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Qantas Group strategy update

Sydney, 04 May 2012

The Qantas Group will reduce capital expenditure in 2012/13 by a further $400 million in addition to the $500 million announced in February, as it pursues competitiveness in all business areas.

Capital expenditure in 2012/13 will now total $1.9 billion compared with the $2.3 billion previously planned, consistent with the Group’s commitment to disciplined capital management. Capital expenditure in 2013/14 will be $1.9 billion or less.

The reduction in 2012/13 expenditure will be achieved through changes to the Group’s fleet plan, including the rescheduling of two Airbus A380s previously intended for delivery in early 2013. These aircraft will now be delivered in 2016/17. The Group’s final six A380s will be delivered from 2018-19.

Progress continues on the Group’s international transformation initiatives, with benefits of $280-$365 million to be realised across financial years 2012-14 from improving fleet economics, deepening alliances, withdrawing from loss-making routes and modernising operational practices.

Consultation on the future of Qantas’ heavy maintenance operations in Australia has concluded and a decision will be announced by mid-May after all options have been assessed thoroughly.

Qantas Chief Executive Officer Alan Joyce said the Group continued to deliver against its strategic goals.

“Our priorities remain to build on our strong domestic business, enhance Qantas Frequent Flyer, turn around Qantas International and grow Jetstar in Asia,” Mr Joyce said.

“Today we announce significant capacity increases and product upgrades for the Qantas, Jetstar and QantasLink domestic networks in 2013/14, focusing on core business and leisure routes. This will ensure that the Group retains a profit-maximising 65 per cent domestic market share while delivering the best customer experience in the market.

“We have made substantial progress in our fleet renewal program – our average aircraft age is now 8.3 years, which is highly competitive with other major global carriers.

“As a result we are in a good position to reduce capital expenditure, targeting investment at business areas that deliver sustainable returns while maintaining flexibility in forward fleet commitments. With 12 A380s now in service and our Boeing 747 reconfiguration program well underway, we have made the financially prudent decision to reschedule a further two A380 deliveries – enabling significant capital expenditure savings.

“We are focused on making changes that will increase productivity and competitiveness in a range of areas, including modernising and consolidating our catering operations, streamlining heavy maintenance and introducing new engineering processes. Further updates on these initiatives will be provided in the coming weeks.

“Jetstar continues to expand across Asia, with Jetstar Japan to commence services ahead of schedule in July 2012 and Jetstar Hong Kong expected to do so in mid-2013 , in the first ever joint venture with a Chinese airline. Airlines and investors in Asian markets recognise the value of partnering with the Qantas Group to capture growth opportunities.

“The Group’s balanced portfolio and clear strategy makes it well-placed to manage the challenges of ongoing high fuel prices and the changing global economy, while also taking growth opportunities in Australia, Asia and elsewhere. We are acting decisively now to position ourselves for strong, sustainable growth over the long term.”

Issued by Qantas Corporate Communication (5393a)
Email: qantasmedia@qantas.com.au