar brand removed from that entity. As part
of the business service agreement, amongst other services, Qantas allows their credit card transactions to be acquired through the
Qantas Group’s contractual arrangements. The credit card support with the entity in Vietnam has been terminated subsequent to 30
June 2020
– The Qantas Group as part of shareholder arrangements co-guarantees the finance lease obligations for two A320 aircraft on behalf
of Jetstar Japan to the external lessors in exchange for guarantee fees to the Qantas Group. Subsequent to year end, the Qantas
Group with other shareholders of Jetstar Japan provided limited guarantees to support unsecured debt raising by Jetstar Japan to
increase liquidity in response to COVID-19. This was completed in August 2020.
33 PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED
(A) CONDENSED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2020
Revenue and other income2
Expenditure
Impairment of assets and related costs3
Statutory (loss)/profit before income tax expense and net finance costs
Net finance costs
Statutory (loss)/profit before income tax expense
Income tax benefit/(expense)
Statutory (loss)/profit for the year
2020
$M
9,229
(10,523)
(1,455)
(2,749)
(221)
(2,970)
833
(2,137)
2019
(restated)1
$M
12,132
(11,174)
(285)
673
(242)
431
(97)
334
1. 2019 has been restated for the impact of the adoption of AASB16 and the IFRIC Fair Value hedging agenda decision. In addition, Qantas Airways Limited also restated for the
impact of impairment of intercompany receivables of $270 million.
2. Revenue and other income included nil million (2019: $335 million) of dividend income from wholly-owned subsidiaries of the Qantas Group.
3.
Impairment of assets and related costs includes the impairment of investments in subsidiaries and intercompany loans of $220 million (2019: $283 million).
(B) CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020
Statutory (loss)/profit for the year
Effective portion of changes in fair value of cash flow hedges, net of tax
Transfer of hedging gains from hedge reserve to the Condensed Income Statement, net of tax
De-designation of fuel and foreign exchange hedges to the Condensed Income Statement, net of tax
Recognition of effective cash flow hedges on capitalised assets, net of tax
Net changes in hedge reserve for time value of options, net of tax
Fair value gains on investments, net of tax
Defined benefit actuarial losses, net of tax
Total other comprehensive loss for the year
Total comprehensive (loss)/income for the year
102
2020
$M
(2,137)
(205)
(123)
425
(42)
(232)
(16)
(38)
(231)
(2,368)
2019
(restated)
$M
334
51
(249)
-
(13)
(47)
4
(121)
(375)
(41)
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
33 PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED (CONTINUED)
(C) CONDENSED BALANCE SHEET AS AT 30 JUNE 2020
CURRENT ASSETS
Cash and cash equivalents
Receivables
Intercompany receivables
Inventories
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Intercompany receivables
Investments in subsidiaries
Property, plant and equipment
Right of use assets
Intangible assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Intercompany payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Other reserves
Profit reserves
Retained losses
Total equity
2020
$M
3,569
264
5,626
189
559
10,207
123
597
420
10,238
1,254
765
678
14,075
24,282
1,790
5,914
2,258
988
449
1,534
12,933
99
2,186
6,284
1,245
332
10,146
23,079
1,203
3,104
(51)
(169)
1,774
(3,455)
1,203
2019
(restated)
$M
2,079
814
5,666
246
527
9,332
76
585
530
11,198
1,284
837
629
15,139
24,471
1,817
5,317
3,508
799
419
957
12,817
-
1,453
5,106
1,261
976
8,796
21,613
2,858
1,871
(152)
109
2,326
(1,296)
2,858
(D) DIVIDENDS DECLARED AND PAID
In February 2020, the Directors announced a fully franked interim dividend of 13.5 cents per ordinary share, totalling $201 million. To
preserve liquidity in response to the impact of COVID-19, this was subsequently revoked in June 2020.
For the year ended 30 June 2020, $204 million in dividends (2019: $363 million) were paid to shareholders. Dividends are paid from the
profit reserves of Qantas Airways Limited, as the parent of the Group.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
33 PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED (CONTINUED)
(E) CAPITAL EXPENDITURE COMMITMENTS
The capital expenditure commitments held by the parent entity are the same as those held by the Group as disclosed in Note 15(C).
(F) CONTINGENT LIABILITIES
The contingent liabilities held by the parent entity are the same as those held by the Group as disclosed in Note 34.
(G) PARENT ENTITY GUARANTEES IN RESPECT OF DEBTS OF ITS SUBSIDIARIES
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of its
subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the Deed are disclosed in Note 31.
The parent entity related parties in respect to the provision of guarantees are primarily the same as those held by the Group, which are
disclosed in Note 32.
(H) INTEREST-BEARING LIABILITIES
The parent entity has total interest-bearing liabilities of $7,272 million (2019: $5,906 million), of which $1,253 million (2019: $1,666
million) represent secured loans payable to controlled entities. Of the $6,019 million (2019: $4,240 million) payable to other parties,
$4,154 million (2019: $2,550 million) represents secured bank loans and other secured loans, with the remaining balance representing
unsecured loans.
34 CONTINGENT LIABILITIES
Details of contingent liabilities are set out below. The Directors are of the opinion that provisions are not required with respect to
these matters, as it is not probable that a future outflow of economic benefits will be required or the amount is not capable of reliable
measurement.
(A) GUARANTEES
The Qantas Group co-guarantees the finance lease obligations for two A320 aircraft on behalf of Jetstar Japan to the external lessors
in exchange for guarantee fees to the Qantas Group. Subsequent to year end, the Qantas Group in conjunction with other shareholders
of Jetstar Japan provided limited guarantees to support unsecured debt raising by Jetstar Japan to increase liquidity in response to
COVID-19.
As part of the business service agreements, the Qantas Group has extended support for the Jetstar-branded airlines in Japan and
Vietnam by allowing its credit card transactions to be acquired through the Qantas Group’s contractual arrangements. The business
service agreement and credit support with the entity in Vietnam has been terminated subsequent to 30 June 2020.
Qantas has also entered into guarantees in the normal course of business to secure a self-insurance licence under the Safety,
Rehabilitation and Compensation Act 1988, the New South Wales Workers’ Compensation Act, the Victorian Accident Compensation
Act and the Queensland Workers’ Compensation Act and Rehabilitation Act, to support non-aircraft lease commitments and other
arrangements entered into with third parties. Due to specific self-insurance provisions raised, the Directors are of the opinion that the
probability of having to make a payment under these guarantees is remote.
(B) LITIGATION
From time to time Qantas is subject to claims and litigation during the normal course of business. The Directors have given
consideration to such matters, which are or may be subject to litigation at year end and, subject to specific provisions raised, are of the
opinion that no material contingent liability exists.
35 POST-BALANCE DATE EVENTS
On 10 August 2020, the retail Share Purchase Plan was completed, resulting in the issuance of 22.5 million shares at $3.18 per share
(totalling $71.7 million). This transaction will be recognised within the 2020/21 financial year.
On 25 August 2020, as part of its COVID-19 Recovery Plan, the Group has informed its employees of initiatives affecting its ground
handling operations at airports across Australia. This is a non-adjusting post-balance date event and has no impact on the financial
statements for the year ended 30 June 2020.
Subsequent to year end, the Group completed the debt raising of a 10-year, $0.5 billion unsecured bond issue as part of its ongoing
management of its debt maturity profile. The proceeds will strengthen short-term liquidity and be used to pay $0.4 billion in bonds due
to expire in June 2021.
Subsequent to year end, various Australian state governments reimposed restrictions on interstate travel or imposed expanded
localised lockdowns. The New South Wales Government introduced restrictions on visitors from Victoria. The Queensland Government
reimposed restrictions on visitors from New South Wales and the Australian Capital Territory in addition to existing restrictions on
visitors from Victoria. The Victorian Government imposed stage four lockdowns on Greater Melbourne, together with stage three
lockdowns on regional Victoria. These government restrictions have impacted demand for domestic travel and the Group has
responded by adjusting capacity.
The Group’s Recovery Plan is a three-year plan, and while these post-balance date events have impacted the timing of demand
recovery, they are expected to have a short-term impact and not materially change the overall assumptions underpinning the Group’s
three-year plan.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
36 MATERIAL BUSINESS RISKS
The aviation industry is subject to numerous inherent foreseeable risks that can impact operations if left untreated. In rare circumstances
‘black swan’ risk events can materialise, resulting in unexpected consequences such as those that the aviation industry is experiencing
due to COVID-19. The COVID-19 pandemic has impacted Qantas’ operations significantly, including its strategic and financial
objectives.
Material business risks arising from COVID-19, notably liquidity risks, are being critically managed to ensure the ongoing sustainability
of the Group. To minimise this consequence, Management has established a Three-Year Recovery Plan to rightsize and transform the
Group in response to COVID-19 impacts to guidance the Group’s return to growth. As the impact of COVID-19 evolves, the Group
continues to plan for a wide range of scenarios and risks.
Other inherent risks that can impact the Group’s operations include exposure to changes in economic conditions, changes in government
regulations, fuel and foreign exchange volatility and other exogenous events such as aviation incidents, natural disasters, or international
conflicts.
General economic conditions: As air travel is closely linked with economic growth, the Qantas Group’s operating and financial
performance is influenced by a variety of general economic and business conditions in Australia and overseas. A sustained decline
in consumer and business demand as part of a broader deterioration of economic conditions is likely to have a material adverse effect
on the financial condition and business of the Qantas Group.
COVID-19 has created considerable uncertainty and volatility surrounding these macroeconomic factors, and any further deterioration
may have a material adverse impact on the business, financial condition and prospects of the Qantas Group.
Human resources and industrial action risk: The Qantas Group operates in a highly regulated employment market and a portion
of the Qantas Group’s employees are represented by unions and are party to collective bargaining arrangements. Any significant
enterprise bargaining dispute between the Qantas Group and its employees, including in relation to the Recovery Plan, could lead
employees to take industrial action, including work stoppages. This could disrupt the Qantas Group’s day-to-day operations as well as
lead to reputational damage.
The COVID-19 crisis has necessitated the standing down of a significant portion of employees. While the need to stand down employees
will decrease over time, any significant successful legal challenge to the Qantas Group’s ability to stand down employees could likely
have a material adverse effect on the Qantas Group’s financial performance and condition.
The Qantas Group also has certain Key Management Personnel whose institutional knowledge, expertise, relationships and experience
are considered important to the continued success of the business. The loss of key personnel could adversely impact the Qantas Group’s
business and future performance.
Further, given employee costs represent a significant component of the Qantas Group’s operating expenses, increases in labour costs
(whether as a result of enterprise agreement negotiations, union action or otherwise) would likely have a material adverse effect on the
Qantas Group’s financial performance and condition.
Customer risk: The ongoing success of the Qantas Group depends to a large degree on customer satisfaction and loyalty, particularly
in light of the significant competition for passengers that characterises the aviation industry.
The significant financial and operational challenges posed by COVID-19, the impact of the pandemic on the travel industry and the
response of the Qantas Group to these challenges could also impact customer satisfaction and loyalty. In particular, a diminution of
customer satisfaction due to the cancellation and refund policies of the Qantas Group in the context of COVID-19 may impact the
Qantas Group’s reputation and its ability to attract customers in the future.
In addition, the Qantas Group is vulnerable to longer-term changes in consumer preferences in relation to its service offerings, the
markets in which it operates, and consumer sentiment towards leisure travel. Any failure by the Qantas Group to predict or respond
to such changes in a timely and cost-effective manner may adversely impact the Qantas Group’s future operating and financial
performance.
Competitive intensity: Ordinarily, the international and domestic aviation markets in which the Qantas Group operates are highly
competitive, and growth in market capacity ahead of underlying demand impacts profitability on an industry-wide basis. Its competitors
include many major foreign airlines (including government-owned or controlled airlines), some with more financial resources or lower
cost structures than Qantas. This competition may increase with the expansion of existing airlines, the consolidation of existing airlines
and/or the creation of alliances between airlines, or new airlines entering the market.
Australia’s aviation policies favour the creation of a more competitive environment, including more liberal rights of entry into Australian
domestic and international markets. These policies have attracted offshore competitors (predominantly state-sponsored airlines) to the
Australian international aviation market, which has further increased competition for passengers on international routes.
Additionally, the Qantas Group ordinarily faces high levels of price competition in the markets in which it operates, which places
significant pressure on the Qantas Group to price match by offering heavily discounted fares. Aggressive pricing by competitors
seeking to gain market share can materially adversely affect the Qantas Group’s revenues and yield performance. The financial impact
of any discounting of fares as a result of competitive pressures is exacerbated by the high fixed costs and low profit margins that
characterise the aviation industry. The combined effect of these factors may have a material adverse effect on the revenue and
financial condition of the Qantas Group.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
36 MATERIAL BUSINESS RISKS (CONTINUED)
Reputational and brand risk: The Qantas brand carries significant commercial value and the continued success of the Qantas Group
relies on the maintenance of a positive reputation and brand recognition among customers, suppliers, strategic partners and governments.
Any negative publicity (for example, due to a safety incident, labour dispute, regulatory investigation or public customer complaint) may
damage Qantas’ reputation and have a negative impact on its business operations and financial performance.
Fuel and foreign exchange volatility: The Qantas Group is subject to fuel and foreign exchange risks. These risks are an inherent
part of the operations of an airline. The continued focus on forecasting and the operational agility of our aviation operations are supporting
the Group to manage the residual uncertainty. Accordingly, the size of the Group’s fuel and foreign exchange risk will vary in line with
operational changes. The Qantas Group manages fuel and foreign exchange risks through a comprehensive hedging program. Qantas
will continue to hedge its fuel and foreign exchange risk in line with this program. In early April, the Qantas Group closed out its over-
hedged position through to September 2020, which significantly lowered the exposure to further hedging losses in the short-term. The
Qantas Group has some fuel hedging arrangements beyond September 2020 in the form of outright options with a base layer of collars.
The collars remain subject to market price movements. There are no margin call obligations on the Qantas Group’s hedging position.
Cyber security and data governance: The global cyber and privacy landscape is constantly evolving and at the same time, data
governance has become an important function for many organisations including the Qantas Group. Qantas remains focused on
embedding cyber security, privacy and data governance into business processes, taking a security and privacy by design approach
and creating a cybersafe and privacy orientated culture that builds on an established safety culture. The Group is also enhancing its
Data Governance Framework to ensure ethical and commercial data risks are managed in addition to data protection and privacy.
Qantas has a defined Risk and Control Framework, aligned with industry standards, which is designed to protect the confidentiality,
integrity, availability and privacy of data and to maintain compliance with regulatory requirements. The Qantas Group's cyber security
and data privacy related controls operate to reduce the likelihood and severity of cyber security and data privacy related incidents and
related impacts. The Group’s cyber and data privacy risks are continuously monitored by the Group Cyber and Privacy Committee and
are subject to independent assurance including for material third party suppliers.
Key business partners and alliances: The Qantas Group has relationships with a number of key business partners. In order to continue
to maximise mutual benefit from both a financial and customer proposition perspective, governance structures are in place to track and
report performance against common strategic objectives. The Qantas Group continues to proactively build relationships with existing
and new industry partners through ongoing dialogue with relevant authorities and stakeholder groups.
Risk of increase in airport services related-costs or change in availability of airport facilities: The Qantas Group is exposed to
the risk of increases in airport services-related costs (including air traffic control, airport, transit, take-off and landing fees and security
charges). The availability and cost of airport facilities are fundamental to the ability of the Qantas Group to operate.
These costs represent a significant portion of the Qantas Group’s operating costs and have a financial impact on its operations. Most
Australian airports are privately owned and owners have flexibility to increase charges to airlines. There can be no assurance that
major airport operators will not continue to increase their fees or that the Qantas Group will not incur new costs in Australia or elsewhere
(for example, additional fees assessed against environmental criteria such as emissions levels or noise pollution). Further, it is likely
that security and health measures around the world will continue to be increased in response to the COVID-19 experience and the
perceived threat of terrorism, which may lead to increases in airport clearance and security charges. To the extent that the Qantas
Group is unable to pass on any fee increases to its customers, these developments could have a material adverse effect on the Qantas
Group’s operational results and financial position.
In addition, health concerns during the COVID-19 crisis and in the period following it are likely to impact the availability of airport slots
and facilities in ways that are difficult to predict. This, too, could have a material adverse effect on the Qantas Group’s operations and
Recovery Plan.
Climate change: The Qantas Group is subject to short-term and long-term climate-related physical and transition risks. These risks are
an inherent part of the operations of an airline and are managed by undertaking scenario analysis, strengthening governance, technology,
operational and market-based controls, including proactive consideration of how changing factors (including global climate policies)
impact the proximity of climate-related risks. The Qantas Group has also set ambitious but achievable targets to reduce our emissions
by capping emissions at 2020 levels and achieving net-zero emissions by 2050, while also investing in the development of sustainable
aviation fuels. The Qantas Group is responding to increased demand for transparency on identification and management of climate-
related risks by aligning our corporate disclosures with the Taskforce on Climate-Related Financial Disclosures (TCFD) including
further developing and disclosing findings from the scenario analysis first undertaken during the year ending 30 June 2020. These
disclosures are available at https://www.qantas.com/au/en/qantas-group/acting-responsibly/our-planet.html.
An overview of the Group Risk Management Framework is contained in the Qantas Group Business Practices Document available at
www.qantas.com.au.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
i. Controlled Entities
Controlled entities are entities controlled by the Group. Control exists when the Group is exposed to or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial
Statements of controlled entities are included in the Consolidated Financial Statements from the date that control commences until the
date that control ceases.
ii. Non-Controlling Interests
Non-controlling interests in the results and equity of controlled entities are shown separately in the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Balance Sheet.
iii. Equity Accounted Investments
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating
policies. Significant influence is evidenced through, but not limited to, voting power of the Group, representation on the board of
directors and participation in policy-making processes. Interests in associates are accounted for under the equity accounting method
and initially recognised at cost, including transaction costs. Subsequent to initial recognition, the Consolidated Financial Statements
include the Group’s share of profit or loss and other comprehensive income of equity accounted investees, until the date on which
significant influence ceases. Dividends received or receivable reduce the carrying amount of the equity accounted investment.
When the Group’s share of total comprehensive losses exceeds the equity accounted carrying value of an associate, the Group’s
carrying amount is reduced to nil and recognition of further losses is discontinued, except to the extent that the Group has incurred
legal or constructive obligations to fund an associate’s operations or has made payments on behalf of an associate. When an associate
is disposed of in its entirety or partially such that significant influence is lost, the cumulative amount in the Foreign Currency Translation
Reserve related to that associate is reclassified to the Consolidated Income Statement as part of the gain or loss on disposal. When the
Group disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount in the
Foreign Currently Translation Reserve related to that associate is reclassified to the Consolidated Income Statement.
The carrying amount of equity accounted investments is tested for impairment in accordance with the policy described in Note 37(G).
iv. Transactions Eliminated on Consolidation
Intra-group transactions, balances and unrealised gains and losses on transactions between controlled entities are eliminated in the
Consolidated Financial Statements. Unrealised gains and losses arising from transactions with investments accounted for under the
equity method are eliminated to the extent of the Group’s interest in the associate.
(B) FOREIGN CURRENCY
i. Foreign Currency Transactions
Transactions in foreign currencies are translated into the respective functional currencies of the Group’s companies at the exchange
rates at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally
recognised in the Consolidated Income Statement.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the
reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional
currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost
in a foreign currency are translated at the exchange rate at the date of the transactions.
Foreign Operations
ii.
The assets and liabilities and the income and expenditure of foreign operations that have a functional currency other than AUD are
translated into AUD as follows:
– assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
– income and expenses for each income statement and statement of comprehensive income are translated at average exchange
rates
– all resulting exchange differences are recognised in other comprehensive income and accumulated in the Foreign Currency
Translation Reserve, except to the extent that the translation difference is allocated to non-controlling interests.
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the
cumulative amount in the Foreign Currency Translation Reserve related to that foreign operation is reclassified to the Consolidated
Income Statement as part of the gain or loss on disposal. If the Group disposes of part of its interests in a subsidiary but retains control,
then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part
of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is
reclassified to the Consolidated Income Statement.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) FINANCIAL INSTRUMENTS
Non-Derivative Financial Instruments
i. Recognition and Measurement of Non-Derivative Financial Assets
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs related to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed.
The Group subsequently classifies its financial assets in the following measurement categories:
– Those to be measured subsequently at fair value (either through the Consolidated Income Statement or the Consolidated Statement
of Comprehensive Income)
– Those to be measured at amortised cost.
ii. Recognition and Measurement of Non-Derivative Financial Liabilities
At initial recognition, the Group measures a non-derivative financial liability at its fair value, less transaction costs.
The Group subsequently measures non-derivative financial liabilities at amortised cost, with any difference between cost and
redemption value being recognised in the Consolidated Income Statement over the period of the borrowings using the effective
interest rate method.
Derivative Financial Instruments
Derivative financial instruments are recognised at fair value both initially and on an ongoing basis. The accounting for subsequent
changes in fair value depends on whether the derivative is a designated hedging instrument, and if so, the nature of the item being
hedged and the type of hedge relationship designated. The Group designates derivatives as either hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair value hedges), or as hedges of a particular risk associated with the cash flows of recognised
assets and liabilities or of highly probable forecast transactions (cash flow hedges). At the inception of the transactions, the Qantas
Group documents the economic relationship between hedging instruments and hedged items, including the risk management objective
and strategy for undertaking each transaction. The Qantas Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the hedging instruments that are used in hedge transactions have been and will continue to be highly
effective.
From time to time, certain derivative financial instruments do not qualify for hedge accounting, notwithstanding that the derivatives are
held to hedge identified exposures. Any changes in the fair value of a derivative instrument or part of a derivative instrument that do not
qualify for hedge accounting are classified as ‘ineffective’ and recognised immediately in the Consolidated Income Statement.
i. Fair Value Hedges
Changes in the fair value of derivative financial instruments that are designated and qualify as fair value hedges are recorded in the
Consolidated Income Statement, together with any changes in the fair value of the hedged asset or liability or firm commitment
attributable to the hedged risk.
ii. Cash Flow Hedges
Where a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is
recognised in the Consolidated Statement of Comprehensive Income and accumulated within Hedge Reserve. Any ineffective portion
of changes in the fair value of the derivative is recognised immediately in the Consolidated Income Statement.
The amount accumulated in equity is retained in the Hedge Reserve and reclassified to the Consolidated Income Statement in the
same period or periods during which the hedged forecast cash flows affect profit or loss or the hedged item affects profit or loss. Where
the hedged item is capital in nature, the cumulative gain or loss recognised in the hedge reserve is transferred to the carrying amount
of the asset when the asset is recognised.
If the forecast transaction is no longer expected to occur, the hedge no longer meets the criteria for hedge accounting, the hedging
instrument expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is de-designated
prospectively. As a result, the amount accumulated in the Hedge Reserve is reclassified to the Consolidated Income Statement
immediately.
iii. Cost of Hedging
The time value of an option, the forward element of a forward contract and any foreign currency basis spread is excluded from
the designation of a financial instrument and accounted for as a cost of hedging. The fair value changes of these elements are
recognised in Other Comprehensive Income and depending on the nature of the hedged item, will either be transferred to the
Consolidated Income Statement in the same period that the underlying transaction affects the Consolidated Income Statement
or be capitalised into the initial carrying value of the asset.
If the forecast transaction being hedged is no longer expected to occur, the hedge no longer meets the criteria for hedge accounting,
the hedging instrument expires or is sold, terminated or exercised, or the designation is revoked, the cumulative cost of the hedging
instrument recognised in Other Comprehensive Income is immediately reclassified to the Consolidated Income Statement.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) FINANCIAL INSTRUMENTS (CONTINUED)
iv. Fair Value Calculations
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair
value of financial instruments that are not traded in an active market is estimated using valuation techniques consistent with accepted
market practice. The Qantas Group uses a variety of methods and input assumptions that are based on market conditions existing
at balance date. The different methods of estimating the fair value of these items have been defined in the Consolidated Financial
Statements as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
v. Financial Guarantee Contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured
at fair value and subsequently at the higher of:
– the amount determined in accordance with the expected credit loss model under AASB 9 Financial Instruments; and
– the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the
principles of AASB 15 Revenue from Contracts with Customers.
The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual
payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount
that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of associates
are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.
(D) REVENUE RECOGNITION
i. Net Passenger and Net Freight Revenue
Net passenger revenue primarily arises within the Qantas Domestic, Qantas International and Jetstar Group segments. Net freight
revenue primarily arises within the Qantas International segment except where bellyspace is utilised in Qantas Domestic and the
Jetstar Group.
Passenger, freight revenue, capacity hire and air charter revenue are recognised when the travel or service is provided. Revenue
recognised on travel is net of sales discounts, passenger and freight interline/IATA commission and Goods and Services Tax. Net
freight revenue includes amounts the Group receives as operating lease income in relation to freighters leased to customers.
At the time of expected travel, revenue is also recognised in respect of tickets that are not expected to be used. Unused tickets are
recognised as revenue using estimates based on the terms and conditions of the ticket, experience, historical and expected future
trends. The Group generally does not recognise revenue in respect of unredeemed travel credits due to the extended redemption
conditions and in certain circumstances, the ability for the passenger to request a refund.
Passenger travel and freight services are generally paid for in advance of travel and are deferred on the balance sheet as revenue
received in advance. Travel credits are classified as revenue received in advance where they are available for future flights or in certain
circumstances for refund, if requested. Where customers have made refund claims these are classified as payables, where the balance
of refunds is material in aggregate.
Where the passenger is also a Qantas Frequent Flyer member and earns Qantas Points on travel, the allocation of revenue is on
a proportional basis using relative stand-alone selling prices and the consideration allocated to Qantas Points is deferred as
unrecognised redemption revenue.
Consideration received in relation to certain ancillary services relating to passenger travel such as credit card fees and change fees are
not considered to be distinct from the passenger flight. Revenue relating to these ancillary services is deferred until uplift to align with
the related passenger travel. These amounts are included within net passenger revenue.
Passenger recoveries (including fuel surcharge on passenger tickets) are included in net passenger revenue. Freight fuel surcharge
is included in net freight revenue.
ii. Frequent Flyer Marketing Revenue
Marketing revenue associated with the issuance of Qantas Points is recognised within the Qantas Loyalty segment as the service is
performed over time (typically this approximates the timing of the issuance of Qantas Points). Marketing revenue is measured as the
difference between the stand-alone selling price of a Qantas Point and the consideration received, using the residual approach. The
stand-alone selling price of a Qantas Point is determined using estimation techniques based on the value of redemption options for which
Qantas Points could be redeemed and considers the proportion of Qantas Points not expected to be redeemed. The consideration for
Qantas Points is typically received within normal credit terms following issuance of points.
Marketing revenue on inter-segment Qantas Point issuances is eliminated on consolidation.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) REVENUE RECOGNITION (CONTINUED)
iii. Frequent Flyer Redemption Revenue
The consideration for issuance of Qantas Points is typically received in advance of redemption and is deferred as unrecognised
redemption revenue. Redemption revenue is recognised within the Qantas Loyalty segment when Qantas Points are redeemed.
Redemption revenue is measured based on the weighted average value of the points redeemed. Redemption revenue arising from
Qantas Group flight redemptions is recognised when the passenger is uplifted and within net passenger revenue on consolidation.
Redemption revenue in relation to products provided by suppliers outside the Group, such as Qantas Store redemptions and other
carrier redemptions is recognised in the income statement net of related costs, where the Group is an agent. For the purposes of
segment reporting, the Qantas Loyalty segment reports these redemptions on a gross basis. Adjustments are made within
consolidation eliminations to present these redemptions on a net basis at a Group level within Other revenue. Obligations for returns or
refunds in relation to redemptions from the Qantas Store are recognised where material.
Significant changes in Qantas Points expected to expire unredeemed are recognised within other income. The Group uses estimates
based on terms and conditions of the Frequent Flyer program, experience, historical and expected future trends to determine any
amount recognised.
iv. Other Carrier Commissions and Commissions from Third Parties
The Group considers whether it is a principal or agent in relation to services by considering whether it has a performance obligation to
provide services to the customer or whether the obligation is to arrange for services to be provided by a third party, such as another
carrier or a third party. Other carrier commission revenue is included within Other revenue and is generally recognised on uplift by the
other carrier. Consideration for other carrier commissions is received within normal credit terms through IATA. Commissions from third
parties are typically recognised when the underlying good or service has been transferred to the end-customer.
Incremental Costs of Obtaining a Contract
v.
The incremental cost of obtaining a contract is capitalised and amortised over the expected period of benefits to the Group and the
pattern those benefits are expected to arise The Group recognises the incremental costs of obtaining a contract as an expense when
incurred where the amortisation period of the asset that would have been recognised is one year or less.
(E) GOVERNMENT GRANTS
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and
the Group expects to comply with the conditions. Note 24 provides further information on how the Group accounts for government grants.
(F) TAXES
i. Tax Compliance
The Qantas Group is committed to embedding risk management practices to support the achievement of compliance objectives and
fulfil corporate governance obligations. Tax risk management is governed by both the Qantas Group Risk Management Policy and the
Qantas Group Tax Risk Management Policy, ensuring corporate governance obligations with respect to tax risks are met. The Qantas
Group has paid all taxes that it owes and all tax compliance obligations are up to date. The Australian Taxation Office (ATO) has advised
that the Qantas Group is a key taxpayer, continuing to have a ‘low’ likelihood of non-compliance. The ATO also acknowledged Qantas’
continued commitment to engage cooperatively and transparently to mitigate tax risks, including obtaining tax certainty on key transactions
through the use of binding Private Rulings and entering into a multi-tax Annual Compliance Arrangement (ACA).
Tax Treaties:
Due to the operation of income tax treaties and specific rules dealing with airlines, the Qantas Group appropriately reports the majority
of its income in Australia, with only a small component being reported in foreign jurisdictions (for the purpose of determining liability to
company tax).
Current Income Tax:
Current income tax liability is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
enacted at balance date where the Group and its subsidiaries operate and generate taxable income and any adjustment to tax payable
with respect to previous years.
Deferred Tax:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
– Temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit
– Temporary differences relating to investments in controlled entities and associates and jointly controlled entities to the extent that
they will probably not reverse in the foreseeable future
– Taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences only to the extent
that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Such reductions
are reversed when the probability of future taxable profits improves. Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax rates enacted or substantially enacted at the reporting date. Qantas
provides for income tax in both Australia and overseas jurisdictions where a liability exists.
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Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) TAXES (CONTINUED)
Income Tax
ii.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated Income Statement
except to the extent that it relates to items recognised directly in equity or in Other Comprehensive Income, in which case it is
recognised in equity or in other comprehensive income.
iii. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset
or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable
from, or payable to, the taxation authority is included as a current asset or liability in the Consolidated Balance Sheet. The GST
components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation
authority are classified as operating cash flows.
iv. Tax Consolidation
Qantas and its Australian wholly-owned controlled entities, trusts and partnerships are part of a tax consolidated group. As a
consequence, all members of the tax consolidated group are taxed as a single entity.
(G) IMPAIRMENT
i. Non-Financial Assets
The carrying amounts of non-financial assets such as equity accounted investments, property, plant and equipment, goodwill and
intangible assets and other assets are reviewed at each balance sheet date to determine whether there is any indication of impairment.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. For the purpose of assessing impairment,
goodwill and indefinite lived intangible assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash generating units). Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Assets which primarily generate cash flows as a group, such as aircraft, are typically assessed on a cash generating unit (CGU) basis,
inclusive of related infrastructure and intangible assets and compared to net cash inflows for the CGU. Where assets are no longer
expected to contribute to the cash flows of a CGU, they are tested for impairment separately. Identification of an asset’s CGU requires
significant judgement, as it requires identification of the lowest aggregation of assets that generate largely independent cash inflows.
In Management’s judgement, the lowest aggregation of assets which give rise to CGUs as defined by AASB 136 Impairment of Assets
are the Qantas Domestic CGU, Qantas International CGU, Qantas Loyalty CGU, Qantas Freight CGU, Jetstar Asia CGU, Jetstar
Pacific CGU, Jetstar Japan CGU and the Jetstar Australia/New Zealand CGU. Estimated net cash flows used in determining recoverable
amounts are discounted to their net present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the assets or CGU.
An impairment loss is recognised for the amount by which the asset’s or CGU’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and value in use. Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. The
maximum amount of any impairment reversal is the lower of:
– the amount necessary to bring the carrying amount of the asset to its recoverable amount (if it is determinable); and
– the amount necessary to restore the assets of the CGU to their pre-impairment carrying amounts less subsequent depreciation or
amortisation that would have been recognised.
ii. Financial Assets
The carrying value of financial assets is assessed at each reporting date to determine whether there is any objective evidence that it is
impaired. Where necessary, the Group recognises provisions for expected credit loss (ECL) at amortised cost, based on 12-month or
lifetime losses depending on whether there has been a significant increase in credit risk, including risk of default occurring, since initial
recognition. For significant customers, the Group allocates each exposure to a credit risk grade based on data that is determined to be
predictive of the risk of loss (including but not limited to external ratings, audited financial statements, management accounts and cash
flow projections and available press information about customers) and applying experienced credit judgment. For other customers,
ECL is assessed based on credit risk characteristics and the days past due. It is then measured based on actual historical credit loss
experienced over the past years, along with other factors to reflect differences between the economic conditions during the period over
which the historical data has been collected, current conditions and the Group's view of macro-economic conditions over the expected
lives of the receivables. The Group considers a financial asset to be in default when the counterparty is unlikely to pay is credit
obligations in full.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating
ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit
assessment, including forward-looking information. A financial asset is written off when there is no reasonable expectation of recovery,
such as the debtor failing to engage in a repayment plan with the Group.
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For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(H) PROPERTY, PLANT AND EQUIPMENT
i. Recognition and Measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Items of property, plant
and equipment are initially recorded at cost, being the fair value of the consideration provided plus incidental costs directly attributable
to the acquisition.
Costs to dismantle and remove assets
The cost of acquired assets includes the initial estimate of costs of dismantling and removing the items and restoring the site on which
they are located, and changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing
or outflow of resources required to settle the obligation or from changes in the discount rate. The unwinding of the discount is treated as
a finance expense in the Consolidated Income Statement.
Gains or losses on cash flow hedges of the purchase of assets
The cost also may include transfers from the hedge reserve of any gain or loss on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment in accordance with Note 37(C).
Capitalisation of interest
Interest attributed to progress payments made on account of aircraft and other qualifying assets under construction are capitalised and
added to the cost of the asset. All other borrowing costs are recognised in the Income statement in the year in which they are incurred.
ii. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to
the Group.
iii. Depreciation
Depreciation is provided on a straight-line basis on all items of property, plant and equipment except for freehold land, which is not
depreciated. The depreciation rates of owned assets are calculated to allocate the cost or valuation of an asset, less any estimated
residual value, over the asset’s estimated useful life to the Qantas Group. Assets are depreciated from the date of acquisition or,
with respect to internally constructed assets, from the time an asset is available for use. The costs of improvements to assets are
depreciated over shorter of the remaining useful life of the asset or the estimated useful life of the improvement.
The principal asset depreciation periods and estimated residual value percentages applied where material are:
Buildings and leasehold improvements
Plant and equipment
Passenger aircraft and engines
Freighter aircraft and engines
Aircraft spare parts
Years
Residual Value (%)
0 – 40
2.5 – 20
2.5 – 25
2.5 – 20
15 – 20
0
0
0 – 10
0 – 10
0 – 10
Useful lives and residual values are reviewed annually and adjusted where appropriate, having regard to commercial and technological
developments, the estimated useful life of assets to the Qantas Group and the long-term fleet plan.
iv. Maintenance and Overhaul Costs
Embedded Maintenance:
An element of the cost of an acquired aircraft is attributed to its service potential, reflecting the maintenance condition of its engines
and airframe. This cost is depreciated over the shorter of the period to the next major inspection event, the remaining life of the asset or
the remaining lease term.
Subsequent Maintenance Expenditure:
The costs of subsequent major cyclical maintenance checks for owned and leased aircraft are recognised as an asset and depreciated
over the shorter of the scheduled usage period to the next major inspection event, the remaining life of the aircraft or lease term (as
appropriate to their estimated residual value). Maintenance checks which are covered by third-party maintenance agreements where
there is a transfer of risk and legal obligation are expensed on the basis of hours flown. All other maintenance costs are expensed as
incurred.
Modifications:
Modifications that enhance the operating performance or extend the useful lives of aircraft are capitalised and depreciated over the
remaining estimated useful life of the asset or remaining lease term (as appropriate to their estimated residual value).
v. Manufacturers’ Credits
The Qantas Group receives credits from manufacturers in connection with the acquisition of certain aircraft and engines. These
credits are recorded as a reduction to the cost of the related aircraft and engines, when the credits are utilised by the Group.
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For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) LEASES
The Group predominantly leases passenger aircraft and engines, freighter aircraft, domestic and international properties, and
equipment. Lease contracts are typically entered into for fixed periods but may have extension options.
Initial Recognition
i.
Leases (other than those described below) are recognised as a lease liability with a corresponding right of use asset at the date at
which the leased asset is available for use by the Group.
Scope
AASB 16 applies to contracts which convey the right to control the use of an identified asset for a period of time in exchange
for consideration. Control is conveyed where the Group has both the right to direct the use of the identified asset and to obtain
substantially all the economic benefits from the use of the asset throughout the period of use.
Short-term leases (lease term of 12 months or less from the commencement date and that do not contain a purchase option) and
leases of low-value assets are not recognised as lease liabilities. Lease payments on short-term leases and leases of low-value assets
are recognised as an expense in the Consolidated Income Statement as incurred.
For contracts that include lease components and non-lease components, these are separated based on their relative stand-alone
selling prices. The lease component is recognised as a lease under AASB 16 and the non-lease component is recognised as an
expense in the Consolidated Income Statement as incurred. This includes, for example, certain Capacity Hire arrangements where a
third party provides aircraft (lease component) to the Group together with other services such as crew and maintenance (non-lease
components).
Lease liability
At the lease commencement date, lease liabilities are initially measured at the present value of lease payments over the lease term.
Lease payments include fixed payments (less any lease incentives receivable), variable payments that are based on an index or a rate
(initially measured using the index or rate as at the commencement date) and, where relevant, the exercise price of a purchase option
(where it is reasonably certain that option will be exercised).
The lease term includes the non-cancellable period for which the Group has contracted to lease the asset, together with any option
terms to extend the lease if reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if
reasonably certain not to be exercised. When determining the lease term for cancellable leases or renewable leases the Group
considers both the broader economics of the contract (and not only contractual termination payments) and whether each of the parties
has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. Such leases
include, for example, leases which have expired and are legally cancellable by both the lessor and lessee and/or leases which contain
holdover arrangements which allow the lessee to continue to occupy the property beyond the lease end date until the arrangement is
cancelled by either the lessee or the lessor.
Lease payments are discounted using the Group's incremental borrowing rate where the implicit interest rate in the lease is not readily
determined. The Group's incremental borrowing rate is the rate that the Group would have to pay to borrow the funds necessary to
obtain an asset of similar value or the right to use an asset in an economic environment with similar terms and conditions.
Right of use asset
At the lease commencement date, right of use assets are measured at an amount equal to the initial measurement of the lease liability
(adjusted for any lease payments made at or before the commencement date), and an initial estimate of the present value of restoration
or return costs that arise at lease commencement (with the corresponding amount recognised as a provision under AASB 137 Provisions,
Contingent Liabilities and Contingent Assets), less any lease incentives received.
ii. Subsequent Measurement
Lease liability
Lease payments are allocated between principal and interest payments. The interest expense is recognised in the Consolidated Income
Statement over the lease term to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Lease liabilities denominated in currencies other than the Group's functional currency are translated to Australian dollars at each
reporting date, however the right of use asset is recognised at the foreign exchange rate at initial recognition.
From 1 July 2019, in accordance with the Group's Treasury Risk Management Policy, certain foreign currency lease liabilities (for
example, aircraft leases denominated in US dollars) have been designated as a hedging instrument of future corresponding foreign
currency revenues (for example, US dollar revenues) in a cash flow hedge relationship. The effective portion of the foreign exchange
revaluation of the lease liability is recognised in 'Other Comprehensive Income' and is recycled to the Consolidated Income Statement
within 'Net Passenger Revenue' when the hedged item is realised.
In accordance with AASB 9, the hedge relationship was designated prospectively from 1 July 2019. For the comparative periods before
this designation (year ended 30 June 2019) the foreign exchange movements on lease liabilities recognised upon adoption of AASB 16
are recognised in the Consolidated Income Statement within 'Other Expenses'.
The lease liability is remeasured where there is a change in future lease payments arising from a change in index or rate, if there is a
change in the Group's estimate of amounts expected to be payable under a residual value guarantee or if there is a change in the lease
term, including the Group’s assessment of whether it will exercise a purchase, extension or termination option (reassessed where there
is a significant event or change in circumstances that is within the Group's control and affects the ability to exercise, or not to exercise,
an option). Where the lease liability is remeasured in this way, a corresponding adjustment is recognised to the right of use asset or is
recorded in the Consolidated Income Statement if the carrying amount of the right of use asset has been reduced to zero.
Right of use asset
Right of use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The
right of use asset is adjusted for certain changes in the lease liability.
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For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) LEASES (CONTINUED)
iii. Amendment to AASB 16
In May 2020, the IASB issued amendments to AASB 16 to provide an optional relief to lessees from applying AASB 16’s guidance on
lease modification accounting for rent concessions if they are a direct consequence of COVID-19 and meet certain conditions specified
in the amendment. The practical expedient allows the lessee to recognise a forgiveness or waiver of lease payments as a variable lease
payment in the income statement and a corresponding derecognition of the part of the lease liability that has been extinguished by the
forgiveness or waiver of lease payments. The practical expedient also provides guidance on accounting for rent deferrals whereby a
change in lease payment that reduces the payment in one period and proportionally increases the payment in another does not extinguish
the lessee’s lease liability nor changes the consideration for the lease. The lessee would continue to recognise lease payment deferrals
within the lease liability.
The Group has determined that it meets the conditions to apply the practical expedient and has applied the practical expedient in
accounting for rent concessions. The impact of the application of this practical expedient is disclosed in Note 16.
iv. Lease revenue
Lessor accounting under AASB 16 is substantially unchanged from AASB 117. Lessors continue to classify all leases using the same
classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases.
Where the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the
lease classification of a sub-lease with reference to the right to use asset arising from the head lease, not with reference to the underlying
asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease
as an operating lease.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term within
'Net Freight Revenue' and 'Other Revenue and Income'.
(J) INTANGIBLE ASSETS
i. Recognition and Measurement
Goodwill
Goodwill has an indefinite useful life and is stated at cost less any accumulated impairment
losses. With respect to investments accounted for under the equity method, the carrying amount
of goodwill is included in the carrying amount of the investment.
Airport landing slots
Airport landing slots have an indefinite useful life. Airport landing slots are not amortised and are
stated at cost less any accumulated impairment losses.
Brand names and trademarks Brand names and trademarks have an indefinite useful life and are carried at cost less any
accumulated impairment losses.
Software
Software is stated at cost less accumulated amortisation and impairment losses. Software
development expenditure, including the cost of materials, direct labour and other direct costs, is
only recognised as an asset when the Qantas Group controls future economic benefits as a result
of the costs incurred and it is probable that those future economic benefits will eventuate and the
costs can be measured reliably.
Customer
contracts/relationships
Customer contracts/relationships are carried at their fair value at the date of acquisition less
accumulated amortisation and impairment losses.
Contract intangible assets
Contract intangible assets are stated at cost less accumulated amortisation. Amortisation
commences when the asset is ready for use.
The Group considers that there are no individual intangible assets that are material for additional disclosure within the financial
statements.
ii. Subsequent Expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on internally-generated goodwill and brands, is recognised in the Consolidated
Income Statement as incurred.
iii. Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method
over their estimated useful lives and is recognised in the Consolidated Income Statement. Goodwill, brand names and trademarks and
airport landing slots are indefinite lived intangible assets and are allocated to the relevant CGU. These indefinite lived intangible assets
are not amortised but tested annually for impairment. Contract intangible assets are not amortised until such time as the intangible
asset is ready for use but are tested annually for impairment.
The principal amortisation periods and estimated residual value percentages applied where material are:
Software
Years Residual Value %
2 – 10 years
0%
(K) INVENTORIES
Inventories are valued at the lower of cost and net realisable value. The cost is determined by the weighted average cost method.
Inventories include mainly engineering expendables, consumable stores and work-in-progress.
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For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) PAYABLES
These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year which are unpaid.
The amounts are unsecured and are usually paid within 30-60 days of recognition. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method, if the effect of discounting is material.
(M) PROVISIONS
A provision is recognised if, as a result of a past event, there is a present legal or constructive obligation that can be measured reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are not recognised for future
operating losses.
If the effect is material, a provision is determined by discounting the best estimate of the expected future cash flows required to settle
the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
The unwinding of the discount is treated as a finance expense in the Consolidated Income Statement.
Obligations are presented as current liabilities in the balance sheet if the Group does not have an unconditional right to defer settlement
for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Wages, salaries and
annual leave
Liabilities for wages, salaries and annual leave vesting to employees are recognised in respect of
employees’ services up to the end of the reporting period. These liabilities are measured at the amounts
expected to be paid when they are settled and include related on-costs, such as workers’ compensation
insurance, superannuation and payroll tax. The annual leave provision is discounted using corporate bond
rates which most closely match the expected settlement dates of the provision.
Long service leave
The liability for long service leave is recognised as a provision for employee benefits and measured at the
present value of estimated future payments to be made in respect of services provided by employees up
to the end of the reporting period. The provision is calculated using expected future increases in wage and
salary rates including related on-costs and expected settlement dates based on expected employee
usage. The provision is discounted using corporate bond rates which most closely match the expected
settlement dates of the provision. The unwinding of the discount is treated as a finance expense in the
Consolidated Income Statement. Remeasurements as a result of experience adjustments and changes in
assumptions are recognised in the Consolidated Income Statement.
Redundancies and
other employee
benefits
Redundancy provisions are recognised as an expense at the earlier of when the Group can no longer
withdraw the offer of those benefits and when the Group recognises costs for a restructuring. These
benefits are expected to be settled wholly within 12 months of the end of the reporting period.
Other employee benefits such as discretionary bonus amounts due to non-executive employees are
recognised as a provision where the Group has a legal or constructive obligation to make the payment to
non-executive employees and the amount can be reliably measured.
Onerous contracts
An onerous contract is a contract in which the unavoidable cost of meeting the obligations under the
contract exceeds the economic benefit expected to be received.
A provision for onerous contracts is measured at the present value of the lower of the expected cost of
terminating the contract and the expected net cost of continuing with the contract. Before a provision is
established, the Group recognises any impairment loss on the assets associated with that contract.
Make good on
leased assets
Insurance, legal
and other
Aircraft: An initial estimate of the present value of restoration or return costs that arise at lease
commencement are recognised as a provision with a corresponding amount recognised as part of the
initial recognition of the right of use asset and depreciated over the lease term. Changes in this provision
are recognised as an adjustment to the right of use asset.
Provisions for return costs that occur over the lease term through usage or the passage of time are
recognised as an expense when they occur.
Property and environment: An initial estimate of the present value of restoration costs that arise at lease
commencement are recognised as a provision with a corresponding amount recognised as part of the
initial recognition of the right of use asset and depreciated over the lease term. Changes in this provision
are recognised as an adjustment to the right of use asset.
Where the usage of property or land gives rise to an obligation for rehabilitation, the Group recognises a
provision for the costs associated with restoration.
Insurance: The Qantas Group self-insures for risks associated with workers’ compensation in certain
jurisdictions. Qantas has made a provision for all notified assessed workers’ compensation liabilities,
together with an estimate of liabilities incurred but not reported, based on an independent actuarial
assessment. The provision is discounted using pre-tax rates that reflect current market assessments of the
time value of money and the risks specific to the liabilities and which have maturity dates approximating
the terms of Qantas’ obligations. Workers’ compensation for all remaining employees is commercially
insured.
Legal and other provisions: These are recognised where they are incurred as a result of a past event,
there is a legal or constructive obligation that can be measured reliably and it is probable that an outflow
of economic benefits will be required to settle the obligation.
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For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(N) OTHER EMPLOYEE BENEFITS
Employee share plans
The grant date fair value of equity-settled share-based payment awards granted to employees is recognised as an expense, with a
corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect
the number of awards for which related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the
vesting date. For share-based payment awards with market performance conditions, the grant date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of equity-based entitlements settled in cash is recognised as an employee expense with a corresponding increase in
liability over the period during which employees unconditionally become entitled to payment. The liability is remeasured at each
reporting date and at settlement date based on the fair value. Any changes in the fair value of the liability are recognised as an
employee expense in the Consolidated Income Statement.
Defined contribution superannuation plans
The Qantas Group contributes to employee defined contribution superannuation plans. Contributions to these plans are recognised as
an expense in the Consolidated Income Statement as incurred.
Defined benefit superannuation plans
The Qantas Group’s net obligation with respect to defined benefit superannuation plans is calculated separately for each plan. The
Qantas Superannuation Plan has been split based on the divisions which relate to accumulation members and defined benefit members.
Only defined benefit members are included in the Qantas Group’s net obligation calculations. The calculation estimates the amount of
future benefit that employees have earned in return for their service in the current and prior periods, which is discounted to determine
its present value, and the fair value of any plan assets is deducted.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When
the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available
in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic
benefits, consideration is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability or asset, which comprise actuarial gains and losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling are recognised immediately in other comprehensive income. The Group determines the net
interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the
defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability/(asset), taking into account any
changes in the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest
expense and other expenses related to defined benefit plans are recognised in the Consolidated Income Statement.
The discount rate used is the corporate bond rate which has a maturity date that approximates the expected terms of Qantas’ obligations.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately
in the Consolidated Income Statement as past service costs. The Group recognises gains and losses on the settlement of a defined
benefit plan when the settlement occurs.
(O) NET FINANCE COSTS
Net finance costs comprise interest payable on borrowings calculated using the effective interest method, unwinding of the discount
rate on lease liabilities, provisions and receivables, interest receivable on funds invested and gains and losses on mark-to-market
movements in fair value hedges. Finance income is recognised in the Consolidated Income Statement as it accrues, using the effective
interest method.
Finance costs are recognised in the Consolidated Income Statement as incurred, except where interest costs relate to qualifying
assets, in which case they are capitalised to the cost of the assets. Qualifying assets are assets that necessarily take a substantial
period of time to be made ready for intended use. Where funds are borrowed generally, borrowing costs are capitalised using the
average interest rate applicable to the Qantas Group’s debt facilities.
(P) CAPITAL AND RESERVES
i. Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares are recognised as a
deduction from equity, net of tax.
ii. Repurchase of Share Capital
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is
recognised as a deduction from equity.
iii. Treasury Shares
Shares held by the Qantas-sponsored Employee Share Plan Trust are recognised as treasury shares and deducted from equity.
iv. Employee Compensation Reserve
The fair value of equity plans granted is recognised in the employee compensation reserve over the vesting period. This reserve will
be reversed against treasury shares when the underlying shares vest and transfer to the employee at the fair value. The difference
between the fair value at grant date and the cost of treasury shares used is recognised in retained earnings (net of tax).
116
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(P) CAPITAL AND RESERVES (CONTINUED)
v. Hedge Reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments and
the cumulative change in fair value arising from the time value of options related to future forecast transactions. Gains or losses relating
to ineffective portions are recognised immediately in the Consolidated Income Statement.
The amounts within Hedge Reserve reclassified to the Consolidated Income Statement in the same period or periods during which the
hedged forecast cash flows affect profit or loss or the hedged item affects profit or loss. Where the hedged item is capital in nature, the
cumulative gain or loss recognised in the hedge reserve is transferred to the carrying amount of the asset when the asset is
recognised.
If the forecast transaction is no longer expected to occur, the hedge no longer meets the criteria for hedge accounting, the hedging
instrument expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is de-designated
prospectively. As a result, the amount accumulated in the Hedge Reserve is reclassified to the Consolidated Income Statement
immediately.
vi. Foreign Currency Translation Reserve
The Foreign Currency Translation Reserve comprises all foreign exchange differences arising from the translation of the Financial
Statements of foreign controlled entities and investments accounted for under the equity method.
vii. Other Reserves
Other reserves includes the defined benefit reserve comprising the remeasurements of the net defined benefit asset/(liability) which
are recognised in other comprehensive income in accordance with AASB 119 Employee Benefits and the fair value reserve comprising
the fair value gains/(losses) on investments at fair value through Other Comprehensive Income.
viii. Dividends
A provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Group,
on or before the end of the reporting period but not distributed at the end of the reporting period. Where the Group has revoked a declared
dividend, it is no longer recognised as a provision.
(Q) COMPARATIVES
The comparative balances have been restated for the adoption of AASB 16 Leases and the IFRIC agenda decision in relation to the
treatment of fair value hedges of foreign currency risk and non-financial assets (IFRS Fair Value hedging agenda decision). Refer to
Note 38 for details of the restatement.
Where applicable, comparative balances have been reclassified to align with current period presentation. A reclassification to
decrease Payables (Current Liability) and increase Revenue Received in Advance (Current Liability) by $99 million has been made
in the comparative Consolidated Balance Sheet for the year ended 30 June 2019 to align with current period presentation (June 2018:
$81 million).
(R) SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the CODM, being the Chief Executive
Officer, Group Management Committee and the Board of Directors.
Underlying EBIT is the primary reporting measure used by the CODM, for the purpose of assessing the performance of the operating
segments, with the exception of the Corporate segment which is assessed using Underlying PBT. Underlying EBIT of the Qantas Group’s
operating segments is prepared and presented on the basis that it reflects the revenue earned and the expenses incurred by each
operating segment. The significant accounting policies applied in implementing this basis of preparation are set out below. These
accounting policies have been consistently applied to all periods presented in the Consolidated Financial Statements.
Segment Performance
Measure
Basis of Preparation
External segment
revenue
External segment revenue is reported by operating segments as follows:
– Net passenger revenue is reported by the operating segment that operated the relevant flight or
provided the relevant service. For Qantas Airlines, where a multi-sector ticket covering international
and domestic travel is sold, the revenue is reported by Qantas International and Qantas Domestic on a
pro-rata basis using an industry standard allocation process
– Other revenue is reported by the operating segment that earned the revenue.
Inter-segment
revenue
Inter-segment revenue for Qantas Domestic, Qantas International and Jetstar Group operating segments
primarily represents:
– Net passenger revenue arising from the redemption of Frequent Flyer points for Qantas Group flights
by Qantas Loyalty
– Net freight revenue from the utilisation of Qantas Group’s aircraft bellyspace.
Inter-segment revenue for Qantas Loyalty primarily represents marketing revenue arising from the
issuance of Frequent Flyer points to Qantas Domestic, Qantas International and Jetstar Group. Inter-
segment revenue transactions, which are eliminated on consolidation, occur in the ordinary course of
business at prices that approximate market prices. The inter-segment arrangements with Qantas Loyalty
are not designed to derive a net profit from inter-segment Frequent Flyer point issuances and redemptions.
117
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
37 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(R) SEGMENT REPORTING (CONTINUED)
Segment Performance
Measure
Basis of Preparation
Share of net profit/(loss)
of investments
accounted for under the
equity method
Share of net profit/(loss) of investments accounted for under the equity method is reported by the operating
segment that is accountable for the management of the investment. The share of net profit/(loss) of
investments accounted for under the equity method for Qantas Airlines’ investments has been equally
shared between Qantas Domestic and Qantas International.
Underlying EBITDA
The significant expenses impacting Underlying EBITDA are as follows:
– Manpower and staff-related costs are reported by the operating segment that utilises the manpower.
Where manpower supports both Qantas Domestic and Qantas International, costs are reported by
using an appropriate allocation methodology
– Fuel expenditure is reported by the segment that consumes the fuel in its operations
– Aircraft operating variable costs are reported by the segment that incurs these costs
– All other expenditure is reported by the operating segment to which it is directly attributable or, in the case
of Qantas Airlines, between Qantas Domestic and Qantas International using an appropriate allocation
methodology.
To apply this accounting policy, where necessary, expenditure is recharged between operating segments
as a cost recovery.
Depreciation and
amortisation
Qantas Domestic, Qantas International and Jetstar Group report depreciation expense for passenger and
freight aircraft owned by the Qantas Group and flown by the segment. Other depreciation and amortisation
is reported by the segment that uses the related asset.
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP
ADOPTION OF AASB 16 LEASES
AASB 16 Leases replaces AASB 117 Leases, AASB Interpretation 4 Determining whether an Arrangement contains a Lease, AASB
Interpretation 115 Operating Leases–Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal
Form of a Lease. The Group adopted AASB 16 from 1 July 2019. AASB 16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for most leases under a single on balance sheet model, similar
to the accounting for finance leases under AASB 117.
Summary of impact of AASB 16
Under AASB 16, at the commencement date of a lease, a lessee recognises a liability to make lease payments (i.e. lease liability) and
an asset representing the right to use the underlying asset during the lease term (i.e. right of use asset).
– Lease liabilities are initially measured at the present value of lease payments over the lease term
– Right of use assets are measured at an amount equal to the lease liability (adjusted for any lease payments made at or before the
commencement date), an initial estimate of restoration or return costs that arise at lease commencement (with the corresponding
amount recognised as a provision under AASB 137 Provisions, Contingent Liabilities and Contingent Assets), less any lease
incentives received.
Lessees separately recognise the interest expense on the lease liability and depreciation expense on the right of use asset. Interest
expense is highest at the beginning of the lease term, decreasing towards the end of the lease term as the lease liability is amortised.
Previously under AASB 117, the Group's leases were classified as either finance or operating leases. Operating leases (primarily
aircraft and property) were not recognised on the Consolidated Balance Sheet. Payments made under operating leases (net of any
incentives received from the lessor) were recognised in the Consolidated Income Statement on a straight-line basis over the term of
the lease.
The adoption of AASB 16 did not require any changes to the recognition or measurement of leases previously recognised as finance
leases under AASB 117. Leases previously classified as finance lease assets and finance lease liabilities have been transferred to right
of use assets and lease liabilities respectively on adoption of AASB 16.
Under AASB 16, within the Consolidated Cash Flow Statement, lease payments are split between interest paid (recognised in Operating
Cash Flows) and repayments of lease liabilities (recognised in Financing Cash Flows). Previously under AASB 117, all lease payments
for operating leases were recognised as an outflow within Operating Cash Flows. Lease payments for finance leases were previously
split between interest payments and finance lease principal repayments which is unchanged under AASB 16.
Under AASB 16, the initial estimate of the present value of the expected aircraft restoration or return costs that arise at lease
commencement is included within the right of use asset at the inception of the lease with an associated provision. This has resulted
in the earlier recognition of lease return provisions, which is reflected in the AASB 16 remeasurements. Provisions for expected
aircraft restoration or return costs that do not arise at lease commencement continue to be recognised over the lease term. The Group
identifies lease return obligations and estimates the cost of meeting these obligations at the end of the lease term using observable
data and forward-looking judgements. Previously under AASB 117, a provision to meet expected aircraft restoration or return costs
was recognised over the lease term.
118
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP (CONTINUED)
Transition
The Group adopted AASB 16 using the full retrospective method from 1 July 2019. Under this approach, the Group's lease liabilities,
right of use assets and other related balances are measured as if AASB 16 had applied from the lease commencement date of each
relevant lease in place at 1 July 2018. This has resulted in the restatement of the Consolidated Balance Sheet as at 30 June 2018 and
30 June 2019, the Consolidated Income Statement and the Consolidated Cash Flow Statement for the year ended 30 June 2019.
The Group elected to use the exemptions proposed by the standard on short-term leases and lease contracts for which the underlying
asset is of low value.
The Group's restated Consolidated Balance Sheet, Consolidated Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Cash Flow Statement and Earnings Per Share which reflect the adoption of AASB 16 are presented in Note 38(A) to 38(D).
The Group's revised accounting policies for leases under AASB 16 are provided in Note 37(I).
Capital Management
The Group's Financial Framework is outlined in Note 23(C) and is unchanged by the adoption of AASB 16. The Framework includes
maintaining an optimal capital structure that minimises the cost of capital, by holding an appropriate level of net debt. The appropriate
level of net debt reflects the Qantas Group's size, measured by Invested Capital. This is consistent with investment grade credit metrics.
The adoption of AASB 16 increased both total asset and total liabilities recognised on the Consolidated Balance Sheet resulting in a
change to the reconciliation between the Consolidated Balance Sheet and net debt under the Group's Financial Framework.
Net debt is a non-statutory measure which includes on balance sheet interest-bearing liabilities (which does not include lease liabilities
under AASB 16) and Capitalised Aircraft Lease Liabilities measured under the Group's Financial Framework.
Capitalised Aircraft Lease Liabilities are measured at fair value at the lease commencement date and remeasured over the lease term
on a principal and interest basis. The residual value of the Capitalised Aircraft Lease Liability denominated in a foreign currency is
translated at a long-term exchange rate.
This measurement of Capitalised Aircraft Lease Liabilities differs from the lease liability recognised on the Consolidated Balance Sheet
under AASB 16 which measures lease liabilities as the present value of lease payments over the lease term. Given lease terms are
usually shorter than the useful life of an aircraft, the lease liability recognised at lease commencement under AASB 16 (present value of
lease payments over the lease term) is generally lower than the Capitalised Aircraft Lease Liability included in net debt under the
Group's Financial Framework (full fair value of the aircraft).
The measurement of net debt under the Group's Financial Framework remains consistent following the adoption of AASB 16 and is
reconciled as follows:
– Net debt includes on balance sheet interest-bearing liabilities (which does not include Lease Liabilities) and Capitalised Aircraft
Lease Liabilities as outlined above
– Non-aircraft leases continue to be treated as a service cost rather than being separated into interest payments and debt repayments
(ROIC EBIT is adjusted to account for the full cash expense for non-aircraft leases)
– Upon adoption of AASB 16, finance leases which were previously classified as interest-bearing liabilities have been reclassified to
lease liabilities on the Consolidated Balance Sheet. Accordingly, Capitalised Aircraft Lease Liabilities under the Group's Financial
Framework have been increased to include finance leases, with no net impact to the Group's net debt.
The target net debt range of $4.5 billion to $5.6 billion is based on Invested Capital at 30 June 2020 of $6.0 billion.
Net debt
Metric
$B
4.5 to 5.6
June 2020
$B
June 2019
$B
4.7
4.7
IFRIC FAIR VALUE HEDGING AGENDA DECISION
In September 2019, the IFRS Interpretations Committee (IFRIC) published a final agenda decision in relation to the treatment of fair
value hedges of foreign currency risk on non-financial assets. IFRIC introduced new guidance and requirements in order to hedge
exposure to foreign currency risk in the fair value of non-financial assets.
The Group had historically used certain US dollar denominated interest-bearing liabilities as the hedging instrument in fair value hedges
of the foreign currency risk of certain non-financial assets (US dollar foreign currency risk in owned aircraft that are recognised as
property, plant and equipment in Australian dollars).
As a result of the agenda decision and new guidance, the Group is required to retrospectively apply the decision as a change in
accounting policy by removing the fair value hedge relationship. This has resulted in the restatement of the Consolidated Balance
Sheet as at 30 June 2018 and 30 June 2019, the Consolidated Income Statement and the Consolidated Cash Flow Statement for the
year ended 30 June 2019.
Revised hedge designations
From 1 July 2019, the Group has applied alternative hedging designations, in line with the Group's risk management framework, which
are unaffected by the IFRIC Fair Value hedging agenda decision.
The Group has designated certain US dollar denominated interest-bearing liabilities as a hedging instrument in cash flow hedges
of future corresponding foreign currency revenues in a cash flow hedge relationship. The effective portion of the foreign exchange
revaluation of the interest-bearing liability is recognised in Other Comprehensive Income and is recycled to the Consolidated Income
Statement within Net Passenger Revenue when the hedged item is realised. In accordance with AASB 9, this hedge relationship was
designated prospectively from 1 July 2019. For the comparative periods before this designation (year ended 30 June 2019) the foreign
exchange movements on foreign currency denominated interest-bearing liabilities are recognised in the Consolidated Income
Statement within Other Expenses.
119
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP (CONTINUED)
(A) CONSOLIDATED BALANCE SHEET RESTATEMENT
The impact on the Consolidated Balance Sheet as at 30 June 2018 is:
30 June 2018
$M
AASB 16
Remeasurements
$M
IFRIC
Fair Value Hedges
$M
30 June 2018
(restated)
$M
1,694
840
474
351
118
161
3,638
110
112
222
12,851
-
1,113
601
15,009
18,647
2,139
4,099
404
-
34
853
7
64
7,600
1,446
4,344
-
25
367
910
7,092
14,692
3,955
2,508
(115)
479
1,080
3,952
3
3,955
-
-
-
-
-
(5)
(5)
-
-
(56)
(52)
1,448
-
-
1,340
1,335
(3)
-
(12)
434
-
15
-
-
434
-
(81)
1,332
-
44
(99)
1,196
1,630
(295)
-
-
-
(295)
(295)
-
(295)
-
-
-
-
-
-
-
-
-
-
(108)
-
-
-
(108)
(108)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(32)
(32)
(32)
(76)
-
-
-
(76)
(76)
-
(76)
1,694
840
474
351
118
156
3,633
110
112
166
12,691
1,448
1,113
601
16,241
19,874
2,136
4,099
392
434
34
868
7
64
8,034
1,446
4,263
1,332
25
411
779
8,256
16,290
3,584
2,508
(115)
479
709
3,581
3
3,584
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other financial assets
Inventories
Assets classified as held for sale
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Investments accounted for under the equity method
Property, plant and equipment
Right of use assets
Intangible assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Income tax liabilities
Liabilities classified as held for sale
Total current liabilities
NON-CURRENT LIABILITIES
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Retained earnings
Equity attributable to the members of Qantas
Non-controlling interests
Total equity
120
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP (CONTINUED)
(A) CONSOLIDATED BALANCE SHEET RESTATEMENT (CONTINUED)
The impact on the Consolidated Balance Sheet as at 30 June 2019 is:
30 June 2019
$M
AASB 16
Remeasurements
$M
IFRIC
Fair Value Hedges
$M
30 June 2019
(restated)
$M
CURRENT ASSETS
Cash and cash equivalents
Receivables
Other financial assets
Inventories
Assets classified as held for sale
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Investments accounted for under the equity method
Property, plant and equipment
Right of use assets
Intangible assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Income tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Retained earnings
Equity attributable to members of Qantas
Non-controlling interests
Total equity
2,157
1,101
334
364
1
236
4,193
77
184
272
12,977
-
1,225
449
15,184
19,377
2,371
4,414
635
-
89
954
113
8,576
1,466
4,589
-
48
415
847
7,365
15,941
3,436
1,871
(152)
111
1,603
3,433
3
3,436
-
-
-
-
-
(5)
(5)
-
-
(55)
(52)
1,419
-
-
1,312
1,307
(5)
-
(25)
459
-
13
-
442
-
(62)
1,293
-
60
(109)
1,182
1,624
(317)
-
-
-
(317)
(317)
-
(317)
-
-
-
-
-
-
-
-
-
-
(149)
-
-
-
(149)
(149)
-
-
-
-
-
-
-
-
-
-
-
-
-
(44)
(44)
(44)
(105)
-
-
-
(105)
(105)
-
(105)
2,157
1,101
334
364
1
231
4,188
77
184
217
12,776
1,419
1,225
449
16,347
20,535
2,366
4,414
610
459
89
967
113
9,018
1,466
4,527
1,293
48
475
694
8,503
17,521
3,014
1,871
(152)
111
1,181
3,011
3
3,014
121
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP (CONTINUED)
(B) CONSOLIDATED INCOME STATEMENT RESTATEMENT
The impact on the Consolidated Income Statement for the year ended 30 June 2019 is:
30 June 2019
$M
AASB 16
Reclassifications
$M
IFRIC Fair
Value Hedges
$M
30 June 2019
(restated)
$M
REVENUE AND OTHER INCOME
Net passenger revenue
Net freight revenue
Other revenue and income
Revenue and other income
EXPENDITURE
Manpower and staff-related
Aircraft operating variable
Fuel
Depreciation and amortisation
Non-cancellable aircraft operating lease rentals
Share of net profit of investments accounted for under the
equity method
Impairment/(reversal of impairment) of assets and related costs
Redundancies and related costs
Net gain on disposal of assets
Other1
Expenditure
Statutory profit before income tax expense and net finance
costs
Finance income
Finance costs
Net finance costs
Statutory profit before income tax expense
Income tax expense
Statutory profit for the year
15,696
971
1,299
17,966
4,268
4,010
3,846
1,665
264
(22)
(39)
65
(217)
2,676
16,516
1,450
47
(232)
(185)
1,265
(374)
891
-
-
-
-
-
-
-
340
(264)
(1)
-
-
(8)
(132)
(65)
65
-
(97)
(97)
(32)
10
(22)
1. Other includes the impact of non-aircraft rentals, capacity hire, foreign exchange movements, other leases and reclassifications.
-
-
-
-
-
-
-
(9)
-
-
-
-
-
50
41
(41)
-
-
-
(41)
12
(29)
15,696
971
1,299
17,966
4,268
4,010
3,846
1,996
-
(23)
(39)
65
(225)
2,594
16,492
1,474
47
(329)
(282)
1,192
(352)
840
122
Q A N T A S A N N U A L R E P O R T 2 0 2 0
Notes to the Financial Statements continued
For the year ended 30 June 2020
38 NEW STANDARDS AND INTERPRETATIONS ADOPTED BY THE GROUP (CONTINUED)
(C) CONSOLIDATED CASH FLOW RESTATEMENT
The impact on the Consolidated Cash Flow Statement for the year ended 30 June 2019 is:
30 June 2019
$M
AASB 16
Remeasurements
$M
IFRIC
Value
Hedges
$M
30 June 2019
(restated)
$M
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash payments to suppliers and employees (excluding cash
payments to employees for redundancies and related costs and
discretionary bonus payments to non-executive employees)
Cash generated from operations
Cash payments to employees for redundancies and related costs
Discretionary bonus payments to non-executive employees
Interest received
Interest paid (interest-bearing liabilities)
Interest paid (lease liabilities)
Dividends received from investments accounted for under the equity
method
Australian income taxes paid
Foreign income taxes paid
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment and intangible assets
Interest paid and capitalised on qualifying assets
Payments for investments held at fair value
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of a controlled entity
Proceeds from disposal of shares in associate
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for share buy-back
Payments for treasury shares
Proceeds from interest-bearing liabilities
Repayments of interest-bearing liabilities
Repayments of lease liabilities
Dividends paid to shareholders
Aircraft lease refinancing
Net cash used in financing activities
Net decrease in cash and cash equivalents held
Cash and cash equivalents held at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
(D) EARNINGS PER SHARE RESTATEMENT
The impact on basic and diluted Earnings Per Share is as follows:
19,050
(15,876)
3,174
(58)
(25)
41
(168)
-
11
(156)
(12)
2,807
(1,944)
(42)
(60)
333
139
11
(1,563)
(637)
(98)
1,137
(744)
-
(363)
(88)
(793)
451
1,694
12
2,157
-
451
451
-
-
-
7
(101)
-
-
-
357
-
-
-
-
-
-
-
-
-
-
11
(368)
-
-
(357)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,050
(15,425)
3,625
(58)
(25)
41
(161)
(101)
11
(156)
(12)
3,164
(1,944)
(42)
(60)
333
139
11
(1,563)
(637)
(98)
1,137
(733)
(368)
(363)
(88)
(1,150)
451
1,694
12
2,157
Basic Earnings Per Share (cents)
Diluted Earnings Per Share (cents)
30 June 2019
as previously reported
Remeasurements
30 June 2019
(restated)
54.6
54.4
(3.1)
(3.1)
51.5
51.3
39 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED BY THE GROUP
The Group has not identified any standards or interpretations that have been issued, but are not yet effective that would have a material
impact on the Group when adopted.
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Directors’ Declaration
For the year ended 30 June 2020
1. In the opinion of the Directors of Qantas Airways Limited (Qantas):
a. The Consolidated Financial Statements and Notes are in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of the financial position of the Qantas Group as at 30 June 2020 and of its performance for the
financial year ended on that date
ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001
b. There are reasonable grounds to believe that Qantas will be able to pay its debts as and when they become due and payable.
2. There are reasonable grounds to believe that Qantas and the controlled entities will be able to meet any obligations or liabilities to
which they are or may become subject to by virtue of the Deed of Cross Guarantee between Qantas and those controlled entities
pursuant to ASIC Corporations (Wholly-owned companies) instrument 2016/785 (Instrument).
3. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive
Officer and the Chief Financial Officer for the year ended 30 June 2020.
4. The Directors draw attention to Note 1(A) which includes a statement of compliance with International Financial
Reporting Standards.
Signed in accordance with a Resolution of the Directors:
Richard Goyder
Chairman
Alan Joyce
Chief Executive Officer
18 September 2020
18 September 2020
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Independent Auditor’s Report
For the year ended 30 June 2020
To the Shareholders of Qantas Airways Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the Financial Report of Qantas Airways
Limited (the Company).
The Group consists of the Company and the entities it controlled
at the year end and from time to time during the financial year.
In our opinion, the accompanying Financial Report of the Company
is in accordance with the Corporations Act 2001, including;
– giving a true and fair view of the Group’s financial position as
at 30 June 2020 and of its financial performance for the year
ended on that date; and
– complying with Australian Accounting Standards and the
Corporations Regulations 2001.
The Financial Report comprises the:
– Consolidated Balance Sheet as at 30 June 2020
– Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Changes
in Equity, and Consolidated Cash Flow Statement for the year
then ended
– Notes including a summary of significant accounting policies
– Directors’ Declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report
section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our
audit of the Financial report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
– Recoverability of non-current assets, in particular aircraft and
related assets
– Passenger revenue recognition
– Frequent Flyer revenue recognition
– Derivative financial instrument accounting
– Initial adoption of AASB 16 Leases
Key Audit Matters are those matters that, in our professional
judgment, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the
Financial Report as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Recoverability of non-current assets, in particular aircraft, and other related assets
Refer to Notes 12, 15, 17 and 25 to the financial report
THE KEY AUDIT MATTER
Assessment of the recoverability of non-current assets,
including aircraft, related spare parts and inventory was a
key audit matter due to:
– the significant cumulative value and long-lived nature of
these assets;
– the inherent uncertainty regarding the duration and
severity of COVID-19 related domestic and international
travel restrictions and resultant decrease in travel
demand;
– the estimates and assumptions used in the cashflow
projections which form the basis of the recoverable
amounts attributable to the Group’s Cash Generating
Units (“CGUs”) require significant judgement; and
– the recognition of an impairment of $1,018m related to
A380 aircraft, spare parts and inventory, not contributing
to CGUs, determined by estimating fair value less costs
of disposal with reference to external valuations.
We focused on significant forward-looking assumptions and
judgements, specifically:
– the Group’s Board approved Three-Year Recovery Plan
and terminal year growth rate used in the Group’s CGU
discounted cash flow models; and
– the fair value less costs of disposal (FVLCD) model, the
application of external valuations, and adjustments to
reflect remaining maintenance life for the 12 A380
aircraft and related assets.
We involved valuation specialists to supplement our senior
audit team members in assessing this key audit matter.
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Our procedures for assessing the CGU value in use models included:
– meeting with management to understand the impact of COVID-19 on
the Group, the mitigation strategies the Group is adopting in response
and how these are reflected in the Board approved Recovery Plan.
– comparing the assumptions in the Recovery Plan relating to the
easing of international and domestic travel restrictions and return of
travel demand to published views of market commentators, and
publicly available aviation industry reports relating to the impact
COVID-19 pandemic has on global passenger demand.
– analysing the Group’s monitoring and management of activities
based on internal reporting and the Recovery Plan to assess the
allocation of assets to CGUs and the identification of idle assets.
– considering the appropriateness of and assessing the integrity of the
value in use model applied by the Group for CGU impairment testing
against the requirements of the accounting standards.
– comparing the forecast cash flows and capital expenditure contained
in the value in use models to the Board approved Recovery Plan.
– considering the sensitivity of the models by varying key assumptions,
such as expected rate of recovery for the Group, terminal growth
rates and discount rates, within a reasonably possible range. We
considered the interdependencies of key assumptions and what the
Group considers to be reasonably possible.
– we challenged the Group’s forecast cash flow and growth
assumptions. We compared the recovery period and terminal growth
rates to authoritative published studies from external sources. We
used our knowledge of the Group and our industry experience. We
sourced authoritative and credible inputs from our specialists and
market advisors.
– working with our valuation specialists, we independently developed a
discount rate range considered comparable using market data for
comparable entities, adjusted by risk factors specific to the Group.
Working with our global aviation valuation specialists, our procedures for
assessing the fair value less costs of disposal (FVLCD) model used for
estimating the recoverable value of A380 aircraft, spare parts and
inventory included:
– meeting with appraisers from the two independent international
aircraft valuation specialists to understand their methodology
valuation, key assumptions, outlook for the aircraft type and to
discuss the reasonableness of the Group’s adjustments to reflect the
remaining maintenance life of the aircraft.
– assessing the objectivity of the independent aircraft valuation
specialists.
– comparing key inputs in the model to the relevant internal or external
sources, including the Group’s accounting records, engineering
records, invoices for maintenance activity, external price lists, Airbus
A380 fact sheets and foreign currency translation rates.
– assessing the integrity of the modelling used, including the accuracy
of the underlying calculation and formulae.
We assessed the disclosures in the financial report using our
understanding of the issue obtained from our testing and against the
requirements of the accounting standards, including those made with
respect to judgements and estimates.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Passenger revenue recognition
Refer to Note 4(A) and 37(D)(i) to the Financial Report
THE KEY AUDIT MATTER
Recognition of passenger revenue is a key audit matter due to:
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Our procedures included:
– its financial significance to the Group;
– the high volume of relatively low value passenger tickets;
– judgement within the estimate for the proportion of unused
tickets which are expected to expire (breakage).; and
– audit effort arising from a variety of ticket conditions and
points of sale.
Travel restrictions as a result of the COVID-19 pandemic
have resulted in a significant decline in global and domestic
travel demand, which resulted in a significant number of
cancelled flights during the reporting period. These flight
cancellations have caused a significant reduction in
passenger revenue and forward bookings and also
necessitated the payment of certain customer refunds.
Historical trend information which has been used in the past
to estimate breakage, has been supplemented by forward-
looking estimation with regard to the current conditions to
determine breakage at 30 June 2020.
Given the dependence on IT systems and controls, we
involved our IT specialists in addressing this key audit matter.
– for key revenue streams, we assessed the Group’s identification
of performance obligations and revenue recognised by comparing
to the relevant features of the underlying contracts.
– with the assistance of our IT specialists, we analysed the end to
end flow of ticket information through multiple passenger revenue
IT systems and interfaces to evaluate the recognition of revenue
against accounting standards.
– with the assistance of our IT specialists, we tested the key
controls restricting access to authorised users and preventing
unauthorised changes to the IT systems. We tested key controls
within the system relating to ticket validation and the recognition
of revenue at flight date.
– testing key controls related to management review and approval
of manual changes to revenue accounting records where tickets
have been identified as exceptions to automated validation.
– checking a sample of passenger revenue transactions to
underlying records including evidence of payment and flight
records to assess the accuracy of the revenue recognised.
– checking a sample of passenger revenue received in advance to
underlying records to assess the completeness of revenue
recognised.
– assessing the Group’s ability to reliably estimate ticket breakage
by comparing previous estimates to actual outcomes. We met
with senior management to understand the Group’s responses
regarding ticket holders impacted by cancelled flights from the
COVID-19 pandemic. Through these discussions, reviews of the
Group’s external announcements and documented internal
policies, we understood the effects of cancelled flights on
breakage estimates.
– checking the calculation and IT system reports in the Group’s
expectation of the proportion of tickets which will expire unused.
We evaluated the Group’s breakage assumptions against
historical trends, adjusting for the forecast impact of COVID-19 on
customer behaviour, and assessed for indicators of bias, using
our industry knowledge.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Frequent Flyer revenue recognition
Refer to Note 4(B) to the Financial Report
THE KEY AUDIT MATTER
Recognition of Frequent Flyer revenue is a key audit matter
due to the high level of audit effort and judgement required by
us in assessing the Group’s assumptions underpinning the
amount deferred as Unredeemed Frequent Flyer revenue. We
focused on the Group’s assumptions used in their estimation
of the:
– stand-alone selling price of the Qantas Points: this is
based on the observable price of available rewards
weighted in proportion to the expected redemptions, based
on historical experience, and impacted by future
unpredictable customer behaviour; and
– expected proportion of Qantas Points to be redeemed by
members in the future (breakage): the Group uses
actuarial experts to estimate the expected proportion of
Qantas Points to be redeemed by members in the future,
also based on future unpredictable customer behaviour
In the financial year, the Group was impacted by the global
travel restrictions implemented in response to the COVID-19
pandemic which resulted in a significant reduction in the
volume of Qantas Points earned and redeemed for flights,
and resulted in revisions to the program. The increased
uncertainty relating to the future volume of Qantas Points
earned and redeemed for flights and other changes to the
Frequent Flyer program required additional audit effort in the
current year.
Given the complex judgements, we involved our actuarial
specialists to supplement our senior team members in
addressing this key audit matter.
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Our procedures included:
– we assessed the Group’s methodology used to estimate the
stand-alone selling price of the Qantas Points against the
requirements of AASB 15 Revenue and the Group’s accounting
policy.
– we tested the integrity of the calculation used to estimate the
stand-alone selling price of Qantas Points, including the accuracy
of the underlying calculation formulas.
– we assessed the key inputs of the various redemption channels
used to estimate the stand-alone selling price of expected future
redemptions. We did this by comparing a sample to observable
market values, such as comparable market air fares. We
compared the weighting used in the calculation to historic
redemption patterns, taking into consideration the estimated future
volume of Qantas Points redeemed for flights and our
understanding of other changes in the Frequent Flyer program.
– involving our actuarial specialists, we assessed the
appropriateness of the Group’s breakage calculation by
developing an independent model using our understanding of the
Frequent Flyer program, accounting standard requirements and
comparing it to the Group’s calculation.
– involving our actuarial specialists, we assessed key breakage
assumptions against historical experience, recent trends and the
estimated future volume of Qantas Points earned and redeemed
for flights based on the Board approved Recovery Plan and our
understanding of other changes in the Frequent Flyer program.
– we compared the forecast easing of international and domestic
travel restrictions and return of travel demand in the Recovery
Plan to published views of market commentators seeking
authoritative and credible sources.
– we checked the accuracy of points activity data used in the
calculation of breakage to source Qantas Point’s system and
reports.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Derivative financial instrument accounting
Refer to Note 27 to the Financial Report
THE KEY AUDIT MATTER
Cash flow hedge accounting and valuation of financial
instruments is a key audit matter due to:
– the complexity inherent in the Group’s estimation of the fair
value of derivative financial instruments. The Group uses
market standard valuation techniques to determine the fair
value of options, swaps and cross-currency swaps not
traded in active markets;
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Our procedures included:
– testing the Group’s key internal controls. These included the
Group’s controls associated with:
– assessment and approval of the details of trades to
counterparty confirmations;
– assessment of hedge accounting designation; and
– the impact of changes in the underlying market price of
– assessment of the volume of hedged exposures compared to
fuel and foreign exchange rates which are key inputs to the
derivative valuations;
– the complexity in the Group’s cash flow hedge accounting
relationships driven by an active financial risk management
strategy, including the restructuring of specific exposures
over time;
– the volume of transactions and counterparties;
– the hedging of a high proportion of forecast future cash
flows; and
– the significance of the Group’s financial risk management
program on the financial results.
In the financial year the Group was impacted by COVID-19
which resulted in a significant decline in forecast flying activity
and fuel consumption. This resulted in the de-designation of
hedge relationships and release of deferred gains and losses
to the income statement where the hedged items were no
longer considered probable. This required additional audit
effort due to estimation uncertainty in consumption forecasts
and identifying the appropriate derivatives for de-designation
within restructured positions.
In assessing this key audit matter, we involved our valuation
specialists to supplement our senior team members, who
understand methods, inputs and assumptions relevant to the
Group’s derivative portfolio.
total exposures.
– we compared financial instrument fair values in the Group’s
accounting records to the records in the treasury risk
management system.
– with the assistance of our valuation specialists, we independently
estimated the fair values of the Group’s financial instruments as at
30 June 2020 using recognised market valuation methodologies
and inputs. We adjusted these fair values for the range of
acceptable market valuation techniques in estimating fair values
of instruments not traded in active markets. We compared the
Group's valuations recorded in the general ledger to these fair
value ranges.
– we tested a sample of cash flow hedge accounting designations
against the requirements of the accounting standard. This
included a sample of the restructured positions involving multiple
derivatives.
– we compared the Group’s forecast fuel consumption against the
Board approved Recovery Plan and ensured consistency with
other key forward looking assumptions
– we tested the Group’s derecognition of hedge relationships where
the hedged item is no longer considered probable.
– we evaluated the appropriateness of the classification and
presentation of derivative financial instruments and related
financial risk management disclosures against accounting
standard requirements.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Initial adoption of AASB 16 Leases
Refer to Note 38 to the Financial Report
THE KEY AUDIT MATTER
The initial adoption of AASB 16 Leases (“AASB 16”) is a key
audit matter due to the inherent complexity of adopting this
standard for the first time using the fully retrospective
transition approach, and specific lease features driving
different accounting outcomes, increasing the need for
interpretation, judgement and audit effort.
We focused on:
– the Group’s new accounting processes and controls
applied retrospectively to the lease portfolio as at 1 July
2018;
– the Group’s identification of a complete population of
leases, including embedded leases identified within service
agreements;
– incremental borrowing rates used incorporating specific
credit risk and lease term; and
– lease terms including the assessment of renewal,
purchase or termination options.
Applying AASB 16 fully retrospectively to the Group’s aircraft
lease agreements is complex. As a result the Group developed
an in-house model for its aircraft lease calculations. This
resulted in increased audit effort due to the greater risk for
potential error and inconsistent application.
In the financial year, the Group was impacted by COVID-19
and in response, negotiated a number of rent abatements
and deferrals with lessors. The Group applied the practical
expedient issued by the IASB in May 2020 and the
assessment of whether individual rent abatements met the
criteria of the practical expedient required additional audit
effort in the current year.
We involved our senior audit team members in assessing this
key audit matter, along with our debt advisory specialists.
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Our procedures included:
– we considered the appropriateness of the Group’s new
accounting policies against the requirements of the accounting
standard and our understanding of the business and industry
practice.
– we obtained an understanding of the Group’s new processes
used to calculate the lease liability, right of use asset, depreciation
and interest expense, and retained earnings adjustment.
– we assessed the completeness of the Group’s leases by:
– inquiring with the Group to understand their process to compile
the Group’s listing of leases;
– checking the Group’s listing of leases to the items included in
the operating lease commitments disclosure in the prior year’s
financial report;
– based on our understanding of the business we inspected a
sample of key agreements including service contracts for the
existence of embedded leases; and
– inspecting relevant expense accounts for payments during the
year to identify the existence of leases not included in the
Group’s listing of leases.
– we compared the Group’s inputs in the AASB 16 lease calculation
model, such as, key dates, fixed and variable rent payments,
incentives, renewal, purchase and termination options, and make
good obligations, for consistency to the relevant terms of a
sample of underlying source documents including signed lease
agreements, lessor’s invoices, and the Group’s bank statements.
– we assessed the Group’s determination of lease terms based on
the probability of the Group exercising the lease renewal or
termination options. We compared key management decisions for
consistency to board approved plans, strategies and past
practices.
– working together with our debt advisory specialists, we
independently developed a series of point estimates for the
incremental borrowing rates applied to the leases using the
corporate yield curve, adjusted by risk factors specific to the
Group, the industry it operates in, and each lease term. We
compared it to the incremental borrowing rates applied by the
Group.
– we assessed the integrity of the Group’s in-house model for its
AASB 16 aircraft lease calculations, including the accuracy of the
underlying calculation formulas.
– for a sample of leases, we recalculated the amount of lease
liability, right of use asset, depreciation and interest expense, and
retained earnings relevant to this financial year and compared our
recalculated amounts against the amounts recorded by the
Group.
– we tested a sample of rent abatements and deferrals to agreed
lease modifications and assessed against the requirements of the
practical expedient.
– We assessed the disclosures in the financial report using our
understanding obtained from our testing and against the
requirements of the accounting standard.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
Other Information
Other Information is financial and non-financial information in Qantas Airways Limited’s annual reporting which is provided in addition to
the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any
form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether
the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of Directors for the Financial Report
The Directors are responsible for:
– preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001
– implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error
– assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of
accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
– to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to
fraud or error; and
– to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the Financial Report.
A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance Standards
Board website at: www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.
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Independent Auditor’s Report continued
For the year ended 30 June 2020
REPORT ON THE REMUNERATION REPORT
Opinion
In our opinion, the Remuneration Report of Qantas Airways
Limited for the year ended 30 June 2019, complies with Section
300A of the Corporations Act 2001.
DIRECTORS’ RESPONSIBILITIES
The Directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
Section 300A of the Corporations Act 2001.
OUR RESPONSIBILITIES
We have audited the Remuneration Report included in pages 30
to 54 of the Directors’ report for the year ended 30 June 2020.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Andrew Yates
Partner
Sydney
18 September 2020
Caoimhe Toouli
Partner
Sydney
18 September 2020
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Shareholder Information
For the year ended 30 June 2020
The shareholder information set out below was applicable as at 14 August 2020.
TWENTY LARGEST SHAREHOLDERS
Shareholders
Ordinary Shares Held
% of Issued Shares
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
HSBC Custody Nominees (Australia) Limited (NT-CTH S C A/C)
BNP Paribas Noms Pty Ltd (DRP)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Pacific Custodians Pty Limited (Emp Share Plan Tst)
Pacific Custodians Pty Limited (QAN Plans Ctrl)
HSBC Custody Nominees (Australia) Limited – A/C 2
Morgan Stanley Australia Securities (Nominee) Pty Limited (No 1 A/C)
HSBC Custody Nominees (Australia) Limited-GSCO ECA
AMP Life Limited
UBS Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd (IB AU Noms Retail Client DRP)
Alan Joyce Pty Ltd
HSBC Custody Nominees (Australia) Limited
ECapital Nominees Pty Limited (Accumulation A/C)
Mrs Pamela Honora Ditchfield
Total
DISTRIBUTION OF ORDINARY SHARES
Analysis of ordinary shareholders by size of shareholding:
Number of Shares
1–1,0001
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
622,390,343
332,858,461
184,852,548
136,816,512
64,182,327
26,645,287
19,458,841
12,966,400
8,784,026
8,164,328
4,267,387
3,663,552
3,650,006
2,972,996
2,946,145
2,774,747
2,728,924
2,521,383
2,047,247
1,700,000
33.00
17.65
9.80
7.25
3.40
1.41
1.03
0.69
0.47
0.43
0.23
0.19
0.19
0.16
0.16
0.15
0.14
0.13
0.11
0.09
1,446,391,460
76.68
Ordinary
Shares Held
42,808,069
152,476,954
68,523,034
124,243,999
1,497,992,642
Number of
Shareholders
% of
Issued Shares
98,759
63,992
9,647
5,911
206
2.27
8.08
3.63
6.59
79.43
100.00
1,886,044,698
178,515
1. 7,358 shareholders hold less than a marketable parcel of shares in Qantas, as at 14 August 2020.
SUBSTANTIAL SHAREHOLDERS
The following shareholders have notified that they are substantial shareholders of Qantas:
Shareholders
Pendal Group Limited1
1. Substantial shareholder notice dated 6 November 2019.
Ordinary
Shares Held
82,037,038
% of
Issued Shares
5.22
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Financial Calendar and Additional Information
2020
2021
20 February Half year results announcement
25 February
Half year results announcement
30 June
Year end
9 March
Record date for interim dividend*
20 August
Preliminary final results announcement
13 April
Interim dividend payable*
23 October
Annual General Meeting
30 June
Year end
26 August
Preliminary final results announcement
14 September Record date for final dividend*
19 October
Final dividend payable*
5 November
Annual General Meeting
ADDITIONAL SHAREHOLDER INFORMATION
Using your Shareholder Reference Number (SRN) or Holder
Identification Number (HIN) and postcode of your registered
address, you are able to view your holding online through
Qantas’ share registry, Link Market Services. Log on at
www.linkmarketservices.com.au, where you will have the
option to:
– View your holding balance
– Retrieve holding statements
– Review your dividend payment history
– Access shareholder forms.
The Investor Centre also allows you to update or add details to
your shareholding, including the following:
– Change or amend your address if you are registered with
an SRN
– Nominate or amend your direct credit payment instructions
– Set up or amend your DRP instructions
– Sign up for electronic communications
– Add/change TFN/ABN details.
COMPANY SECRETARIES
Andrew Finch
Nicole Malone
Benjamin Elliott
An electronic copy of this Annual Report is available at
investor.qantas.com/home/
Further information about the Qantas Group can be found on our
corporate site at www.qantas.com/qantas-group
*Subject to a dividend declared by the Board.
2020 ANNUAL GENERAL MEETING
The 2020 AGM of Qantas Airways Limited will be held in Sydney
at 11am AEDT (Sydney time) on Friday 23 October 2020.
Further details are available in the Investors section on the Qantas
website investor.qantas.com/home/
COMPANY PUBLICATIONS
In addition to the Annual Report, the following publications can
be accessed from www.qantas.com/au/en/qantas-group/acting-
responsibly/our-reporting-approach.html
– Code of Conduct and Ethics
– Corporate Governance Statement
– Inclusion and Diversity Policy
– Workplace Gender Equality Reports.
REGISTERED OFFICE
Qantas Airways Limited ABN 16 009 661 901
10 Bourke Road, Mascot NSW 2020 Australia
Telephone +61 2 9691 3636
Facsimile +61 2 9490 1888
www.qantas.com
QANTAS SHARE REGISTRY
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000 Australia; or
Locked Bag A14, Sydney South NSW 1235 Australia
Telephone 1800 177 747 (toll free within Australia)
International +61 2 8280 7390
Facsimile +61 2 9287 0309
Email registry@qantas.com
SECURITIES EXCHANGE
Australian Securities Exchange
Exchange Centre, 20 Bridge Street,
Sydney NSW 2000 Australia
134
By 1971, the first Qantas Boeing 747 had landed and brought
with it low airfares that revolutionised international travel by
making it more accessible for Australians.
The first direct flight between Australia and Europe became a
reality in 2018 when the Qantas 787-9 Dreamliner made the shortest
and fastest version of the Kangaroo Route in its 70-year history.
The Qantas Annual Report 2020 is printed on ecoStar+ 100% Recycled Uncoated, which is manufactured
from 100% recycled post-consumer waste and is made carbon neutral. In 2019, this Report was printed
on the same recycled paper. By the end of 2021, the Qantas Group will be the first airline in the world to
reduce its waste to landfill by 75%.
Environment
ISO 14001
QANTAS AIRWAYS LIMITED
ABN 16 009 661 901