A N N U A L R E P O R T 2 0 2 3
LONDON
ROME
SEOUL
TOKYO
SHANGHAI
DELHI
HONG KONG
BENGALURU
(BANGALORE)
BANGKOK
MANILA
VANCOUVER
SAN FRANCISCO
LOS ANGELES
DALLAS
NEW YORK
NEW YORK
HONOLULU
SINGAPORE
JAKARTA
BALI
DILI
DARWIN
PORT MORESBY
HONIARA (SOLOMON ISLANDS)
APIA (SAMOA)
FIJI
NOUMEA
NUKU'ALOFA (TONGA)
PERTH
BRISBANE
ADELAIDE
MELBOURNE
SYDNEY
AUCKLAND
WELLINGTON
CHRISTCHURCH
QUEENSTOWN
SANTIAGO
JOHANNESBURG
FLYING FROM:
NOW FLYING
OCTOBER 2023
(SEASONAL SERVICE)
LONDON
ROME
JOHANNESBURG
SEOUL
TOKYO
SHANGHAI
DELHI
HONG KONG
BENGALURU
(BANGALORE)
BANGKOK
MANILA
SINGAPORE
JAKARTA
BALI
DILI
DARWIN
VANCOUVER
SAN FRANCISCO
LOS ANGELES
DALLAS
NEW YORK
NEW YORK
HONOLULU
PORT MORESBY
HONIARA (SOLOMON ISLANDS)
APIA (SAMOA)
FIJI
NOUMEA
NUKU'ALOFA (TONGA)
PERTH
BRISBANE
ADELAIDE
MELBOURNE
SYDNEY
AUCKLAND
WELLINGTON
CHRISTCHURCH
QUEENSTOWN
SANTIAGO
Contents
Financial Snapshot
Five-Year History
Chairman’s Message
Board of Directors
Review of Operations
Condensed Corporate Governance Statement
Directors’ Report
Financial Report
Shareholder Information
Financial Calendar and Additional Information
04
05
06
08
12
23
25
63
131
132
03
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Financial Snapshot1
$2.47 billion
UNDERLYING PROFIT
BEFORE TA X
$1.74 billion
STATUTORY PROFIT
AFTER TA X
96 cents
EARNINGS PER SHARE
$2.89 billion
NET DEBT
$10 billion
LIQUIDIT Y SOURCES 2
$1.0 billion
RETURNED TO
SHAREHOLDERS
Other Highlights
132%
INCREASE IN FLYING
COMPARED TO FY22
9 million
JETSTAR FARES
UNDER $100
10
NEW AIRCRAFT ARRIVALS
ACROSS QANTAS
AND JETSTAR
$340 million
IN BENEFITS SHARED
WITH EMPLOYEES
1 Refer to the Review of Operations section in the Qantas Annual Report 2023 for definitions and explanations
of non-statutory measures. Unless otherwise stated, amounts are reported on an underlying basis.
2 Includes $4.4 billion in cash and undrawn facilities and $5.6 billion in unencumbered assets.
04
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Q A N T A S A N N U A L R E P O R T 2 0 2 3
Five-Year History
FINANCIAL PERFORMANCE1
Revenue and other income
Statutory Profit/(Loss) Before Tax
Statutory Profit/(Loss) After Tax
Underlying Profit/(Loss) Before Tax
Underlying Earnings/(Loss) Before Interest
and Tax (EBIT)
Operating Margin
Earnings Per Share
Return on Invested Capital (ROIC)
Share price at 30 June
Dividend per share3
Cash flow from operations
Net Free Cash Flow
Net on balance sheet debt
Net Debt
Net capital expenditure
Shareholder distributions3
Unit Revenue (RASK)
Total unit cost4
Ex-fuel unit cost4
STATISTICS
Available Seat Kilometres (ASK)
Revenue Passenger Kilometres (RPK)
Passengers carried
Seat Factor
Aircraft at end of period
$M
$M
$M
$M
$M
%
cents
%
$
cents
$M
$M
$M
$M
$M
$M
c/ASK
c/ASK
c/ASK
M
M
‘000
%
2023
19,815
2,472
1,744
2,465
2022
9,108
(1,191)
(860)
(1,859)
20212
5,934
(2,299)
(1,692)
(1,774)
2,682
(1,558)
(1,473)
13.5
96.0
103.6
6.20
–
5,085
2,460
1,998
2,885
2,666
1,000
12.29
(10.19)
(6.30)
2023
117,258
97,693
45,725
83.3
336
(17.1)
(45.6)
(31.6)
4.47
–
2,670
2,430
2,617
3,937
398
–
9.48
(13.16)
(9.64)
2022
50,633
34,363
21,257
67.9
322
(24.8)
(89.9)
(21.4)
4.66
–
(386)
(1,108)
4,609
5,890
693
–
9.72
(15.76)
(12.67)
2021
29,374
18,557
15,866
63.2
315
2020
14,257
(2,708)
(1,964)
124
395
2.8
(129.6)
5.8
3.78
–
1,083
(488)
3,173
4,734
1,571
647
8.99
(8.87)
(6.22)
20192
17,966
1,192
840
1,326
1,608
9.0
51.5
19.2
5.40
25
3,164
1,601
2,980
4,710
1,563
1,000
8.85
(7.97)
(5.40)
2020
2019
111,870
151,430
92,027
40,475
82.3
314
127,492
55,813
84.2
314
1 Refer to the Review of Operations on pages 12 to 22 for definitions and explanations of non-statutory measures.
2 2021 has been restated for the impact of the adoption of the IFRIC agenda decision in relation to cloud computing. 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.
3 Dividend per share is reported as the interim and final dividend in relation to the relevant financial year. Shareholder
distributions includes dividends paid and share buy-backs and are reported in the year cash distributions are made.
4 Total unit cost is net expenditure (Underlying PBT excluding ticketed passenger revenue) per ASK. Ex-fuel unit cost is net
expenditure excluding fuel, share of profit/(loss) of investments accounted for under the equity method and discount rate
changes on provisions, per ASK.
05
Chairman’s Message
This past year has been extremely
challenging on a number of fronts —
both for our company and many of
our stakeholders.
OPERATIONAL CHALLENGES AND
INVESTMENT
We had significant issues as Qantas
and Jetstar’s flying ramped up
post-COVID, with supply chain and
resourcing challenges resulting in
too many cancellations and delays.
It was deeply disappointing and we
sincerely apologise.
Our people worked incredibly hard to
fix this, and by the end of the year
Qantas was the most on time of the
major domestic airlines for 11 out of
12 months.
Demand for travel has been very
strong and our flying increased to
carry 46 million people — more than
twice the number we carried the year
before. Importantly, our operational
safety performance across the Group
was strong, and this will always be our
top priority.
We took delivery of 10 new aircraft
during the year as we started a
decade-long renewal program of
our jet fleet. Over the next three
financial years alone, we’re investing
around US$4.3 billion in a mix of
wide and narrow-body aircraft,
which will open up new domestic
and international routes.
These aircraft also burn around 20
per cent less fuel, helping us towards
our interim net emissions reduction
targets for 2030.
06
REPUTATIONAL CHALLENGES AND
ACCOUNTABILITY
As we move through our recovery,
management and the Board are
acutely aware of the need to rebuild
your confidence in Qantas. We’re
also conscious of the loss of trust
that has occurred because our
service has often fallen short of
expectations, compounded by a
number of other issues relating to the
pandemic period.
In recognition of the customer and
brand impact of cumulative events,
the Board has applied its discretion
to reduce short term incentives for
senior executives in FY23. Details of
this are outlined in our Remuneration
Report on page 31.
In August 2023, the ACCC started
proceedings against Qantas for
alleged breaches of Australian
Consumer Law, dating back to our
difficult restart in the first half of
calendar 2022.
We take our obligations under
consumer law, and therefore these
allegations, very seriously and are
working through the legal process
now underway. What we can say in
the interim is Qantas’ longstanding
practice is that when a flight is
cancelled, customers are offered an
alternative flight or a refund. However,
in the interests of good governance,
the Board will withhold payments
under the FY23 short term incentive
program for senior executives while
this matter progresses.
In September 2023, the High Court
upheld the findings of the Federal
Court that Qantas’ decision to
outsource the remainder of its ground
handling function in 2020 was a
breach of the Fair Work Act.
While the Court endorsed that Qantas
had sound commercial reasons
for making this decision, it wasn’t
satisfied that we discharged the
reverse onus of proof that applied
in this case. We regret that the
circumstances in 2020 necessitated
difficult decisions across much of our
workforce, including the retrenchment
of the 1,700 workers involved. We
will be working with the Court on
appropriate compensation.
On any matter, management and the
Board only take a course of action
if they believe it’s lawful. However,
we also accept that there must be
accountability where those actions
are found to be otherwise, and we will
work through these and other issues
with relevant stakeholders.
RENEWAL
Both Board and Management are
undergoing a significant period
of renewal.
Alan Joyce retired in September 2023
after 15 years as Group CEO. Alan
guided the company through some of
the toughest periods in its history and
led some pivotal long-term decisions
on fleet and network. He openly
recognised that there were elements
of the COVID restart that could have
been managed better and took action
Q A N T A S A N N U A L R E P O R T 2 0 2 3 We have incredibly passionate people
working for us and we’re continuing
to invest heavily in skills development
for pilots, cabin crew and engineers.
On behalf of the Board, we are
committed to delivering strong,
sustainable outcomes for
all stakeholders.
Richard Goyder AO
to start turning that around. The
Board thanks him sincerely for his
enormous contribution.
Vanessa Hudson took over the role
as Group CEO and is expanding the
effort to serve our customers better.
Vanessa has restructured the Group
Management Committee with seven
new appointments, including creation
of a Chief People Officer role to help
increase the focus on what is our
most important asset.
The Board is also undergoing renewal.
As announced in May, Non-executive
Director Michael L’Estrange will step
down in November 2023 after seven
years of dedicated service.
Joining the board are Doug Parker
and Dr Heather Smith, who bring a
wealth of experience across aviation
and government affairs respectively.
These new appointments, including
Vanessa as Managing Director, are
subject to shareholder approval at
the AGM.
This process of Board renewal will
continue with a focus on the skills
and capabilities required for the
challenges and opportunities now in
front of us.
STRONG FOUNDATIONS FOR
IMPROVEMENT
As we face into the current
challenges, we can’t lose sight of
the fact that the Group is in a strong
position to manage them.
We have a pipeline of investment
that will improve what we deliver for
our customers – from new aircraft
to new routes and new lounges. We
are making significant investment in
digital technology that will put more
power in the hands of our people and
passengers. And we continue to grow
Qantas Loyalty and Qantas Freight.
Our ability to invest comes from a
strong balance sheet and strong
travel demand, which means we
can also keep delivering returns
to shareholders.
07
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Board of Directors
RICHARD GOYDER AO
VANESSA HUDSON
ALAN JOYCE AC
BCom, FAICD
BBus, CA
Chairman and Independent
Non-Executive Director
Chief Executive Officer and
Managing Director
Mr Goyder was appointed to the
Qantas Board in November 2017
and as Chairman in October 2018.
He is Chair of the Nominations
Committee.
Mr Goyder is Chairman of Woodside
Energy Group Ltd, the Australian
Football League Commission, the West
Australian Symphony Orchestra and
of 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 which includes business
leaders from all G20 economies)
and JDRF Australia.
Age: 63
08
Vanessa Hudson was appointed
as an Executive Director on 5 May
2023, and as Chief Executive
Officer and Managing Director on 6
September 2023.
She is a Member of the Safety, Health,
Environment and Security Committee.
Ms Hudson was previously Group
Chief Financial Officer for four years,
including through the pandemic and
the airline’s recovery.
She served as Qantas Chief Customer
Officer between February 2018 and
October 2019, with responsibilities
spanning all aspects of the customer
experience and strategy.
Joining Qantas in 1994, she has
held a variety of senior commercial,
customer and finance roles across
the Group, in Australia and overseas,
including Executive Manager of Sales
and Distribution, Senior Vice President
for Qantas across the Americas and
New Zealand, Executive Manager of
Commercial Planning and Executive
Manager for Product and Service. In
these various roles her responsibilities
ranged from sales channels, revenue
management and network planning,
to transformation in catering, airports
and network.
Vanessa has a Bachelor of Business
and was admitted as a Member of the
Institute of Chartered Accountants
in 1994.
Age: 53
BSc, MSc, MA, FRAeS, FTSE
Former Chief Executive Officer and
Managing Director
Alan Joyce was appointed Chief
Executive Officer and Managing
Director of Qantas in November 2008,
and retired on 5 September 2023.
He was a Member of the Safety, Health,
Environment and Security Committee.
Mr Joyce is Chairman of the Sydney
Theatre Company and a Director of the
Museum of Contemporary Art Australia.
Between June 2009 and October
2021, Mr Joyce was a Member of the
International Air Transport Association’s
Board of Governors, having served as
Chairman from 2012 to 2013.
He was also a Director of the Business
Council of Australia between November
2013 and November 2022 and 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.
Prior to that, 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: 57
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Board of Directors continued
MAXINE BRENNER
JACQUELINE HEY
BA, LLB
BCom, Grad Cert (Mgmt), GAICD
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.
She is Chair of the Remuneration
Committee, a Member of the Audit
Committee and a Member of the
Nominations Committee.
Ms Hey is Chair of Bendigo and
Adelaide Bank Limited and a Director
of the Commonwealth Superannuation
Corporation.
Ms Hey was also formerly a Director of
AGL Energy Limited from 2016 to 2022,
Cricket Australia from 2012 to 2020,
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: 57
She is a Member of the Remuneration
Committee and the Audit Committee.
Ms Brenner is a Director of Origin
Energy Limited, Telstra Group Limited
and Woolworths Group 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
Orica Limited, Neverfail Springwater
Limited, Bulmer Australia Limited,
Treasury Corporation of NSW and
Growthpoint Properties Australia
Limited. She also served as a Member
of the Australian Government’s
Takeovers Panel.
Age: 61
09
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Board of Directors continued
BELINDA HUTCHINSON AC
MICHAEL L’ESTRANGE AO
DOUG PARKER
BEc, FCA, FAICD
BA, MA (Oxon)
BEc, MBA
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Belinda Hutchinson was appointed
to the Qantas Board in April 2018.
Michael L’Estrange was appointed
to the Qantas Board in April 2016.
Doug Parker was appointed to the
Qantas Board in May 2023.
She is Chair of the Audit Committee,
a Member of the Nominations
Committee and a Member of the
Safety, Health, Environment and
Security Committee.
Ms Hutchinson is currently Chancellor
of the University of Sydney and a Non-
Executive Director of Thales Australia.
Ms Hutchinson was also Chairman
of the Future Generation Global
Investment Company between
May 2015 and June 2021.
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: 70
10
He is a Member of the Remuneration
Committee and Safety, Health,
Environment and Security Committee.
Mr Parker was CEO of American
Airlines from 2013 to March 2022, and
Chairman of the Board until April 2023.
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 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.
Mr L’Estrange was also a Non-
Executive Director of Rio Tinto plc and
Rio Tinto Limited between September
2014 and May 2021.
He has been a Director of the University
of Notre Dame, Australia since 2014
and 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 as a Master of Arts with First
Class Honours.
Age: 70
Previously, Mr Parker was Chairman
and CEO of US Airways. He served
as Chairman, President and CEO of
America West Airlines prior to the
merger of US Airways and America
West in 2005.
Mr Parker was also previously Vice
President, Assistant Treasurer and
Vice President of Financial Planning
and Analysis for Northwest Airlines.
From 1986 to 1991, he held several
financial management positions
with American Airlines.
He is a member of the Vanderbilt
University Board of Trust, the SMU Cox
School of Business Executive Board,
and the Medal of Honour Museum
Foundation Board of Directors.
Mr Parker earned a Bachelor of Arts
in Economics from Albion College
in 1984 and a Master of Business
Administration from Vanderbilt
University in 1986.
Age: 61
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Board of Directors continued
TODD SAMPSON
MBA, BA (Hons)
DR HEATHER SMITH PSM
ANTONY TYLER
PSM FAIIA, BEc (Hons), PhD
BA (Jurisprudence)
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Todd Sampson was appointed to the
Qantas Board in February 2015.
Dr Heather Smith was appointed to the
Qantas Board in August 2023.
Antony Tyler was appointed to the
Qantas Board in October 2018.
He is a Member of the Remuneration
Committee and a Member of the
Audit 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: 53
Dr Smith is a Non-Executive Director
of ASX Limited and Challenger Limited.
She is also a Fellow and National
President of the Australian Institute of
International Affairs.
Dr Smith has extensive experience
in public policy, innovation and
technological change, national security
and economic reform and a deep
knowledge of government and the
public sector.
Dr Smith has close to 20 years’
experience working in the Australian
Public Service at senior levels,
culminating in being Secretary of the
Department of Industry, Innovation and
Science from 2017 to 2020. She has
also previously served as Secretary of
the Department of Communications
and the Arts.
Dr Smith has also held senior positions
in the departments of Prime Minister
and Cabinet, Foreign Affairs and Trade,
and the Treasury, as well as the Office
of National Intelligence. Dr Smith
began her career at the Reserve Bank
of Australia.
Dr Smith has a PhD in Economics from
the Australian National University
(ANU) and is a Professor at the ANU
National Security College. She is also
an independent director of the Reef
Restoration and Adaptation Program.
Age: 58
He is Chair of the Safety, Health,
Environment and Security Committee
and a Member of the Nominations
Committee.
Mr Tyler was Director General and Chief
Executive Officer 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 as 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: 68
11
Q A N T A S A N N U A L R E P O R T 2 0 2 3 Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations
For the year ended 30 June 2023
RESULTS HIGHLIGHTS
Underlying Profit/(Loss) Before Tax
Statutory Profit/(Loss) After Tax
Return on Invested Capital
2,465 $M
1,744 $M
103.6 %
FY23
FY22
FY21
FY20
FY19
2,465
(1,859)
(1,774)
124
1,326
(860)
1,744
FY23
FY22
(1,692)
FY21
FY20 (1,964)
840
FY19
FY23
FY22
FY21
FY20
FY19
103.6%
(31.6%)
(21.4%)
5.8%
19.2%
The Qantas Group (referred to as the Qantas Group or the Group) reported Underlying Profit Before Tax1 (Underlying PBT) of $2,465 million for
the financial year 2022/23, a significant turnaround from the Underlying Loss Before Tax of ($1,859) million in financial year 2021/22. The
result was underpinned by Group capacity (ASKs2) returning to 77 per cent of pre-COVID levels in financial year 2022/23, ongoing strength in
travel demand, and the completion of the Group’s three-year Recovery Plan, including delivery of $1 billion in permanent cost benefits.
The recovery of Group capacity for financial year 2022/23 was driven by Group Domestic ASKs returning to 96 per cent of pre-COVID levels
and Group International ASKs back to 67 per cent of pre-COVID levels. Whilst the impacts of COVID-19 have abated, the Group continued to
experience industry recovery challenges which adversely affected operations. These included aircraft manufacturer delays, supply chain
dislocations, constrained labour availability and training, and limited heavy maintenance slots at MROs3. Significant investments were made
during the year to build up resilience against these factors, resulting in temporary costs and inefficiencies which are expected to unwind into
financial year 2023/24.
The Group’s Statutory Profit Before Tax was $2,472 million, improving by $3,663 million compared to the financial year 2021/22, with the
Statutory result including $7 million of net benefits, which were not included in Underlying PBT. Statutory Profit After Tax was $1,744 million.
For Group Domestic operations, the dual brand strategy continued to be core to the Group’s strategic proposition, with leadership across all
key segments of the market. Qantas Domestic delivered an Underlying EBIT of $1,270 million, achieving an EBIT margin4 of 18 per cent.
Jetstar Domestic delivered an Underlying EBIT of $255 million, achieving an EBIT margin of 11 per cent. The Group Domestic EBIT margin of 16
per cent was underpinned by cost transformation, structural network changes and strong leisure demand.
The Group’s International operations (including Freight) contributed an Underlying EBIT of $1,055 million. Rapid return of demand and a
gradual recovery in industry capacity resulted in strong Unit Revenue5 performance substantially above pre-COVID levels. As expected, this
unit revenue performance moderated in the second half as capacity progressively returned. The contribution from Qantas Freight,
approximately $150 million higher than pre-COVID periods, moderated from record levels in financial year 2021/22 as yields normalised and
passenger aircraft belly capacity returned.
Qantas Loyalty continued its strong performance delivering an Underlying EBIT of $451 million, with points earned and redeemed exceeding
pre-COVID levels. The result demonstrates the program’s unrivalled proposition with approximately one million new members joined in the last
12 months and an estimated one in five Australian SMEs6 now part of Qantas Business Rewards. Within the Loyalty ecosystem the coalition of
partners now exceeds 700 with this depth of engagement delivering over $2 billion in gross cash receipts in financial year 2022/23.
Other key financial metrics for the 2022/23 financial year include:
– Earnings Per Share of 96 cents per share
– Group operating margin of 14 per cent
– Three-year Recovery Plan complete, delivering $1 billion of permanent cost benefits
– Qantas Domestic and Qantas International (including Freight) achieving EBIT margins of 18 per cent and 12 per cent respectively
– Operating cash flow of $5.1 billion, driven by structural change in earnings and working capital rebuild
– Net Free Cash Flow of $2.5 billion.
The Group’s Financial Framework remains core to the Group’s strategy, driving sustainable financial strength to support investment and
shareholder returns whilst preserving financial flexibility. As at 30 June 2023, Net Debt under the Financial Framework was $2.89 billion,
below the Group’s target range of $3.7 billion to $4.6 billion.
During the year, the Group completed $1 billion of share buy-backs at an average price of $6.19 per share. With all pillars of the Group’s
Financial Framework met, the Board resolved to distribute further surplus capital to shareholders, announcing a further on-market share buy-
back of up to $500 million.
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 Profit Before Tax
on page 20.
2 Available Seat Kilometres – total number of seats available for passengers, multiplied by the number of kilometres flown.
3 Maintenance and Repair Organisation.
4 Underlying EBIT divided by Total Revenue, also referred to as Operating Margin.
5 Ticketed passenger revenue divided by ASKs.
6 Small to medium enterprise.
12
2,465(1,859)(1,774)1241,3261,744(860)(1,692)(1,964)840103.6%(31.6%)(21.4%)5.8%19.2% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
FINANCIAL FRAMEWORK ALIGNED WITH SHAREHOLDER OBJECTIVES
Qantas’ Financial Framework aligns our objectives with those of our shareholders with the aim of achieving top quartile shareholder returns
by targeting maintainable Earnings Per Share (EPS) growth over the cycle with industry-leading ESG7 credentials. The Financial Framework is
built on three clear priorities and associated long-term targets:8,9,10
1. Maintaining an optimal capital structure
Minimise cost of capital by targeting a Net Debt range
of 2.0x - 2.5x EBITDA where ROIC is 10 per cent
2. ROIC > WACC8 through the cycle
Deliver ROIC > 10 per cent9
Deliver against Climate Action Plan Targets
ESG included in business decisions
3. Disciplined allocation of capital
Grow Invested Capital with disciplined
investment and return surplus capital
Prioritise projects that exceed both ESG and ROIC
targets
INDUSTRY-LEADING ESG CREDENTIALS | MAINTAINABLE EPS GROWTH OVER THE CYCLE
TOTAL SHAREHOLDER RETURNS IN THE TOP QUARTILE
Maintaining an Optimal Capital Structure
The Group’s Financial Framework targets an optimal capital structure to achieve the lowest cost of capital. The range is based on a Net Debt
to 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. The Group’s optimal capital structure is consistent
with investment grade credit metrics and the Group maintains an investment grade Baa2 rating with Moody’s Investor Services.
At 30 June 2023, Net Debt was $2.89 billion, below the Net Debt target range.
Debt Analysis
Net on balance sheet debt
Capitalised operating lease liabilities10
Net Debt
June 2023
$M
June 2022
$M
1,998
887
2,885
2,617
1,320
3,937
Change
$M
(619)
(433)
(1,052)
Change
%
(24)
(33)
(27)
7 Environmental, Social and Governance.
8 Weighted Average Cost of Capital, calculated on a pre-tax basis.
9 10 per cent ROIC allows ROIC to be greater than pre-tax WACC through the cycle.
10 Capitalised aircraft lease liabilities are measured at fair value at the lease commencement date and remeasured over lease term on a principal and interest basis. Residual value of
capitalised aircraft lease liability denominated in foreign currency are translated at a long-term exchange rate.
13
Net Debt Profile FY19 to FY23 ($ billion)4.74.75.93.92.9Net Debt ($B)Target rangeFY19FY20FY21FY22FY23
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
FINANCIAL FRAMEWORK ALIGNED WITH SHAREHOLDER OBJECTIVES (continued)
ROIC > WACC Through the Cycle
The Return on Invested Capital (ROIC) for the 12 months to 30 June 2023 was 103.6 per cent. This ROIC was based on an average Invested
Capital of $2.6 billion which is significantly lower than pre-COVID levels. Group ROIC is expected to moderate in future periods as Invested
Capital rebuilds, however structural changes in earnings, and working capital benefits are expected to deliver Group ROIC in excess of pre-
COVID levels.
Disciplined Allocation of Capital
The Qantas Group takes a disciplined approach to allocating capital, with the aim to grow Invested Capital and return surplus capital to
shareholders. Net capital expenditure11 totalled $2,666 million during the financial year 2022/23. The Group returned $1 billion to
shareholders through an on-market share buy-back. This resulted in an 8.6 per cent reduction in shares on issue since 1 July 2022.
Upon considering the forward outlook for the business under its Financial Framework, the Board has resolved to announce an on-market
buy-back up to the value of $500 million.
Maintainable EPS Growth Over the Cycle
Earnings Per Share was 96 cents per share for the financial year 2022/23. The increase from financial year 2021/22 was driven by a
significant increase in the Statutory Profit After Tax coupled with the EPS accretion from completion of the $1 billion on-market buy-back in
financial year 2022/23.
11
GROUP PERFORMANCE
The Qantas Group reported an Underlying Profit Before Tax of $2,465 million for the 2022/23 financial year, a significant turnaround from the
Underlying Loss Before Tax of ($1,859) million in the financial year 2021/22.
Net passenger revenue increased by 184 per cent with the return of domestic and international operations. Net freight revenue decreased due
to a moderation in record yields achieved in financial year 2021/22 as international belly space capacity returned and other revenue
increased primarily due to revenue growth at Qantas Loyalty.
Group Underlying Income Statement Summary12
Net passenger revenue
Net freight revenue
Other
Revenue
Operating expenses (excluding fuel)
Fuel
Impairment
Depreciation and amortisation
Share of net (loss)/profit of investments accounted for under the equity method
Total underlying expenditure
Underlying EBIT
Net finance costs
Underlying PBT
June 2023
June 2022
$M
16,923
1,380
1,512
19,815
(10,771)
(4,555)
(1)
(1,762)
(44)
(17,133)
2,682
(217)
2,465
$M
5,951
1,963
1,194
9,108
(6,853)
(1,848)
(38)
(1,801)
(126)
(10,666)
(1,558)
(301)
(1,859)
June 2019
(pre-COVID)
$M
15,696
971
1,299
17,966
(10,599)
(3,846)
—
(1,936)
23
(16,358)
1,608
(282)
1,326
11 Net Capital Expenditure is equal to net expenditure from investing cash flows included in the Consolidated Cash Flow Statement and the impact to Invested Capital from the disposals/
acquisitions of leased aircraft.
12 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.
14
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
GROUP PERFORMANCE (continued)
Operating Statistics
Available Seat Kilometres (ASK)13
Revenue Passenger Kilometres (RPK)14
Passengers carried
Seat Factor15
Operating Margin16
Unit Revenue (RASK)17
Total Unit Cost18
June 2023
June 2022
117,258
97,693
45,725
83.3
13.5
12.29
(10.19)
50,633
34,363
21,257
67.9
(17.1)
9.48
(13.16)
June 2019
(pre-COVID)
151,430
127,492
55,813
84.2
9.0
8.85
(7.97)
M
M
000
%
%
c/ASK
c/ASK
Group capacity for the year (ASK) increased by 132 per cent with the return of domestic and international operations. Revenue Passenger
Kilometres increased by 184 per cent as the Group’s Seat Factor increased to 83 per cent, from 68 per cent. Group Unit Revenue increased 30
per cent to 12.29 c/ASK. Total Unit Cost decreased to 10.19 c/ASK with the continued return of Group capacity and the fixed cost base,
including depreciation and amortisation, being spread across significantly higher ASKs and as a result of the completion of the three-year
Recovery Plan, delivering $1 billion of permanent cost benefits.
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 the year
June
2023
$M
5,085
(2,625)
2,460
(2,628)
3,343
(4)
3,171
June
2022
$M
2,670
(240)
2,430
(1,310)
2,221
2
3,343
Change
$M
2,415
(2,385)
30
(1,318)
1,122
(6)
(172)
Change
%
90
>(100)
1
>(100)
51
>(100)
(5)
Operating cash inflows for the financial year 2022/23 were $5,085 million, underpinned by capacity growth, strong unit revenue performance,
the continued rebuild of Revenue Received in Advance and Loyalty billings generating significant positive cash flow.
Investing cash outflows for the financial year 2022/23 were ($2,625) million. Net capital expenditure19 was $2,666 million, which included ten
aircraft deliveries, pre-delivery payments and the balance primarily directed to capitalised maintenance.
Net financing cash outflows of ($2,628) million included $1,669 million debt repayments partially offset by $826 million drawdown of debt,
$682 million in net aircraft and non-aircraft lease repayments, and an on-market share buy-back of $1,000 million.
The Group 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.
13 ASK – total number of seats available for passengers, multiplied by the number of kilometres flown.
14 RPK – total number of passengers carried, multiplied by the number of kilometres flown.
15 Seat Factor – RPKs divided by ASKs. Also known as load factor or load.
16 Operating Margin is Group Underlying EBIT divided by Group total revenue.
17 Unit Revenue (RASK) is calculated as ticketed passenger revenue divided by Available Seat Kilometres (ASK).
18 Total Unit Cost is Underlying PBT less ticketed passenger revenue per ASK.
19 Net capital expenditure is equal to net investing cash flows in the Consolidated Cash Flow Statement and the impact to Invested Capital from the disposals/acquisitions of leased
aircraft.
15
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
FLEET
The Group’s strategic priorities for fleet planning are centred on three key principles: the right aircraft for the right route, maintaining flexibility
and maintaining competitiveness. The determination of the optimal fleet plan, including the availability of new technology, balances the level
of capacity growth required in the markets, the competitive landscape and whether the investment is earnings accretive. At all times, the
Group retains significant flexibility in its fleet to respond to changes in market conditions through fleet redeployment, refurbishment, lease
extension or return and retirement.
During the year, Qantas International took delivery of two 787-9 aircraft and QantasLink activated six additional wet lease E190s from Alliance
Airlines. An additional two A320-200 aircraft were transferred from Jetstar Australia to QantasLink to support the growing resource market
and one A320-200 was returned to the lessor. Nine next-generation A321LRs were also received in the Jetstar Group (one of the nine
A321neos went to Jetstar Japan, which is excluded from the table below) and one 737-300F was retired from freight operations.
At 30 June 2023, the Qantas Group fleet20 totalled 336 aircraft.
Fleet Summary (Number of Aircraft)
A380-80021
A330-20022
A330-300
737-800
787-9
Total Qantas
717-200
Q200/Q300
Q400
E190
F100
A320-200
Total QantasLink
A320-200
A321-200
A321LR
787-8
Total Jetstar
737-300F/737-400F
767-300F
A321-200F
747-8F
747-400F
Total Qantas Freight
Total Group
June
2023
10
18
10
75
13
126
20
19
31
18
18
13
119
56
6
8
11
81
4
1
3
–
2
10
June
2022
10
18
10
75
11
124
20
19
31
12
18
11
111
59
6
–
11
76
5
1
3
2
–
11
336
322
20 Includes Qantas Airways, Jetstar Australia and New Zealand, Jetstar Asia (Singapore), Qantas Freight and QantasLink and excludes aircraft operated by Jetstar Japan and capacity
hire aircraft to Jetstar Australia,from Jetstar Japan.
21 Seven A380-800 aircraft in operation as at 30 June 2023.
22 Conversion of two A330-200s expected to finalise in the first half of financial year 2023/24.
16
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
SEGMENT PERFORMANCE
Segment Performance Summary
Qantas Domestic
Qantas International
Jetstar Group
Qantas Loyalty
Corporate
Unallocated/Eliminations
Underlying EBIT
Net Finance Costs
Underlying PBT
QANTAS DOMESTIC
June
2023
$M
1,270
906
404
451
(212)
(137)
2,682
(217)
2,465
June
2022
$M
(765)
(238)
(796)
292
(129)
78
(1,558)
(301)
(1,859)
June 2019
(pre-COVID)
$M
778
323
400
376
(171)
(98)
1,608
(282)
1,326
Revenue
Underlying EBIT
6,980 $M
1,270 $M
Operating Margin
18.2 %
FY23
FY22
FY21
FY20
FY19
6,980
3,448
2,745
4,672
6,098
Metrics
ASKs
Seat Factor
FY23
FY22
FY21
FY20
FY19
1,270
(765)
(575)
173
778
FY23
FY22
FY21
FY20
FY19
18.2%
(22.2%)
(20.9%)
3.7%
12.8%
June 2023
June 2022
32,513
76.2
21,233
60.9
June 2019
(pre-COVID)
33,866
77.8
M
%
Qantas Domestic reported an Underlying EBIT of $1,270 million, a significant turnaround from a loss before interest and tax of ($765) million in
the financial year 2021/22 as capacity returned to 96 per cent of pre-COVID levels. The result delivered an operating margin of 18 per cent
and was driven by cost transformation benefits from the Recovery Plan, structural network changes and strong travel demand particularly in
leisure segments.
In addition to the strong leisure demand, Qantas Domestic saw continued strength in resource segments and maintained leading market
share positions in both Corporate and Small and Medium-sized Enterprise (SME) segments (at ~80 per cent and ~54 per cent respectively). In
the second half, Qantas Domestic also commenced the domestic fleet renewal program, with the delivery of next-generation A220 aircraft
expected in financial year 2023/24 enabling the existing fleet of 20 717-200 aircraft to commence retirement plans.
During the first half of the year, Qantas Domestic experienced operational challenges including sick leave, supply chain and other industry
challenges. Steps were taken to address performance, including increased investment in recruitment and building network resilience. This
resulted in a steady improvement in operational performance from the second half and Qantas Domestic outperformed its major competitor
on on-time performance for the majority of the year. The improvement in operational performance is also supporting customer NPS23
recovery.
23 Net promoter score. Customer advocacy measure.
17
6,9803,4482,7454,6726,0981,270(765)(575)17377818.2%(22.2%)(20.9%)3.7%12.8%
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
QANTAS INTERNATIONAL (including Freight)
Revenue
7,749 $M
Underlying EBIT
906 $M
Operating Margin
11.7 %
FY23 7,749
FY22 3,706
FY21
1,598
FY20 6,077
FY19 7,420
906
FY23
FY22 (238)
(548)
FY21
56
FY20
323
FY19
Metrics
ASKs
Seat factor
M
%
June 2023
June 2022
45,187
85.7
12,187
75.4
FY23
FY22
FY21
FY20
FY19
11.7%
(6.4%)
(34.3%)
0.9%
4.4%
June 2019
(pre-COVID)
69,571
86.0
Qantas International (including Freight) reported an Underlying EBIT of $906 million and an operating margin of 12 per cent, a significant
turnaround from a Loss Before Interest and Tax of ($238) million in financial year 2021/22. The result was supported by a strong revenue
environment, cost transformation benefits from the Recovery Plan and structural uplift in Freight earnings. Premium demand was notably
strong with premium cabin seat factors averaging 92 per cent, contributing to the uplift in unit revenue performance.
The restoration of flying continued in the year with capacity at 65 per cent of pre-COVID levels in financial year 2022/23 (compared to 18 per
cent in financial year 2021/22). Expansion into new routes included Melbourne-Jakarta, Melbourne-Dallas-Fort Worth, Sydney-Seoul, Sydney-
Auckland-New York and Sydney-Bengaluru. Qantas International also commenced return to service for Sydney/Melbourne/Brisbane-Tokyo,
Sydney-Santiago, Sydney-Hong Kong and Sydney-San Francisco. Increased flying was supported by the delivery of two more 787-9s and the
Group’s seventh reconfigured A380 returning to service. Supported by the investments in fleet, food and beverage offerings and the re-
opening of lounges, NPS recovered strongly in the second half.
In financial year 2022/23, Freight performance moderated from a record in financial year 2021/22 as international yields adjusted to
increased belly space capacity. Despite this moderation, the Freight business delivered an approximate $150 million uplift in annual earnings
versus the pre-COVID periods, with the fourth quarter yields holding to greater than 150 per cent of the financial year 2018/19 average.
JETSTAR GROUP
Revenue
4,235 $M
Metrics
ASKs
Seat factor
FY23 4,235
FY22 1,440
FY21 1,140
FY20 3,006
FY19 3,961
Underlying EBIT
404 $M
Operating Margin
9.5 %
FY23 404
FY22 (796)
FY21 (541)
FY20 (26)
FY19 400
9.5%
FY23
FY22 (55.3%)
FY21 (47.5%)
FY20 (0.9%)
10.1%
FY19
June 2023
June 2022
39,558
86.4
17,213
71.2
June 2019
(pre-COVID)
47,993
86.1
M
%
The Jetstar Group reported an Underlying EBIT of $404 million, representing a strong turnaround to profitability despite a slower return of its
key international markets. Jetstar Group capacity was 82 per cent of pre-COVID levels, with seat factor increasing to 86 per cent, up from 71
per cent in financial year 2021/22.
Jetstar’s Australian Domestic network delivered an Underlying EBIT of $255 million, with capacity recovered to 97 per cent of pre-COVID
levels. The domestic operating margin was 11 per cent in the year, supported by ancillary revenue growth which was up 37 per cent vs pre-
COVID levels, with the second half performance demonstrating a pathway to achieve its margin target of 15 per cent in financial year
2023/24. This pathway builds on recent improvements in operational performance, supporting the future reduction in temporary costs.
Jetstar’s international network reported an Underlying EBIT of $149 million, reflecting a progressive return of key markets, with capacity
recovered to 73 per cent of pre-COVID levels. Jetstar’s Australian international business delivered an 11 per cent margin, demonstrating the
return of strong demand, with Jetstar resuming services to Japan and South Korea and launching Sydney-Raratonga with the next-
generation A321LR.
18
7,7493,7061,5986,0777,420906(238)(548)5632311.7%(6.4%)(34.3%)0.9%4.4%4,2351,4401,1403,0063,961404(796)(541)(26)4009.5%(55.3%)(47.5%)(0.9%)10.1% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
JETSTAR GROUP (CONTINUED)
Jetstar Asia (Singapore) also demonstrated strong profitability in the year, with ROIC greater than WACC. Further growth is planned following
this strong performance, with an additional two aircraft expected in the first half of financial year 2023/24.
Jetstar Group’s result includes a ($54) million loss attributable to the share of statutory losses for Jetstar Japan. This loss included an
adverse foreign exchange impact of ($12) million relative to financial year 2021/22. Although the business was challenged with domestic
demand and an excess capacity environment in Japan with extended COVID-19 impacts in the market, the underlying performance of the
business improved $30 million vs financial year 2021/22 and is expected to return to profitability in the financial year 2023/24.
Jetstar Group received nine A321LR aircraft in financial year 2022/23 (eight to Jetstar Australia and New Zealand and one to Jetstar Japan),
delivering an estimated 10 per cent unit cost advantage compared to Australian competitors.
The Jetstar Group continues to deliver low fares leadership, offering over 9 million fares below $100 in the year.
QANTAS LOYALTY
Revenue
2,189 $M
Metrics
QFF members
Points earned
Points redeemed24
FY23 2,189
FY22 1,334
FY21 984
FY20 1,224
FY19 1,654
Underlying EBIT
451 $M
Operating Margin
20.6 %
FY23 451
FY22 292
FY21 272
FY20 341
FY19 376
FY23 20.6%
FY22 21.9%
FY21 27.6%
FY20 27.9%
FY19 22.7%
June 2023
June 2022
15.2
175
155
14.1
118
93
June 2019
(pre-COVID)
12.9
156
123
M
B
B
Qantas Loyalty reported an Underlying EBIT of $451 million, with strong travel recovery underpinning an uplift in member engagement and
points earned and burned exceeding pre-COVID levels. The strength of the program was reflected in membership growth, with more than one
million new members in the last 12 months.
Momentum continued as the business saw record points earned on financial services products, with spend on Qantas Points-earning credit
cards greater than 110 per cent of pre-COVID levels, and approximately 250,000 new cards acquired, up 65 per cent relative to financial year
2021/22. Qantas Point earning credit cards continue to maintain approximately 35 per cent of all consumer spend on credit cards. Airline
redemption activity was approximately double relative to financial year 2021/22, with redemption activity returning to 117 per cent of pre-
COVID levels.
In addition, Qantas Loyalty generated more than $1 billion in new bookings across Hotels, Holidays and Tours, up 90 per cent relative to
financial year 2021/22, following the expansion of the Qantas Holidays brand and increased redemption value since February 2022. Since the
expansion, members have received increased redemption value, giving members substantially more value on Qantas Hotels and Holidays.
Other highlights in the portfolio include 41 per cent growth in health insurance customers and greater than 60 per cent growth in travel
insurance policies sold relative to financial year 2021/22. Qantas Business Reward members have grown 19 per cent to approximately
450,000 members, capturing one in five Australian Small and Medium-sized Enterprises (SME) relative to financial year 2021/22.
Qantas Loyalty is committed to growing its member base through broader and deeper program engagement, maintaining strong member
engagement through initiatives, including the expansion of Hotel and Holiday offerings and status extensions for Qantas Frequent Flyer
members at Silver tier and above.24
24 Net points redeemed (in prior years gross points redeemed).
19
2,1891,3349841,2241,65445129227234137620.6%21.9%27.6%27.9%22.7% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
RECONCILIATION OF UNDERLYING PBT TO STATUTORY PROFIT/(LOSS) BEFORE TAX
The Statutory Profit Before Tax was $2,472 million for the year ended 30 June 2023.
Underlying PBT
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.
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 outside the ordinary course of business relating to business
activities in other reporting periods, Recovery Plan restructuring costs, transactions involving investments, impairments of assets and other
transactions.
RECONCILIATION OF UNDERLYING PBT TO STATUTORY PROFIT/(LOSS) BEFORE TAX
Underlying PBT
Items not included in Underlying PBT
– Recovery Plan restructuring costs
– Reversal of impairment of assets and related costs
– Net gain on disposal of Mascot land and buildings
– Net gain on disposal of investments/associates
Total items not included in Underlying PBT
Statutory Profit/(Loss) Before Tax
June
2023
$M
2,465
5
–
–
2
7
June
2022
$M
(1,859)
(21)
3
686
–
668
2,472
(1,191)
In the 2022/23 financial year, items outside of Underlying PBT included:
Item Outside of
Underlying PBT
Recovery Plan
restructuring costs
Net gain on disposal of
investments/
associates
Description
$5 million primarily relates to the reversal of a redundancy provision previously recognised.
The net gain on disposal of investments/associates of $2 million arose from the sale of the Group’s investment in
Helloworld Travel Ltd (ASX: HLO).
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 3
Review of Operations continued
For the year ended 30 June 2023
MATERIAL BUSINESS RISKS
The aviation industry is subject to inherent risks that can impact operations if left untreated. These include, but are not limited to, exposure to
economic uncertainty and geopolitical instability, changes in government regulations, volatility in fuel prices and foreign exchange rates, and
other exogenous events such as aviation incidents, natural disasters, climate change, international conflicts or an epidemic. In rare
circumstances, ‘black swan’ risk events can materialise, resulting in unexpected consequences such as those that the aviation industry
experienced due to the COVID-19 pandemic.
The Group continues to plan for a wide range of scenarios and risks to ensure the Group maintains its strong position to support financial
targets, operational outcomes and meet travel demand and customer expectations.
The Group is subject to material business risks which may impact the achievement of the Group's strategy and financial prospects. The
Group’s focus is on continuously improving the controls to manage or mitigate these risks.
Operational and people safety: While there are inherent safety risks in aviation, the Qantas Group’s ‘safety first’ approach ensures that there
is a consistent focus on and continuous improvement in the systems and processes that seek to identify and treat current and emerging
safety risks to our people and customers, both in the air and on the ground. All Group airlines have regulatory approved systems, including
aircraft airworthiness and maintenance as well as operational activities, procedures and training programs utilising qualified (licensed)
personnel, approved manuals, and a robust safety and reporting culture. Comprehensive operational and workplace audit and assurance
programs seek to confirm that key processes and controls are operating as intended and that the Group continues to meet its regulatory
compliance obligations.
Physical security of people and assets: The Group is committed to protecting our people, customers, aircraft and other assets from physical
security threats and interference. A comprehensive threat and operational risk assessment program is in place which is supported by
extensive collaboration with key Australian and international government agencies and security partners. Security screening measures are
implemented throughout the network, in line with regulatory requirements. Extensive controls are in place to protect the operational safety of
flight systems, including access controls to aircraft flight decks and physical security of aircraft at ports.
Liquidity and fuel price volatility (including foreign exchange): The Qantas Group’s ability to maintain sufficient liquidity is inherent in
providing for its operating needs. Maintaining access to a variety of funding sources, targeting minimum liquidity levels, and continued
vigilance on costs through ongoing focus on further transformation opportunities are embedded to ensure adequate coverage of liquidity
requirements, taking into consideration a range of adverse scenarios, including flexibility in setting capacity to be able to respond to sudden
changes in demand and shift in customer preferences. Following the delivery of the $1 billion ongoing structural cost benefits in financial year
2022/23 which was part of its COVID-19 pandemic Recovery Plan, the Qantas Group remains focused on delivering its strategic priorities
while continuing to protect its liquidity position through the ongoing application of its Financial Framework.
The Qantas Group is subject to fuel price (including refining margin) and foreign exchange risks which are an inherent part of the operations of
an airline and as such, are industry-wide risks. For the Qantas Group, the size of the Group’s fuel and foreign exchange risk will vary with
operational capacity, the routes the Group operates as well as the size of fleet investment capital expenditure. The Qantas Group manages its
fuel and foreign exchange risks through a comprehensive hedging program (aligned to the Group’s Treasury Risk Management Policy) which
provides time for the business to ultimately adjust capacity to reflect the new operating environment or change its cost base. Qantas will
continue to hedge its fuel and foreign exchange risks in line with this program. The Group normally uses a mix of fuel derivative collars and
outright options to cover underlying fuel price risk and is actively managed for changes in capacity.
Competition: The markets in which the Qantas Group operates are highly competitive, and growth in market capacity ahead of underlying
demand can impact upon industry profitability. Competitors include both domestic airlines and 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 a highly competitive environment, including more liberal rights of entry into Australian domestic and
international markets. These policies have historically 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 and aggressive pricing by competitors
seeking to gain market share can 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 that characterise the aviation industry. The
combined effect of these factors may have a materially adverse effect on the revenue and financial position of the Group. The Group
continues to leverage its dual brand strategy and established governance processes to optimise network and fleet plans to enhance the
Group’s competitive position, and reacts appropriately to emerging issues on pricing, network and capacity. The Group also continues to focus
on execution of clear strategies to maintain leadership in key customer segments, enabled by strong relationship management, investment in
loyalty programs, and technology-enabled solutions.
Market demand: Demand for travel largely drives the Qantas Group’s planning as it deploys capacity based on market demand. Unforeseen
and/or sustained change in market demand and/or change in capacity settings could result in a capacity/demand imbalance impacting on
the Group’s ability to maximise its position in the market. The Qantas Group optimises network and fleet plans through its dual brand strategy,
ensuring there is flexibility to adjust capacity settings across the network to be able to respond to changes in demand. Active monitoring of
early warning indicators of changes to markets is performed to mitigate exposures and pursue opportunities across the dual brands.
Industrial relations: The Qantas Group operates in a highly regulated employment market and a large proportion 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 could lead employees to take industrial action, including work stoppages. This could disrupt the
Qantas Group’s day-to-day operations and adversely affect business performance, potentially leading to reputational damage. The Group has
developed business continuity plans, including testing and rehearsal (to the extent possible), to provide continuity of operations in the event
of industrial action.
21
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Review of Operations continued
For the year ended 30 June 2023
MATERIAL BUSINESS RISKS (CONTINUED)
Customer risk: The ongoing success of the Qantas Group depends to a large degree on customer satisfaction and loyalty, particularly
considering the significant competition for passengers that characterises the aviation industry. A reduction in customer satisfaction due to
operational challenges, i.e., frequent cancellations, poor on-time performance and mishandled baggage, and the ability to claim/utilise the
remaining credit balances created in the context of COVID-19 may impact the Qantas Group’s reputation and its ability to attract customers in
the future. The Group continues to invest in its customer experience processes and focus on improving operational reliability, provide
customers with flexibility, incentives and options to utilise their flight credits, vouchers, and Qantas Passes and has recently launched a new
campaign to actively encourage customer usage.
The Qantas Group is vulnerable to long-term changes in consumer preferences in relation to its service offerings, the markets in which it
operates, and consumer and business sentiment towards travel, including environmental considerations and digital expectations. 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. The Group is focused on embedding a continuous improvement culture in core business units to
ensure an integrated and consistent Group approach in managing customer concerns and complaints. As customer preferences shift, the
Group is looking to transform the customer experience through a multi-year program aimed at adapting to new customer journey
requirements, market learnings and business need, to ensure the Group’s strong market position is maintained.
Climate Change: The Group recognises that human-induced climate change is a significant issue for the aviation industry and is committed
to supporting the aims of the Paris Climate Agreement to limit warming to well below two degrees Celsius above pre-industrial levels, and
pursuing efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels. Climate-related risks include both
physical risks (such as increased extreme weather events) and transition risks (including development of alternative fuel and changes to
government policy, law and regulation). The Group manages these risks through mechanisms including, but not limited to, emission reduction
targets; scenario analysis to inform the Group’s strategy; robust governance; fleet transformation activities; investing in modern aircraft
technology; supporting a competitive sustainable aviation fuel industry in Australia; operational and market-based controls; carbon offset
programs; and monitoring government policy. In March 2022 the Qantas Group’s Climate Action Plan was released, with targets for: a 25 per
cent reduction in net emissions from 2019 levels by 2030; 10 per cent sustainable aviation fuel in fuel mix by 2030; an average of 1.5 per cent
fuel efficiency improvements per annum to 2030; and net zero emissions by 2050. The Qantas Group is responding to increased demand for
transparency on identification and management of climate-related risks by aligning its corporate disclosures with the Taskforce on Climate-
related Financial Disclosures (TCFD).
Cyber security and data loss: The heightened cyber threat environment continues to evolve following the recent successful external cyber-
attacks on other corporations and increased cyber-criminal activities targeting organisations capable of paying ransoms. As cyber breaches
and attacks surge globally and remote ways of working continue, the Qantas Group, through its Cyber Strategic Road Map and utilising
learnings from analysis of cyber incidents in other organisations, continues its proactive response to external and internal threats. The
approach includes heightened monitoring and assessment of its technology and data environment, further enhancing its cyber security,
privacy and data governance controls and embedding them into business processes, taking a security and privacy by design approach and
creating a cyber-safe and privacy-orientated culture that builds on an established safety culture and the Three Lines model.
The Group’s Data Governance Framework now includes mechanisms to ensure that ethical and commercial data risks are managed in
addition to data protection and privacy risks. 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 Group’s cyber and data privacy risks are continuously monitored by the Group Cyber and Information Management Committee and are
subject to independent assurance, including for significant third-party suppliers. In addition, the Qantas Group has a close working
relationship and engagement with government and industry peers to enable the Group to effectively manage cyber and privacy risks as they
evolve.
Supply chain: The Qantas Group is dependent on third-party providers for the expansion and replacement of its aircraft fleet, including
availability of slots for aircraft maintenance and supply of aircraft parts, and other critical business processes. The failure of these providers
to deliver and/or adequately perform their service obligations or other unexpected interruptions of services may cause significant disruption
to the Group’s operations and have an adverse impact on financial performance. The Group continuously analyses and monitors the global
and local supply market to provide early insights to support assessments of the Group’s supply chain exposure; proactively manages and
invests in high risk items; uses its business continuity plans to manage the risk of supply failures and has contingency plans in place to
respond to key supplier interruption.
Policy or regulatory change: Given the highly regulated business environment the Group operates in, any major policy or regulatory change,
such as those in relation to competition and consumer legislation, rights of entry, climate change policy and airport infrastructure, can
significantly impact the Group’s operations, demand or competition. The Group continues to proactively engage with regulators and policy
makers to demonstrate and inform the potential implications of proposed changes and contribute to improved policy outcomes. The Group
also participates in industry bodies in Australia and internationally to proactively work with stakeholders with shared interests and drive policy
outcomes which consider industry-wide challenges and implications.
New business models: As more large customer brands aim for a seamless customer journey, the threat of further airline disintermediation,
the rapid rise of digitalisation and new technology and business models continue to evolve. The Group continues to enhance its distribution
strategy and digital capability, expand its coalition business through innovative new business models, new partners and member experience,
and invest in technological platforms and processes to enable a significantly improved end-to-end customer journey.
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 3
Condensed Corporate Governance Statement
For the year ended 30 June 2023
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 comprises a majority of Independent Non-Executive
Directors who, together with the Group CEO and Managing 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 and adopted the ASX Corporate
Governance Principles and Recommendations (ASX Principles)
4th Edition throughout 2022/23.
Accordingly, Qantas Airways Limited (Qantas) has disclosed
its 2023 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 agreeing 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.
THE BOARD IS STRUCTURED TO BE EFFECTIVE AND
TO ADD VALUE
The Qantas Board currently has 10 Directors. Nine Directors are
Independent Non-Executive Directors, seven of whom have been
elected by shareholders and two have been appointed to the Board
to fill casual vacancies. The Qantas Group CEO, who is an
Executive Director, is not regarded as independent.
Details of the Directors, their qualifications, skills, experience and
tenure are set out on pages 8 to 11 of the Qantas Annual Report
2023.
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 2022/23 Board and Committee
meetings are detailed on page 26 of the Qantas Annual Report
2023.
THE BOARD INSTILS A CULTURE OF ACTING LAWFULLY,
ETHICALLY AND RESPONSIBLY
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)
undertake 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, and an
Anti-Bribery and Corruption Policy, which outlines appropriate
behaviour for all employees of the Qantas Group.
The Qantas Group Share Trading Policy sets out guidelines
designed to protect the Qantas Group and its personnel (including
Directors) from intentionally or unintentionally breaching the law.
The Qantas Group Share Trading Policy prohibits personnel 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 personnel 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.
THE BOARD SAFEGUARDS THE INTEGRITY OF CORPORATE
FINANCIAL REPORTING
The Board and the Audit Committee closely monitor the
integrity of all corporate reports. Qantas has a sound system
of risk management and internal controls in place to verify
the half-year and annual financial reports and confirm the
declarations provided by the CEO and CFO to the Board.
The Board and the Audit Committee also monitor the
independence of 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 rotated its lead external audit partner during the
2021/22 financial year. The next rotation of lead external audit
partner for KPMG will take place following the finalisation of the
audit for the 2025/26 financial year. Notwithstanding there are no
service, quality or independence issues with the current auditor, in
consideration of best practice, the Qantas Group has decided to
undertake a competitive external audit tender process during the
2024/25 financial year for appointment in relation to the 2026/27
financial year.
The Qantas Group is committed to verifying the integrity of all
other periodic corporate reports it releases to the market that are
not audited or reviewed by the external auditor. Information
regarding the verification process is disclosed in our 2023
Corporate Governance Statement.
23
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Condensed Corporate Governance Statement continued
For the year ended 30 June 2023
THE BOARD MAKES TIMELY AND BALANCED DISCLOSURE
THE BOARD RECOGNISES AND MANAGES RISK
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 made available to all shareholders at the same time.
Additionally, the Qantas Board receives copies of all material
market announcements for review and approval of release to the
market, as well as a final copy promptly after they have been
made.
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. Qantas actively maintains a corporate site and
investor portal which outlines the Company’s corporate
governance policies and procedures and includes an array of
information to help assist investors to make informed decisions.
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), Qantas Investor Days and, as is common practice
among its major listed peers, through periodic meetings with
current and potential institutional shareholders.
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. Qantas is focused on reducing our carbon
footprint whilst providing timely corporate updates and
disclosures. As such, Qantas will no longer send physical meeting
documents unless a shareholder requests a copy to be mailed.
The external auditor attends the AGM and is available to
answer shareholder questions that are relevant to the audit.
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 framework
for the Qantas Group, including that the Group is operating
with due regard to the risk appetite set by the Board, and
for ensuring the Qantas Group has an appropriate corporate
governance structure. Within that overall framework, Management
has designed and implemented a risk management and internal
control system to manage Qantas’ material business risks.
During 2022/23, the Audit Committee undertook its 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 in the Remuneration Report from page 30 to 60 of the
Qantas Annual Report 2023.
Information about the 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 60 of the Qantas Annual Report 2023.
Non-Executive Directors do not receive any performance-based
remuneration. Further information has been disclosed in the
Remuneration Report from pages 58 to 60 of the Qantas Annual
Report 2023.
24
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,
appears 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 Note 34 of the Financial Report for events which occurred
subsequent to the balance sheet date. Other than the matters
disclosed in Note 34, 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.
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report
For the year ended 30 June 2023
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 2023. In compliance with the provisions of the
Corporations Act 2001 (Cth), the Directors’ Report is set out below.
DIRECTORS
The Directors of Qantas at any time during or since the end of the
year are:
Richard Goyder AO
Vanessa Hudson (appointed 5 May 2023)
Alan Joyce AC (retired 5 September 2023)
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson AC
Michael L’Estrange AO
Doug Parker (appointed 23 May 2023)
Todd Sampson
Dr Heather Smith PSM (appointed 24 August 2023)
Antony Tyler
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
No final dividend will be paid in relation to the year ended 30 June
2023 (2022: nil final dividend). There was also no interim dividend
paid during the year.
In August 2023, the Directors announced an on-market share buy-
back of up to $500 million. During the year ended 30 June 2023,
Qantas completed an on-market share buy-back of $400 million
announced in August 2022, and an on-market share buy-back of
$500 million announced in February 2023, and subsequently
increased to $600 million in May 2023.
25
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
DIRECTORS’ MEETINGS
The number of Directors’ meetings held (including meetings of Committees of Directors) and attendance of Directors during 2022/23
is as follows:
Qantas Board
Remuneration Committee1
Scheduled
Meetings
Unscheduled
Meetings
Sub-
Committee
Meetings2
Sub-
Committee
Unscheduled
Meetings2
Safety, Health,
Environment
and Security
Committee1
Audit
Committee1
Scheduled
Meetings
Unscheduled
Meetings
Nominations
Committee1
Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3 Attended Held3
8
8
8
8
8
8
8
8
1
1
8
8
8
8
8
8
8
8
1
1
4
3
4
4
4
4
4
3
1
-
4
3
4
4
4
4
4
4
1
-
2
2
-
-
2
-
-
-
-
-
25
25
-
-
25
-
-
-
-
-
1
1
-
-
1
-
-
-
1
-
1
1
-
-
1
-
-
-
1
-
-
-
5
5
5
-
5
-
-
-
-
-
5
5
5
-
5
-
-
-
-
5
-
-
5
5
-
5
-
-
-
5
-
-
5
5
-
5
-
-
-
-
3
3
-
3
3
-
-
-
-
-
3
3
-
3
3
-
-
-
-
-
1
1
-
1
1
-
-
-
-
-
1
1
-
1
1
-
-
-
2
-
-
2
2
-
-
2
-
-
2
-
-
2
2
-
-
2
-
-
Directors
Richard Goyder4
Alan Joyce
Maxine Brenner
Jacqueline Hey
Belinda
Hutchinson
Michael
L’Estrange
Todd Sampson
Antony Tyler
Vanessa
Hudson6
Doug Parker7
1 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.
2 Sub-Committee meetings convened for specific Board-related business.
3 Number of meetings held during the period that the Director held office.
4 The Chairman attends all Committee Meetings.
5 Number of meetings held and requiring attendance.
6 Vanessa Hudson was appointed Non-Executive Director on 5 May 2023.
7 Doug Parker was appointed Non-Executive Director on 23 May 2023.
DIRECTORSHIPS OF LISTED COMPANIES HELD BY MEMBERS OF THE BOARD AS AT 30 JUNE 2023 – FOR THE PERIOD 1 JULY 2020 TO
30 JUNE 2023
Richard Goyder
Qantas Airways Limited
Current, appointed 17 November 2017
Woodside Energy Group Ltd
Current, appointed 1 August 2017
Vanessa Hudson
Qantas Airways Limited
Alan Joyce
Qantas Airways Limited
Maxine Brenner
Qantas Airways Limited
Origin Energy Limited
Orica Limited
Current, appointed 5 May 2023
Ceased, appointed 28 July 2008 and ceased 5 September 2023
Current, appointed 29 August 2013
Current, appointed 15 November 2013
Current, appointed 8 April 2013
Woolworths Group Limited
Current, appointed 1 December 2020
Growthpoint Properties Australia Limited
Ceased, appointed 19 March 2012 and ceased 30 November 2020
Jacqueline Hey
Qantas Airways Limited
Current, appointed 29 August 2013
Bendigo and Adelaide Bank Limited
Current, appointed 5 July 2011
Belinda Hutchinson
Qantas Airways Limited
Current, appointed 12 April 2018
AGL Energy Limited
Ceased, appointed 21 March 2016 and ceased 30 May 2022
Michael L’Estrange
Future Generation Global Investment
Company Limited
Qantas Airways Limited
Rio Tinto Limited
Rio Tinto plc
Ceased, appointed 28 May 2015 and ceased 17 June 2021
Current, appointed 7 April 2016
Ceased, appointed 1 September 2014 and ceased 6 May 2021
Ceased, appointed 1 September 2014 and ceased 6 May 2021
Todd Sampson
Qantas Airways Limited
Antony Tyler
Doug Parker
Qantas Airways Limited
Qantas Airways Limited
Current, appointed 25 February 2015
Current, appointed 26 October 2018
Current, appointed 23 May 2023
26
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
QUALIFICATIONS AND EXPERIENCE OF EACH PERSON WHO HELD OFFICE AS A COMPANY SECRETARY OF QANTAS BETWEEN
1 JULY 2022 UNTIL THE DATE OF THIS REPORT
Andrew Finch –
Company Secretary
Benjamin Jones –
Company Secretary
Benjamin Elliott –
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
– LLM (USYD), LLB, BSocSci (Policy) (UNSW)
– Appointed as Company Secretary on 20 July 2021
– Joined Qantas on 9 September 2013
– Admitted as a solicitor of the High Court of Australia and the Supreme Court of NSW in 2008
– 2008 to 2013 – Solicitor at Herbert Smith Freehills
– 2013 to present – Football Australia, Disciplinary and Ethics Committee Member
– 2013 to present – Football NSW, General Purposes Tribunal (Deputy Chair 2018 to present)
– BBC, GIA (Affiliated)
– Appointed as Company Secretary on 18 February 2020
– Joined Qantas on 14 August 2013
– 2021 to present – Head of Secretariat and Corporate Governance
– 2018 to 2021 – Manager, Group Secretariat
– 2014 to 2018 – Manager, Corporate Governance
– 2013 to 2014 – Manager, Public Company
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
Vanessa Hudson
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson
Michael L’Estrange
Doug Parker
Todd Sampson
Dr Heather Smith
Antony Tyler
Number of Shares
2023
225,5542
818,2513
39,498
64,8272
69,9722
33,945
–
42,7392
–
52,000
1 Shares held as at date of 2022 Annual Report (9 September 2022).
2 Includes restricted Ordinary shares held by the Employee Share Plan Trust.
3 Includes restricted Ordinary shares awarded in the 2021-2023 LTIP held in Employee Share Plan Trust that remain subject to an additional one-year trading restriction.
Rights held in trust under the Non-Executive Director Fee Sacrifice Share Acquisition Plan1:
Directors
Richard Goyder
Belinda Hutchinson
Todd Sampson
1 Refer to page 60 for information regarding the operation of the Non-Executive Director Fee Sacrifice Share Acquisition Plan.
2 Rights held as at date of 2023 Annual Report (20 September 2023).
3 Rights held as at date of 2022 Annual Report (9 September 2022).
Number of Rights
20232
15,192
6,979
2,880
20221
193,5372
n/a
39,498
64,8272
55,5782
33,945
n/a
36,8792
n/a
52,000
20223
17,525
7,879
3,028
27
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
DIRECTORS’ INTERESTS AND BENEFITS (CONTINUED)
In addition to the direct interests shown, indirect interests in Qantas shares held in trust on behalf of Ms Vanessa Hudson are as follows:
Rights granted under:
2021-2023 Long Term Incentive Plan
2022-2024 Long Term Incentive Plan
2023-2025 Long Term Incentive Plan
2022-2023 Recovery Retention Plan
Total Rights
Number of Rights
2023
–1
208,0002
223,5003
–4
431,500
2022
n/a
n/a
–
–
n/a
1 Following the testing of performance hurdles as at 30 June 2023 and the Board’s approval of the 2021-2023 Long Term Incentive Plan (LTIP) vesting outcome on 23 August 2023,
100 per cent of the 2021-2023 LTIP awarded to Ms Hudson vested and converted to 364,500 shares. The shares awarded remain subject to an additional one-year trading restriction.
2 Performance hurdles will be tested as at 30 June 2024 to determine whether any Rights vest to Ms Hudson.
3 Performance hurdles will be tested as at 30 June 2025 to determine whether any Rights vest to Ms Hudson.
4 Following the testing of performance hurdles as at 30 June 2023 and the Board’s approval of the 2022-2023 Recovery Retention Plan vesting outcome on 23 August 2023, 100 per
cent of the 2022-2023 Recovery Retention Plan awarded to Ms Hudson vested and converted to 262,500 shares.
28
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
PERFORMANCE RIGHTS
Performance Rights are awarded to select Qantas Group Executives under the Qantas Long Term Incentive Plan (LTIP). Additionally, the
Recovery Retention Plan (RRP) was announced in the second half of the 2021/22 financial year and includes the issue of Performance Rights
to eligible employees (both non-executive and executive). Refer to pages 49 to 50 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 during the year
Rights forfeited during the year
Rights vested and converted to shares during the year
Rights lapsed during the year
Rights outstanding as at 30 June
Number of Rights
2023
2022
61,194,044
16,568,569
5,792,250
47,181,572
(2,655,176)
(1,143,343)
(1,149,491)
62,038,2841
(871,097)
(827,568)
(857,432)
61,194,0441
1 The movement of Rights outstanding as at 30 June 2023 to the date of this Report is explained in the footnotes of the table 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 2023:
2023
Unvested
687,000
Number of Rights
2023
Total
2022
Net Vested
687,000
Testing Period Grant Date
30 Jun 202
27 Oct 17
Value at
Grant Date
$3.30
30 Jun 212
26 Oct 18
$2.33
30 Jun 221
4 Oct 19
$4.06
30 Jun 222
26 Oct 19
$3.59
30 Jun 233
11 Sep 20
$2.24
30 Jun 233
23 Oct 20
$3.07
30 Jun 24
17 Sep 21
$3.90
30 Jun 24
5 Nov 21
$3.85
30 Jun 25
4 Nov 22
$4.24
30 Jun 233
28 Feb 224
$4.98
30 Jun 233
4 Nov 22
$5.92
2023
Net Vested
–
–
–
–
–
–
–
–
–
–
–
651,000
651,000
–
–
743,000
743,000
8,210,480
8,210,480
1,349,000
1,349,000
3,087,900
3,087,900
861,000
861,000
4,273,500
4,273,500
40,752,904
40,752,904
1,422,500
1,422,500
Name
2018–2020
Long Term
Incentive Plan
2019–2021
Long Term
Incentive Plan
2020–2022
Long Term
Incentive Plan
2020–2022
Long Term
Incentive Plan
2021–2023
Long Term
Incentive Plan
2021–2023
Long Term
Incentive Plan
2022–2024
Long Term
Incentive Plan
2022–2024
Long Term
Incentive Plan
2023–2025
Long Term
Incentive Plan
2022–2023
Recovery
Retention Plan
2022–2023
Recovery
Retention Plan
Total
2022
Unvested
687,000
2022
Total
687,000
651,000
651,000
2,292,834
2,292,834
743,000
743,000
8,408,138
8,408,138
1,349,000
1,349,000
3,271,000
3,271,000
861,000
861,000
–
–
42,931,072
42,931,072
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62,038,284
62,038,284
–
61,194,044
61,194,044
1 Following the testing of performance hurdles as at 30 June 2022 and the Board’s approval of the 2020-2022 vesting outcome on 24 August 2022, 50 per cent of Rights vested and
converted to shares on the day of the release of the 2022 Annual Report for Executives other than the CEO. For the CEO, the CEO offered, and the Board agreed, to defer the decision
until at least August 2023 as to whether his Rights will be forfeited or allowed to convert to shares.
2 After agreeing in previous years to defer the decision of vesting of Rights awarded under the 2018-2020 LTIP, 2019-2021 LTIP and the 2020-2022 LTIP, the CEO elected to convert
these Rights to shares in August 2023. Based on the testing of performance hurdles as at the end of the relevant financial year of each LTIP and the Board’s approval of the vesting
outcome of the respective LTIP, 50 per cent of the 2018-2020 LTIP, 50 per cent of the 2019-2021 LTIP and 50 per cent of the 2020-2022 LTIP awarded to Mr Joyce vested and
converted to shares after the release of the 2022/23 financial results.
3 Following the testing of performance hurdles as at 30 June 2023 and the Board’s approval of the 2021-2023 LTIP and the 2022-2023 RRP vesting outcome on 23 August 2023,
100 per cent of Rights vested and converted to shares. The shares awarded under the 2021-2023 LTIP remain subject to an additional one-year trading restriction.
29
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT
REMUNERATION REPORT
Cover Letter to the Remuneration Report
1
2
3
4
5
6
7
8
9
10
11
Remuneration Report Summary
Remuneration Governance
Remuneration Outcomes for 2022/23
Statutory Remuneration Disclosures for 2022/23
Executive Remuneration Structure
Annual Incentive Scorecard Outcome 2022/23
Long Term Incentive Outcome 2021-2023
Summary of Key Contract Terms as at 30 June 2023
Qantas Financial Performance History
Equity Instruments
Non-Executive Director Fees
31
33
40
42
43
45
51
53
53
54
55
58
30
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT
COVER LETTER TO THE REMUNERATION REPORT
Dear Shareholder
The 2022/23 financial year was extremely challenging for our people, our customers and the aviation industry. After three particularly
difficult years for shareholders, it is pleasing to see improved financial results and a resumption of more normal levels of flying. We have
not done as well with customer satisfaction and trust as you should expect from the Qantas Group and the work continues to ensure we
return to levels that meet our customers’ expectations. We are deeply disappointed and we sincerely apologise for this situation.
This Remuneration Report sets out remuneration information for the CEO, direct reports to the CEO (Executive Management, including
Vanessa Hudson who was Chief Financial Officer and then the CEO-Designate for the period covered by this report) and Non-Executive
Directors who are Key Management Personnel (KMP).
Fixed Remuneration
In line with the end of the Group’s two-year wage freeze and after reviewing pay compared to the market, Base Pay for Executive
Management increased by 3 per cent effective from 1 July 2022. The CEO’s Base Pay remained unchanged for the fifth consecutive year.
2022/23 Annual Incentive
2022/23 Short Term Incentive Plan (STIP) Outcomes
In 2022/23, Qantas achieved an Underlying PBT of $2.465 billion and delivered a Total Shareholder Return (TSR) of 39 per cent. This was
due to continued strong travel demand enabled by our investments in new aircraft, the return of our widebody aircraft from long-term
storage, improved reliability enabling spare capacity to be released and the hard work of all our people in completion of the three-year
Recovery program.
The Board increased the weighting to Customer in the 2022/23 STIP Scorecard to underline the importance of continued improvement in
this critical area. While Qantas’ Domestic on-time performance outperformed Virgin in 11 out of 12 months, we are not yet at the level of
service our customers expect – we hear and understand their disappointment – and this performance impacted remuneration through a
Board discretion to assess a zero outcome in the Customer component of the STIP Scorecard applicable to Executive Management.
Overall there was strong performance against the financial and some of the non-financial components that resulted in STIP incentives
being assessed at an above target level of 126 per cent. Notwithstanding this performance, the Board has exercised its discretion to reduce
actual awards made - more on this below.
Board discretion on 2022/23 STIP
Given the challenges currently facing Qantas, the Board has exercised the following discretion on the 2022/23 STIP outcome for the CEO
and all Executive Management who were members of the Group Management Committee (GMC) for the whole or any part of the year ending
30 June 2023.
–
–
–
As described above, the Customer Target outcome moved from a small achievement to a zero achievement (2 out of 20 to zero out of
20)
The Board has determined that there will be a 20 per cent downward adjustment in the 2022/23 STIP assessed outcomes.
In addition, in light of the Australian Competition and Consumer Commission (ACCC) proceedings advised to Qantas on 31 August
2023 and the High Court finding on 13 September 2023, the Board has determined to delay delivery of the 2022/23 STIP award. The
final STIP award outcome will be determined once the Board has further information.
Change to 2023/24 STIP Scorecard Weightings
The 2023/24 STIP Scorecard Categories will be re-weighted to 40 per cent Group Financial, 40 per cent Customer, 15 per cent Workplace
and Operational Safety and 5 per cent Climate.
2022-2023 Recovery Retention Plan (RRP)
2022-2023 RRP Outcomes
The 2022-2023 RRP vested in full as a result of achieving the three performance measures which were:
–
–
–
Delivering the $1 billion Recovery program target by 30 June 2023
Qantas Group’s Net Debt range below the top end of the Net Debt range as at 30 June 2023 (as approved by the Board in accordance
with the Group’s Financial Framework); and
The Qantas Group is profitable on an Underlying PBT basis for 2022/23.
The RRP also delivered up to 1,000 shares to 20,000 eligible non-executive employees in recognition of their contribution to the Group’s
recovery. As advised in the 2022 Remuneration Report there was no further restriction on the RRP shares.
31
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (CONTINUED)
2021-2023 Long Term Incentive Plan (LTIP)
2021-2023 LTIP Outcomes
The 2021-2023 LTIP awards vested in full based on Qantas’ delivery of top quartile relative Total Shareholder Return (TSR) performance
against the airline peer group (ranking 1st of the 17 airlines) and the ASX100 peer group (ranking 17th). The value of the shares awarded
under this plan increased from $3.78 to $6.20 over the three-year performance period.
The LTIP awards made to Executives under the 2021-2023 plan were at a higher level than in a normal year due to a one-off pay remix,
approved by shareholders at the 2020 Annual General Meeting (AGM), which reduced the weighting to annual incentives and increased the
weighting to long term incentives to strengthen alignment with the shareholder experience during execution of the Recovery program.
The 2021-2023 LTIP shares are now subject to a further one-year restriction until August 2024.
Changes to 2024-2026 LTIP Weightings and Board discretion
The 2024-2026 LTIP will introduce a third measure focused on Reputation. The Reputation measure will sit alongside the two existing
relative TSR measures, all of which will be equally weighted.
At the same time, commencing with the 2024-2026 LTIP, full Board discretion on the vesting outcome will be introduced for the first time,
aligning the Group to market practice.
Malus and Clawback
The existing Remuneration framework provides the Board with mechanisms to apply remuneration consequences through malus and
clawback. We have detailed further information on this topic in the body of the report.
Summary of CEO Remuneration Outcomes in 2022/23 and CEO Succession
The CEO’s total pay outcome for 2022/23 was $21.4 million. The 2022/23 STIP is not included due to the treatment described above in the
STIP Board discretion item. The 2022/23 STIP and the 2021-2023 LTIP remains subject to Board discretion and clawback, should the Board
determine this to be necessary. The full extent of the CEO’s remuneration subject to clawback and/or malus is up to $14.4m as set out in the
body of the report. Statutory remuneration was $11.9 million.
After offering in previous years to defer the decision on vesting of Rights awarded under the 2018-2020 LTIP, 2019-2021 LTIP and the
2020-2022 LTIP, the CEO elected in August 2023 to convert these Rights to shares. The combined value of these three LTIPs contributed
$6.45 million to the CEO’s actual outcome of $21.4 million for 2022/23. To ensure transparency on the full value of LTIP awards that vested
during the year, Qantas has disclosed each of the LTIP outcomes that have vested to the CEO in the actual remuneration outcome for
2022/23.
CEO Succession
During the year, we also announced significant changes to our Executive team, with the CEO announcing his retirement, which occurred
after the 2022/23 period covered by this report. No severance payment was made to the CEO upon his departure. The succession of CEO-
Designate Vanessa Hudson to the CEO position took place on 6 September 2023. Ahead of this transition, the Board commissioned detailed
market benchmarking to establish the appropriate remuneration level for the new CEO. Consistent with overall market trends, and reflecting
the fact that this is Ms Hudson’s first CEO level appointment, her starting Base Pay and total remuneration is lower than her predecessor.
Non-Executive Director Board fees
Non-Executive Director Board fees were remixed during 2022/23, with an increase in Board fees offset by the removal of the Nominations
Committee fee. This was all undertaken within the current NED fee pool limit. There was no change to the Chairman fees.
The Board has resolved that there will be a zero increase in Chair and NED fees, effective 1 July 2023 for the 2023/24 year.
I invite you to review the 2023 Remuneration Report.
Jacqueline Hey
Chair, Remuneration Committee
32
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED)
1
REMUNERATION REPORT SUMMARY
The objectives of, and approach to, Qantas’ Executive Remuneration Framework are summarised as follows:
Remuneration Objectives
– 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.
The structure of the Executive Remuneration Framework is as follows:
Base Pay
Annual Incentive
Also referred to as the
Short Term Incentive
Plan (STIP)
Fixed Annual Remuneration inclusive of
superannuation
– An annual incentive opportunity
– Balanced Scorecard
(financial and non-financial measures)
– Individual performance
(achievements and conduct)
– Delivered two thirds cash and one third
shares
Remuneration Effectiveness
– 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
– 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 40 to 41.
Cash
Cash
Shares
Deferral Period
Additional Lock
Long Term Incentive
Also referred to as the
Long Term Incentive
Plan (LTIP)
(LTIP)
– Award of Rights
– Qantas’ three-year TSR performance relative
50% of Rights may vest, subject to Qantas’ TSR
performance relative to airline peers
Additional Lock
Performance
Restriction
to:
– A global airline peer group
– ASX100 companies
– Rights may convert to shares on vesting
50% of Rights may vest, subject to Qantas’ TSR
performance relative to ASX100 companies
Additional Lock
Performance
Year 1
Year 2
Year 3
Restriction
Year 4
l
C
a
w
b
a
c
k
a
p
p
l
i
e
s
33
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
BASE PAY OUTCOMES
The CEO’s Base Pay remained unchanged (and has not increased
since 2018). Executive Management received 3 per cent Base Pay
increases, their first increase (excluding promotions, where
applicable) since 1 July 2018. The Base Pay for each Executive
KMP is provided on page 53.
ANNUAL INCENTIVE PLAN
Annual Incentive — Structure
The STIP is an annual incentive opportunity where an
Executive may receive an award that is a combination
of cash and 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
% of Base Pay
Target
Maximum
Business Performance
CEO
100%
200%
Executive
Management
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 behaviours.
The IPF can range from 0 to a maximum of 1.5.
STIP Formula
Base Pay x
Target
Opportunity
x
STIP Scorecard
Outcome
x
IPF
Delivery
Cash: Two thirds
Shares: One third with a two-year deferral period and an
additional one-year trading restriction, during which shares
cannot be traded and are subject to clawback.
Disclosure
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
two-year deferral period and one-year trading restriction).
Board Discretion
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.
34
Annual Incentive Outcomes
2022/23 STIP Outcome
The 2022/23 STIP Scorecard Outcome was 126 per cent. This
Scorecard Outcome was determined based on the Board’s
assessment of Management’s achievement against the
Scorecard’s performance measures.
2022/23 STIP Scorecard
Each year, the Board sets the performance measures that
comprise the STIP Scorecard in alignment with the Qantas
Group’s strategic priorities. For 2022/23, the Board determined to
return to Underlying PBT as the primary financial measure, with a
weighting of 50 per cent of the STIP Scorecard. Acknowledging
our need to do more to deliver the service our customers expect,
the STIP Scorecard weighting to Customer increased to 20 per
cent. Our existing suite of ESG measures were further enhanced
with the addition of a climate measure with a 5 per cent
weighting.
There was strong performance against both the financial and
some of the non-financial components of the STIP Scorecard. In
acknowledgement that our broader customer performance did
not meet expectations the Board exercised discretion to zero the
Customer component resulting in an outcome of 126 per cent
(out of a maximum 175 per cent) under the 2022/23 STIP.
Strategic Objective
Group Profitability
Transformation and Growth
Customer
G
S
E
Workplace and Operational Safety
Climate
STIP Scorecard Outcome
Weighting
(target) Outcome
50%
10%
20%
15%
5%
100%
ò
ò
¿
ò
ò
126%
ò Target achieved or exceeded
ò Partial achievement against targets
¿ No achievement against targets
Board Discretion on 2022/23 STIP
Prior to the delivery of the 2022/23 STIP award the Board
became aware of a number of matters which – in addition to the
below threshold Customer performance during the year – had
serious impacts on the reputation of the Group:
– The launch of ACCC proceedings (31 August 2023)
– A finding in the High Court that the Group had breached the
Fair Work Act (13 September 2023).
These issues caused the Board to exercise discretion under the
STIP to reduce the calculated outcome for the CEO and Executive
Management by 20 per cent. Further, as proceedings into the
ACCC matter are ongoing, the Board has determined to delay its
decision as to whether to approve the vesting of the STIP until it
has further information available. Should the Board determine to
vest any award under the 2022/23 STIP it will be fully disclosed
in the applicable future Remuneration Report.
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
RECOVERY RETENTION PLAN
Recovery Retention Plan – Structure
Recovery Retention Plan Outcomes
The RRP was a one-off, two-year plan that involved an upfront
award of a fixed number of Rights. If performance and service
conditions are achieved over a two-year period, Rights vest and
convert to Qantas shares.
The RRP replaced the annual participation in the STIP for
2021/22 only. In 2022/23 Qantas reverted to the prior practice of
the STIP.
Purpose
Reward for longer term delivery of the three key pillars of the
Group’s post-pandemic success.
Target Opportunity and Allocation Methodology
The number of Rights awarded under the RRP was calculated by
applying a face value methodology to determine the maximum
number of Rights that may vest and convert to Qantas shares.
The target opportunity for the CEO and Executive Management
was as follows:
Target
Opportunity
% of Base Pay on a
face value basis
CEO
150%
Executive
Management
120%
The number of Rights awarded was determined by applying the
following formula:
Base Pay
x
Target
Opportunity
÷
Face Value of
Right
Business Performance
The Board determined the performance conditions in August
2021 for the RRP as follows:
– The Qantas Group meets its $1 billion Recovery program
target by 30 June 2023
– As at 30 June 2023, Qantas Group’s Net Debt range is below
the top end of the Net Debt range as approved by the Board
in accordance with the Group’s Financial Framework
– The Qantas Group is profitable on an Underlying PBT basis for
2022/23.
Board Discretion
The Board retained discretion on vesting of the award in the
event of a material safety failure.
Delivery
If performance and service conditions are achieved, Rights vest
and convert to Qantas shares.
Disclosure
In addition to the required statutory disclosures, Qantas chooses
to disclose the full value of RRP awards that vest during the year,
based on the share price at the end of the performance period.
Further detail on the RRP is provided on pages 49 to 50.
RRP – Achievement of Performance Conditions
Performance Measure
Delivery of $1 billion Recovery program
Achieving Qantas’ stated Net Debt target
Achieving profitability at the underlying level for
2022/23
Outcome
ò
ò
ò
ò Target achieved or exceeded
¿ No achievement against targets
RRP Outcome
Based on full achievement of the three performance conditions,
100 per cent of Rights awarded under the 2022-2023 RRP vested
and converted to shares.
35
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
LONG TERM INCENTIVE PLAN
Long Term Incentive — Structure
Long Term Incentive Outcomes
2021-2023 LTIP – Achievement of Performance Conditions
Qantas’ three-year relative TSR performance was ranked:
Airline Peer Group
1st
ASX100
17th
(performance condition fully
achieved)
(performance condition fully
achieved)
LTIP Outcomes
Based on Qantas’ top quartile TSR performance against both the
ASX100 and airline peer groups, 100 per cent of Rights awarded
under the 2021-2023 LTIP vested and converted to shares which
are subject to a further one-year trading restriction.
Longer Term TSR Performance
Qantas continued to outperform the majority of its airline peers,
achieving top quartile relative TSR performance for the eighth
consecutive rolling three-year period.
QANTAS AND AIRLINE PEERS — THREE-YEAR TSR PERFORMANCE1
LTIP Period
Airline Peer Group
ASX100 Peer Group
2021-2023
Top quartile
2020-2022
2019-2021
Top quartile
Top quartile
2018-2020
Top quartile
2017-2019
Top quartile
2016-2018
Top quartile
2015-2017
Top quartile
2014-2016
Top quartile
Top quartile
Below median
Below median
Below median
Top quartile
Top quartile
Top quartile
Top quartile
1
TSR performance, applying the LTIP performance test methodology (which uses
the average closing share price over the six months preceding the test date of
30 June 2023).
The LTIP is a four-year plan that involves an upfront award of a
fixed number of Rights. If performance and service conditions are
achieved over a three-year period, Rights vest and convert to
Qantas shares which are then restricted for a further one-year.
Purpose
Reward for longer term Qantas Group performance.
Target Opportunity and Allocation Methodology
The number of Rights awarded under the LTIP has been
calculated by applying a face value methodology to determine
the maximum number of Rights that may vest and convert to
Qantas shares. The target opportunity for the CEO and Executive
Management is as follows:
Target Opportunity
Standard % of Base Pay
on a face value basis
One-off % of Base Pay
on a face value basis
for 2021-2023 LTIP
CEO
185%
Executive
Management
95%
235%
135%
The number of Rights awarded is determined by applying the
following formula:
Base Pay
x
Target
Opportunity
÷
Face Value of
Right
Business Performance
Qantas’ three-year Total Shareholder Return (TSR) performance
relative to:
– A global airline peer group
– ASX100 companies.
Delivery
If performance and service conditions are achieved, Rights vest
and convert to Qantas shares. A further one-year trading
restriction on vested shares applies, during which the shares
cannot be traded and are subject to clawback.
Disclosure
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.
Rights Awarded Under the 2021-2023 LTIP
Executives received a larger award under the 2021-2023 LTIP,
due to the Pay Remix in 2020/21. This one-off change in 2020/21
involved a decrease in that year’s annual incentive opportunity,
offset by an increase in that year’s long term incentive
opportunity to align remuneration to the three-year Recovery
Plan.
36
QantasTop Quartile2nd QuartileBelow MedianQantasSingapore AirlinesDeutsche LufthansaRyan AirJapan AirlinesUnited ContinentalDelta AirlinesAll Nippon AirwaysCathay Pacific AirwaysAmerican AirlinesIAGSouthwest AirlinesAir New ZealandAirAsiaeasyJetAir France/KLMLATAM(100)%(75)%(50)%(25)%0%25%50%75% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
REMUNERATION OUTCOMES FOR THE CEO
The CEO’s total pay outcome for 2022/23 was higher than 2021/22. The Group’s sustained performance was recognised through the
operation of the Group’s RRP and LTIP. A one-off increase to the CEO’s total pay was also realised by the CEO electing to accept the previously
deferred Rights under the 2018-2020 LTIP, 2019-2021 LTIP and 2020-2022 LTIP. The CEO’s STIP award has not been finalised as the Board
has determined to delay its decision as to whether to approve the vesting of the 2022/23 STIP until it has further information available.
Base Pay
The CEO did not receive a Base Pay increase during 2022/23.
Base Pay (cash) is $2,144,708 (Base Pay of $2,170,000 less
superannuation contributions of $25,292).
Annual Incentive — STIP
Based on the Board’s assessment of performance against the
STIP Scorecard measures and the CEO’s individual performance,
the CEO’s STIP award was initially calculated as follows:
The Individual Performance Factor (IPF) for the CEO was
determined by the Board based on its assessment of the CEO’s
contribution.
Total
=
Base Pay
x
‘Target’
Opportunity
$ 2,734,200 = $2,170,000 x
100%
x
x
STIP
Scorecard
Outcome
126%
x
x
Individual
Performance
Factor
1
The Board has reduced the CEO’s calculated outcome by a
further 20 per cent to $2,187,360. The CEO’s STIP award has not
been finalised as the Board has determined to delay its decision
as to whether to approve the vesting of the STIP until it has
further information available.
The STIP Scorecard Outcome is detailed on page 51.
Recovery Retention Plan – 2022-2023 RRP
At the 2022 AGM shareholders approved a grant of 698,000
Rights under the 2022-2023 RRP.
Based on Qantas’ achievement against the performance
measures, 100 per cent of Rights vested and converted to shares.
The share price appreciation from 1 July 2021 to 30 June 2023
represents $1,075,000 (25 per cent) of the $4,327,000 realised
outcome.
Long Term Incentive
b.
The 2020/21 Pay Remix (detailed on page 36) applied to the CEO
as follows:
a.
The CEO’s 2020/21 STIP opportunity was decreased from 100
per cent of Base Pay to 50 per cent
The CEO’s award of Rights under the 2021–2023 LTIP was
increased from 185 per cent of Base Pay to 235 per cent.
Following this pay remix, at the 2020 AGM shareholders approved
an award of 1,349,000 Rights to the CEO under the 2021–2023
LTIP.
Based on Qantas’ top quartile TSR performance over the three-
year performance period of the 2021-2023 LTIP, 100 per cent of
Rights vested and the CEO was awarded 1,349,000 shares. A
further one-year trading restriction on vested shares applies.
After agreeing in previous years to defer the decision on vesting
of Rights awarded under the 2018-2020 LTIP, 2019-2021 LTIP
and 2020-2022 LTIP, the CEO elected to convert these Rights to
shares in August 2023.
Note 1 The implementation of the RRP replaced the annual STIP opportunity for
2021/22. As a result, no annual STIP awards were paid for 2021/22.
Note 1 The number of Rights vested multiplied by the Qantas share price of $6.20 at
30 June 2023.
To ensure transparency on the full value of LTIP awards that
vested during the year, Qantas has disclosed in the actual
remuneration outcome the CEO’s total LTIP outcome for
2022/23. The total share price appreciation across the four LTIPs
listed represents $3,740,000 (25 per cent) of the $14,815,000
realised outcome.
Note 1 The number of Rights vested multiplied by the Qantas share price of $6.20 at
30 June 2023.
37
$'000$2,146$2,145Base Pay (cash)20222023$0$1,100$2,200$'000$0$0STIP - Cash bonusSTIP - share-based20222023$0$1,000$2,000$3,000$'000$0$4,327Recovery Retention Plan20222023$0$1,500$3,000$4,500 Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Actual & Statutory Remuneration Outcomes
The actual remuneration outcomes for the CEO in 2022/23 are
detailed in the following table.
The statutory remuneration disclosures for the CEO are prepared
in accordance with Australian Accounting Standards.
2023
$'000
2022
$'000
CEO Remuneration
Outcomes1,2
Base Pay (cash)
STIP – cash bonus3
STIP – share-based3
RRP – vesting
2018-2020 LTIP – vesting4
2019-2021 LTIP – vesting4
2020-2022 LTIP – vesting4
2021- 2023 LTIP – vesting4
Other
Total Actual Outcome5
1 The non-statutory remuneration methodology is explained on pages 45 to 50.
2 A reconciliation of remuneration outcomes to statutory remuneration disclosures
2,145
–
–
4,327
2,130
2,018
2,303
8,364
156
21,443
2,146
–
–
–
–
–
–
–
126
2,272
is provided on page 44.
3 The CEO’s STIP award has not been finalised as the Board has determined to delay
its decision as to whether to approve the vesting of the STIP until it has further
information available.
4 Each LTIP Award was previously approved by Shareholders at the respective AGM.
5 The share price appreciation for the RRP and LTIPs represents $4.815 million of
the $21.4 million.
The statutory disclosures differ from the actual remuneration
outcomes for the CEO due to the accounting treatment of share-
based payments for the STIP, RRP and LTIP.
CEO Statutory Remuneration
Base Pay (Cash)
STIP - cash bonus1
STIP - share-based1
RRP
LTIP
Other
Total
2023
$'000
2,145
1,458
625
3,304
4,231
156
11,919
2022
$'000
2,146
—
31
—
3,272
126
5,575
1 In relation to the STIP, the Board has determined to delay its decision as to whether
to approve the vesting of the 2022/23 STIP, until it has further information
available, without adjusting the original service period. Statutory Remuneration
reported above (STIP- cash bonus and STIP - share based) is calculated with
reference to the maximum remaining potential outcome of the 2022/23 STIP
(Scorecard Outcome is 126 per cent less the 20 per cent reduction applied by
Board discretion). The final outcome of the 2022/23 STIP may be less than this
amount or potentially nil, in which event the Statutory Remuneration expense
reported may be fully or partially reversed in the future financial reporting periods.
CEO Remuneration Outcomes History (2013/14 to 2022/23)
Qantas’ incentive awards are designed to align Executive remuneration outcomes with business performance. This alignment is
demonstrated each year in the variability of the incentive plan outcomes for the CEO driven by actual performance or Board discretion.
Underlying PBT ($M)
ROIC %1
2014
($646)
(1.5%)
2015
$975
16.2%
2016
$1,532
22.7%
2017
$1,401
20.1%
2018
$1,565
21.4%
2019
$1,326
19.2%
2020
$124
5.8%
2021
2022
2023
($1,774)
($1,859)
$2,465
(21.4%)
(31.6%)
103.6%
1 Group ROIC is expected to moderate in future periods as Invested Capital rebuilds, however structural changes in earnings, and working capital benefits are expected to deliver Group
ROIC in excess of pre-COVID levels.
1
2
After agreeing in previous years to defer the decision of vesting of Rights awarded under the 2018-2020 LTIP (343,500 Rights), 2019-2021 LTIP (325,500 Rights) and 2020-2022
LTIP (371,500 Rights), the CEO elected to convert these Rights to shares in August 2023. Accordingly, the 2020, 2021 and 2022 LTIP Outcomes for the CEO have been updated to
reflect the vesting of Rights under the respective plans.
The Board determined that the STIP would not operate in 2021/22. This was replaced by the RRP. Shareholder approval was sought and received at the 2022 AGM for the CEO’s
participation in the RRP and for the CEO’s grant of Rights under the plan
3 The CEO’s STIP award has not been finalised as the Board has determined to delay its decision as to whether to approve the vesting of the STIP until it has further information
available.
CEO Remuneration subject to Malus or Clawback
The Remuneration Framework, which delivers rewards to executives in a mixture of cash and deferred or restricted shares, also provides the
Board with the mechanisms to apply significant remuneration consequences through malus and/or clawback. The following table sets out the
amount of both restricted and unvested equity on which this may be applied if determined by the Board that this is justified.
Alan Joyce
Plan
2022/23 STIP2
2021-2023 LTIP
2022-2024 LTIP3
2023-2025 LTIP3
Number of
Shares
–
1,349,000
Total
1,349,000
Number of
Rights
–
–
626,110
353,956
980,066
Value of Shares
and Rights1
$’000
—
8,364
3,882
2,195
14,441
Deferral / Restriction Date /
Test Date
August 2024
August 2024
August 2025
1
2
Interest in shares or rights as at 30 June 2023 multiplied by the Qantas share price of $6.20 at 30 June 2023.
The CEO’s STIP award has not been finalised as the Board has determined to delay its decision as to whether to approve the vesting of the STIP until it has further information
available.
3 Rights awarded under the 2022-2024 LTIP and 2023-2025 LTIP are subject to performance hurdles that are yet to be tested. The Rights may vest and convert to shares at the end of
the performance period subject to the achievement of the original respective performance conditions. Any shares allocated following the vesting are subject to a one-year trading
restriction. The value shown is an indicative value assuming full vesting; the actual vesting outcome may vary and could be nil.
38
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
REMUNERATION OF INCOMING CEO – VANESSA HUDSON
Ms Hudson was appointed CEO-Designate on 2 May 2023, and commenced as CEO on 6 September 2023 (post the period covered by this
report).
Ms Hudson’s Base Pay and Total Remuneration was set at a level below her predecessor to reflect that Ms Hudson is a first-time CEO. Details
of the remuneration arrangements under her employment agreement as CEO are set out below.
Base Pay
From 2 May 2023, Ms Hudson’s Base Pay increased to $1,300,000 in recognition of the additional responsibilities and workload that she would
assume under the transition from her current role as CFO. Effective 6 September 2023, her Base Pay will increase to $1,600,000 per annum
upon stepping into the CEO role. Base Pay can be taken as cash or non-cash components such as superannuation and motor vehicles. The
next review of Base Pay for Ms Hudson will be in 2024.
Defined Benefit Superannuation
At retirement, Ms Hudson’s total Defined Benefit (DB) benefit will be a lump-sum amount calculated using a pre-determined formula for her
member category, which is based on the relevant Final Average Salary (FAS), Credited Service and Accrual Rate. The FAS is the highest final
average annual Superannuation Salary calculated over any consecutive three financial years ending 30 June in the most recent 10 year
period. Superannuation Salary is an amount used to determine how much to contribute to Superannuation, Credited Service is the length of
time that the employee has been continuously employed by the Qantas Group and Accrual Rate is a fixed percentage used to calculate DB.
Ms Hudson has contributed at least 4 per cent of her Superannuation Salary during each year of DB membership and these contributions,
together with investment earnings in the DB plan, will form part of her DB entitlement. The balance of the cost is met by Company
contributions to the DB plan together with investment earnings, a portion of which will form part of her DB entitlement in the DB plan. The
actuarial value (under AASB 119 ‘Employee Benefits’) of Ms Hudson’s DB benefit accrued over her total DB plan membership to 30 June 2023
is included in the Defined Benefit Obligation for all DB members shown in Note 29 of the Financial Report. The Company financed cost (under
AASB 119 ‘Employee Benefits’) of Ms Hudson’s superannuation accruing over the financial year ending 30 June 2023 was $121,224 and is
detailed on page 43 within post-employment benefits.
Incentives:
STIP: The Target award under the STIP is 100 per cent of Base Pay, with a Maximum award capped at 160 per cent of Base Pay.
LTIP: On an annual basis Ms Hudson will be invited to participate in the LTIP. Ms Hudson is eligible for a maximum award under the LTIP of
160 per cent of Base Pay. The minimum award is nil, which would occur if the threshold level of performance is missed on each LTIP measure.
Shareholder approval for Ms Hudson’s participation in the LTIP and grant of Rights under the 2024-2026 LTIP will be sought at the 2023 AGM.
CHANGES TO REMUNERATION FRAMEWORK FOR 2023/24
The Remuneration Framework is continually monitored and refined to ensure that it remains aligned with the business strategy. As the
recovery of the business accelerates and moves into more normalised trading conditions, the focus broadens from recovery-related
measures to other concerns, in particular, further increasing our focus on delivering great experiences for our customers, and through this,
the sustained work to repair our reputation. Looking ahead to 2023/24, the following changes have been made to the Framework:
STIP Scorecard
Acknowledging our need to do more to deliver the service our customers expect, the STIP Scorecard weighting will be further increased toward
Customer with Group Financial and Customer Scorecard categories assigned an equal target weighting of 40 per cent respectively. This
adjustment doubles the weighting to Customer from 20 per cent in the 2022/23 STIP Scorecard. The Workplace and Operational Safety and
Climate categories retain the same weighting as 2022/23 STIP Scorecard.
In response to the heightened level of cyber security risks that have been evident in Australia in recent times, the Group has acknowledged
the importance of Qantas being prepared to meet this threat and as a result has introduced a cyber security metric into the STIP Scorecard
Customer category. In alignment with the Group’s cyber maturity and strategy to further embed cyber into the business and management
accountabilities, the selected measure is the Phishing Simulation Click Rate, which is the industry-leading metric for People Cyber (Human
Firewall) and a key risk/behavioural metric important in protection of our customers’ data.
A climate-related performance measure was first introduced into the STIP Scorecard in 2022/23 to include a CO2 emissions reduction target.
In addition to decarbonisation, waste is also a key focus of the Qantas Group Climate Action Plan (CAP), and the climate measure for 2023/24
will be expanded to include a waste target for deployment of key initiatives.
LTIP
The Remuneration Committee regularly considers the operation of the LTIP. Effective from 1 July 2023 for the 2024-2026 LTIP, the Board has
introduced a third measure focused on Reputation. The Reputation measure will sit alongside the two existing relative TSR measures, all of
which will be equally weighted. At the same time, commencing with the 2024-2026 LTIP, full Board discretion over the vesting outcome will
be introduced for the first time, aligning the Group to market practice. Further details on 2024-2026 LTIP will be provided in the Notice of
Meeting to the 2023 AGM.
39
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
REMUNERATION REPORT FOR 2022/23
The Remuneration Report sets out remuneration information for the CEO, Executive Management (including the CEO-Designate) and Non-
Executive Directors who are Key Management Personnel (KMP). Section 300A of the Corporations Act 2001 (Cth) 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 Management (and their statutory remuneration disclosures) are
listed on page 43. Non-Executive KMP (and their statutory remuneration disclosures) are listed on page 59.
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 a robust and rigorous approach to remuneration governance and effectiveness across
the areas of oversight, structure, operation and quantum as described below:
Oversight
The remuneration governance roles of the Board; the Remuneration Committee; the Safety, Health, Environment and
Security Committee; the Audit Committee; and the Board’s independent remuneration consultant Ernst & Young (EY) are
each 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 written 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. All Board members are invited
and eligible to attend Remuneration Committee meetings.
During 2022/23, EY continued as the Remuneration Committee’s 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 (Cth), which are incorporated into the terms of engagement with EY.
The Remuneration Committee did not seek, nor receive, a formal remuneration recommendation (as defined
in the Corporations Act 2001 (Cth)) during 2022/23.
40
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
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
or imprudently influenced by any individual employee
– Individual performance defined and assessed in terms of both achievements and conduct
– The Board retaining discretion over remuneration outcomes
– Clear maximum values specified for STIP Scorecard outcomes and a challenging vesting scale under the LTIP
– Diversity of the timeframes within which performance is measured, with performance under the STIP measured over
one year and performance under the LTIP measured over three years
– Deferral of a portion of awards under the STIP for two years, with an additional one-year trading restriction providing
further alignment with shareholder interests
– Deferral of Rights that vest and convert to shares under the LTIP, with shares subject to a one-year trading
restriction to provide further alignment with shareholder interests
– A clawback mechanism 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 to be forfeited
– In the case of serious misconduct, cancel any post-employment benefits for the relevant employee(s)
(where possible).
The Qantas Board has a demonstrated history of aligning remuneration outcomes with Group 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 are provided on page 46.
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. They are also the peer groups with which Qantas
competes for Executive talent.
Operation
Quantum
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, 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.
41
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
3 REMUNERATION OUTCOMES FOR 2022/23
The following table summarises the remuneration decisions and outcomes for the CEO and Executive Management for the year ended
30 June 2023. The remuneration outcomes detailed in this table are useful in understanding current year pay and its alignment with
performance, as additional information to the statutory remuneration disclosures.
Actual Remuneration Outcomes Table — CEO and Executive Management1
$'000s
Current Executives
Alan Joyce7
Chief Executive Officer
Andrew David
CEO Qantas Domestic &
International to 31 May 2023
CEO Qantas Domestic
from 1 June 2023
Vanessa Hudson8
Chief Financial Officer
to 1 May 2023
CEO Designate and Chief
Financial Officer
from 2 May 2023
Stephanie Tully9
CEO Jetstar Group
from 14 November 2022
Cameron Wallace
CEO Qantas International &
Freight from 1 June 2023
Olivia Wirth
CEO Qantas Loyalty
Total
Former Executive
Gareth Evans10
Former CEO Jetstar Group
(exited 31 December 2022)
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Base Pay
(Cash)2
STIP Cash
Bonus3
STIP Deferred
Award3
RRP
LTIP4,5
Other
Benefits6
2,145
2,146
1,026
996
986
921
807
–
69
–
868
843
5,901
4,906
528
1,057
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,327
–
1,628
–
14,815
–
2,259
401
1,628
–
2,260
334
1,197
1,106
–
–
–
1,386
–
10,166
–
1,299
–
–
–
–
1,919
341
22,359
1,076
1,997
425
156
126
33
59
250
183
174
–
38
–
108
67
759
435
98
101
Total
21,443
2,272
4,946
1,456
5,124
1,438
3,284
–
107
–
4,281
1,251
39,185
6,417
3,922
1,583
5
6 Other Benefits are detailed on page 50.
7
1 Details of the non-statutory remuneration methodology are explained on pages 45 to 50.
2 Base Pay (Cash) is Base Pay less superannuation contributions. Superannuation is reported in Other Benefits.
3
4
The Board has determined to delay its decision as to whether to approve the vesting of the STIP until it has further information available. For 2021/22 the Board determined that STIP
would not operate and as a result, the value is nil. The 2021/22 STIP was replaced by the RRP.
LTIP awards vested in 2022/23 at 100 per cent. After agreeing in previous years to defer the decision of vesting of Rights awarded under the 2018-2020 LTIP, 2019-2021 LTIP and
2020-2022 LTIP, the CEO elected to convert these Rights to shares.
The number of Rights vested multiplied by the Qantas share price of $6.20 at 30 June 2023 (the end of the plan’s performance period) (2022: $4.47 at 30 June 2022).
The share price appreciation component of the equity based RRP and LTIPs that have vested to the CEO contributes a total of $4,815,000 (20 per cent) of the overall total
remuneration outcome.
8 Superannuation benefits are provided through a defined benefit superannuation plan. The amount disclosed has been measured in accordance with AASB 119 Employee Benefits.
9 The 2022/23 remuneration reflects the full year remuneration for Ms Tully. This differs to the Statutory Remuneration disclosure which includes only the remuneration for the period
of time in a KMP role for Ms Tully (14 November 2022 to 30 June 2023).
10 Mr Evans ceased as a KMP and ceased employment with Qantas on 31 December 2022. Mr Evans transitioned CEO Jetstar Group to Ms Tully on 14 November 2022. 2022/23
Remuneration is included up until the termination date.
Mr Evans ceased as a KMP and ceased employment on 31 December 2022. Treatment on cessation of employment, as a good leaver, under
the STIP, RRP and LTIP (consistent with the terms and conditions of those plans) was as follows:
– Under the 2022/23 STIP, subject to the Board determining that an award should vest, an award of cash and restricted shares pro-rated for
the portion of the performance period worked
– Under the 2021-2023 LTIP and RRP, Rights that vested were pro-rated for the portion of the performance period employed. Shares
allocated following vesting of the LTIP are subject to a one-year trading restriction
– Under the 2022-2024 LTIP, Rights continue to remain on foot on a pro-rata basis for the portion of the performance period in which
Mr Evans was employed, and may vest and convert to shares at the end of the performance period subject to achievement of the original
LTIP performance conditions. Any shares allocated following vesting of the LTIP will be subject to a one-year trading restriction.
During 2023, the Group announced that the CEO, Mr Joyce and the CEO Qantas Domestic, Mr David had made the decision to retire during the
2023/24 financial year. Mr Joyce retired 5 September 2023 and Mr David will leave the Group on 29 September 2023. Mr Joyce and Mr David
will not participate in the 2023/24 STIP and 2024-2026 LTIP.
42
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
4 STATUTORY REMUNERATION DISCLOSURES FOR 2022/23
The statutory remuneration disclosures for the year ended 30 June 2023 are detailed below. These are prepared in accordance with
Australian Accounting Standards and differ from the 2022/23 remuneration outcomes on page 42. The differences arise due to the
accounting treatment of share-based payments for the STIP, RRP and LTIP.
Statutory Remuneration Table — CEO and Executive Management
Incentive Plan – Accounting Accrual
Other Benefits
Equity-Settled
Share-Based Payments
Base Pay
(Cash)1,2
STIP
Cash
Bonus1
STIP
Deferred
Shares1
RRP
Rights
LTIP
Rights
Sub-
Total
Non-Cash
Benefits1,3
Post-
Employment
Benefits4
Other
Long-
Term
Benefits5
Sub-
Total
Total
2023
2022
2023
2022
2,145
2,146
1,026
996
1,458
–
593
–
625
31
237
10
3,304
4,231
11,763
–
872
291
3,272
895
771
5,449
3,623
2,068
2023
2022
986
921
677
–
107
8
872
291
845
716
3,487
1,936
2023
2022
2023
2022
2023
2022
2023
2022
518
–
69
–
293
–
–
–
47
–
–
–
402
214
1,474
–
–
–
–
–
–
–
69
–
868
843
5,612
4,906
514
–
3,535
81
742
723
2,928
10
1,097
247
655
6,192 6,908
1,755
23,344
–
59
829
5,414
11,208
2023
2022
528
1,057
293
–
146
12
735
308
375
817
2,077
2,194
17
23
31
11
43
34
131
–
21
–
76
8
319
76
11
46
51
46
56
51
88
57
(54)
(2)
156
11,919
126 5,575
3,656
33
60
2,128
185
144
22
5
250 3,737
183
2,119
46
–
33
–
56
52
427
293
43
52
(22)
155
1,629
–
5
–
–
–
59
–
128
–
(24)
108
3,036
7
15
67
44
4
67
761
1,822
24,105
436
11,644
98
2,175
102
2,296
$'000s
Current Executives
Alan Joyce6
Chief Executive Officer
Andrew David6
CEO Qantas Domestic
& International to
31 May 2023
CEO Qantas Domestic
from 1 June 2023
Vanessa Hudson7
Chief Financial Officer
to 1 May 2023
CEO Designate and
Chief Financial Officer
from 2 May 2023
Stephanie Tully8
CEO Jetstar Group
from 14 November
2022
Cameron Wallace8
CEO Qantas
International & Freight
from 1 June 2023
Olivia Wirth
CEO Qantas Loyalty
Total
Former Executive
Gareth Evans9
Former CEO Jetstar
Group (exited 31
December 2022)
1
Short-term employee benefits include Base Pay (cash), STIP cash bonus and non-cash benefits. In relation to the STIP, the Board has determined to delay its decision as to whether
to approve the vesting of the 2022/23 STIP until it has further information available, without adjusting the original service period. Statutory Remuneration reported above (STIP Cash
Bonus and STIP Deferred Shares) is calculated with reference to the maximum remaining potential outcome of the 2022/23 STIP (Scorecard Outcome is 126 per cent less the 20 per
cent reduction applied by Board discretion). The final outcome of the 2022/23 STIP may be less than this amount or potentially nil, in which event the Statutory Remuneration
expense reported may be fully or partially reversed in the future financial reporting periods.
2 Base Pay (Cash) is Base Pay less superannuation contributions. Superannuation is reported in Post-Employment Benefits.
3 Non-cash benefits include the value of travel benefits while employed and other minor benefits.
4 Post-Employment Benefits includes superannuation and an accrual for post-employment travel of $26,000 for Mr Joyce, $64,000 for Ms Hudson and $30,000 for each other
Executive (2022: $22,000 for Mr Joyce, $28,000 for Ms Hudson and $28,000 for each other Executive).
5 Other Long-Term Benefits include 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 Mr Joyce and Mr David will cease employment with Qantas during 2023/24. Shares that are awarded under the 2022/23 STIP to Mr Joyce and Mr David are subject to a deferral
period. The deferral period and additional trading restriction will continue to apply and these shares are subject to clawback. As Mr Joyce and Mr David will cease employment prior to
the end of the performance period, the Rights under the 2022-2024 LTIP and the 2023-2025 LTIP will continue to remain on foot on a pro-rata basis for the portion of the
performance period in which Mr Joyce and Mr David were employed, consistent with the Terms and Conditions of those plans as a good leaver. The Rights may vest and convert to
shares at the end of the performance period subject to achievement of the original respective performance conditions. Any shares allocated following vesting of the LTIP will be
subject to a one-year trading restriction.
Superannuation benefits are provided through a defined benefit superannuation plan. The amount disclosed has been measured in accordance with AASB 119 Employee Benefits.
7
8 2022/23 remuneration reflects the period of time in a KMP role for Ms Tully (14 November 2022 to 30 June 2023) and Mr Wallace (1 June 2023 to 30 June 2023). Non-Cash benefits
for Mr Wallace includes the amortised accounting value for the one-off equity grant (as an equity-settled share based payment) to replace forfeited incentives as a result of joining
Qantas that are subject to a vesting event occurring.
9 Mr Evans ceased as KMP and ceased employment on 31 December 2022. As a good leaver, Mr Evans was eligible to receive an award of cash and restricted shares pro-rated for the
portion of the performance period employed under the 2022/23 STIP subject to the Board determining that an award should vest. Rights under the 2021-2023 LTIP and the RRP that
vested were pro-rated for the portion of the performance period in which Mr Evans was employed. Shares allocated following the vesting of the 2021-2023 LTIP are subject to a one-
year trading restriction. Rights under the 2022-2024 LTIP continue to remain on foot on a pro-rata basis for the portion of the performance period in which Mr Evans was employed,
consistent with the Terms and Conditions of the plan as a good leaver. The Rights may vest and convert to shares at the end of the performance period subject to achievement of the
original respective performance conditions. Any shares allocated following vesting of the LTIP will be subject to a one-year trading restriction.
43
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
A reconciliation of the CEO’s remuneration outcome to the statutory disclosures is detailed below.
CEO’s Statutory Remuneration Disclosure to Remuneration Outcome for 2022/23
Reconciliation
Statutory Remuneration Disclosure
($'000) Description
11,919
Accounting Value of STIP, LTIP and RRP awards
The Statutory Remuneration Disclosure includes:
– Less: Accounting value for STIP awards
(2,083)
– Less: Accounting value for LTIP share awards
(4,231)
– Less: Accounting value for RRP share awards
(3,304)
–
–
the maximum remaining potential outcome of the 2022/23 STIP
notwithstanding that the Board has determined to delay its decision
as to whether to approve the vesting of the 2022/23 STIP until it has
further information available. The final outcome of the 2022/23 STIP
may be less than this amount or potentially nil, in which event the
Statutory Remuneration expense reported may be fully or partially
reversed in the future financial reporting periods.
the accounting value of share-based payments. Accounting
standards require share-based payments to be amortised over the
relevant performance and service periods. The accounting value for
awards under the LTIP and RRP do not have regard to whether
performance conditions were achieved.
Current year STIP share awards and vesting of RRP
and LTIP awards
In a year where STIP share awards are made or awards under the RRP or
LTIP vest, the Remuneration Outcomes disclosure includes:
– Add: 2022-2023 STIP awards
— – The Board has determined to delay its decision as to whether to
approve the vesting of the 2022/23 STIP until it has further
information available and therefore the value is nil
– Add: 2022-2023 RRP – vesting
– Add: 2018-2020 LTIP – vesting
– Add: 2019-2021 LTIP – vesting
– Add: 2020-2022 LTIP – vesting
– Add: 2021-2023 LTIP – vesting
Remuneration outcome – Total
4,327 – The full value of the shares that vested under the RRP
2,130 – The full value of the shares that vested under the 2018-2020 LTIP,
2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP applying the
30 June 2023 Qantas share price. The shares awarded under the
2021-2023 LTIP are subject to an additional one-year
trading restriction.
2,018
2,303
8,364
21,443
Annual Incentive Decision Delayed for 2022/23 — CEO and Executive Management
The 2022/23 STIP award has not been finalised as the Board has determined to delay its decision as to whether to approve the vesting of the
STIP until it has further information available.
$'000s
Alan Joyce
Andrew David
Vanessa Hudson
Stephanie Tully
commenced as KMP 14 November 2022
Cameron Wallace
commenced as KMP 1 June 2023
Olivia Wirth
Gareth Evans2
ceased as KMP 31 December 2022
Total STIP Award
Decision Delayed1
2,187
STIP Cash Bonus1
Decision Delayed
1,458
890
1,016
704
–
771
439
593
677
469
–
514
293
STIP Deferred
Shares1
Decision Delayed
Total STIP as a % of
maximum
opportunity
Decision Delayed
Total STIP forfeited
as a % of maximum
opportunity
729
297
339
235
–
257
146
50 %
53 %
58 %
49 %
– %
58 %
51 %
50 %
47 %
42 %
51 %
– %
42 %
49 %
The Board has determined to delay its decision as to whether to approve the vesting of the STIP until it has further information available.
1
2 As a good leaver, Mr Evans, will subject to the Board determining that an award should vest be eligible to receive an award of cash and restricted shares pro-rated for the portion of
the performance period employed under the 2022/23 STIP.
44
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
5
EXECUTIVE REMUNERATION STRUCTURE
The Qantas Executive Remuneration Framework, as it applies to the CEO and Executive Management, is summarised on pages 33 to 39.
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)
Annual Incentive
STIP Overview
Calculation of
STIP Awards
Target
Opportunity
Performance
Conditions —
STIP Scorecard
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) but does include salary sacrifice components such as motor vehicles and purchased annual
leave.
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.
They are also the peer groups with which Qantas competes for Executive talent.
There has been no increase to the Base Pay for Mr Joyce since 1 July 2018.
The Base Pay for Ms Hudson, Mr David and Ms Wirth increased by 3 per cent from 1 July 2022 as part of the 2022 Annual
Review.
Ms Hudson was appointed to the role of CEO-Designate on 2 May 2023 , and then CEO on 6 September 2023. Ms
Hudson’s Base Pay was set at a level below her predecessor and having regard to comparable roles in peer group
companies. The same approach to setting Base Pay has been applied to:
– Ms Tully, who was appointed to the role of CEO Jetstar and commenced in her KMP role on 14 November 2022
– Mr Wallace, who commenced employment with Qantas in the role of CEO International and Freight on 1 June 2023.
The Base Pay for the CEO and Executive Management is outlined on page 53.
The STIP is the annual incentive plan for the CEO and members of Qantas Executive Management. Each year,
the 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 Opportunity expressed as a percentage of Base Pay:
– For the CEO and CEO-Designate, 100 per cent of Base Pay
– For Executive Management, 80 per cent of Base Pay.
The Board set a Scorecard of performance measures for 2022/23.
The STIP Scorecard contains a mix of Group financial and non-financial measures.
For 2022/23, the Board selected Underlying PBT as the key financial performance measure for the Qantas Group, 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 2022/23 STIP Scorecard outcome is provided
on pages 51 to 52.
45
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Performance
Conditions —
Individual
Performance
Factor (IPF)
Board
Discretion
Delivery of
STIP Awards
(and Application
of Board
Discretion in
2022/23)
STIP Award
Deferral
and Trading
Restriction
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 Behaviours. The Qantas Group Behaviours are:
– Responsible – Always care and be responsible
– Respectful – Working together, being respectful and inclusive
– Resilient – A positive attitude to everyday challenges
– Excellence – Striving for excellence (in all we do).
IPFs are generally in the range of 0.8 to 1.2. However, in the case of underperformance 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 as fundamental in calculating the STIP, it also recognises that remuneration
outcomes must be considered in the broader 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 to date).
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, 2013/14, 2019/20, 2020/21 and 2021/22)
– 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 2016/17, 2018/19 and 2022/23)
– A decision on whether to vest an award be delayed pending the outcome of further proceedings (2022/23).
In a year where STIP awards are made, the default delivery is two thirds of the STIP award paid as a cash bonus, with
the remaining one third deferred into Qantas shares.
The Board retains discretion as to how STIP awards are delivered.
The Board determined to delay its decision as to whether to approve the vesting of the 2022/23 STIP until it has further
information available.
In a year where STIP awards are made, the default approach is that shares awarded 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 outgoing CEO and 160 per cent of
Base Pay for the CEO-Designate and 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.
46
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
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, provided the Executive worked for a minimum of six months, 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, the original deferral period and
additional trading restriction continue to apply and these shares are subject to clawback.
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 42. 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).
There is nil value for:
– The current year, as the Board has determined to delay its decision as to whether to approve the vesting of the
2022/23 STIP until it has further information available
– The prior year, as no awards were made under the 2021/22 STIP as the plan did not operate.
Disclosure of STIP awards in the Statutory Remuneration Table on page 43 is based on the requirements of the
Corporations Act 2001 (Cth) and applicable Australian Accounting Standards. The STIP awards are disclosed as either:
– A cash incentive for any cash bonus paid, or
– 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.
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 further 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.
47
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Performance
Conditions
The performance conditions for each of the 2021-2023 LTIP (tested at 30 June 2023), 2022-2024 LTIP (to be tested at
30 June 2024) and 2023-2025 LTIP (to be tested at 30 June 2025) are Qantas’ relative TSR 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’ relative 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’ relative 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 three-year performance period.
The peer groups selected are because Qantas’ Financial Framework targets top quartile TSR performance relative to
global airline peers and ASX100 companies as these 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 comprises those companies that make up the S&P/ASX100 Index at the commencement of
the performance period.
The vesting scale for both the ASX100 and the global 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 date of
the performance period.
The global 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 2021-2023 LTIP, 2022-2024 LTIP
and 2023-2025 LTIP, the global listed airline peer group comprised: AirAsia, 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, and United
Continental.
The Remuneration Committee regularly reviews the appropriateness of the performance conditions. In 2022/23, the
Remuneration Committee determined that the current conditions continue to remain the most appropriate. These
conditions are aligned with returns achieved for shareholders and are consistent with the Group Financial Framework.
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.
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.
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 are subject to a one-year trading restriction.
Review of
Performance
Conditions
Vesting of
LTIP Award
Trading
Restriction
Cessation of
Employment
Allocation
Methodology
The number of Rights granted to the CEO and Executive Management under the LTIP is calculated on a face value basis
and is the maximum that may vest at the end of the performance period.
The maximum LTIP opportunity for the CEO and Executive Management is provided on a face value basis in the
Summary of Key Contract Terms on page 53.
48
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Allocation
Methodology
Used in 2022/23
Award to the CEO
At each year’s AGM, Qantas seeks shareholder approval for any award of Rights to the CEO. At the 2022 AGM,
shareholders approved an award of 898,000 Rights to the CEO (under the 2023-2025 LTIP), being the maximum
number of Rights that may vest and convert to shares.
The Notice of Meeting for the 2022 AGM set out the proposed number of LTIP Rights to be granted to the CEO on a face
value basis as follows:
Number of Rights awarded =
898,000 Rights awarded =
Base Pay x Maximum LTIP
opportunity
Face value (Qantas share price) as
at 30 June 2022
$2,170,000 x 185%
$4.47
Change of Control
In the event of a change of control, the Board determines whether the LTIP Rights vest or otherwise.
Disclosure
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 42. 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.
Recovery Retention Plan (RRP)
RRP Overview
The RRP replaced the 2021/22 STIP opportunity with an upfront award of Rights, with vesting tied to performance
conditions that must be achieved in full over the two-year performance period.
Allocation
Methodology
The number of Rights granted under the RRP was calculated on a face value basis. The number of Rights awarded was
the maximum number of Rights that may vest and convert to Qantas shares at the end of the performance period.
Performance
Conditions
For Rights to vest under the RRP, all of the following performance conditions were required to be achieved by the end of
the performance period on 30 June 2023:
– The Qantas Group meets its $1 billion Recovery program target by 30 June 2023
– As at 30 June 2023, Qantas Group’s Net Debt range is below the top end of the Net Debt range as approved by the
Board in accordance with the Group’s Financial Framework
– Qantas Group is profitable on an Underlying PBT basis for 2022/23.
Board
Discretion
The Board retained discretion to:
– Adjust the Net Debt range upwards to take into consideration significant initiatives or strategic proposals
undertaken by the Qantas Group that have impacted the ability to deliver the Net Debt target
– Not approve any vested award where there is a material failure in the structure of or compliance with a safety policy
or process that results in death or serious injury, arising out of Qantas Group’s business operations.
Vesting of
RRP Award
If performance and service conditions are achieved over the two-year performance period ending 30 June 2023, Rights
will vest and convert to unrestricted Qantas shares. If the two-year performance conditions or service conditions are not
met, the Rights lapse.
49
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Cessation of
Employment
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.
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 performance and service conditions of the RRP.
Disclosure
The statutory remuneration disclosure amortises the accounting value of RRP awards over the relevant performance
and service period as per the accounting standards.
In addition to the required statutory disclosures, Qantas chooses to disclose the full value of the RRP awards that
vested during the year in the Remuneration Outcomes Table on page 42. The full value is equal to the number of Rights
vested, multiplied by the Qantas share price at the end of the performance period.
Other Benefits
Non-Cash
Benefits
Travel
Non-Cash Benefits, as disclosed in the remuneration tables, includes other minor benefits.
Travel concessions are provided to permanent Qantas employees, consistent with prevailing practice in the airline
industry.
Travel at concessionary prices is on a sub-load basis. That is, it is subject to considerable restrictions and limits
on availability. The policy includes specified direct family members or a nominated travel companion or beneficiary.
In addition, and also consistent with prevailing 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
trips for personal purposes at no cost to the individual 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 (or superannuation benefits
provided through a defined benefit superannuation plan) 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.
Minimum Shareholding Guidelines
Minimum
Shareholding
Guidelines
The following shareholding guidelines were introduced with effect from 1 July 2019:
Individual
Non Executive Directors
CEO
Executive Management
Guideline
1 times Base Fee
1.5 times Base Pay
0.75 times Base Pay
Non-Executive Directors, the CEO and Executive Management have a maximum five-year period from the date of their
appointment to the respective role or commencement of this guideline to accumulate the value of their shareholding.
50
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
6
ANNUAL INCENTIVE SCORECARD OUTCOME 2022/23
For 2022/23, the Board considered the following key measures of financial and operational performance and the associated targets to be
critical indicators of performance and drivers of shareholder value. The table below summarises performance versus target against each
Scorecard category under the 2022/23 STIP.
Scorecard
Weighting
Target
(Range of
Outcomes)
Actual
Outcome
Component
Outcome1
Comment
Scorecard
Category/
Strategic
Objective
Measures
Group
Profitability
Underlying PBT less
transformation costs
Transformation
and Growth
Restructuring benefits
Qantas Loyalty Underlying
EBIT
Maximise our Leading
Domestic Position
50%
100%
ò
12.5%
(0-100%)
10%
(0-15%)
ò
0%
Customer
Net Promoter Score (NPS) -
for domestic airlines and
Qantas Frequent Flyer
20%
(0-30%)
Punctuality
Reliability
External Reputation/Trust
Workplace and
Operational
Safety
Board’s assessment of
Operational Safety
15%
(0-22.5%)
Workplace Safety measures
Climate
2022/23 CO2 emissions
reductions
5%
(0-8.75%)
2022/23 STIP Scorecard Outcome
100%
ò
6%
ò
126%
The Underlying PBT less transformation costs result
of $2,465 million for 2022/23 exceeded the
‘overdrive’ target set by the Board, which was set
with consideration to the prior Qantas Group record
result in 2017/18.
Management’s commitment and focus on the
Recovery Plan delivered more than $1,072 billion of
benefits over the three-year period and $300 million
in cost savings and incremental revenue benefits to
offset inflation and cost escalation.
Qantas Loyalty exceeded its Earnings Before Interest
and Tax (EBIT) target for 2022/23.
The Qantas Domestic and QantasLink revenue share
result for the domestic corporate travel market and
Small and Medium-sized Enterprise (SME) travel
market was below threshold and around threshold
respectively.
¿
Customer satisfaction for all key domestic and
international airlines and Qantas Frequent Flyer was
below threshold as a result of the operational
challenges during the year.
Based on Qantas Domestic and QantasLink
outperforming Virgin’s on-time performance rate in
11 out of 12 months, the target for this measure was
assessed as achieved.
ò
¿ The Qantas Domestic and QantasLink combined
¿ The Reputation/Trust result was also below
cancellation rate result was below threshold.
threshold.
In acknowledgement that our broader customer
performance did not meet expectations in 2022/23
the Board exercised discretion (as it did in 2021/22)
to zero this component.
¿
7.5% ò Operational Safety performance for the year was
strong. Therefore, there was a full contribution under
the Operational Safety measure.
¿
Improvements in Workplace Safety metrics of up to
8% were targeted. Due to the significantly increased
operational activity compared to the prior year this
level of improvement was not achieved. Therefore,
there was no contribution under the Workplace
Safety measure.
The Group delivered emissions reductions totalling
402,000 tonnes CO2-e, exceeding the target of
390,000 tonnes CO2-e.
72%
(0-175%)
out of a maximum 175%
out of a maximum scorecard outcome
KEY:
ò Target achieved or
exceeded
ò Partial achievement
against targets
¿ No achievement against targets
1 Component outcome shown for measure where overall target is partially achieved.
51
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Additional Descriptions of 2022/23 STIP Scorecard Measures
Group
Financial
Measures
In anticipation of a return to more normalised trading conditions during 2022/23, Underlying PBT (adjusted for
transformation costs recognised outside of Underlying PBT) was selected as a key financial performance measure.
Underlying PBT is the primary financial performance measure for the Qantas Group 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 generally not disclosed,
but for the purposes of the 2022/23 STIP, the maximum overdrive was set with consideration to the prior Qantas Group
record result achieved in 2017/18 of $1.604 billion.
Underlying PBT is derived by adjusting Statutory PBT for the impacts of items which are identified by Management and
reported to the Chief Operating Decision-Making bodies, as not representing the underlying performance of the business.
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, transactions involving investments, impairment of assets and other transactions outside the ordinary
course of business. For the purposes of the STIP Scorecard, Underlying PBT performance is reduced by any transformation
or restructuring costs recognised outside of Underlying PBT. This is an updated approach to ensure clear accountability by
Management for the efficient implementation of transformation initiatives.
Transformation
and Growth
To maintain focus on delivering the restructuring initiatives aligned to the recovery of the business and to ensure
inflationary cost pressures and any impact of CPI continued to be mitigated, a restructuring benefit target and an inflation
and cost escalation mitigation target was included.
To support the strategic initiative of growing diversified earnings, a STIP target was set to grow Qantas Loyalty EBIT.
Aligned to the strategic initiatives of maximising our domestic position through the dual brand strategy, STIP targets were
set in relation to our Australian domestic share of the corporate and small and medium-sized enterprise (SME) travel
markets.
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 Domestic/QantasLink combined, Qantas Frequent
Flyer, Jetstar Australia Domestic, Qantas International and Jetstar International.
Reputation/Trust is a survey-based measure of how trusted Qantas is as a brand in the community.
On-time departures for Qantas Domestic and QantasLink and cancellation rates continue to be important to our business
performance and are therefore included as performance measures. 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
Cancellation is measured as the number of flights removed from service within seven days of scheduled
departure.
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 or in the event where safety outcomes do not meet our expectations. The exercise of that
discretion considers the specific circumstances of the incident and/or safety outcomes, and is informed by a
recommendation of the Safety, Health, Environment and Security Committee. In 2016/17, for example, the Board exercised
its discretion in relation to the Workplace Safety outcome in that year to both zero the STIP Scorecard in that respect and by
additionally reducing the overall STIP award to the CEO and Executive Management by a significant proportion.
Of course, this ‘safety override’ discretion is in addition to, and does not qualify, the Board’s overall discretion over STIP
awards.
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.
Decarbonisation is a strategic priority and the key focus of the Qantas CAP and targets. Aligned to the strategic objective
and interim target of achieving a 25 per cent reduction in net emissions from 2019 levels by 2030, a CO2 emissions
reduction target was included as a measure.
Workplace and
Operational
Safety
Climate
52
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
7
LONG TERM INCENTIVE OUTCOME 2021-2023
Qantas TSR Performance
Qantas TSR Rank vs Global
Airlines
Qantas TSR Rank vs ASX100
Vesting of 2021-2023 LTIP
71%
1st
17th
100%
The three-year performance measures under the 2021-2023 LTIP are Qantas’ TSR compared to:
– A global airline peer group
– ASX100 companies.
Having delivered on a Recovery Plan set at the start of the pandemic, the business is now in a strong financial position. This has been
reflected in our share price and TSR performance.
Qantas’ TSR performance over the past three years ranked 1st of companies in the global airline peer group and 17th of companies in the
ASX100, resulting in top quartile performance against both performance measures. Based on this performance, 100 per cent vesting was
achieved.
Qantas’ Three-Year TSR Performance1 vs Peer Groups (%)
1 TSR performance, applying the LTIP performance test methodology (which uses the average closing share price over the six months preceding the test date of 30 June 2023).
8
SUMMARY OF KEY CONTRACT TERMS AS AT 30 JUNE 2023
Contract Details
Base Pay
Pay Mix per contract:
– STIP Target1
– LTIP Target1,2
Alan Joyce3
$2,170,000
Vanessa Hudson4
$1,300,000
Andrew David5
$1,051,000
Stephanie Tully5 Cameron Wallace5,6
$850,000
$850,000
Olivia Wirth5
$893,000
100 %
185 %
100 %
160 %
80 %
95 %
80 %
95 %
80 %
95 %
80 %
95 %
An annual benefit of trips for these Executives and eligible beneficiaries during employment,7 at no cost to the
individual, is as follows:
4 long-haul
12 short-haul
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
The same benefit is provided for use post-employment, based on the period of service in an Executive Management
role within the Qantas Group.
Employment may be terminated by either the Executive or Qantas by providing six months’ written notice.8 Each
Executive’s contract includes a provision that limits any termination payment to the statutory limit prescribed under
the Corporations Act 2001 (Cth).
A severance payment of six months’ Base Pay applies where termination is initiated by Qantas.8
Notice
Severance
Opportunity expressed as a percentage of Base Pay.
1
2 Rights awarded on a face value basis and is the maximum number of Rights that may vest and convert to Qantas shares.
3
4
5
6 On a one-off basis Mr Wallace is eligible to receive an equity grant to replace forfeited incentives as a result of joining Qantas. Subject to a vesting event, Qantas will provide an award
of Qantas shares to the same gross value as the vested award forfeited. This will be reported as Remuneration Outcome in the 2024 Remuneration Report once the value is known.
Target Remuneration Mix for the CEO for 2022/23 was Base Pay 26 per cent, STIP 26 per cent, and LTIP (on a face value basis) 48 per cent.
Target Remuneration Mix for CEO-Designate from 2 May 2023 was Base Pay 28 per cent, STIP 28 per cent, and LTIP (on a face value basis) 44 per cent.
Target Remuneration Mix for Executive Management for 2022/23 was Base Pay 36 per cent, STIP 29 per cent, and LTIP (on a face value basis) 35 per cent.
7 These benefits are not cumulative and lapse if they are not used during the calendar year in which the entitlements arise.
8 Other than for misconduct or unsatisfactory performance.
53
QantasGlobal Airlines 75th PercentileGlobal Airline MedianASX100 75th PercentileASX100 Median0%20%40%60%80% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
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:
Earnings Per Share1
Underlying Profit Before Tax ($M)2
Operating Cash Flow ($M)
Basic Earnings/(Loss) Per Share (cents).
1
2 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 Profit/(Loss) After Tax for 2022/23 was $1,744 million (2022: ($860)
million; 2021: ($1,692) million; 2020: ($1,964) million; and 2019: $840 million).
Qantas’ Five-Year TSR Performance
54
51.50(129.60)(89.90)(45.60)96.002018/192019/202020/212021/222022/23(150)(120)(90)(60)(30)03060901201,326124(1,774)(1,859)2,4652018/192019/202020/212021/222022/23(2,000)(1,500)(1,000)(500)05001,0001,5002,0002,5003,0003,1641,083(386)2,6705,0852018/192019/202020/212021/222022/23(800)08001,6002,4003,2004,0004,8005,600QantasS&P/ASX100MSCI World AirlinesJul-18Jul-19Jul-20Jul-21Jul-22Jul-23(80%)(60%)(40%)(20%)0%20%40%60%80% Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
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 STIP that are subject to a deferral period:
Short Term Incentive Plan
Alan Joyce
Andrew David
Vanessa Hudson
Stephanie Tully
commenced as KMP 14 November 2022
Cameron Wallace
commenced as KMP 1 June 2023
Olivia Wirth
Gareth Evans
ceased as KMP 31 December 2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
1 July
–
97,768
–
33,088
–
26,585
–
–
–
–
–
31,250
–
38,963
Number of Shares
Granted
Vested and
Transferred
Forfeited
30 June
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(97,768)
–
(33,088)
–
(26,585)
–
–
–
–
–
(31,250)
–
(38,963)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Rights Awarded Under the Long Term Incentive Plan
The following table details Rights awarded under the LTIP that are subject to performance hurdles that are yet to be tested, and tested Rights
that have not yet converted into shares.
Number of Rights
Vested and
Transferred3
–
Lapsed/
Forfeited
Ceased
Employment
–
–
30 June4
5,189,000
Long Term Incentive Plan
Alan Joyce5,6,7,8
Andrew David8
Vanessa Hudson
Stephanie Tully
commenced as KMP 14 November 2022
Cameron Wallace
commenced as KMP 1 June 2023
Olivia Wirth
Gareth Evans9
ceased as KMP 31 December 2022
1 July
Commenced
as KMP
2023
4,291,000
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
3,430,000
752,000
701,500
722,000
576,000
–
–
–
–
638,500
595,500
796,500
742,500
–
–
–
–
–
–
259,000
–
–
–
–
–
–
–
Granted1,2
898,000
861,000
223,500
208,000
223,500
208,000
86,500
–
–
–
(89,750)
(78,750)
(74,750)
(31,000)
–
–
–
–
(89,750)
(78,750)
(74,750)
(31,000)
–
–
–
–
(76,250)
– 4,291,000
796,000
–
–
–
–
–
–
–
–
–
752,000
796,000
722,000
345,500
–
–
–
676,000
638,500
–
–
190,000
176,500
–
–
(76,250)
(66,750)
(95,000)
(66,750)
(268,854)
–
(432,646)
220,500
(83,250)
(83,250)
–
796,500
1
Rights under the 2023-2025 LTIP were granted on 21 November 2022 to Mr Joyce (following approval by shareholders at the 2022 AGM) and other Executives and will be tested
against the performance hurdles as at 30 June 2025. The number of Rights granted was determined using the face value of a Right on 30 June 2022 of $4.47, being the start of the
performance period. The fair value of a Right on the grant date was $4.24 per Right.
2 Rights under the 2022-2024 LTIP were granted on 5 November 2021 to Mr Joyce (following approval by shareholders at the 2021 AGM) and 17 September 2021 for other Executives
and will be tested against the performance hurdles as at 30 June 2024. The number of Rights granted was determined using the face value of a Right on 30 June 2021 of $4.66,
being the start of the performance period. The fair value of a Right on the grant date was $3.85 for Mr Joyce and $3.895 per Right for other Executives.
3 50 per cent of Rights under the 2020-2022 LTIP (granted on 4 October 2019 for other Executives) vested following the testing of performance hurdles as at 30 June 2022 and the
Board’s approval of the 2020-2022 LTIP vesting outcome on 24 August 2022, with the remaining Rights lapsing.The shares awarded upon vesting of the LTIP remain subject to an
additional one-year trading restriction and are detailed in the Equity Holdings and Transactions table.
4 Rights under the 2021-2023 LTIP (granted on 23 October 2020 to Mr Joyce and 11 September 2020 for other Executives) are included in the 30 June 2023 balance. The number
of Rights granted was determined using the face value of a Right on 30 June 2020 of $3.78, being the start of the performance period. The fair value of a Right on the grant date was
$3.07 for Mr Joyce and $2.235 per Right for other Executives. 100 per cent of these Rights vested following the testing of performance hurdles as at 30 June 2023 and the Board’s
approval of the 2021-2023 LTIP vesting outcome on 23 August 2023. The shares awarded to Executive Management upon vesting of the LTIP remain subject to an additional one-
year trading restriction.
5 Rights under the 2020-2022 LTIP (granted on 25 October 2019 to Mr Joyce) are included in the 30 June 2023 balance. 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. 50 per cent vesting
was achieved following the testing of performance hurdles as at 30 June 2022. Notwithstanding that the LTIP conditions were partially achieved, the CEO offered, and the
Board agreed, to defer the decision as to whether his Rights will be forfeited or allowed to convert to shares until August 2023. After agreeing in previous years to defer the decision,
the CEO elected to convert these Rights to shares on 23 August 2023, with remaining Rights lapsing.
6 Rights under the 2019-2021 LTIP (granted on 26 October 2018 to Mr Joyce) are included in the 30 June 2023 balance. 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. 50 per cent vesting
was achieved following the testing of performance hurdles as at 30 June 2021. Notwithstanding that the LTIP conditions were partially achieved, the CEO offered, and the
Board agreed, to defer the decision as to whether his Rights will be forfeited or allowed to convert to shares until August 2023. After agreeing in previous years to defer the decision,
the CEO elected to convert these Rights to shares on 23 August 2023, with remaining Rights lapsing.
7 Rights under the 2018-2020 LTIP (granted on 27 October 2017 to Mr Joyce) are included in the 30 June 2023 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. 50 per cent vesting
was achieved following the testing of performance hurdles as at 30 June 2020. Notwithstanding that the LTIP conditions were partially achieved, the CEO offered, and the
Board agreed, to defer the decision as to whether his Rights will be forfeited or allowed to convert to shares until August 2023. After agreeing in previous years to defer the decision,
the CEO elected to convert these Rights to shares on 23 August 2023, with remaining Rights lapsing.
8 Mr Joyce and Mr David will cease employment with Qantas during 2023/24. As Mr Joyce and Mr David will cease employment prior to the end of the performance period, the Rights
under the 2022-2024 LTIP and the 2023-2025 LTIP will continue to remain on foot on a pro-rata basis for the portion of the performance period in which Mr Joyce and Mr David were
employed, consistent with the Terms and Conditions of those plans as a good leaver. The Rights may vest and convert to shares at the end of the performance period subject to
achievement of the original respective performance conditions. Any shares allocated following vesting of the LTIP will be subject to a one-year trading restriction. The full award of
Rights under the respective plans for Mr Joyce and Mr David is included in the 30 June 2023 balance. The total number of Rights to be forfeited after prorating for the portion of the
performance period worked is 778,934 for Mr Joyce and 182,701 for Mr David.
9 Mr Evans ceased as KMP and ceased employment on 31 December 2022. Rights under the 2021-2023 LTIP remained on foot on a pro-rata basis for the portion of the performance
period employed and were tested a 30 June 2023. Rights under the 2022-2024 LTIP continue to remain on foot on a pro-rata basis for the portion of the performance period
employed and may vest and convert to shares at the end of the performance period subject to achievement of the original performance conditions. Any shares allocated following
vesting of the LTIP will be subject to a one-year trading restriction.
56
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Rights Awarded Under the Recovery Retention Plan
The following table details Rights awarded under the RRP that are tested Rights that have not yet converted into shares.
Recovery Retention Plan
Alan Joyce
Andrew David
Vanessa Hudson
Stephanie Tully
commenced as KMP 14 November 2022
Cameron Wallace
commenced as KMP 1 June 2023
Olivia Wirth
Gareth Evans2
ceased as KMP 31 December 2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Number of Rights
1 July
–
Commenced
as KMP
–
Granted
698,000
Vested and
Transferred
–
Lapsed/
Forfeited
–
Ceased
Employment
–
–
262,500
–
262,500
–
–
–
–
–
223,500
–
278,500
–
–
–
–
–
–
193,000
–
–
–
–
–
–
–
–
–
262,500
–
262,500
–
–
–
–
–
223,500
–
278,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(69,053)
–
(209,447)
30 June1
698,000
–
262,500
262,500
262,500
262,500
193,000
–
–
–
223,500
223,500
–
–
–
278,500
1
Rights under the 2022-2023 RRP are included in the 30 June 2023 balance. Rights were granted on 4 November 2023 to Mr Joyce (following approval at the 2022 AGM) and 9 June
2022 for other Executives. The number of Rights granted was determined using the face value of a Right on 30 June 2021 of $4.66, being the Qantas share price at the start of the
performance period. The fair value of a Right was $5.918 per Right for the CEO and $4.98 per Right for other Executives. 100 per cent of these Rights vested following the testing of
performance hurdles as at 30 June 2023 and the Board’s approval of the vesting outcome on 23 August 2023.
2 Mr Evans ceased as KMP and ceased employment on 31 December 2022. Rights under the 2022-2023 RRP remained on foot on a pro-rata basis for the portion of the performance
period employed and were tested at 30 June 2023.
Equity Holdings and Transactions
Executive Management or their related parties directly, indirectly or beneficially held shares in the Qantas Group as detailed in the table below.
It also shows each individual’s shareholding and corresponding progress against their Minimum Shareholding Guideline at 30 June 2023.
Key Management
Personnel — Executives
Alan Joyce
Andrew David
Vanessa Hudson
Stephanie Tully
commenced as KMP 14 November
2022
Cameron Wallace
commenced as KMP 1 June 2023
Olivia Wirth
Gareth Evans6
ceased as KMP 31 December 2022
Interest in
Shares 1 July
2022
2,990,243
244,918
116,501
Commenced
as Executive
Management
–
–
–
Rights
Converted to
Shares1
–
Other
Changes2
(2,500,000)
89,750
(244,000)
74,750
–
74,806
–
(40,056)
–
–
–
717,854
23,750
–
76,250
–
–
Interest in
Shares 30
June
2023
490,243
90,668
191,251
34,750
Progress
Against
Minimum
Shareholding
Guideline4
On track
On track
Meets
Value of
Shares3
$'000
3,040
562
1,186
215
On track
23,750
147
On track
76,250
473
On track5
Ceased
Employment
–
–
–
–
–
–
–
–
95,000
(500,000)
(312,854)
–
–
NA
Shares awarded upon vesting of the 2020-2022 LTIP remained subject to an additional one-year trading restriction until 25 August 2023.
1
2 Other Changes include shares purchased, sold, forfeited, and on cessation as a KMP.
3
4
The interest in shares at 30 June 2023 multiplied by the Qantas share price of $6.20 at 30 June 2023.
The CEO and Executive Management have a maximum five-year period from the later of the date of their appointment to their respective role or 1 July 2019 to accumulate the value
of their shareholding.
5 Ms Wirth has previously been unable to comply with the Minimum Shareholding Guideline as her spouse is a Partner at an accounting firm that prohibits the individual (or their
immediate family member) owning a financial interest in assurance and audit clients. Commencing with the 2023-2025 LTIP and 2022/23 STIP, a voluntary election to restrict
vested shares for a maximum of 15 years from grant date was introduced. Ms Wirth made an election to participate to the extent necessary to meet the Minimum Shareholding
Guideline.
6 Mr Evans ceased as KMP on 31 December 2022. The 95,000 shares awarded upon vesting of the 2020-2022 LTIP remained subject to an additional one-year trading restriction until
25 August 2023.
Other than share-based payment compensation, all equity instrument transactions between the Executive Management (including
their related parties) and Qantas during the year have been on an arm’s length basis.
57
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
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.
Executives
Alan Joyce2
Andrew David2
Vanessa Hudson
Stephanie Tully
Cameron Wallace3
Olivia Wirth
RRP Awards
2023-2024
$'000
826
145
146
106
–
124
STIP
Awards1
Future Expense by Plan
Future Expense by Financial Year
LTIP Awards
2022-2023
$'000
2021-2023
$'000
2022-2024
$'000
2023-2025
$'000
104
59
232
161
–
176
244
43
43
21
–
36
219
67
298
116
–
253
300
80
648
251
–
551
Total
$'000
1,693
394
1,367
655
–
1,140
2024
$'000
1,693
394
850
417
–
713
–
–
449
206
–
371
Total
$'000
1,693
394
1,367
655
–
–
–
68
32
–
56
1,140
2025
$'000
2026
$'000
1 The Board has determined to delay its decision as to whether to approve the vesting of the STIP until it has further information available.
2 Mr Joyce and Mr David will cease employment with Qantas during 2023/24. Shares that are awarded under the 2022/23 STIP to Mr Joyce and Mr David are subject to a deferral period.
The deferral period and additional trading restriction will continue to apply and these shares are subject to clawback. As Mr Joyce and Mr David will cease employment prior to the end
of the performance period, the Rights under the 2022-2024 LTIP and the 2023-2025 LTIP will continue to remain on foot on a pro-rata basis for the portion of the performance period
in which Mr Joyce and Mr David were employed, consistent with the Terms and Conditions of those plans as a good leaver. The Rights may vest and convert to shares at the end of the
performance period subject to achievement of the original respective performance conditions. Any shares allocated following vesting of the LTIP will be subject to a one-year trading
restriction. The future expense reflects the service period to the termination date.
3 In addition to the above, the maximum value of the future expense for 2023/24, assuming all performance conditions are met, includes the amortised accounting value of $56,000 for
the one-off equity grant to Mr Wallace to replace forfeited incentives as a result of joining Qantas that are subject to a vesting event occurring during 2023/24.
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 2023 was
$2.18 million (2022: $2.24 million), which is within the approved annual fee pool. Non-Executive Directors’ remuneration reflects the
responsibilities of Non-Executive Directors, with fees benchmarked against Non-Executive Director fees of ASX50 companies and revenue-
based peer groups.
During 2022/23, Non-Executive Director fees were remixed with an increase in fees offset by the removal of the Nomination Committee fee.
There was no change to the Chairman Board fees.
Board Fees
Board
Committees1
Chairman2
$610,000
Member
$167,500
Chair
$74,250
Member
$32,500
1 The committees are the Audit Committee, Remuneration Committee, Nominations Committee and Safety, Health, Environment and Security Committee. No fees are received for
serving on or chairing the Nominations Committee.
2 The Chairman does not receive any additional fees for serving on or chairing any Board committee.
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 the participation of all Directors.
A Non-Executive Director Fee Sacrifice Share Acquisition Plan is offered to Non-Executive Directors whereby the Non-Executive Director 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 to achieve (and if desired, exceed) the Minimum Shareholding
Guideline in a tax effective manner which further aligns their interests with the interests of shareholders. Fees elected to be sacrificed in
return for a grant of Rights continue to be reported as Base Pay in the remuneration disclosures.
All Non-Executive Directors and eligible beneficiaries receive travel entitlements. The Chairman 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 Chairman 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).
58
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Remuneration for 2022/23 — Non-Executive Directors
$'000
Richard Goyder
Chairman
Maxine Brenner
Non-Executive Director
Jacqueline Hey
Non-Executive Director
Belinda Hutchinson
Non-Executive Director
Michael L'Estrange
Non-Executive Director
Doug Parker2
Non-Executive Director
Todd Sampson
Non-Executive Director
Antony Tyler3
Non-Executive Director
Total
Short-Term Employee Benefits
Post-Employment Benefits
Base Pay
(Cash)1
604
Non-Cash
Benefits
117
Sub-Total
721
Superannuation
6
Travel
23
Sub-Total
29
586
210
201
249
233
256
246
210
201
30
–
214
194
292
273
2,065
1,934
27
161
49
32
2
78
15
7
16
–
–
34
20
6
1
435
130
613
371
250
281
235
334
261
217
217
30
–
248
214
298
274
2,500
2,064
24
22
20
24
18
18
17
22
20
–
–
19
16
–
–
111
115
21
11
10
11
10
11
10
11
10
11
–
11
10
11
10
100
81
45
33
30
35
28
29
27
33
30
11
–
30
26
11
10
211
196
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Total
750
658
404
280
316
263
363
288
250
247
41
–
278
240
309
284
2,711
2,260
1 Base Pay includes any amounts that the Non-Executive Director elects to salary sacrifice in return for a grant of Rights under the Non-Executive Director Fee Sacrifice Share
Acquisition Plan.
2 2022/23 remuneration reflects the period served by Mr Parker as a Non-Executive Director from 23 May 2023 to 30 June 2023. Mr Parker received a travel allowance of $12,000
during 2022/23. This amount is included in Base Pay (Cash).
3 Mr Tyler received a travel allowance of $50,000 during 2022/23 (2021/22: $20,000). This amount is included in Base Pay (Cash).
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. It also shows each individual’s shareholding and corresponding progress against their Minimum Shareholding Guideline at 30 June
2023.
Key Management Personnel – Non-
Executive Directors
Richard Goyder
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson
Michael L'Estrange
Doug Parker5
Todd Sampson
Antony Tyler
Interest in
Shares as at
30 June 2022
175,603
Conversion of
Rights to Ordinary
Shares1
35,459
Other
Changes2
–
Interest in
Shares as at 30
June 2023
211,062
Value of
Shares3
$'000
1,309
Progress Against
Minimum
Shareholding
Guideline4
Meets
39,498
61,731
47,199
33,945
–
33,783
52,000
–
3,096
16,258
–
–
6,304
–
–
–
–
–
–
–
–
39,498
64,827
63,457
33,945
–
40,087
52,000
245
402
393
210
–
249
322
Ordinary shares issued upon conversion of Rights acquired under the Non-Executive Director Fee Sacrifice Share Acquisition Plan.
1
2 Other Changes includes shares purchased and sold.
3 The interest in shares at 30 June 2023 multiplied by the Qantas share price of $6.20 at 30 June 2023.
4 Non-Executive Directors have a maximum five-year period from the later of the date of their appointment to the respective role or 1 July 2019 to accumulate the value
of their shareholding.
5 Mr Parker as a recent appointee has yet to commence accumulating a shareholding.
Meets
Meets
Meets
Meets
–
Meets
Meets
59
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
REMUNERATION REPORT (AUDITED) (CONTINUED)
Rights Acquired Under the Non-Executive Director Fee Sacrifice Share Acquisition Plan
The following table details Rights acquired under the Non-Executive Director Fee Sacrifice Share Acquisition Plan by Non-Executive Director
KMP or their related parties:
Key Management Personnel – Non-Executive Directors
Richard Goyder
Maxine Brenner
Jacqueline Hey
Belinda Hutchinson
Michael L'Estrange
Doug Parker
Todd Sampson
Antony Tyler
Interest in Rights as
at 30 June 2022
17,934
Acquired by Fee
Sacrifice1
32,017
Converted to
Ordinary Shares2
(35,459)
Interest in Rights as
at 30 June 2023
14,492
–
3,096
8,379
–
–
3,096
–
–
–
14,394
–
–
5,860
–
–
(3,096)
(16,258)
–
–
(6,304)
–
–
–
6,515
–
–
2,652
–
1 Number of Rights acquired under the Non-Executive Director Fee Sacrifice Share Acquisition Plan. Rights were acquired on 1 September 2022 applying a fair value of $ 5.2211 per
Right. Rights were acquired on 3 March 2023 applying a fair value of $ 6.3138. The Rights acquired 3 March 2023 remained outstanding at 30 June 2023 and converted to restricted
ordinary shares on 28 August 2023.
2 Rights acquired on 4 March 2022 (fair value of $ 5.1019 per Right) converted to restricted ordinary shares on 26 August 2022 and Rights acquired on 1 September 2022 (fair value of
$5.2211 per Right) converted to restricted ordinary shares on 28 February 2023.
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 2023 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.
60
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
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 assists the
Board with fulfilling its strategy, policy, systems oversight, monitoring and corporate governance responsibilities with regard to environmental
matters, including compliance with legal and regulatory obligations and risk management.
The Directors are satisfied that the Qantas Group Management System Standard underpins the management of the Qantas Group’s
environmental exposures and environmental performance, including compliance obligations. The Directors are also satisfied that appropriate
monitoring procedures are in place to ensure compliance with the Group Management System Standard. Any significant environmental
incidents are reported to the Board through the Safety, Health, Environment and Security Committee.
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 2022/23 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 2022/23 by KPMG as the external auditor were compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001 (Cth)
b. Any non-audit services provided during 2022/23 by KPMG as the external auditor did not compromise the auditor independence
requirements of the Corporations Act 2001 (Cth) 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 (Cth) 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 (Cth) is included on
page 62.
Details of the amounts paid to KPMG for audit and non-audit services provided during the year are set out in Note 27 to the Financial
Statements.
61
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Report continued
For the year ended 30 June 2023
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 2023, 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
20 September 2023
Julian McPherson
Partner
KPMG, an Australian partnership and a member firm of the KPMG
global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by
guarantee. All rights reserved.
The KPMG name and logo are trademarks used under license by
the independent member firms of the KPMG global organization.
Liability limited 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
20 September 2023
Vanessa Hudson
Chief Executive Officer
20 September 2023
62
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Financial Report
For the year ended 30 June 2023
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
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Statement of Compliance and Basis of Preparation
Operating Segments, Underlying Profit Before Tax and Return on Invested Capital
Earnings Per Share
Revenue and Other Income
Depreciation and Amortisation
Net Gain on Disposal of Assets
Other Expenditure
Net Finance Costs
Income Tax
Dividends and Other Shareholder Distributions
Receivables
Inventories
Assets Classified as Held for Sale
Investments Accounted for Under the Equity Method
Property, Plant and Equipment
Leases
Intangible Assets
Deferred Tax Assets
Other Assets
Revenue Received in Advance
Net on Balance Sheet Debt
Provisions
Capital
Impairment of Assets and Related Costs
Share-Based Payments
Financial Risk Management
Auditor’s Remuneration
Notes to the Consolidated Cash Flow Statement
Superannuation
Deed of Cross Guarantee
Related Parties
Parent Entity Disclosures – Qantas Airways Limited
Contingent Liabilities
Post-Balance Sheet Date Events
Summary of Significant Accounting Policies
New Standards and Interpretations Not Yet Adopted by the Group
Directors’ Declaration
Independent Auditor’s Report
64
65
66
67
69
70
71
75
75
75
76
76
76
77
78
79
79
79
80
81
82
83
84
85
85
86
87
87
88
91
93
99
99
100
102
104
105
107
108
108
123
124
125
63
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Income Statement
For the year ended 30 June 2023
REVENUE AND OTHER INCOME
Net passenger revenue
Net freight revenue
Other revenue and income
Revenue and other income
EXPENDITURE
Salaries, wages and other benefits
Aircraft operating variable
Fuel
Depreciation and amortisation
Share of net loss of investments accounted for under the equity method
Net gain on disposal of assets
Other
Expenditure
Statutory profit/(loss) before income tax expense and net finance costs
Finance income
Finance costs
Net finance costs
Statutory profit/(loss) before income tax expense
Income tax (expense)/benefit
Statutory profit/(loss) for the year
Attributable to:
Members of Qantas
Non-controlling interests
Statutory profit/(loss) for the year
Notes
4(B)
5
14
6
7
8
8
8
9
2023
$M
16,923
1,380
1,512
19,815
4,261
3,996
4,555
1,762
44
(4)
2,512
17,126
2,689
138
(355)
(217)
2,472
(728)
1,744
1,746
(2)
1,744
2022
$M
5,951
1,963
1,194
9,108
3,024
2,328
1,848
1,801
126
(692)
1,563
9,998
(890)
17
(318)
(301)
(1,191)
331
(860)
(860)
—
(860)
EARNINGS PER SHARE ATTRIBUTABLE TO MEMBERS OF QANTAS
Basic Earnings/(Loss) Per Share (cents)
Diluted Earnings/(Loss) Per Share (cents)
3
3
96.0
93.0
(45.6)
(45.6)
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
64
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
Statutory profit/(loss) 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 tax1
De-designation of fuel and foreign exchange hedges to the Consolidated Income Statement, 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)/gains, net of tax
Fair value losses on investments, net of tax
Other comprehensive (loss)/income for the year
Total comprehensive income/(loss) for the year
Attributable to:
Members of Qantas
Non-controlling interests
Total comprehensive income/(loss) for the year
2023
$M
1,744
(79)
(232)
—
(111)
(17)
5
—
(103)
(12)
(549)
1,195
1,197
(2)
1,195
2022
$M
(860)
492
(274)
(20)
20
(18)
7
(3)
203
(22)
385
(475)
(475)
—
(475)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
1
These amounts were allocated to revenue of $17 million (2022: ($19) million), fuel expenditure of ($348) million (2022: ($372) million) and income tax expense of $99 million (2022:
$117 million) in the Consolidated Income Statement.
65
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Balance Sheet
As at 30 June 2023
CURRENT ASSETS
Cash and cash equivalents
Receivables
Lease receivables
Other financial assets
Inventories
Assets classified as held for sale
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Lease 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
Total current liabilities
NON-CURRENT LIABILITIES
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Notes
21(A)
11
16(B)
26(B), (C)
12
13
19
11
16(B)
26(B), (C)
14
15
16(A)
17
18
19
20
21(B)
16(C)
26(B), (C)
22
20
21(B)
16(C)
26(B), (C)
22
23(A)
23(B)
Accumulated losses
Equity attributable to members of Qantas
Non-controlling interests
Total equity
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
66
2023
$M
3,171
1,046
10
222
290
38
328
5,105
5
52
151
25
11,849
1,303
687
367
810
15,249
20,354
2,732
6,662
799
581
51
1,272
12,097
2,010
4,370
976
311
580
8,247
20,344
10
2,186
(106)
200
(2,275)
5
5
10
2022
$M
3,343
1,102
9
641
269
1
268
5,633
5
45
199
57
10,224
957
778
853
902
14,020
19,653
2,474
5,863
669
384
67
1,101
10,558
2,066
5,291
888
246
794
9,285
19,843
(190)
3,186
(8)
649
(4,024)
(197)
7
(190)
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Statement of Changes in Equity
For the year ended 30 June 2023
30 June 2023
$M
Balance as at 1 July 2022
Issued
Capital
3,186
Treasury
Shares
(8)
Employee
Compensation
Reserve
81
Hedge
Reserve
394
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Foreign
Currency
Translation
Reserve
15
Other
Reserves1
159
Accumulated
Losses
(4,024)
Non-
controlling
Interests
7
Total
Equity
(190)
Statutory profit 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
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
Defined benefit actuarial losses,
net of tax
Fair value losses on investments,
net of tax
Total other comprehensive loss
for the year
Total comprehensive income for
the year
Recognition of effective cash flow
hedges on capitalised assets,
net of tax
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Transactions with owners in their capacity as owners
On-market share buy-back
(1,000)
Revaluation of put option over non-
controlling interest
Treasury shares acquired
Share-based payments
Shares vested and transferred to
employees/Rights unvested and
lapsed
Total transactions with owners in
their capacity as owners
Balance as at 30 June 2023
–
–
(104)
–
6
–
–
–
–
(1,000)
(98)
2,186
(106)
–
–
–
(79)
–
(232)
–
–
–
–
–
–
–
–
–
–
–
188
(10)
178
259
(111)
–
–
–
–
(422)
(422)
(22)
–
–
–
–
–
–
(50)
–
–
–
–
(17)
5
–
–
(12)
(12)
–
–
–
–
–
–
–
3
–
–
–
–
–
–
(103)
(12)
(115)
(115)
–
–
(56)
–
–
–
(56)
(12)
1,746
(2)
1,744
–
–
–
–
–
–
–
–
–
(79)
–
(232)
–
–
–
–
–
(111)
(17)
5
(103)
(12)
–
(549)
1,746
(2)
1,195
–
–
–
–
–
3
3
(2,275)
–
(22)
–
(1,000)
–
–
–
–
–
5
(56)
(104)
188
(1)
(973)
10
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
1 Other Reserves as at 30 June 2023 includes the defined benefit reserve of $278 million, the put option reserve of ($280) million and the fair value reserve of ($10) million.
67
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Statement of Changes in Equity continued
For the year ended 30 June 2023
30 June 2022
$M
Balance as at 1 July 2021
Issued
Capital
3,186
Treasury
Shares
(18)
Employee
Compensation
Reserve
34
Hedge
Reserve
176
TOTAL COMPREHENSIVE LOSS FOR THE YEAR YEAR
Foreign
Currency
Translation
Reserve
26
Other
Reserves1
196
Accumulated
Losses
(3,160)
Non-
controlling
Interests
3
Total
Equity
443
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
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
Defined benefit actuarial gains,
net of tax
Fair value losses on investments, net
of tax
Transfer of accumulated fair value
losses to accumulated losses
Total other comprehensive
income for the year
Total comprehensive loss for
the period
Recognition of effective cash flow
hedges on capitalised assets, net of
tax
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Transactions with owners in their capacity as owners
Recognition of non-controlling
interest from acquisition of
subsidiary
Recognition of put option over non-
controlling interest
Dividends paid
Treasury shares acquired
Share-based payments
Shares vested and transferred to
employees/Rights unvested and
lapsed
Total transactions with owners in
their capacity as owners
Balance as at 30 June 2022
–
–
–
–
–
–
–
3,186
–
–
–
(5)
–
15
10
(8)
–
–
–
492
–
(274)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63
(16)
47
81
(20)
20
–
–
(3)
–
–
–
215
215
3
–
–
–
–
–
–
–
394
–
–
–
–
–
(18)
7
–
–
–
–
(11)
(11)
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
203
(22)
6
187
187
–
–
(224)
–
–
–
–
(224)
(860)
–
(860)
–
–
–
–
–
–
–
–
–
(6)
(6)
–
492
–
(274)
–
(20)
–
–
–
–
–
–
–
–
20
(18)
7
(3)
203
(22)
–
385
(866)
–
(475)
–
–
–
–
–
–
2
2
–
3
5
5
–
(224)
(1)
–
–
–
4
7
(1)
(5)
63
1
(161)
(190)
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
1 Other Reserves as at 30 June 2022 includes the defined benefit reserve of $381 million, the put option reserve of ($224) million and the fair value reserve of $2 million.
68
159
(4,024)
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Consolidated Cash Flow Statement
For the year ended 30 June 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash payments to suppliers and employees
Interest received
Interest paid (interest-bearing liabilities)
Interest paid (lease liabilities)
Dividends received from investments accounted for under the equity method
Foreign income taxes paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment and intangible assets
Interest paid and capitalised on qualifying assets
Proceeds from disposal of property, plant and equipment, net of costs
Proceeds from disposal of shares in investments accounted for under the equity method
Payments for investments accounted for under the equity method
Payments for acquisition of subsidiary, net of cash acquired
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for share buy-back
Payments for treasury shares
Proceeds from interest-bearing liabilities, net of costs
Repayments of interest-bearing liabilities
Repayments of lease liabilities
Proceeds from lease receivables
Dividends paid to non-controlling interests
Net cash outflow from financing activities
Net (decrease)/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
Notes
16(C)
14
28
8
14
21(D)
21(D)
16(C)
Cash and cash equivalents at the end of the year
21(A)
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
2023
$M
21,555
(16,356)
128
(186)
(65)
12
(3)
5,085
2022
$M
12,236
(9,326)
13
(186)
(66)
–
(1)
2,670
(2,563)
(906)
(31)
11
33
(75)
–
(15)
801
–
(66)
(54)
(2,625)
(240)
(1,000)
(103)
826
(1,669)
(690)
8
–
–
(2)
491
(1,441)
(363)
6
(1)
(2,628)
(1,310)
(168)
3,343
(4)
3,171
1,120
2,221
2
3,343
69
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements
For the year ended 30 June 2023
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 (Cth).
The Consolidated Financial Statements for the year ended 30 June 2023 comprise Qantas and its controlled entities (together referred to as
the Qantas Group or the Group) and the Qantas Group’s interest in investments accounted for under the equity method.
The Consolidated Financial Statements of Qantas for the year ended 30 June 2023 were authorised for issue in accordance with a resolution
of the Directors on 20 September 2023.
i.
Statement of Compliance
The Consolidated Financial Statements are general purpose financial statements which have been prepared in accordance with the Australian
Accounting Standards (AASB) adopted by the Australian Accounting Standards Board and the Corporations Act 2001 (Cth). The Consolidated
Financial Statements also complies with International Financial Reporting Standards (IFRS) and the International Financial Reporting
Interpretations Committee (IFRIC) Interpretations adopted by the International Accounting Standards Board (IASB).
ii.
Basis of Preparation
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. The Consolidated Financial Statements are presented in Australian dollars, which is the functional and
presentation currency of the Qantas Group, and have been prepared on the basis of historical cost except in accordance with relevant
accounting policies where assets and liabilities are stated at their fair values in 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 the fair value of plan assets less the present value of the defined benefit obligation
– Put option liability over relevant non-controlling interests is measured at fair value through Equity.
The Group is of a kind referred to in Australian Securities and Investments Commission (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.
(B)
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 exercise of
judgement 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. In preparing this report,
areas of judgements made by Management in the application of Australian Accounting Standards that have a significant effect on the
Consolidated Financial Statements and estimates with a significant risk of material adjustment in future periods are included in the following
notes:
– Note 26(C)/Note 35(C) – Derivatives and Hedging Instruments
– Note 29 – Superannuation
– Note 35(D) – Summary of Significant Accounting Policies (Revenue Recognition)
– Note 22/Note 35(O) – Summary of Significant Accounting Policies (Provisions).
Impact of climate change on financial reporting
The Group recognises that human-induced climate change is a significant issue for the aviation industry and is committed to supporting the
aims of the Paris Climate Agreement to limit warming to well below 2 degrees Celsius above pre-industrial levels.
In 2019, the Group announced its commitment to achieving net zero emissions by 2050 and capping net emissions at 2019 levels. In March
2022, the Group announced new interim targets as part of the Climate Action Plan (CAP), including:
– 25 per cent reduction in net emissions from 2019 levels by 2030
– 10 per cent Sustainable Aviation Fuel (SAF) in fuel mix by 2030
– Average of 1.5 per cent fuel efficiency improvements to 2030.
The Qantas Group’s long-term strategy acknowledges the potential impact of climate change and resource constraints on the business.
Climate-related risks and opportunities are also addressed in the Qantas Group’s Sustainability Report 2023.
70
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
1
STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION (CONTINUED)
(B)
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Three pillars support the achievement of the Group’s interim targets as detailed in the CAP:
– Operational and fleet efficiency: Focusing on flying and engineering practices, investing in fuel-efficient aircraft, as well as broader
airspace design and management initiatives which require industry-wide collaboration. Continuing to reduce fuel burn, including smarter
flight planning. Reducing single-use plastic and waste to landfill
– Sustainable Aviation Fuels (SAF): Working with governments, industry and businesses to develop a commercial-scale, competitive SAF
industry in Australia. This includes supporting the establishment of new supply chains and relies on creating SAF from various biomass
sources such as used cooking oil, energy crops, agricultural residues or waste materials that can reduce emissions on a lifecycle basis,
typically by up to around 80 per cent. It also includes advancing non-biogenic, synthetic SAF produced with carbon dioxide, green
hydrogen and significant amounts of renewable electricity using power-to-liquid technology pathways
– Carbon offsets: Offsetting emissions by investing in high-quality, high-integrity Australian and international projects with community co-
benefits, including those led by Traditional Owners.
The Group’s Financial Plan incorporates estimates of known future impacts on the Group of meeting the interim targets (as detailed in the
CAP), including the financial impact within cash flow projections of the increased cost of carbon offsetting and SAF (together with estimated
recovery through revenue) and capital expenditure to introduce more fuel-efficient aircraft.
In preparing the Consolidated Financial Statements, the medium and long-term cash flow impacts of meeting the interim targets in the CAP
have been considered in key estimates, including:
– The estimates of future cash flows used in impairment assessments of the Group’s Cash Generating Units (CGUs)
– The estimates of future profitability used to assess the recoverability of deferred tax assets, particularly relating to carried forward tax
losses
– The assessment of the useful lives of aircraft identified in the Group fleet plan to be retired as part of the introduction of more fuel-
efficient aircraft.
2
OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL
(A)
OPERATING SEGMENTS
The Qantas Group comprises the following operating segments:
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 as Underlying PBT as outlined below (refer to Note 2(B))
but excluding the impact of net finance costs.
71
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
2
OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(A)
OPERATING SEGMENTS (CONTINUED)
ii.
Analysis by Operating Segment
2023
$M
REVENUE AND OTHER INCOME
External segment revenue and other income
Inter-segment revenue and other income
Total segment revenue and other income
Share of net (loss)/profit of investments
accounted for under the equity method
Underlying EBITDA2
Depreciation and amortisation
Impairment
Underlying EBIT
Net finance costs
Underlying PBT
ROIC %3
2022
$M
REVENUE AND OTHER INCOME
External segment revenue and other income
Inter-segment revenue and other income
Total segment revenue and other income
Share of net loss of investments accounted for
under the equity method
Underlying EBITDA2
Depreciation and amortisation
Impairment
Underlying EBIT
Net finance costs
Underlying PBT
ROIC %3
Qantas
Domestic
Qantas
International
Jetstar
Group
Qantas
Loyalty
Corporate
Unallocated/
Eliminations1
Consolidated
6,497
483
6,980
5
1,936
(665)
(1)
1,270
7,493
256
7,749
4,097
138
4,235
5
(54)
1,592
(686)
–
906
759
(355)
–
404
2,043
146
2,189
–
500
(49)
–
451
(324)
(1,023)
(1,347)
–
(137)
–
–
(137)
9
–
9
–
(205)
(7)
–
(212)
(217)
(429)
19,815
–
19,815
(44)
4,445
(1,762)
(1)
2,682
(217)
2,465
103.6%
Qantas
Domestic
Qantas
International
Jetstar
Group
Qantas
Loyalty
Corporate
Unallocated/
Eliminations1
Consolidated
3,127
321
3,448
(1)
(27)
(700)
(38)
(765)
3,615
91
3,706
1,388
52
1,440
(1)
(124)
448
(686)
–
(238)
(448)
(348)
–
(796)
1,284
50
1,334
–
351
(59)
–
292
(316)
(514)
(830)
–
78
–
–
78
10
–
10
–
(121)
(8)
–
(129)
(301)
(430)
9,108
–
9,108
(126)
281
(1,801)
(38)
(1,558)
(301)
(1,859)
(31.6%)
1 Unallocated/Eliminations represents unallocated businesses of the Qantas Group that are not considered to be reportable segments and 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. Unallocated/Eliminations also includes the recognition of the Recovery Boost bonus for EBA-covered employees announced in June
2022 and the Recovery Retention bonuses announced in February 2022 expensed in accordance with relevant Accounting Standards.
2 Underlying EBITDA represents underlying earnings before income tax expense, depreciation, amortisation, net finance costs and impairment.
3 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 Marketplace 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.
72
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
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/(LOSS) 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.
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 outside the ordinary course of business relating to business
activities in other reporting periods, Recovery Plan restructuring costs, transactions involving investments, impairments of assets and other
transactions.
RECONCILIATION OF UNDERLYING PBT TO STATUTORY PROFIT/(LOSS) BEFORE TAX
Underlying PBT
Items not included in Underlying PBT
– Recovery Plan restructuring costs
– Reversal of impairment of assets and related costs
– Net gain on disposal of Mascot land and buildings
– Net gain on disposal of investments/associates
Total items not included in Underlying PBT
Statutory Profit/(Loss) Before Income Tax Expense
2023
$M
2,465
2022
$M
(1,859)
5
–
–
2
7
(21)
3
686
–
668
2,472
(1,191)
In the 2022/23 financial year, items outside of Underlying PBT included:
Item outside of
Underlying PBT
Recovery Plan
restructuring costs
Net gain on disposal of
investments/associates
Description
$5 million primarily relates to the reversal of a redundancy provision previously recognised.
The net gain on disposal of investments/associates of $2 million arose from the sale of the Group’s investment in
Helloworld Travel Ltd (ASX: HLO).
The 2021/22 financial year included the following items:
Item outside of
Underlying PBT
Recovery Plan
restructuring costs
Description
$21 million primarily relates to $14 million of restructuring costs resulting from fleet and people restructuring as
a result of the Recovery Plan and $7 million acquisition and launch costs for new businesses.
Reversal of impairment of
assets and related costs
$3 million of reversal of impairment relates to $1 million net reversal of impairment relating to the Group’s
investment in Helloworld Travel Limited and $2 million in other impairment reversals.
Net gain on disposal of
Mascot land and buildings
The net gain on disposal of assets of $686 million arose from the sale of land in Mascot, Sydney that was not
core to the Group’s long-term strategy.
(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 AND ROIC %
ROIC EBIT is derived by adjusting Underlying EBIT for the year to exclude leased aircraft depreciation under AASB 16 Leases (AASB 16) and to
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.
73
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
2
OPERATING SEGMENTS, UNDERLYING PROFIT BEFORE TAX AND RETURN ON INVESTED CAPITAL (CONTINUED)
(C)
RETURN ON INVESTED CAPITAL (CONTINUED)
Underlying EBIT
Add back: Lease right of use depreciation under AASB 16
Less: Notional depreciation1
Less: Cash expenses for non-aircraft leases
ROIC EBIT
Average Invested Capital for the year ended 30 June
ROIC %2
2023
$M
2,682
320
(131)
(228)
2,643
2,552
103.6%
2022
$M
(1,558)
336
(118)
(219)
(1,559)
4,928
(31.6%)
1 For calculating ROIC, capitalised leased aircraft are included in the Group's Invested Capital at the AUD market value (referencing Aircraft Value Analysis Company (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 as notional depreciation.
2 ROIC % represents Return on Invested Capital (ROIC) EBIT divided by Average Invested Capital. Refer to Note 2(C)ii.
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, lease receivables, interest-
bearing liabilities, other financial assets/(liabilities) and tax balances as well as lease liabilities and right of use assets (for leased aircraft,
property and other assets) as 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 AASB 16 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
2023
$M
1,051
290
1,138
25
11,849
687
38
(2,732)
(1,852)
(8,672)
1,409
3,231
2,552
2022
$M
1,107
269
1,170
57
10,224
778
1
(2,474)
(1,895)
(7,929)
1,892
3,200
4,928
1 For calculating ROIC, all statutory aircraft leases, balances and provisions related to leased aircraft are adjusted to represent the capitalised value of leased aircraft, as if they were
owned. Capitalised leased aircraft are included in the Group's Invested Capital at the AUD market value (referencing Aircraft Value Analysis Company (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 in ROIC EBIT as notional depreciation. The carrying value of leased aircraft (AUD market value less accumulated notional depreciation) and an adjustment to exclude aircraft
lease return provisions is reported within Invested Capital as capitalised aircraft leased assets.
74
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
3
EARNINGS PER SHARE
Basic Earnings/(loss) per share1
Diluted Earnings/(loss) per share2
2023
cents
96.0
93.0
2022
cents
(45.6)
(45.6)
1 Weighted average number of shares used in basic Earnings Per Share calculation of 1,818 million (June 2022: 1,886 million) excludes unallocated treasury shares.
2 Weighted average number of shares used in diluted Earnings Per Share calculation of 1,877 million (June 2022: 1,886 million). Weighted average number of shares used in the diluted
Earnings Per Share calculation for the year ended 30 June 2023 excludes unallocated treasury shares and includes the effect of share rights expected to vest (using the treasury
stock method). Weighted average number of shares for the year ended 30 June 2022 used in the diluted Earnings Per Share calculation is the same as used in basic Earnings Per
Share calculation as the effect of share rights expected to vest were anti-dilutive and excluded from the calculation.
Statutory profit/(loss) attributable to members of Qantas
NUMBER OF SHARES
Issued shares as at 1 July
Shares bought back and cancelled
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
2023
$M
1,746
2023
Number
M
1,886
(162)
1,724
1,824
2023
$M
13,785
4,518
18,303
1,512
19,815
2022
$M
(860)
2022
Number
M
1,886
—
1,886
1,886
2022
$M
6,026
1,888
7,914
1,194
9,108
Net passenger and freight revenue is attributed to a geographic region based on the point of sale, or 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 Marketplace and other redemption revenue1,2
Third-party services revenue
Other revenue and income
Total other revenue and income
2023
$M
868
79
271
294
1,512
2022
$M
537
64
185
408
1,194
1 Qantas Marketplace and other 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
Notes
15
16(A)
17
2023
$M
1,351
320
91
1,762
2022
$M
1,345
336
120
1,801
75
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
6
NET GAIN ON DISPOSAL OF ASSETS
Net gain on disposal of property, plant and equipment
Net gain on disposal of investment/associates
Total net gain on disposal of assets
2023
$M
(2)
(2)
(4)
2022
$M
(692)
–
(692)
In the 2022/23 financial year, the Group recognised a net gain on disposal of investments/associates of ($2) million that arose from the sale
of the Group’s investment in Helloworld Travel Ltd (ASX: HLO).
The net gain on disposal of property, plant and equipment in the 2021/22 financial year includes a net gain of $686 million arising from the
sale of Mascot land and buildings.
2023
$M
577
541
410
127
188
67
(34)
1
–
4
631
2,512
2023
$M
135
3
138
(264)
(65)
31
(298)
(24)
(33)
(57)
(355)
(217)
2022
$M
263
452
194
120
99
124
(194)
35
(22)
5
487
1,563
2022
$M
13
4
17
(232)
(73)
15
(290)
(9)
(19)
(28)
(318)
(301)
Notes
16(C)
15
7
OTHER EXPENDITURE
Commissions and other selling costs
Technology and digital
Capacity hire (excluding lease components)
Property occupancy and utility expenses
Marketing and advertising
Discretionary bonuses to non-executive employees
Discount rate changes impact on provisions
Impairment of assets and related costs
De-designation of fuel and foreign exchange hedges
Redundancy and related costs
Other
Total other expenditure
8
NET FINANCE COSTS
FINANCE INCOME
Interest income on financial assets measured at amortised cost
Unwind of discount on other assets and 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
1 The borrowing costs are capitalised using a 3.7 per cent interest rate (2022: 3.4 per cent).
76
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
9
INCOME TAX
(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 (expense)/benefit
Origination and reversal of temporary differences
(Net utilisation of tax losses)/benefit of tax losses
Utilisation of prepaid income tax instalments
Current year deferred income tax (expense)/benefit
Adjustments for the prior year
Total deferred income tax (expense)/benefit
Total income tax (expense)/benefit in the Consolidated Income Statement
2023
$M
–
–
–
(121)
(485)
(117)
(723)
(5)
(728)
(728)
(B)
RECONCILIATION BETWEEN INCOME TAX (EXPENSE)/BENEFIT AND STATUTORY PROFIT/(LOSS) BEFORE INCOME TAX
Statutory profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit using the domestic corporate tax rate of 30 per cent
Adjusted for:
Differences in loss from investments accounted for under the equity method
Utilisation of previously unrecognised tax losses/(losses not recognised) for foreign branches
Utilisation of previously unrecognised tax losses/(losses not recognised) for controlled entities
Non-assessable gain on property, plant and equipment
Other net non-deductible items
Recognition of previously unrecognised losses for branches and controlled entities
Over provision from prior periods
Income tax (expense)/benefit
2023
$M
2,472
(742)
(16)
4
7
–
(4)
22
1
(728)
(C)
INCOME TAX BENEFIT/(EXPENSE) RECOGNISED DIRECTLY IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Income tax on:
Cash flow hedges
Defined benefit actuarial losses/(gains)
Fair value losses on investments
Income tax benefit/(expense) recognised directly in the Consolidated Statement of
Comprehensive Income
2023
$M
190
44
4
238
2022
$M
–
–
–
111
222
–
333
(2)
331
331
2022
$M
(1,191)
357
(37)
(16)
(13)
43
(5)
–
2
331
2022
$M
(95)
(87)
9
(173)
77
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
9
INCOME TAX (CONTINUED)
(D)
RECONCILIATION OF INCOME TAX (EXPENSE)/BENEFIT TO INCOME TAX PAYABLE
Income tax (expense)/benefit
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)/Value of recognised tax losses
Tax losses utilised/(recognised)
Prepaid tax instalments utilised
Income tax payable
10
(A)
DIVIDENDS AND OTHER SHAREHOLDER DISTRIBUTIONS
DIVIDENDS DECLARED AND PAID
2023
$M
(728)
(88)
2
(1)
75
105
(2)
(2)
64
(86)
(1)
1
54
121
5
(602)
485
117
–
2022
$M
331
(13)
1
(1)
(35)
(51)
12
(28)
(12)
38
18
(12)
(28)
(111)
2
222
(222)
–
–
During the year ended 30 June 2023 the Group did not declare or pay any dividends. No dividend will be paid in relation to the year ended
30 June 2023.
(B)
OTHER SHAREHOLDER DISTRIBUTIONS
During the year ended 30 June 2023, the Group completed on-market buy-backs totalling $1,000 million, which were announced in August
2022, February 2023 and May 2023. The Group purchased 161.6 million ordinary shares on issue at the average price of $6.19.
In August 2023, the Directors announced an on-market share buy-back of up to $500 million.
(C)
FRANKING ACCOUNT
Total franking account balance at 30 per cent
2023
$M
1
2022
$M
–
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.
78
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
11
RECEIVABLES
Trade receivables
Less: provision for impairment losses
Total trade receivables
Sundry receivables
Total receivables
2023
$M
Current
Non-current
876
(1)
875
171
1,046
–
–
–
5
5
Total
876
(1)
875
176
1,051
The ageing of trade receivables, net of provision for expected credit losses at 30 June was:1
Not past due
Past due 1-30 days
Past due 31-120 days
Past due 121 days or more
Total trade receivables
2022
$M
Current
Non-current
989
(1)
988
114
1,102
–
–
–
5
5
2023
$M
763
88
17
7
875
Total
989
(1)
988
119
1,107
2022
$M
837
84
67
–
988
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 35(G) for the Group’s accounting
policy.
12
INVENTORIES
Engineering expendables
Consumables stores
Work in progress
Total inventories
2023
$M
240
50
—
290
2022
$M
227
41
1
269
13
ASSETS CLASSIFIED AS HELD FOR SALE
2023
$M
Aircraft and engines
Total assets classified as held for sale
Opening Net Book
Value
Transferred from
Property, Plant and
Equipment
1
1
21
21
Disposals
–
–
Reversal of
Impairment/
(Impairment)
Closing Net Book
Value
16
16
38
38
2022
$M
Aircraft and engines
Total assets classified as held for sale
Opening Net Book
Value
Transferred from
Property, Plant and
Equipment
1
1
–
–
Reversal of
Impairment/
(Impairment)
Closing Net Book
Value
1
1
1
1
Disposals
(1)
(1)
The balance as at 30 June 2023 relates to aircraft being retired as part of the fleet renewal program. 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 35(C) for a
definition of the fair value hierarchy.
79
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
14
INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
Ownership interest in investments accounted for under the equity method1
Fiji Resorts Pte 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.
PT Holidays Tours & Travel
1 Based on voting rights.
Balance as at 1 July
Cash additions
Non-cash additions
Dividends received
Share of net loss
Share of reserves and other movements
Transfer to provisions
Reversal of impairment/(impairment)1
Disposal of investments2
Balance as at 30 June
June 2023
June 2022
%
21
49
28
37
37
37
–
33
37
2023
$M
57
75
9
(12)
(44)
1
(32)
–
(29)
25
%
21
49
28
37
37
37
12
33
37
2022
$M
57
66
17
–
(126)
5
37
1
–
57
Notes
22
24(C)
1 The Group recognised a reversal of impairment of $1 million in the 2021/22 financial year in relation to its investment in Helloworld Travel Ltd (ASX: HLO). The reversal of impairment
recognised was determined with reference to the closing share price as at 30 June 2022.
2 The Group recognised the disposal of investments of ($29) million in the 2022/2023 financial year from the sale of the Group’s investment in Helloworld Travel Ltd (ASX: HLO).
80
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
15
PROPERTY, PLANT AND EQUIPMENT
2023
$M
Accumulated
Depreciation and
Impairment
–
(188)
(891)
(956)
(13,833)
(595)
–
(16,463)
At Cost
9
229
1,032
1,285
22,698
1,122
1,937
28,312
Acquisition
of
Controlled
Entities Disposals
Cash
Additions1
–
–
13
99
682
135
1,665
2,594
–
–
–
–
–
–
–
–
–
–
–
(2)
–
–
–
(2)
Net Book Value
2022
$M
Accumulated
Depreciation and
Impairment
–
(188)
(896)
(982)
(13,282)
(505)
–
(15,853)
At Cost
9
231
1,067
1,251
21,248
952
1,319
26,077
Net Book Value
9
43
171
269
7,966
447
1,319
10,224
Transferred
(to)/from
Assets
Classified as
Held for Sale Depreciation
–
–
–
–
(22)
1
–
(21)
–
(2)
(28)
(46)
(1,226)
(49)
–
(1,351)
Impairment
Other3
Closing Net
Book Value
–
–
–
–
(17)
–
–
(17)
–
–
–
2
27
(4)
(6)
19
9
41
141
329
8,865
527
1,937
11,849
9
41
141
329
8,865
527
1,937
11,849
Transfers2
–
–
(15)
7
1,455
(3)
(1,041)
403
Acquisition
of
Controlled
Entities Disposals
Cash
Additions1
Transfers2
Transferred
(to)/from
Assets
Classified as
Held for Sale Depreciation
Impairment
Other3
–
–
20
31
507
65
288
911
2
3
2
–
–
–
–
7
(41)
(26)
(4)
(6)
–
(1)
–
(78)
–
–
(9)
7
1
23
(5)
17
–
–
–
–
–
–
–
–
–
(3)
(33)
(53)
(1,212)
(44)
–
(1,345)
–
–
–
–
(35)
(3)
–
(38)
(1)
–
(7)
(2)
(29)
(26)
28
(37)
Closing
Net Book
Value
9
43
171
269
7,966
447
1,319
10,224
Opening
Net Book
Value
9
43
171
269
7,966
447
1,319
10,224
Opening
Net Book
Value
49
69
202
292
8,734
433
1,008
10,787
Freehold land
Buildings
Leasehold improvements
Plant and equipment
Aircraft and engines
Aircraft spare parts
Aircraft deposits
Total property, plant
and equipment
2023
$M
Freehold land
Buildings
Leasehold improvements
Plant and equipment
Aircraft and engines
Aircraft spare parts
Aircraft deposits
Total property, plant and
equipment
2022
$M
Freehold land
Buildings
Leasehold improvements
Plant and equipment
Aircraft and engines
Aircraft spare parts
Aircraft deposits
Total property, plant and
equipment
1
2
Cash additions includes capitalised interest of $31 million (2022: $15 million).
Transfers includes transfers between categories of property, plant and equipment, transfers from/(to) other balance sheet accounts and transfers of leased aircraft from right of use
assets following the completion of lease buyouts during the year.
3 Other includes non-cash movements and movements in accrued payments for property, plant and equipment (2023: $41 million, 2022: ($4) million),
(A)
AIRCRAFT BY GEOGRAPHIC AREA
Aircraft supporting the Group’s global operations are primarily located in Australia, with the exception of two A380 aircraft, which are currently
in storage overseas awaiting maintenance ahead of return to service, and five A320 aircraft, which are based in Singapore to support Jetstar
Asia’s operations.
(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 of 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 $3,885 million (2022: $4,653 million).
(C)
CAPITAL EXPENDITURE COMMITMENTS
The Group’s capital expenditure commitments as at 30 June 2023 are $14,646 million (2022: $15,774 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 2023 closing exchange rate of $0.68 (2022: $0.69).
81
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
16
(A)
LEASES
RIGHT OF USE ASSETS
2023
$M
2022
$M
Accumulated
Depreciation and
Impairment Net Book Value
(1,596)
(1,197)
(232)
(3,025)
521
699
83
1,303
At Cost
2,117
1,896
315
4,328
Accumulated
Depreciation and
Impairment Net Book Value
(2,279)
(1,071)
(204)
(3,554)
355
565
37
957
At Cost
2,634
1,636
241
4,511
Opening Net
Book value
Additions/
Modifications/
Remeasurements
Transfers1
Depreciation
Other2
Closing Net
Book value
355
565
37
957
645
219
84
948
(338)
–
–
(338)
(144)
(138)
(38)
(320)
Opening Net
Book value
Additions/
Modifications/
Remeasurements
406
632
71
1,109
88
73
41
202
Transfers1
Depreciation
–
(3)
(3)
(6)
(147)
(137)
(52)
(336)
3
53
–
56
Other2
8
–
(20)
(12)
521
699
83
1,303
Closing Net
Book value
355
565
37
957
Aircraft
Property
Other
Total right of use assets
2023
$M
Aircraft
Property
Other
Total right of use assets
2022
$M
Aircraft
Property
Other
Total right of use assets
1 Transfers includes transfers to lease receivables where the Group is a sub-lessor and transfers of aircraft to property,plant and equipment relating to completed lease buyouts during
the year.
2 Other movements include early terminations of nil (2022: ($21) million), foreign exchange movements and changes in the measurement of make good assets.
(B)
LEASE RECEIVABLES
2023
$M
2022
$M
Lease receivables1
Total
Current
Non-current
10
10
52
52
Total
62
62
Current
Non-current
9
9
45
45
Total
54
54
1 The Group has subleased property and aircraft and classified the subleases as finance leases. 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 $2 million
(2022: $2 million).
(C)
LEASE LIABILITIES
Aircraft
Property
Other
Total lease liabilities1
2023
$M
Current
Non-current
359
190
32
581
168
738
70
976
2022
$M
Current
Non-current
197
163
24
384
178
674
36
888
Total
527
928
102
1,557
Total
375
837
60
1,272
1
In addition to the lease liabilities disclosed, committed lease payments for non-cancellable lease contracts which have not commenced as at 30 June 2023 are $34 million.
2023
$M
Aircraft
Property
Other
Total lease liabilities
Opening
Balance
375
837
60
1,272
Additions/
Modifications/
Remeasurements1
645
219
84
948
Lease
Repayments2
Interest
Foreign
Exchange
Other3 Closing Balance
(515)
(191)
(49)
(755)
12
48
5
65
9
(1)
1
9
1
16
1
18
527
928
102
1,557
1 During the 2022/23 financial year, the Group recognised lease modifications relating to the exercise of buyout options for aircraft leases. This resulted in a lease liability modification
and repayment of $322 million recognised in financing cash flows.
2 Lease repayments of $755 million includes $690 million principal repayments and $65 million interest repayments. The lease repayments include deferred lease repayments of
$2 million from financial year 2020/21.
3 Other movements include additions to sub-leases which has resulted in corresponding increases to lease liabilities and lease receivables.
82
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
LEASES (CONTINUED)
LEASE LIABILITIES (CONTINUED)
16
(C)
2022
$M
Aircraft
Property
Other
Total lease liabilities
Opening
Balance
471
833
95
1,399
Additions/
Modifications/
Remeasurements
Lease
Repayments1
Interest
Foreign
Exchange
Other2 Closing Balance
53
118
41
212
(196)
(171)
(62)
(429)
16
54
3
73
31
4
4
39
–
(1)
(21)
(22)
375
837
60
1,272
1 Lease repayments of $429 million includes $363 million principal repayments and $66 million interest repayments. The lease repayments include deferred lease repayments of
$7 million from financial year 2020/21.
2 Other movements include rental waivers of $1 million and early terminations of $22 million.
(D)
RECOGNISED WITHIN OTHER EXPENSES IN THE CONSOLIDATED INCOME STATEMENT
Lease expense for short-term leases
Variable lease expenses not included in lease liabilities1
Rental waivers
1 Recognised in other expenditure — capacity hire.
17
INTANGIBLE ASSETS
2023
2022
$M
6
58
–
$M
1
23
1
2023
$M
Accumulated
Depreciation and
Impairment
Net Book Value
–
–
(1,345)
–
(6)
(12)
(1,363)
270
35
178
32
13
159
687
At Cost
270
35
1,523
32
19
171
2,050
2022
$M
Accumulated
Depreciation and
Impairment
Net Book Value
–
–
(1,260)
(1)
(4)
(8)
(1,273)
270
35
263
40
7
163
778
At Cost
270
35
1,523
41
11
171
2,051
Opening Net Book
Value
Cash
Additions
Acquisition of
Controlled Entities1
Amortisation
Closing Net Book
Value
270
35
263
40
7
163
778
–
–
–
–
–
–
–
–
–
–
(8)
8
–
–
–
–
(85)
–
(2)
(4)
(91)
270
35
178
32
13
159
687
Opening Net Book
Value
Cash
Additions
166
35
376
1
–
167
745
–
–
–
–
–
–
–
Acquisition of
Controlled Entities1
104
–
2
40
7
–
153
Amortisation
Closing Net Book
Value
–
–
(115)
(1)
–
(4)
(120)
270
35
263
40
7
163
778
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
2023
$M
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
2022
$M
Goodwill
Airport landing slots
Software
Brand names and trademarks
Customer contracts/relationships
Contract intangible assets
Total intangible assets
1 The fair value of the assets acquired in financial year 2021/22 were subject to the completion of an independent valuation. This was finalised in financial year 2022/23, resulting in a
transfer of $8 million between categories of intangible assets.
83
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
18
DEFERRED TAX ASSETS
Deferred tax assets
(A)
RECONCILIATION OF DEFERRED TAX ASSETS
2023
$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 prepaid tax instalments
Tax value of recognised tax losses
Total deferred tax assets
Recognised in the
Consolidated Income
Statement
Recognised
in Other
Comprehensive
Income
88
(2)
1
(75)
(105)
2
2
(64)
86
1
(1)
(54)
(117)
(485)
(723)
–
–
–
–
–
–
–
–
–
194
–
44
–
–
238
Opening
Balance
(114)
(13)
(1)
(1,333)
(305)
11
971
(119)
381
(277)
560
(23)
136
979
853
1
A deferred tax liability of ($1) million relating to share-based payments recognised in retained earnings.
2022
$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 prepaid tax instalments
Tax value of recognised tax losses
Total deferred tax assets
Opening
Balance
(127)
(12)
(2)
(1,356)
(356)
23
943
(131)
419
(173)
548
37
136
757
706
Recognised in the
Consolidated Income
Statement
13
(1)
1
35
51
(12)
28
12
(38)
(18)
12
28
–
222
333
Recognised
in Other
Comprehensive
Income
–
–
–
–
–
–
–
–
–
(86)
–
(87)
–
–
(173)
A deferred tax liability of ($12) million relating to the acquisition of TAD Holdco Pty Limited and its subsidiaries (TripADeal).
1
2 A deferred tax liability of ($1) million relating to share-based payments recognised in retained earnings.
(B)
QANTAS GROUP CARRIED FORWARD TAX LOSSES
Total tax losses brought forward as at 1 July
Tax losses utilised against current taxable income
Tax losses recognised
Tax losses carried forward to be utilised in future years1
1
A deferred tax asset of $494 million has been recognised for income tax losses and is expected to be recovered in future periods.
84
2023
$M
367
Other
19
–
–
–
–
–
–
–
–
–
–
(1)1
(19)
–
(1)
Other
–
–
–
(12)1
–
–
–
–
–
–
(1)2
–
–
(13)
2023
$M
(979)
507
(22)
(494)
2022
$M
853
Closing
Balance
(7)
(15)
–
(1,408)
(410)
13
973
(183)
467
(82)
559
(34)
–
494
367
Closing
Balance
(114)
(13)
(1)
(1,333)
(305)
11
971
(119)
381
(277)
560
(23)
136
979
853
2022
$M
(757)
–
(222)
(979)
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
18
(C)
DEFERRED TAX ASSETS (CONTINUED)
UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised with respect to the following items:
Tax losses – New Zealand1
Tax losses – Singapore
Tax losses – Hong Kong
Total unrecognised deferred tax assets
1 A deferred tax asset of $22 million was recognised in the 2022/23 financial year which is expected to be recovered in future periods.
2023
$M
16
60
24
100
2022
$M
2022
$M
44
54
21
119
Total
402
539
229
1,170
Total
4,389
3,113
427
7,929
19
OTHER ASSETS
Prepayments
Net defined benefit asset
Other assets1
Total
2023
$M
Note
Current
Non-current
29(B)
251
–
77
328
160
399
251
810
Total
411
399
328
1,138
Current
Non-current
206
–
62
268
196
539
167
902
1 Other assets include incremental costs of obtaining a contract. Refer to Note 35(D)vii. for the Group’s accounting policy.
20
REVENUE RECEIVED IN ADVANCE
Unavailed passenger revenue1
Unredeemed Frequent Flyer revenue
Other revenue received in advance
Total revenue received in advance
2023
$M
Current
Non-current
4,992
1,311
359
6,662
–
1,869
141
2,010
Total
4,992
3,180
500
8,672
2022
$M
Current
Non-current
4,389
1,168
306
5,863
–
1,945
121
2,066
1 Unavailed passenger revenue relates to sales to passengers in advance of the date of passenger travel. The balance includes tickets with a travel date subsequent to year end and
tickets which have been transferred to a travel credit.
85
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
21
(A)
NET ON BALANCE SHEET DEBT
CASH AND CASH EQUIVALENTS
Cash balances
Cash at call
Short-term money market securities and term deposits
Total cash and cash equivalents
2023
$M
703
501
1,967
3,171
2022
$M
254
302
2,787
3,343
Cash and cash equivalents comprise cash balances, cash at call, 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 $292 million (2022: $201 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
2023
$M
Current
Non-current
177
–
373
249
799
971
402
1,330
1,667
4,370
Total
1,148
402
1,703
1,916
5,169
2022
$M
Current
Non-current
308
–
361
–
669
1,321
438
1,566
1,966
5,291
Total
1,629
438
1,927
1,966
5,960
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(B)).
(C)
UNDRAWN FACILITIES
At 30 June 2023, the Group has committed undrawn facilities of $1,196 million (2022: $1,330 million).
(D)
ANALYSIS OF CHANGES IN NET ON BALANCE SHEET DEBT
2023
$M
Interest-bearing
liabilities
Cash
Net on balance sheet
debt
Opening
Balance
Debt
Repayment
Debt
Drawdown
Foreign Exchange,
Mark-to-Market and
Non-Cash Movements
Shareholder
Distributions
Treasury
Shares
Other
Net Cash
Movement
Closing
Balance
5,960
(1,669)
826
(3,343)
2,617
1,669
(826)
–
–
52
4
56
–
1,000
1,000
–
103
103
–
5,169
(1,778)
(1,778)
(3,171)
1,998
2022
$M
Opening
Balance
Debt
Repayment
Debt
Drawdown
Foreign Exchange,
Mark-to-Market and
Non-Cash Movements
Shareholder
Distributions
Treasury
Shares
Interest-bearing
liabilities
Cash
Net on balance sheet
debt
6,830
(2,221)
4,609
(1,441)
1,441
–
491
(491)
–
80
(2)
78
–
–
–
–
2
2
Other
Net Cash
Movement
–
(2,072)
(2,072)
Closing
Balance
5,960
(3,343)
2,617
.
86
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
22
PROVISIONS
Annual leave
Long service leave
Redundancies and other employee benefits
Total employee benefits
Onerous contracts
Make good on leased assets
Insurance, legal and other1
Total other provisions
Total provisions
2023
$M
Non-current
–
44
–
44
–
386
150
536
580
Current
434
353
188
975
7
170
120
297
1,272
Total
434
397
188
1,019
7
556
270
833
1,852
2022
$M
Current
Non-current
358
303
189
850
12
50
189
251
1,101
–
38
–
38
–
641
115
756
794
Total
358
341
189
888
12
691
304
1,007
1,895
1
Insurance, legal and other includes a provision relating to a decision of the Federal Court of Australia that determined Qantas had contravened the adverse action provisions of the
Fair Work Act in outsourcing the remainder of Qantas’ ground handling function in 2020. As at 30 June 2023, the ruling of the Federal Court of Australia was subject to appeal in the
High Court of Australia. Subsequent to year end, on 13 September 2023, the High Court of Australia upheld the ruling of the Federal Court (refer to Note 34 Post-Balance Sheet Date
Events).
Reconciliations of the movements of each class of provision, other than employee benefits, are set out below:
2023
$M
Onerous contracts
Make good on leased assets
Insurance, legal and other
Total other provisions
23
(A)
CAPITAL
ISSUED CAPITAL
Opening
Balance
Provisions
Made
Provisions
Utilised/
Reversed
Unwind of
Discount
Discount
Rate
Changes
Transfers from
Investments in
Associates Other/FX
Closing
Balance
12
691
304
1,007
–
173
44
217
(6)
(336)
(49)
(391)
–
27
3
30
–
(14)
(1)
(15)
–
–
(32)
(32)
1
15
1
17
7
556
270
833
Opening balance: 1,886,044,698 (1 July 2021: 1,886,044,698) ordinary shares, fully paid
Shares bought back during the year: 161,590,018 (June 2022: nil) ordinary shares
Closing balance: 1,724,454,680 (2022: 1,886,044,698) ordinary shares
2023
$M
3,186
(1,000)
2,186
2022
$M
3,186
–
3,186
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 2023,
16,703,789 (2022: 1,602,255) 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-looking basis, which is the difference between the projected Net Debt position and the target Net
Debt position.
87
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
23
(C)
CAPITAL (CONTINUED)
CAPITAL MANAGEMENT (CONTINUED)
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.
Net Debt1
Return on Invested Capital (%)
Net capital expenditure3
Shareholder distributions4
Metrics
$3.7B to $4.6B2
ROIC > WACC
2023
2022
$2.89B
103.6 per cent
$2,666M
$1,000M
$3.94B
(31.6) per cent
$398M
–
1 Net Debt is a non-statutory measure. It includes net 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 $3.7 billion to $4.6 billion is based on the 12-month average Invested Capital of $2.6 billion as at 30 June 2023. The Target Net Debt range for the 2021/22
financial year was $4.2 billion to $5.2 billion, which is based on the average Invested Capital of $4.9 billion as at 30 June 2022.
3 Net capital expenditure is a non-statutory measure which is equal to net investing cash outflows included in the Consolidated Cash Flow Statement of $2,625 million (2022:
$240 million) and the impact to Invested Capital from the acquisitions/disposals of leased aircraft of $41 million (2022: $158 million).
4 During the year ended 30 June 2023, the Group completed on-market buy-backs totalling $1,000 million, which were announced in August 2022, February 2023 and May 2023. The
Group purchased 161.6 million ordinary shares on issue at the average price of $6.19.
24
(A)
i.
IMPAIRMENT OF ASSETS AND RELATED COSTS
IMPAIRMENT TESTING OF CASH GENERATING UNITS
Identification of CGUs
The identification of an asset’s CGU is a key 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.
The identified CGUs by operating segment for the 2022/23 financial year are outlined in the table below:
Operating Segment
Qantas Domestic
Qantas International
Jetstar Group
Qantas Loyalty
ii.
Impairment Assessment
CGUs Identified
Qantas Domestic CGU
Qantas International CGU
Qantas Freight CGU
Jetstar Australia/New Zealand CGU
Jetstar Asia CGU
Jetstar Japan CGU
Qantas Loyalty CGU
TripADeal CGU
An assessment is made 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 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 assessment 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 its value in use. Outlined below are the significant assumptions applied in the determination of the recoverable amount.
88
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
24
(A)
ii.
IMPAIRMENT OF ASSETS AND RELATED COSTS (CONTINUED)
IMPAIRMENT TESTING OF CASH GENERATING UNITS (CONTINUED)
Impairment Assessment (CONTINUED)
Significant
Assumption
Calculation of
recoverable
amount
Net assets
Cash Flows —
Group Financial
Plan
Discount rate
Sensitivity to
significant
changes in
assumptions
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 Financial Plan.
Net assets excluding cash and cash equivalents, interest-bearing liabilities and deferred tax assets/liabilities within CGUs
but excludes any items that have been tested for impairment individually.
Cash flows were projected based on the Board-approved Financial Plan.
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 or
capital expenditure relating to assets that commence operation beyond the terminal year.
The Group’s Financial Plan incorporates estimates of the future impact on the Group of meeting the interim targets in the
Group’s Climate Action Plan, including the financial impact within cash flow projections of the increased cost of carbon
offsetting and SAF (together with estimated recovery through revenue).
For the purposes of performing an impairment test, a terminal value has been been estimated. Cash flows to determine
the terminal value were extrapolated using a constant growth rate of 2.5 per cent per annum, which does not exceed the
long-term average growth rate for the industry.
A pre-tax discount rate of 10 per cent per annum has been used in discounting the projected cash flows of the CGUs,
reflecting the long-term average pre-tax Weighted Average Cost of Capital (WACC) of the Qantas Group (2022: 10 per cent
per annum).
Sensitivity to Changes in Assumptions (CGUs other than Jetstar CGUs in Asia)
The terminal year in the impairment test has the most material impact on the determination of the recoverable amount
and the surplus between the recoverable amount and carrying value of CGUs. The earlier years in the Financial Plan, while
impacting the measurement of the recoverable amount, do not materially impact the surplus identified.
Reasonably possible changes in the Financial Plan and discount rates are unlikely to result in impairment of the CGUs. The
terminal value cash flow is in excess of the break-even cash flow and reasonably possible changes in this assumption do
not result in impairment.
Sensitivity to Changes in Assumptions (Jetstar CGUs in Asia)
The Group recognised impairment in the Jetstar Asia CGU of Goodwill and indefinite lived intangible assets in the 2019/20
financial year and of property, plant and equipment and right of use assets in the 2020/21 financial year. The impairments
were allocated to individual assets to the extent that the assets were not reduced below their individual fair value less
costs of disposal.
Goodwill and indefinite lived intangible assets have been fully impaired, and property, plant and equipment and right of use
assets have been impaired to individual fair value less costs of disposal. Any allocation of CGU impairment should not
reduce the asset below its individual fair value less costs of disposal. As a result, any additional impairment would only be
recognised if there was a reduction in the individual fair value less costs of disposal of the individual assets.
The fair value less costs of disposal could change depending on valuations provided by two external and independent
aircraft valuers (AVAC and AVITAS), changes in AUD/USD exchange rates, or changes in the level of maintenance life
remaining on the aircraft other than already accounted for through depreciation.
89
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
24
(B)
IMPAIRMENT OF ASSETS AND RELATED COSTS (CONTINUED)
CARRYING VALUE OF GOODWILL AND INDEFINITE LIVED INTANGIBLE ASSETS
The following CGUs have goodwill and other intangible assets with indefinite useful lives as follows:
2023
$M
14
68
48
49
91
270
2022
$M
14
12
104
49
91
270
Goodwill
Qantas Domestic CGU
Qantas Loyalty CGU1
TripADeal CGU1
Qantas Freight CGU
Jetstar Australia/New Zealand CGU
Total goodwill
Other intangible assets with indefinite useful lives
TripADeal CGU2
Qantas International CGU
Total other intangible assets with indefinite useful lives
1
40
35
75
Goodwill arising from the acquisition of TAD Holdco Pty Limited (TripADeal) in financial year 2021/22 has been allocated between Qantas Loyalty CGU and TripADeal CGU in financial
year 2022/23 due to the finalisation of the purchase price allocation.
32
35
67
2 Other intangible assets with indefinite useful lives allocated to the TripADeal CGU decreased by ($8) million due to the finalisation of the purchase price allocation relating to the
acquisition of TripADeal.
(C)
RESULTS OF THE GROUP’S IMPAIRMENT TEST
i.
CGU Impairments
No impairment or impairment reversal was recognised in any of the Group’s CGUs during the year ended 30 June 2023 (2022: nil).
ii.
Other Impairments and/or Reversals of Impairment
Investments accounted for under the equity method
No impairment or impairment reversal was recognised in relation to the Group’s investments accounted for under the equity method during
the year ended 30 June 2023 (2022: ($1) million).
Assets classified as held for sale
The Group recognised a net impairment of $1 million in relation to aircraft on transfer to assets held for sale at 30 June 2023
(2022: $38 million). The impairment primarily relates to aircraft being retired as part of the Group’s fleet replacement strategy of which
$17 million was recognised in property, plant and equipment, partially offset by a $16 million impairment reversal in assets held for sale.
90
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
25
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. Additionally, the Recovery Retention Plan was announced in the second half of the 2021/22 financial year
and includes share-based payments to eligible employees (both non-executive and executive). The total equity-settled share-based payment
expense for the year was $188 million (2022: $63 million). Further details regarding the operation of equity plans are outlined in the
Remuneration Report from pages 30 to 60.
(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 Rights. For more information on the operation of the LTIP, see pages 47 to 49.
Performance Rights Reconciliation
Rights outstanding as at 1 July
Rights granted during the year
Rights forfeited during the year
Rights vested and converted to shares during the year
Rights lapsed during the year
Rights outstanding as at 30 June
Rights exercisable as at 30 June
2023
Number of
Rights
18,262,972
4,273,500
(380,758)
(1,143,343)
(1,149,491)
19,862,880
–
2022
Number of
Rights
16,568,569
4,250,500
(871,097)
(827,568)
(857,432)
18,262,972
–
The Rights outstanding as at 30 June 2023 included 9,559,480 Rights under the 2021-2023 LTIP. 9,399,949 Rights vested and converted to
shares and 159.531 Rights forfeited following the testing of performance hurdles as at 30 June 2023 and after applying service conditions
and the Board’s approval of the 2021-2023 LTIP vesting outcome on 23 August 2023. The shares awarded to Executive Management upon
vesting of the LTIP remain subject to an additional one-year trading restriction.
The Rights outstanding as at 30 June 2023 included 687,000 Rights under the 2018-2020 LTIP, 651,000 Rights under the 2019-2021 LTIP and
743,000 Rights under the 2020-2022 LTIP relating to the CEO (Mr Joyce). As noted in the Remuneration Report on page 38, after agreeing in
previous years to defer the decision of vesting Rights awarded under these plans, the CEO (Mr Joyce) elected to convert these Rights to shares
in August 2023. The following Rights vested and converted to shares 343,500 (2018-2020 LTIP), 325,500 (2019-2021 LTIP) and 371,500
(2020-2022 LTIP) and the following Rights lapsed 343,500 (2018-2020 LTIP), 325,500 (2019-2021 LTIP) and 371,500 (2020-2022 LTIP) in
August 2023.
The Rights outstanding as at 30 June 2022 included 3,035,834 Rights under the 2020-2022 LTIP. 1,143,343 Rights vested and converted to
shares and 1,149,491 Rights lapsed following the testing of performance hurdles as at 30 June 2022 and after applying service conditions
and the Board’s approval of the 2020-2022 LTIP vesting outcome on 24 August 2022 (743,000 Rights under the 2020-2022 LTIP in relation to
the CEO (Mr Joyce) remained unvested). The shares awarded to Executive Management upon vesting of the LTIP remain subject to an
additional one-year trading restriction. The Rights outstanding at 30 June 2022 also included 651,000 Rights under the 2019-2021 LTIP and
687,000 Rights under the 2018-2020 LTIP in relation to the CEO (Mr Joyce) which remained unvested.
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 $4.24 (2022: $3.89).
Inputs into the Models
Rights granted
Closing share price
Expected volatility
Dividend yield
Risk-free interest rate
2023
4 November 2022
4,273,500
$5.97
30.0%
2.4%
3.4%
2022
17 September 2021
5 November 2021
3,389,500
$5.53
30.0%
1.1%
0.2%
861,000
$5.62
30.0%
1.1%
0.3%
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 45 to 47. There were nil awards of Qantas shares made during the year ended 30 June 2023
(2022: nil).
During the 2022/23 financial year, share-based payment expense in relation to the STIP was recognised but no deferred shares were
awarded.
91
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
25
SHARE-BASED PAYMENTS (CONTINUED)
(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 the Scorecard performance outcomes, refer to the details of the operation of the STIP on pages pages 45 to 47.
The CEO retains discretion over any awards made under the MIP. There were nil awards of Qantas shares made during the year ended 30 June
2023 (2022: nil).
During the 2022/23 financial year, share-based payment expense in relation to the MIP was recognised but no deferred shares were awarded.
(D)
RECOVERY RETENTION PLAN (RRP)
The Recovery and Retention Plan was announced in the second half of the 2021/22 financial year and includes a grant of Rights to eligible
employees (both non-executive and executive) subject to both performance and service conditions. 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 Rights. For more information
on the operation of the RRP, see pages 49 to 50.
Performance Rights Reconciliation
Rights outstanding as at 1 July
Rights granted during the year
Rights forfeited during the year
Rights outstanding as at 30 June
Rights exercisable as at 30 June
2023
2022
Number of Rights Number of Rights
42,931,072
1,518,750
(2,274,418)
42,175,404
–
–
42,931,072
–
42,931,072
–
Subsequent to 30 June 2023, 41,723,150 Rights vested and converted to shares, and 452,254 Rights forfeited following the testing of
performance hurdles as at 30 June 2023 and after applying service conditions and the Board’s approval of the vesting outcome on
23 August 2023.
i.
Fair Value Calculation
The estimated value of Rights granted was determined at grant date using a simplification of the Black-Scholes option pricing formula. The
weighted average fair value of Rights granted during the year was $5.92 (2022: $4.98).
Inputs into the Models
Rights granted
Weighted average share value
Dividend yield
2023
2022
4 November 2022
28 February 2022
1,518,750
$5.96
0.9%
42,931,072
$5.04
0.9%
92
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(A)
FINANCIAL RISK MANAGEMENT
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 and 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
Liquidity risk
Interest rate
risk
Foreign exchange
risk
Fuel price risk
Credit risk
i.
Liquidity Risk
Nature of Risk
Management of Risk
Difficulty in meeting financial liability
obligations.
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.
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.
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.
Potential loss from a transaction
in the event of a default by a
counterparty during the term or
on settlement of a transaction.
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.
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 Qantas Group has maintained a prudent liquidity policy during the 2022/23 financial year, ensuring adequate coverage of liquidity
requirements while considering a range of adverse scenarios. As at 30 June 2023, the Group’s total sources of liquidity were greater than $10
billion, including $3.2 billion of cash and cash equivalents, $1.2 billion in committed undrawn facilities and an unencumbered asset base
greater than $5.6 billion, including 62 per cent of the Group’s fleet, spare engines and other assets.
93
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(A)
i.
FINANCIAL RISK MANAGEMENT (CONTINUED)
RISKS (CONTINUED)
Liquidity Risk (continued)
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.
2023
$M
Financial liabilities
Payables
Lease liabilities1
Bank loans – secured2
Bank loans – unsecured2
Other loans – secured2
Other loans – unsecured2
Net other financial assets/liabilities – outflows/(inflows)3
Total financial liabilities
2022
$M
Financial liabilities
Payables
Lease liabilities1
Bank loans – secured2
Bank loans – unsecured2
Other loans – secured2
Other loans – unsecured2
Net other financial assets/liabilities – outflows/(inflows)3
Total financial liabilities
Less Than
1 Year
2 to 3 Years
4 to 5 Years
More Than
5 Years
Total
2,732
581
276
23
412
322
(93)
4,253
–
507
536
45
432
133
314
1,967
–
307
447
45
244
411
–
1,454
–
472
558
445
523
1,461
–
3,459
Less Than
1 Year
2 to 3 Years
4 to 5 Years
More Than
5 Years
2,474
419
363
10
424
81
(556)
3,215
–
496
600
459
443
393
(62)
2,329
–
232
394
–
414
430
281
1,751
–
488
466
–
937
1,572
–
3,463
2,732
1,867
1,817
558
1,611
2,327
221
11,133
Total
2,474
1,635
1,823
469
2,218
2,476
(337)
10,758
1 This represents the Group’s contractual undiscounted cash flows relating to leases at 30 June 2023.
2 Recognised financial liability maturity values are shown pre-hedging.
3 Excluding equity investments but includes the put option liability.
ii.
Interest Rate Risk
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 2023, interest-bearing
liabilities amounted to $5,169 million (2022: $5,960 million). The fixed/floating split is 52 per cent and 48 per cent respectively (2022: 48 per
cent and 52 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 fixed/floating on Net Debt is 100 per cent and nil per cent
respectively, which assumes cash is treated as floating (2022: 91 per cent and 9 per cent). As at 30 June 2023, other financial assets and
liabilities including derivative financial instruments relating to debt obligations and future interest payments were nil (2022: nil). These are
recognised at fair value.
94
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(A)
ii.
FINANCIAL RISK MANAGEMENT (CONTINUED)
RISKS (CONTINUED)
Interest Rate Risk (continued)
Sensitivity to interest rate risk
$M
100bps increase in interest rates2,3
Variable rate interest-bearing instruments (net of cash)
100bps decrease in interest rates2,3
Variable rate interest-bearing instruments (net of cash)
Profit/(Loss) Before Tax
Equity (Before Tax)1
2023
2022
2023
2022
3
(2)
(2)
2
–
–
–
–
1 Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2 Sensitivity analysis of financial instruments assume hedge designations as at 30 June 2023 remain unchanged.
3 Sensitivity analysis excludes impact of discount rate movements on provisions.
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.
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 2023, other financial assets and liabilities, including derivative financial instruments relating to the hedging of future
capital expenditure, totalled $15 million (net asset) (2022: $31 million (net asset)) and those relating to the hedging of future operating
expenditure payments were nil (2022: 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 13 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 2023, total unrealised foreign exchange losses on hedges of revenue designated to non-derivative financial liabilities
was $3 million (2022: $2 million gains).
Sensitivity to foreign exchange risk
$M
20% movement in foreign exchange risk2,3
20% (2022: 20%) USD depreciation
20% (2022: 20%) USD appreciation
Profit Before Tax
Equity (Before Tax)1
2023
2022
2023
2022
–
–
–
–
(71)
177
(167)
278
1 Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2 Sensitivity analysis assumes hedge designations as at 30 June 2023 remain unchanged. Sensitivity analysis on foreign currency pairs of 20 per cent represent reasonable volatility in
market conditions.
3 Sensitivity analysis of financial instruments include foreign currency interest-bearing liabilities and derivatives designated in a hedge relationship.
95
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(A)
iv.
FINANCIAL RISK MANAGEMENT (CONTINUED)
RISKS (CONTINUED)
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. The Group 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 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 2023, other financial assets and liabilities included fuel and
foreign exchange derivatives totalling $97 million (net asset) (2022: $587 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% (2022: 20%) USD depreciation, 20% (2022: 20%) increase per barrel
in fuel indices
20% (2022: 20%) USD appreciation, 20% (2022: 20%) decrease per barrel
in fuel indices
Profit Before Tax
Equity (Before Tax)1
2023
2022
2023
2022
–
–
–
–
31
248
271
(35)
1 Equity (Before Tax) does not include sensitivity recognised in Profit/(Loss) Before Tax.
2 Sensitivity analysis of financial instruments assume hedge designations as at 30 June 2023 remain unchanged. Sensitivity analysis on foreign currency pairs and fuel indices of 20
per cent represents reasonable volatility in 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 2023, trade debtors
amounted to $875 million (2022: $988 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 is settled through the 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 2023, 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 $3,368 million
(2022: $3,981 million). Refer to Note 26(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.
96
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(B)
FINANCIAL RISK MANAGEMENT (CONTINUED)
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, put option liability and derivative financial instruments recognised on the Consolidated Balance Sheet. Refer to Note
35(C) for a definition of the fair value hierarchy.
June 2023
Carrying Amount Held at
Fair Value
Through
Profit and
Loss
Fair Value
Through Other
Comprehensive
Income3
–
–
194
194
–
–
82
82
–
–
101
101
–
–
280
280
Amortised
Cost
Fair Value
3,171
1,051
78
4,300
2,732
5,169
–
7,901
3,180
1,051
373
4,604
2,732
5,311
362
8,405
June 2022
Carrying Amount Held at
Fair Value
Through
Profit and
Loss
Fair Value
Through Other
Comprehensive
Income3
–
–
707
707
–
–
89
89
–
–
115
115
–
–
224
224
Amortised
Cost Fair Value
3,343
1,107
18
4,468
2,474
5,960
–
8,434
3,345
1,107
840
5,292
2,474
6,160
313
8,947
$M
Cash and cash equivalents
Receivables
Other financial assets1
Financial assets
Payables
Interest-bearing liabilities2
Other financial liabilities1
Financial liabilities
1 Other financial assets and liabilities represents the fair value of equity investments, the put option liability 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. The put option liability is measured at the present value of the forecast amount expected to be paid under the put
option calculation, using Level 3 inputs. Subsequent movements are recognised within the put option reserve.
2 The fair value of interest-bearing liabilities used level 2 inputs to calculate the present value of outstanding contractual cash flows discounted using market curves.
3 As at 30 June 2023, $92 million of the $101 million (2022: $113 million of the $115 million) of other financial assets relate 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 ($12) million loss (2022: ($22) million loss). The Group recognised fair value changes, net of tax of ($15) million loss
(2022: ($22) million loss) in respect of listed equity investment using Level 1 inputs. The Group recognised fair value changes, net of tax of
nil (2022: nil) in respect of unlisted equity investments using Level 2 inputs. The Group recognised fair value changes, net of tax of
$3 million gain (2022: nil) in respect of unlisted equity investments using Level 3 inputs.
(C)
DERIVATIVES AND HEDGING INSTRUMENTS
The following section summarises derivative financial instruments in the Consolidated Financial Statements:
Type of Hedge
Cash flow hedges
Description
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.
Derivative
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 2023 are detailed below:
$M
Derivative assets
Designated as cash flow hedges
Total derivative assets
Derivative liabilities
Designated as cash flow hedges
Total derivative liabilities
Net derivative assets
2023
2022
Current
Non-current
Total
Current
Non-current
Total
144
144
(51)
(51)
93
50
50
(31)
(31)
19
194
194
(82)
(82)
112
623
623
(67)
(67)
556
84
84
(22)
(22)
62
707
707
(89)
(89)
618
97
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
26
(C)
i.
FINANCIAL RISK MANAGEMENT (CONTINUED)
DERIVATIVES AND HEDGING INSTRUMENTS (CONTINUED)
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 terms of the contract. The ISDA agreements do not meet the criteria for
offsetting in the Consolidated Balance Sheet and consequently, financial assets and liabilities are recognised as gross. This is because the
Group does not have any current legally enforceable right to offset recognised amounts, as 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 $81 million lower (2022:
$89 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 35(C). For the year ended 30 June 2023, ($48) million loss (2022: $340 million gain) is expected to be released to the Consolidated
Income Statement within one year and ($8) million loss (2022: $39 million gain) after one year. A $6 million gain (2022: $15 million gain) is
expected to be capitalised to assets within one year. Other financial assets and liabilities represent the fair value of derivative financial
instruments recognised on the Consolidated Balance Sheet. Refer to Note 35(C) for a definition of the fair value hierarchy.
iii.
Hedge Accounting
Nominal
Amount of
Hedging
Instrument
and Hedged
Item
M
Carrying Amount
of the Hedging
Instrument1,2
Hedge
Rates
Assets
Liabilities
$M
$M
$M
25 Barrels
659
USD
1,591
USD
AUD /
Barrel
104 - 160
AUD / USD
0.66 - 0.72
AUD / USD
0.68 - 0.70
179
(82)
–
15
(517)
–
As at
30 June 2023
Cash flow
hedges
AUD fuel costs
(up to 2 years)
Revenue
(up to 13 years)
Capital
expenditure
(up to 2 years)
Change in Value of
the Hedging
Instrument Used for
Calculating Hedge
Ineffectiveness
Change in Value of
the Hedged Item
used for Calculating
Hedge
Ineffectiveness
Change in Value of the
Hedging Instrument
Recognised
in Other
Comprehensive
Income
Amount
Reclassified
from the Cash Flow
Hedge Reserve to
Profit or Loss
$M
(117)
(22)
26
$M
117
22
(26)
$M
(117)
(22)
26
$M
(348)
17
–
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.
98
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
27
AUDITOR’S REMUNERATION
STATUTORY ASSURANCE SERVICES
Audit and review of Financial Reports
Total statutory assurance services
OTHER ASSURANCE SERVICES
Regulatory assurance services
Other assurance services
Total other assurance services
NON-ASSURANCE SERVICES
Audit-related non-assurance services
Taxation services
Other non-assurance services
Total non-assurance services
Total auditor's remuneration
28
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
RECONCILIATION OF STATUTORY PROFIT/(LOSS) FOR THE YEAR TO NET CASH FROM OPERATING ACTIVITIES
Notes
5
7
14
25
6
7
14
Statutory profit/(loss) for the year
Adjusted for:
Depreciation and amortisation
Impairment of assets and related costs
Hedging-related activities
Share of net loss of investments accounted for under the equity method
Share-based payments
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 and tax payable
Net cash inflow from operating activities
2023
$'000
3,960
3,960
13
319
332
5
175
94
274
4,566
2023
$M
1,744
1,762
1
(149)
44
188
(4)
(34)
43
12
(13)
(58)
(162)
271
741
(28)
727
5,085
2022
$'000
3,517
3,517
39
161
200
–
175
188
363
4,080
2022
$M
(860)
1,801
35
(118)
126
63
(692)
(194)
95
–
(476)
(14)
(18)
657
2,395
201
(331)
2,670
99
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
29
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 other small overseas defined benefit plans. The Qantas Group makes contributions to
defined benefit plans that provide defined benefit amounts for employees upon retirement. Under these 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 for the assets attributable to the QSP’s defined benefit liabilities is to progressively de-risk the
defined benefit investment portfolio as the funding position improves over time. If investment returns underperform expectations, the
Group may be required to provide additional funding to the QSP
– 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 salary inflation will lead to higher liabilities.
(A)
FUNDING
Employer contributions to the defined benefit divisions of the QSP are based on recommendations by the QSP’s plan actuary. It is estimated
that $66 million of normal employer contributions will be paid by the Qantas Group to its defined benefit plans in financial year 2023/24.
In addition, the Trustee of the QSP and the Group have in place an Additional Funding Plan (AFP), last agreed in 2023 (as part of the agreed
Defined Benefit Contribution Strategy following the 2022 triennial actuarial valuation of the QSP), which is an evergreen restoration plan and
addresses the requirements of Australian Prudential Regulation Authority (APRA) Prudential Standard SPS 160. 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 (DB RBI) is less than 100 per cent and retrenchments occur that place a greater than VBI level
of funding strain on the Plan assets. The DB RBI is the ratio of the QSP’s assets attributable to the defined benefit liabilities to the total defined
benefit component of retrenchment benefits in respect of DB members. The last additional contribution required under the AFP was paid into
the QSP by the Group in December 2016. The QSP’s financial position is monitored by the Trustee each quarter.
(B) MOVEMENT IN NET DEFINED BENEFIT (ASSET)/LIABILITY
Present Value of
Obligation
Fair Value of Plan
Assets
$M
$M
Net Defined Benefit
(Asset)/Liability1
$M
2023
1,405
2022
1,762
2023
(1,944)
2022
(2,079)
2023
(539)
2022
(317)
76
78
–
154
–
42
46
51
5
144
–
(137)
(1)
1,565
88
52
–
140
–
–
(398)
37
(3)
(364)
–
(151)
18
1,405
–
(99)
(19)
(118)
–
(59)
(19)
(78)
10
–
–
–
(6)
4
(41)
137
(2)
(1,964)
70
–
–
–
4
74
(4)
151
(8)
(1,944)
76
(21)
(19)
36
10
42
46
51
(1)
148
(41)
–
(3)
(399)
88
(7)
(19)
62
70
–
(398)
37
1
(290)
(4)
–
10
(539)
Balance as at 1 July
Included in the Consolidated Income Statement
Current service cost
Interest expense/(income)
Contributions by plan participants
Total amount included in salaries, wages and other benefits
Included in the Consolidated Statement of Comprehensive Income
Return on plan assets, excluding interest income
Losses from change in demographic assumptions
Losses/(gains) from change in financial assumptions
Experience losses
Exchange differences on foreign plans
Total amount recognised in other comprehensive income
Contributions by employer
Benefit payments
Other movements
Balance as at 30 June
1 The net defined benefit asset is included in non-current other assets (refer to Note 19).
100
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
29
(C)
SUPERANNUATION (CONTINUED)
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
Hedge funds
Property and infrastructure
Agriculture
Timberland
Insurance policies
Cash and cash equivalents1
Total
2023
%
11
9
1
1
5
8
9
30
2
2
5
–
4
13
100
2022
%
10
9
1
1
4
6
17
32
1
4
6
2
2
5
100
1 The majority of these plan assets have a quoted market price in an active market.
2 As at 30 June 2023, QSP assets in shares of Qantas Airways Limited (ASX:QAN) are $968,465 (2022: $747,767).
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
Long-term future salary increase1
2023
%
5.6
3.0
2022
%
5.3
2.0
1 For the 30 June 2023 actuarial calculation, specific increase rates were assumed for years 1 to 5, averaging 2.6 per cent and then 3 per cent for the remaining duration of the plan
(30 June 2022: salary increases averaging 1.8 per cent for years 1 to 5 and 2 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 2023 was nine years (2022: nine years). The sensitivity of
the defined benefit obligation to changes in the significant assumption is as follows:
Impact on Defined Benefit Obligation
30 June 2023
30 June 2022
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Increase in
Assumption
Decrease in
Assumption
1%
1%
Decrease by 9.8%
Increase by 4.8%
Increase by 11.4%
Decrease by 4.4%
Decrease by 9.5%
Increase by 5.8%
Increase by 12.8%
Decrease by 3.8%
Discount rate
Future salary increase
Defined Contribution Fund
A defined contribution expense of $199 million has been recognised for the year ended 30 June 2023 (2022: $153 million).
101
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
30
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 (Cth) requirements for preparation, audit, distribution and lodgement of Financial Statements and
Directors’ Reports:
AAL Aviation Limited
Airlink Pty Ltd
National Jet Operations Services Pty Ltd
Network Aviation Holdings Pty Ltd
Qantas Ground Services Pty Ltd
Qantas Group Flight Training (Australia) Pty Ltd
Network Aviation Pty Ltd
Australian Air Express Pty Ltd
Network Holding Investments Pty Ltd
Australian Airlines Limited
Network Turbine Solutions Pty Ltd
Australian Regional Airlines Pty Ltd
Osnet Jets Pty Ltd
Eastern Australia Airlines Pty Ltd
Express Freighters Australia (Operations) Pty Ltd Q H Tours Limited
Qantas Group Flight Training Pty Ltd
Qantas Information Technology Limited
Qantas Road Express Pty Ltd
Qantas Ventures Pty Limited
Qantas Wheatbelt Connect Pty Limited
Express Freighters Australia Pty Ltd
Impulse Airlines Holdings Pty Ltd
Jetstar Airways Pty Ltd
Jetstar Asia Holdings Pty Ltd
Jetstar Group Pty Ltd
Jetstar Services Pty Ltd
National Jet Systems Pty Ltd
Qantas Asia Investment Company Pty Ltd QF Cabin Crew Australia Pty Ltd
Regional Airlines Charter Pty Ltd
Qantas Courier Limited
Sunstate Airlines (Qld) Pty Ltd
Qantas Domestic Pty Ltd
The Network Holding Trust
Qantas Freight Enterprises Limited
Qantas Frequent Flyer Limited
The Network Trust
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 (Cth) 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 (Cth), 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, 2 November 2017, 31 July 2020 and
14 March 2023.
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 (including dividends), balances and unrealised gains and losses on transactions between entities that are party to the Deed
are eliminated
– Investments in controlled entities that are not party to the Deed are carried at cost less any accumulated impairment
– Dividends received from controlled entities that are not party to the Deed are recognised as income.
(A)
Consolidated Condensed Income Statement for the Year Ended 30 June 2023
Revenue and other income
Expenditure
Impairment of assets and related costs
Statutory profit/(loss) before income tax (expense)/benefit and net finance costs
Finance income
Finance costs
Net finance costs
Statutory profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Statutory profit/(loss) for the year
Accumulated losses as at 1 July
Transfer of accumulated fair value losses to accumulated losses
Shares vested and transferred to employees/Rights unvested and lapsed
Accumulated losses as at 30 June
102
2023
$M
19,348
(16,614)
(6)
2,728
130
(342)
(212)
2,516
(729)
1,787
(4,087)
–
3
(2,297)
2022
$M
8,978
(9,675)
(210)
(907)
14
(311)
(297)
(1,204)
341
(863)
(3,220)
(6)
2
(4,087)
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
30
DEED OF CROSS GUARANTEE (CONTINUED)
i.
Consolidated Condensed Balance Sheet as at 30 June 2023
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 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
Total current liabilities
NON-CURRENT LIABILITIES
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Reserves
Accumulated losses
Total equity
2023
$M
3,090
1,600
144
290
38
243
5,405
87
151
117
22
11,828
1,294
527
373
810
15,209
20,614
3,406
6,448
724
578
51
1,192
12,399
1,996
4,400
976
311
552
8,235
20,634
(20)
2,186
(106)
197
(2,297)
(20)
2022
$M
3,214
1,757
623
269
1
240
6,104
259
199
117
55
10,213
944
617
867
920
14,191
20,295
3,168
5,712
769
382
67
994
11,092
2,066
5,505
888
246
776
9,481
20,573
(278)
3,186
(8)
631
(4,087)
(278)
Net Asset Position of Deed of Cross Guarantee (Deed)
ii.
The Deed’s net asset position of ($20) million at 30 June 2023 (2022: ($278) million) is a direct result of the losses incurred since the
outbreak of COVID-19. The negative net asset position does not impact the ability of the parties to the Deed to pay its debts as and when they
become due and payable.
103
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
31
(A)
RELATED PARTIES
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
2023
$'000
12,798
681
59
15,453
28,991
2022
$'000
8,323
577
71
7,439
16,410
1 Post-employment benefits include superannuation and post-employment travel benefits.
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 annual leave than they accrue during the current year.
Further details in relation to the remuneration of KMP are included in the Remuneration Report.
(B)
NON-EXECUTIVE DIRECTOR FEE SACRIFICE SHARE ACQUISITION PLAN
Under the Non-Executive Director Fee Sacrifice Share Acquisition Plan, 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 the individual 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.
Non-Executive Director Fee Sacrifice Share Acquisition Plan - Rights Reconciliation
Rights outstanding as at 1 July
Rights acquired during the year by fee sacrifice
Rights converted to ordinary shares during the year
Rights outstanding as at 30 June
(C)
OTHER RELATED PARTY TRANSACTIONS – ASSOCIATES
Transactions with associates are conducted on normal terms and conditions.
Transactions between the Qantas Group and associates include:
2023
Number of
Rights
32,505
52,271
(61,117)
23,659
2022
Number of
Rights
44,025
64,493
(76,013)
32,505
– The Qantas Group provides airline seats on domestic and international routes to Helloworld Ltd for sale through its travel agency network.
In the 2022/23 financial year, the Group sold its investment in Helloworld Travel Ltd (ASX: HLO)
– The Qantas Group has established a business service agreement with a Jetstar-branded airline in Japan (Jetstar Japan). As part of the
business service agreement, amongst other services, Qantas allows Jetstar Japan’s credit card transactions to be acquired through the
Qantas Group’s contractual arrangements
– The Qantas Group co-guarantees the lease obligations, on a limited liability basis, in respect of two A320 aircraft on behalf of Jetstar
Japan to the external lessors in exchange for guarantee fees to the Qantas Group. The Qantas Group has also provided indemnities to
Japan Airlines for up to 50 per cent of Japan Airlines’ guarantees provided to Jetstar Japan’s creditor banks in relation to unsecured bank
loans.
104
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
32
(A)
PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED
CONDENSED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2023
Revenue and other income1
Expenditure
Impairment of assets and related costs2
Statutory profit/(loss) before income tax (expense)/benefit and net finance costs
Net finance costs
Statutory profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Statutory profit/(loss) for the year
2023
$M
13,300
(10,279)
(20)
3,001
(178)
2,823
(446)
2,377
1
2
Revenue and other income included $1,300 million of dividend income from wholly-owned subsidiaries of the Qantas Group (2022: nil).
Impairment of assets and related costs includes the impairment of investments in subsidiaries and intercompany loans of $7 million (2022: $174 million).
(B)
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023
Statutory profit/(loss) for the year
Effective portion of changes in fair value of cash flow hedges, net of tax
Transfer of effective 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
Net changes in hedge reserve for time value of options, net of tax
Defined benefit actuarial (losses)/gains, net of tax
Foreign currency translation of investments accounted for under the equity method
Fair value losses on investments, net of tax
Total other comprehensive (loss)/income for the year
Total comprehensive income/(loss) for the year
2023
$M
2,377
(79)
(232)
–
(111)
(103)
1
(11)
(535)
1,842
2022
$M
4,670
(5,411)
(199)
(940)
(272)
(1,212)
369
(843)
2022
$M
(843)
492
(274)
(20)
20
203
1
(22)
400
(443)
105
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
32
(C)
PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED (CONTINUED)
CONDENSED BALANCE SHEET AS AT 30 JUNE 2023
CURRENT ASSETS
Cash and cash equivalents
Receivables
Intercompany receivables
Other financial assets
Inventories
Assets classified as held for sale
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Intercompany receivables
Investments in subsidiaries
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
Intercompany payables
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Revenue received in advance
Interest-bearing liabilities
Lease liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Treasury shares
Other reserves
Profit reserves
Accumulated losses
Total equity
106
2023
$M
2,961
417
7,095
144
183
38
217
11,055
47
30
420
151
22
10,440
1,217
331
262
807
13,727
24,782
1,842
7,070
5,322
721
533
51
888
16,427
1,980
4,368
917
31
254
7,550
23,977
805
2,186
(106)
476
2,377
(4,128)
805
2022
$M
3,212
535
6,596
623
165
1
213
11,345
36
215
420
199
22
8,954
906
414
727
899
12,792
24,137
1,652
7,176
4,643
769
347
67
751
15,405
2,040
5,505
856
22
407
8,830
24,235
(98)
3,186
(8)
855
–
(4,131)
(98)
32(D)
32(E)
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
32
(D)
PARENT ENTITY DISCLOSURES – QANTAS AIRWAYS LIMITED (CONTINUED)
OTHER RESERVES
Employee compensation reserve
Hedging reserves
Defined benefit reserve
Foreign currency translation of investments accounted for under the equity method
Fair value reserve
Total other reserves
(E)
DIVIDENDS AND OTHER SHAREHOLDER DISTRIBUTIONS
2023
$M
259
(50)
278
(1)
(10)
476
2022
$M
81
394
381
(2)
1
855
During the year ended 30 June 2023, Qantas Airways Limited did not declare or pay any dividends. No dividend will be paid in relation to the
year ended 30 June 2023.
During the year, Qantas Airways Limited reported a Statutory Profit After Tax of $2,377 million, which was set aside in a separate profit
reserve.
During the year ended 30 June 2023, Qantas Airways Limited completed on-market share buy-backs totalling $1,000 million, which were
announced in August 2022, February 2023 and May 2023. The Group purchased 161.6 million ordinary shares on issue at an average price of
$6.19.
(F)
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).
(G)
CONTINGENT LIABILITIES
The contingent liabilities held by the parent entity are primarily the same as those held by the Group as disclosed in Note 33.
(H)
PARENT ENTITY'S RELATIONSHIPS WITH SUBSIDIARIES AND ASSOCIATES
During the reporting period and previous reporting periods, Qantas Airways Limited was the primary purchaser and owner of aircraft, the
primary source of issuance of external debt and equity, advanced loans to, received and repaid loans from, and provided treasury, accounting,
legal, taxation and administrative services to other controlled entities within the Group. Entities within the Group also exchanged goods and
services in sale and purchase transactions.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note.
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 30. The parent entity is also the
head entity of the tax consolidated group (wholly-owned Australian resident entities) and has assumed the current tax liabilities of the
members of the tax consolidated group.
The parent entity’s related party transactions with associates and jointly controlled entities, including in respect to the provision of
guarantees, are primarily the same as those held by the Group, which are disclosed in Note 31(C) and Note 33(A).
(I)
INTEREST-BEARING LIABILITIES
The parent entity has total interest-bearing liabilities of $5,089 million (2022: $6,274 million), of which $139 million (2022: $628 million)
represents secured loans payable to controlled entities. Of the $4,950 million (2022: $5,646 million) payable to other parties, $2,721 million
(2022: $3,260 million) represents secured bank loans and other secured loans, with the remaining balance representing unsecured loans.
33
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 that the amount is not capable of reliable
measurement.
(A)
GUARANTEES
The Qantas Group co-guarantees the lease obligations, on a limited liability basis, in respect of two A320 aircraft on behalf of Jetstar Japan to
the external lessors in exchange for guarantee fees to the Qantas Group. The Qantas Group has also provided indemnities to Japan Airlines for
up to 50 per cent of Japan Airlines’ guarantees provided to Jetstar Japan’s creditor banks in relation to unsecured bank loans.
As part of the business service agreements, the Qantas Group has extended support to the Jetstar-branded airline in Japan (Jetstar Japan) by
allowing its credit card transactions to be acquired through the Qantas Group’s contractual arrangements.
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Notes to the Financial Statements continued
For the year ended 30 June 2023
33
(A)
CONTINGENT LIABILITIES (CONTINUED)
GUARANTEES (CONTINUED)
Qantas has also entered into guarantees in the normal course of business to secure a Workers’ Compensation 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 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. Refer to Note 34 for details of contingent liabilities after 30 June 2023.
34
POST-BALANCE SHEET DATE EVENTS
There has not arisen, in the interval between 30 June 2023 and the date of this report, any event (including the items outlined below) that had
a material impact on the Consolidated Financial Statements as at 30 June 2023.
Announcements after 30 June 2023
On 24 August 2023, the Directors announced an on-market share buy-back of up to $500 million. Additionally, the Group announced a firm
order of 24 aircraft (12 Airbus A350s and 12 Boeing 787s) arriving from the 2026/27 financial year to progressively replace its existing A330
fleet. The Group also has additional purchase right options to give flexibility for future growth and ultimately replace its A380 fleet from
around 2031/32 onwards. These transactions have no financial impact on the Consolidated Financial Statements for the year ended 30 June
2023 and will be recognised in subsequent financial reporting periods.
On 31 August 2023, the Qantas Group announced that it would remove the expiry date on COVID travel credits that were due to expire on
31 December 2023. Following this decision, Qantas customers with COVID credits can request a cash refund, and Jetstar customers can use
their COVID vouchers for flights, indefinitely. For Qantas customers, ‘COVID travel credits’ refers to Qantas travel credits for bookings up to
and including 30 September 2021. For Jetstar customers, a ‘COVID Voucher’ refers to all Jetstar Airways vouchers that have an expiry date of
31 December 2023 (which will be extended upon request). The change in terms and conditions of COVID travel credits does not impact the
Consolidated Financial Statements for the year ended 30 June 2023.
On 5 September 2023, Alan Joyce retired as Managing Director and Qantas Group CEO. CEO-Designate Vanessa Hudson assumed the role of
Managing Director and Group CEO effective 6 September 2023.
Contingent Liabilities
The following legal proceedings were filed after 30 June 2023 and have no financial impact on the Consolidated Financial Statements for the
year ended 30 June 2023. These are contingent liabilities subject to the uncertain outcome of the legal proceedings which may, or may not,
result in an obligation. The potential financial impact of any possible obligation, if any, is unable to be reliably measured.
On 21 August 2023, a class action proceeding was filed in the Federal Court of Australia, with allegations including breaches of the Australian
Consumer Law in respect of Qantas’ communications with its customers following the COVID-19 outbreak.
On 31 August 2023, the Australian Competition and Consumer Commission (ACCC) commenced proceedings in the Federal Court of Australia
alleging breaches of the Australian Consumer Law in respect of Qantas’ approach to the cancellation of flights scheduled to operate between
May and July 2022. The ACCC is seeking orders including penalties, injunctions, declarations, and costs.
Outcome of High Court Appeal
On 13 September 2023, the High Court of Australia dismissed an appeal by Qantas against a decision of the Full Federal Court of Australia
that determined that Qantas had contravened the adverse action provisions of the Fair Work Act in outsourcing the remainder of Qantas’
ground handling function in 2020. The High Court’s judgement related only to liability, and made no finding as to the financial remedies – i.e.
penalties or compensation – that might follow that liability. The determination of any remedies will now be determined by a single judge of the
Federal Court, and will have regard to matters such as the redundancy payments already made by Qantas. A Case Management hearing in the
Federal Court is scheduled for 20 September 2023, which will set a timetable for the remedies proceedings, which are expected to take
several months to conclude, before a judgement is issued by the Federal Court. As a first step in that process, the Federal Court is
encouraging, and Qantas has indicated its willingness to participate in, mediation with the claimant. The Group has considered any material
impact of the High Court decision on the best estimate of the provision recognised in the Consolidated Financial Statements for the year
ended 30 June 2023 (refer to Note 22 Provisions). Given the Federal Court has significant discretion to consider and attach weight to the
matters that affect any award of compensation and/or any imposition of penalties, both the quantum and timing of economic outflows is
uncertain and the final outcome may vary from the amount provided. In line with AASB 137 Provisions, Contingent Liabilities and Contingent
Assets further information is not disclosed on the grounds that it may significantly prejudice the outcome of the proceedings.
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(A)
i.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
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 on which control commences until the date on which control
ceases.
Qantas has controlled entities (subsidiaries) and some are material to the Qantas Group. 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 to the
Qantas Group. The material subsidiaries are amongst the wholly-owned Australia entities which are included in the Deed of Cross Guarantee in
Note 30.
ii.
Non-Controlling Interests
Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
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.
Investments Accounted for Under the Equity Method
Jointly controlled entities are those entities in which the Group has joint control (contractually agreed sharing of control), but not control, over
an entity. Joint control exists when decisions about the relevant activities of the entity require unanimous consent of the Group and the party
or parties sharing control. Interests in jointly controlled entities are accounted for under the equity accounting method when the Group has
rights to the net assets of the the jointly controlled entity (joint venture), rather than rights to it assets and obligations for its liabilities (joint
operation).
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating
policies of an entity. Significant influence is evidenced through, but not limited to, the 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.
Investments accounted for under the equity accounting method are 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 or joint control 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 or jointly controlled entity, which
are recognised within provisions.
When an associate or jointly controlled entity is disposed of in its entirety or partially such that significant influence or joint control is lost or
classified as an asset held for sale, the cumulative amount in the foreign currency translation reserve related to that associate or jointly
controlled entity 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, or only part of a jointly controlled entity while retaining joint control, the relevant
proportion of the cumulative amount in the foreign currency translation reserve related to that associate or jointly controlled entity 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 35(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.
v.
Business Combinations
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the
definition of a business combination and control is transferred to the Group. In determining whether a particular set of activities and assets is
a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process
and whether the acquired set of assets and activities has the ability to produce outputs.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill
that arises is tested annually for impairment. Any gain on bargain purchase is recognised in profit or loss immediately. Transaction costs are
expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally
recognised in the profit or loss.
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(B)
i.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY
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.
ii.
Foreign Operations
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 or classified as
an asset held for sale, 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.
iii.
Exchange Rates
References to exchange rates are based on International Air Transport Association (IATA) Five Day Rates.
(C)
FINANCIAL INSTRUMENTS
Non-Derivative Financial Instruments
i.
Recognition, Measurement and Derecognition 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.
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, are settled or the
Group transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership are transferred.
ii.
Recognition, Measurement and Derecognition 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.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. The Group also derecognises
a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new
financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any
non-cash assets transferred or liabilities assumed) is recognised in the Consolidated Income Statement.
At initial recognition, the Group measures a non-controlling interest put option financial liability at the present value of the estimated
redemption amount, through equity via the put option reserve. The subsequent remeasurement includes all changes in the carrying amount of
the liability, including the accretion of interest and is recognised in the put option reserve.
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(C)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS (CONTINUED)
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 the 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 highly probable, the hedging instrument expires or is sold, terminated or exercised, or the designation
is revoked, then hedge accounting is de-designated prospectively. If the forecast transaction is no longer highly probable, but still probable,
hedge accounting is discontinued and the amounts accumulated in the hedge reserve are recognised in the Consolidated Income Statement
in the period in which the original hedged item transaction ultimately occurs. If the forecast transaction is no longer probable (or
subsequently considered no longer probable), hedge accounting is de-designated and the amounts accumulated in the hedge reserve are
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 capitalised into the initial
carrying value of the asset.
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 the balance
sheet 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).
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(C)
v.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS (CONTINUED)
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 belly space 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 the 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 and
unredeemed travel credits are recognised as revenue using estimates based on the terms and conditions of the ticket, experience, historical
and expected future trends.
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 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 regarding 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 surcharges on passenger tickets) are included in net passenger revenue. Freight fuel surcharge is
included in net freight revenue.
ii.
Frequent Flyer Marketing Revenue and Other Qantas Loyalty Businesses
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 to 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 the issuance of points.
Marketing revenue on inter-segment Qantas Point issuances is eliminated on consolidation.
Revenue from other Qantas Loyalty businesses includes both commission revenue where Qantas Loyalty is acting as a sales agent and
holiday package revenue from the provision of travel services where Qantas Loyalty is acting as a principal. Commission and holiday package
revenue is measured based on its relative stand-alone selling price and recognised on satisfaction of the performance obligation (typically,
the transfer of the underlying good or service to the customer). Revenue is recognised on a net basis for commission revenue and a gross
basis for holiday package revenue. Deposits received from customers to secure bookings are paid in advance and are deferred on the balance
sheet as revenue received in advance.
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(D)
iii.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
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 at its relative stand-alone selling price. Redemption revenue is measured based on the weighted average value of the points
redeemed.
Redemption revenue is recognised within the Qantas Loyalty segment when Qantas Points are redeemed.
Redemption revenue in relation to products provided by suppliers outside the Group, such as Qantas Marketplace redemptions and other
carrier redemptions, is recognised in the income statement net of related costs where the Group is an agent. Obligations for returns or refunds
in relation to redemptions from the Qantas Rewards Store are recognised where material. 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 Qantas Marketplace and other redemption revenue.
For the purposes of segment reporting, the Qantas Loyalty segment reports Qantas Group flight redemptions when Qantas Points are
redeemed. Adjustments are made within the consolidation eliminations to present these redemptions on uplift and present within net
passenger revenue.
Significant changes in the estimate of issued Qantas Points expected to expire unredeemed are recognised within other revenue and 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 (within Third-party services revenue)
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 third-party services 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.
v.
Freight Terminal Fees (within Third-party services revenue)
Revenue from freight terminal fees is measured based on its stand-alone selling price and recognised within third party-services revenue on
satisfaction of the performance obligation, which is typically the transfer of the underlying service to the customer. Invoices are issued
according to contractual terms.
vi.
Qantas Club Membership
Qantas Club Membership revenue is measured based on its stand-alone selling price and is recognised within other revenue and income on
satisfaction of the performance obligation, which is typically recognised on a straight-line basis over the membership period. The deferred
revenue is included in other revenue received in advance.
vii.
Incremental Costs of Obtaining a Contract
The incremental cost of obtaining a contract is capitalised and amortised over the expected period of benefits to the Group and in line with 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. Depending on the grant conditions, grants received may be deferred and recognised over time
on a straight-line basis. Grants received to support capital expenditure are deferred and recognised in the Consolidated Income Statement
over the useful life of the related asset.
(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 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).
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Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(F)
i.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TAXES (CONTINUED)
Tax Compliance (continued)
Current income tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to tax payable or
receivable with respect to previous years. It is measured using tax rates enacted or substantially enacted at the balance sheet date where the
Group and its subsidiaries operate and generate taxable income or loss.
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 or loss
– 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.
Income tax
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.
ii.
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, 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.
iii.
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 (CGU)). Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Goodwill arising from a business combination is allocated to CGUs or group of CGUs that are expected to
benefit from the synergies of the combination.
Assets which primarily generate cash flows as a group, such as aircraft, are typically assessed on a 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, TripADeal (TAD) CGU, Qantas Freight CGU, Jetstar Australia/New Zealand CGU, Jetstar Asia CGU and
the Jetstar Japan 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.
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For the year ended 30 June 2023
35
(G)
i.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT (CONTINUED)
Non-Financial Assets (CONTINUED)
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. Impairment loss is recognised in the
Consolidated Income Statement.
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 judgement. 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 macroeconomic 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 its 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.
(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. Changes in the measurement of existing liabilities resulting from changes in foreign exchange rates, timing or expected outflow
of resources required to settle the obligation, or from changes in the discount rate are recognised as an adjustment to the asset recognised.
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 35(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 Consolidated 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.
115
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For the year ended 30 June 2023
35
(H)
iii.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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 the
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 (%)
5 – 40
2 – 20
2 – 25
2 – 20
2 – 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 periods 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.
(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.
i.
Initial Recognition
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.
Leases are 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.
The Group has elected not to recognise right of use assets and lease liabilities for leases of low-value assets and short-term leases. The Group
recognises lease payments associated with these leases 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 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), which are recognised within capacity hire
expense.
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For the year ended 30 June 2023
35
(I)
i.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEASES (CONTINUED)
Initial Recognition (CONTINUED)
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 it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is 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, 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.
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.
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 within the lease contract (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. The right of use asset is also adjusted for changes in the measurement of the
restoration provision recognised for return costs that arise at lease commencement.
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. On 31 March 2021, the IASB extended the period of application of the practical expedient up until 30 June 2022 (originally
30 June 2021). 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.
117
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For the year ended 30 June 2023
35
(I)
iv.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEASES (CONTINUED)
Lease Revenue
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each
lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a finance lease, if not, then it is an operating lease. As part of this
assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
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.
v.
Sale and Leaseback
A sale and leaseback transaction is one where the Group sells an asset in accordance with AASB 15 Revenue from Contracts with Customers,
and simultaneously reacquires the use of the asset by entering into a lease with the buyer.
The Group measures the right of use asset arising from the leaseback at the portion of the previous carrying amount that is retained by the
Group, with any difference between the right of use asset and the lease liability reflected in the gain on sale. Accordingly, any residual gain
from the disposal of assets is representative of the rights transferred to the buyer and is recognised in the Consolidated Income Statement.
(J)
INTANGIBLE ASSETS
i.
Recognition and Measurement
Goodwill
Airport landing slots
Brand names and
trademarks
Software
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 which are recognised as intangible assets 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 have an indefinite useful life and are carried at cost less any accumulated
impairment losses.
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.
Cloud computing arrangements involve service contracts providing the Group with the right to access the cloud
provider’s application software over the contract period. Where the Group does not receive a software intangible
asset at the contract commencement date, costs incurred for the customisation and configuration are generally
recognised as an expense when the work is performed. Fees for use of the underlying software are recognised as
an expense as the service is provided over the contract period.
Customer contracts/
relationships
Contract intangible
assets
Customer contracts/relationships are carried at their fair value at the date of acquisition less accumulated
amortisation and impairment losses. Amortisation commences when the asset is ready for use.
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.
The principal amortisation periods and estimated residual value percentages applied where material are:
Software
Customer contracts/relationships
Contract intangible assets
118
Years
2 – 10 years
11 years
40 years
Residual Value %
0%
0%
0%
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(K)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(L)
ASSETS HELD FOR SALE
Non-current assets, or disposal of groups comprising asset and liabilities, are classified as held for sale if it is highly probable that they will be
recovered primarily through sale rather than through continued use and the asset is available for immediate sale in its present condition.
Such assets, or disposal of groups, are generally measured at the lower of their carrying amount and fair value less cost to sell. Any
impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except
that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, which continue to be measured in
accordance with the Group’s other accounting policies. Impairment loss on initial classification as held for sale and subsequent gains and
losses on remeasurement are recognised in the Consolidated Income Statement.
Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated and any equity-
accounted investees are no longer equity accounted.
(M)
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.
(N)
REVENUE RECEIVED IN ADVANCE
Unavailed passenger revenue
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.
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.
Notwithstanding that travel credits may not 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
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 card
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. The non-current amount of Unredeemed
Frequent Flyer revenue will be materially recognised as revenue over three 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
Other revenue received in advance primarily relates to prepaid Qantas Club membership fees, revenue received in advance for travel
packages, points redemptions on other airlines, unavailed cargo revenue and grants or supplier incentives the Group has received but which
are recognised over time. Other revenue received in advance is classified as current where it is expected to be recognised or transferred to
another carrier within the next 12 months.
(O)
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.
Provisions 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.
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For the year ended 30 June 2023
35
(O)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROVISIONS (CONTINUED)
Wages, salaries and
annual leave
Long service 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.
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, which is determined based on the
incremental costs of fulfilling the obligation under the contract and an allocation of other costs directly related to
fulfilling the contract. Before a provision is established, the Group recognises any impairment loss on the assets
associated with that contract.
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. The determination of provisions for return costs requires significant judgement and
is estimated in USD based on the forecast costs expected to be incurred when the aircraft is returned to or
purchased from the lessor, calculated using expected future increases in costs and discounted to present value
using the Group’s incremental borrowing rate. The expense is recognised pro-rata over the period to an expected
lease return date. Movements in the provision due to changes in foreign exchange rates and discount rates as well
as changes in estimates of forecast return costs expected to be incurred or expected lease return dates are
recognised in the Consolidated Income Statement.
Property: 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.
Environment: 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 with a corresponding amount recognised in the
Consolidated Income Statement. Changes in this provision are recognised in the Consolidated Income Statement.
Insurance: The Qantas Group self-insures for risks associated with workers’ compensation in certain jurisdictions.
Qantas has made a provision for all notified and 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: Provisions 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.
Make good on
leased assets
Insurance, legal
and other
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For the year ended 30 June 2023
35
(P)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 then 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.
(Q)
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.
(R)
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 purchased and held by the Qantas-sponsored Employee Share Plan Trust are recognised as treasury shares at their purchase price
and deducted from equity on the purchase date.
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).
121
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(R)
v.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITAL AND RESERVES (CONTINUED)
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. Cash flow hedges are further described in Note
35(C)ii.
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 following:
– The defined benefit reserve, comprising the remeasurements of the net defined benefit asset/(liability), which is recognised in other
comprehensive income
– The fair value reserve, comprising the fair value gains/(losses) on investments at fair value through other comprehensive income
– The put option reserve, comprising the recognition and remeasurements of a put option liability over relevant non-controlling interests,
which is recognised in equity.
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.
(S)
COMPARATIVES
Where applicable, comparative balances have been reclassified to align with current year presentation.
(T)
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
External segment
revenue
Basis of Preparation
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 belly space.
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.
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.
122
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Notes to the Financial Statements continued
For the year ended 30 June 2023
35
(T)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT REPORTING (CONTINUED)
Underlying EBITDA
The significant expenses impacting Underlying EBITDA are as follows:
– Salaries, wages and other benefits are reported by the operating segment that utilises the salaries, wages
and other benefits. Where personnel support 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.
The impact of discount rate changes on provisions is not allocated to operating segments, and changes in
presentation of income/expenses where the determination of whether the Group is acting as principal or agent
is made on consolidation.
Depreciation and
amortisation
Qantas Domestic, Qantas International and Jetstar Group report depreciation expenses for passenger and
freight aircraft owned or leased by the Qantas Group and flown by the segment. Other depreciation and
amortisation is reported by the segment that uses the related asset.
36
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED BY THE GROUP
A number of new accounting amendments and interpretations have been issued that are not yet effective and not yet adopted by the Group
for the financial year ended 30 June 2023. If applicable, the Group intends to adopt the following new or amended standards and
interpretations when they become effective, with no significant impact being expected on the Consolidated Financial Statements of the
Group:
– AASB 17 Insurance Contracts and amendments
– Amendments to AASB 101 Classification of Liabilities as Current or Non-current
– Amendments to AASB 107, AASB 7 Disclosure of supplier finance arrangements
– Amendments to AASB 112 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
– Amendments to AASB 101, AASB 8 and IFRS Practice Statement 2 Disclosure of Accounting Policies and Definition of Accounting Estimates
– Amendments to AASB 16 Lease liability in a sale-and-leaseback
– Amendments to AASB 10 and 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
123
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Directors’ Declaration
For the year ended 30 June 2023
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 (Cth), including:
i. Giving a true and fair view of the financial position of the Qantas Group as at 30 June 2023 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 (Cth) from the Chief Executive Officer
and the Chief Financial Officer for the year ended 30 June 2023.
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
Vanessa Hudson
Chief Executive Officer
20 September 2023
20 September 2023
124
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report
For the year ended 30 June 2023
To the Shareholders of Qantas Airways Limited
Opinion
We have audited the Financial Report of Qantas Airways Limited
(the Company).
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 2023 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 2023
– 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.
The Group consists of the Company and the entities it controlled at
the year end and from time to time during the financial year.
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 (including Independence Standards) (the Code) that are
relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these
requirements.
Key Audit Matters
The Key Audit Matters we identified are:
– Passenger revenue recognition
– Frequent Flyer revenue recognition
– Derivative financial instrument accounting
Key Audit Matters are those matters that, in our professional
judgement, 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.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company
limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited
by a scheme approved under Professional Standards Legislation
125
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report continued
For the year ended 30 June 2023
Passenger revenue recognition
Refer to Note 4(A) and 35(D)i. to the Financial Report
THE KEY AUDIT MATTER
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Recognition of passenger revenue is a key audit matter due to:
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.
Historical trend information is used to estimate breakage and
has been supplemented by forward-looking estimation and
changes to conditions of carriage to determine breakage at 30
June 2023. Estimations, particularly as they relate to predicting
customer behaviours are prone to a wider range of possible
outcomes for us to consider.
Passenger revenue and ticketing is dependent on IT systems
and controls, therefore we involved our IT specialists in
addressing this key audit matter.
– for key passenger 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 relevant IT systems for financial reporting. We tested
key controls within the system relating to ticket validation and the
recognition of revenue at flight date.
– testing key controls related to the Group’s review and approval of
manual changes to revenue accounting records where tickets have
been identified as exceptions to automated validation.
– using data analytics and sampling techniques, checking passenger
revenue transactions to underlying records including evidence of
payment and flight records, to assess the existence and accuracy of
the revenue recognised.
– using data analytics and sampling techniques, checking passenger
revenue received in advance to underlying records, to assess the
completeness of revenue recognised.
– evaluating the Group’s accounting policy for estimations of
passenger revenue breakage, assessing the methodology applied
and challenging the key assumptions. In doing so: we compared
estimates to historical experience; we assessed the Group’s ability
to reliably estimate ticket breakage by comparing previous
estimates to actual outcomes; we inquired specifically regarding the
Group’s responses to unredeemed travel credit holders; we read the
Group’s external announcements and communications to
customers as corroboration of our sources;
– 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 related key assumptions against historical
trends, adjusting for the forecast customer behaviour, and assessed
for indicators of bias, using our industry knowledge.
126
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report continued
For the year ended 30 June 2023
Frequent Flyer revenue recognition
Refer to Note 4(B), Note 35(D)ii., Note 35(D)iii., and to the Financial Report
THE KEY AUDIT MATTER
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
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 Qantas Points: the Group bases
this on their estimated price of available rewards at the time
of redemption weighted in proportion to the expected
redemptions, based on historical experience and
assumptions of future behaviour; and
– proportion of Qantas Points not expected to be redeemed by
members in the future (breakage): the Group uses actuarial
experts to estimate the proportion of Qantas Points not
expected to be redeemed by members in the future.
Given the complex judgements, we involved our valuation and
actuarial specialists to supplement our senior team members in
addressing this key audit matter.
Our procedures included:
– assessing the Group’s methodology used to estimate the stand-alone
selling price of Qantas Points against the requirements of AASB 15
Revenue from Contracts with Customers 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.
– 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 of available rewards
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 key breakage
assumptions against historical experience, recent trends and the
estimated future volume of Qantas Points redeemed based on the
Board approved Forecast and our understanding of changes in the
Frequent Flyer program.
– involving our actuarial specialists, we assessed the appropriateness
of the Group’s breakage methodology used against accounting
standard requirements and the Frequent Flyer program. We
independently recalculated the breakage using the Group’s inputs
and compared to the Group’s recorded breakage at year end.
– we checked the accuracy of points activity data used in the
calculation of breakage to source data in Qantas’ Points system.
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Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report continued
For the year ended 30 June 2023
Derivative financial instrument accounting
Refer to Note 26 and Note 35(C) to the Financial Report
THE KEY AUDIT MATTER
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
Cash flow hedge accounting and valuation of financial
instruments is a key audit matter due to:
Our procedures included:
– we assessed the appropriateness of the Group’s accounting policies
– the complexity inherent in the Group’s estimation of the fair
against the requirements of the accounting standards.
value of derivative financial instruments. The Group’s
approach is to use market standard valuation techniques to
determine the fair value of options, swaps and cross-
currency swaps not traded in active markets;
– the impact of changes in the underlying market price of 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 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.
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.
– understanding 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;
– assessment of the volume of hedged exposures compared to
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 2023 using recognised market valuation methodologies and
inputs. We adjusted these fair values for our experience of 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 Forecast and assessed consistency with other key
forward looking assumptions.
– we evaluated the appropriateness of the classification and
presentation of derivative financial instruments and related financial
risk management disclosures against accounting standard
requirements.
128
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report continued
For the year ended 30 June 2023
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.
129
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Independent Auditor’s Report continued
For the year ended 30 June 2023
REPORT ON THE REMUNERATION REPORT
Opinion
In our opinion, the Remuneration Report of Qantas Airways Limited
for the year ended 30 June 2023, 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 33 to
60 of the Directors’ report for the year ended 30 June 2023.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian
Auditing Standards.
KPMG
Julian McPherson
Caoimhe Toouli
Partner
Sydney
Partner
Sydney
20 September 2023
20 September 2023
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Q A N T A S A N N U A L R E P O R T 2 0 2 3
Shareholder Information
For the year ended 30 June 2023
The shareholder information set out below was applicable as at 18 August 2023.
TWENTY LARGEST SHAREHOLDERS
Shareholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Pacific Custodians Pty Limited (Emp Share Plan Trust)
BNP Paribas Noms Pty Ltd (DRP)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
HSBC Custody Nominees (Australia) Limited — GSI EDA
HSBC Custody Nominees (Australia) Limited (NT — Commonwealth Super Corp A/C)
HSBC Custody Nominees (Australia) Limited — A/C 2
HSBC Custody Nominees (Australia) Limited — GSCO ECA
Pacific Custodians Pty Limited (QAN Plans Ctrl)
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd (Global Markets DRP)
HSBC Custody Nominees (Australia) Limited (Euroclear Bank SA NV A/C)
BNP Paribas Nominees Pty Ltd (IB AU Noms Retail Client DRP)
Netwealth Investments Limited (Wrap Services A/C)
BNP Paribas Noms (NZ) Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Powerwrap Limited (Escala Sma Trading A/C)
Ordinary Shares Held
% of Issued Shares
596,453,603
258,295,241
225,952,276
69,169,518
47,738,487
35,213,637
25,111,899
18,602,068
12,505,698
11,355,193
8,050,591
7,673,413
5,225,549
4,449,976
4,348,718
4,285,897
2,975,309
2,606,715
1,929,499
1,780,392
34.59
14.98
13.10
4.01
2.77
2.04
1.46
1.08
0.73
0.66
0.47
0.44
0.30
0.26
0.25
0.25
0.17
0.15
0.11
0.10
Total
1,343,723,679
77.92
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
10,001-50,000
50,001-100,000
100,001 and over
Total
Ordinary Shares Held
Number of Shareholders
% of Issued Shares
42,490,600
137,113,066
58,855,136
81,813,697
16,928,918
1,387,253,263
1,724,454,680
107,372
57,702
8,279
4,486
243
161
178,243
2.47
7.95
3.41
4.74
0.98
80.45
100.00
1 2,617 shareholders hold less than a marketable parcel of shares in Qantas, as at 18 August 2023.
ON-MARKET SHARE BUY-BACK
On 24 August 2023, Qantas announced its intention to undertake an on-market share buy-back of up to $500 million.
SUBSTANTIAL SHAREHOLDERS
The following organisations have disclosed a substantial shareholding notice to ASX. Qantas has received no further update in relation to
these substantial shareholdings:
Shareholders
Blackrock Group1
Perpetual Limited and its related bodies corporate2
Substantial shareholding as at 23 June 2023, as per notice dated 27 June 2023.
1
2 Substantial shareholding as at 2 May 2023, as per notice dated 4 May 2023.
Ordinary Shares Held
% of Issued Shares
90,549,478
99,334,816
5.25
5.47
131
Q A N T A S A N N U A L R E P O R T 2 0 2 3
Financial Calendar and Additional Information
For the year ended 30 June 2023
2023
2024
23 February
Half year results announcement
22 February
Half year results announcement
30 June
Year end
24 August
Preliminary final results announcement
3 November
Annual General Meeting
6 March
10 April
30 June
Record date for interim dividend*
Interim dividend payable*
Year end
29 August
Preliminary final results announcement
11 September
Record date for final dividend*
16 October
25 October
Final dividend payable*
Annual General Meeting
*Subject to a dividend being authorised by the Board.
2023 ANNUAL GENERAL MEETING
ADDITIONAL SHAREHOLDER INFORMATION
The 2023 AGM of Qantas Airways Limited will be held in a hybrid
format at 11am AEDT on Friday 3 November 2023.
Further details are available in the Annual General Meeting section on
the Qantas Investor website at: 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
– Qantas Sustainability Report
– Qantas Group Code of Conduct and Ethics
– Qantas Group Corporate Governance Statement
– Qantas Group Inclusion and Diversity Policy
– Qantas Group Modern Slavery and Human Trafficking Statement
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
Benjamin Elliott
Benjamin Jones
An electronic copy of this Annual Report is available in the Annual
Report section on the Qantas Investor website at:
investor.qantas.com/home/
Further information about the Qantas Group can be found on our
corporate site at: www.qantas.com/qantas-group
– Qantas Group Human Rights Policy Statement
– 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
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
132
The Qantas Annual Report 2023 is printed on Revive. Manufactured in Australia using
100% recycled fibre, Revive is FSC Recycled Certified and Certified Carbon Neutral under
the Department of Environment’s National Carbon Offset Standard (NCOS), an Australian
Government initiative.
QANTAS AIRWAYS LIMITED
ABN 16 009 661 901