The Year Ahead - Tourism and Transport Forum

6 February 2013

It is great to start the year in the company of friends at the Tourism and Transport Forum.

Qantas is always in the public eye.

We attract a lot of attention.

We are making big changes in order to succeed, and to continue adding to Australia's national well-being.

So we are grateful to those who stand by us in the national interest, including many in this room.

And especially the Tourism and Transport Forum. Thank you.

It's also good to start 2013 talking about the potential for tourism in Australia.

Often when we meet, we focus on obstacles - on what needs to be overcome if tourism in this country is to flourish.

We talk about the need for infrastructure development.

We talk about better branding and marketing.

And we talk about more training and new technologies.

The fact is that we can easily get all of this done if we put our minds to it.

It's simply a matter of will and sweat.

The bigger challenge is to change the way we think.

As a nation, to some extent, we still see ourselves through a backward lens: faraway, expensive to get to and travel around, and lacking the weight of the great global destinations.
I think we need a more ambitious mindset.

Look at what's changed.

The Australian brand has never been held in such high esteem as it is today.

Around the world Australia is seen as a marvel of natural beauty, social harmony and economic prosperity.

A place you want to send your children for further education.

A second home.

A family reunion.

A backpacking adventure.

A luxury holiday in pristine surrounds.

Attractive safe cities with great food, wine and shopping. We have all this, and more.

Air travel has never been more affordable, and our key international markets are now closer to us than ever before.

When we started Jetstar in 2004, we opened up domestic tourism to many thousands of Australians who were taking their first flight.

Now Jetstar is leading the low fares revolution to and from Australia, and within Asia.

As Jetstar scales up and joins the dots across the region, the opportunities to bring more visitors to Australia will grow.

Qantas is Australia's number one private sector promoter of tourism and we start the year on a high with the Ellen Show coming in March.

Our ground-breaking Qantas partnership with Emirates commences in April, subject to final approval, and last week Emirates began selling tickets to 32 codeshare destinations in Australia courtesy of the Qantas network.

This is good news for Australian tourism.

It means Emirates, the world's largest international airline, with all its marketing and sales resources, is now motivated to sell tickets on a global basis to destinations like Hobart, Cairns, Broome, Canberra and Coffs Harbour.

It is great for Qantas because it means more demand for Qantas services.

And it is a huge opportunity for the regions of Australia.

We all find the high Australian dollar a challenge, Qantas no less than anyone.

We keep calling it the high Australian dollar when now it is the normal Australian dollar.
Yes, it puts pressure on all of us to be competitive in a global context.

But we should never use that as an excuse for not winning tourism business.

Many of the great destinations around the world - London, New York, Paris - have historically had high value currencies, yet tourism has thrived.

We should aim to be one of those rare destinations that visitors return to again and again across the course of their lives.

A place they bring their children, and grandchildren.

A land that offers endless renewal, interest and appeal.

A very special haven in a troubled world.

We can do this. But we need to believe.

I do, and I can assure you that the Qantas Group is committed to supporting this ambition in every way.

That's why we are strongly supportive of TTF's strong advocacy on behalf of Australian tourism, including the push for a second Sydney airport.

Let me turn to the year ahead.

We've had a hectic period at Qantas as we've confronted our major challenges, confirmed our strategic direction, implemented our management restructure, and commenced delivery of our plans.

Now we are fully focused on hitting our targets.

This year is about the renewal of Qantas, and the coming of age of Jetstar.

Of course, there is still a difficult backdrop.

Global economic conditions remain uncertain, and confidence is clearly not as robust as we'd all like to see.

The attractive returns on our Australian dollar mean that the Qantas Group faces tough competition in both the international and domestic markets.

A major factor for us is the continuing high price of jet fuel.

We are delivering major efficiencies to absorb the cost increases.

But our strategy is in place and progress is rapid.

Our international business is transforming.

We now have a superb fleet including 12 A380s and nine young, refurbished 747s.

We're moving at pace to be ready for the April start of flights to Europe via our new hub in Dubai.

We keep improving the details - from stylish new amenity kits, to an outstanding sleep service for business travellers, to chauffeur services for First and Business passengers, to even better in-flight entertainment and meal options.

Our First Lounge in Los Angeles will be double in size when it re-opens next year, with all the acclaimed First features, including a 70 seat restaurant with Neil Perry menus.

Our refurbished LA Business Lounge will nearly treble in capacity, with phase one
due to open this October.

Service keeps getting better.

We've equipped our cabin crew with the tools to give each customer a more personalised experience.

And it is paying off, as customer satisfaction with the Qantas International experience has never been higher.

This week we announced our new Asian network schedule to strengthen our Asian offering for our business and leisure passengers.

We will be offering stronger links to the key hubs of Singapore and Hong Kong, timed to improve connectivity into Asia.

Our new Qantas Singapore Lounge will open in April and a Hong Kong lounge refurbishment will proceed this year.

Benefits for customers go hand in hand with business excellence.

Drawing on our expertise in fleet acquisition, we have restructured our order with Boeing, bringing significant income through the settlement.

We have retired older fleet, with another four 747s due to exit over the next 18
months.

We are modernising our maintenance activities by moving from three bases to two
on the way to one.

We've paid down debt, strengthened our balance sheet, and we've realigned our freight business with the sale of Star Track and the acquisition of AaE.

We have deepened key gateway partnerships with American Airlines, LAN Chile, JAL and China Eastern, which is good for our customers and our bottom line.

With extensive partner relationships and new offerings our Frequent Flyer program is
experiencing strong year on year growth, and we are seeing record customer satisfaction levels.

Our partnership with Emirates does represent a seismic shift for global aviation.

We anticipate there will be dramatic changes and competitive responses, both strategic and tactical.

We have factored these in, and we are very comfortable with we are positioned for the future.
In our Domestic operations we are seeing the rewards of targeted investments in our people, fleet, product and service:

We are achieving:
- The highest domestic customer satisfaction levels ever, and significantly
above our previous best.
- The best check-in results in five years.
- The highest baggage delivery satisfaction levels since 2004.
- Last year, for the fourth straight year, Qantas flights departed and arrived on time far more often than any other domestic airline.
- Our people are well-supported, engaged and doing great work, and in 2012
our domestic cabin crew recorded their strongest levels of employee
satisfaction since records began 10 years ago.

For us it is all about staying in the number one position by investing for our customers and in particular staying 'best for business'; driving out unnecessary costs; and working with our people.

With new fleet, new inflight product and new uniforms to come, plus more lounge announcements, our domestic experience will just keep getting better.

This year Jetstar comes of age.

Two numbers tell the story.

Jetstar has now passed the milestone of 100 million passengers.

And it will shortly celebrate flying 100 aircraft.

These are quite amazing outcomes given the business started less than ten years
ago.

Today Jetstar is a pan-Asian airline group operating more than 3,000 flights per week, providing employment to over 7,000 people, with a network of close to 60 destinations across 16 countries.

Our priority for Jetstar in 2013 will be strengthening the airline in all its existing markets, continuing the momentum of Jetstar Japan and getting ready to launch Jetstar Hong Kong.

We are also looking forward to our first Boeing 787-8 Dreamliner arriving this year as part of our broader fleet renewal program.

Safety is our first priority, so of course we take the technical issues that have arisen with the B787s very seriously.

I am confident that Boeing will resolve these matters.

Ultimately we have every confidence in this aircraft, which will greatly improve the customer experience and lower our operating costs.

Domestic operations in Japan commenced in July last year with five destinations, and the reception so far has been outstanding.

Before launching, Jetstar Japan took more than 100,000 bookings, and we have just announced three new domestic destinations.

The airline is leading its low cost carrier competitors, with the largest number of aircraft, higher load factors out of Narita, and the strongest perceptions of brand value.

We forecast that Jetstar Japan will carry more than 1.5 million passengers in its first year of operations.

Hong Kong is one of Asia's key hubs and a huge aviation market, and our research shows that Hong Kong residents are eager for more options and better prices.

We are moving through the regulatory approval process now, having lodged our AOC application and appointed our Hong Kong-based CEO.

We never take anything for granted, but we believe the case for the new airline is
compelling.

Like all the Jetstar airlines, Jetstar Hong Kong will increase the overall size of the market and attract new passengers, rather than just compete for existing travellers.

What all this means is that we have reached a turning point for the Jetstar business in terms of its scale.

There is now a solid platform from which to accelerate growth and tap into the fastest growing aviation market in the world.

In fact, as all the Jetstar businesses grow, the network benefits of the portfolio will
become more visible and very significant.

We are positioning ourselves, phase-by-phase, in Asia.

Already the Qantas Group has a large presence in China and Greater China.

Qantas flies into Hong Kong and Shanghai.

Jetstar currently flies to nine ports in Greater China.

Our freight business out of Chongqing and Shanghai to the United States carries 5%
of the total China-US airfreight market.

Qantas is the first international airline to enter a joint venture with a Chinese carrier,

China Eastern, a tribute to the respect held for Qantas and Australian aviation in
China.

While the partnership with China Eastern is in very early days, there is great
potential there.

Jetstar Japan and Jetstar Hong Kong are looking to capitalise upon the major
opportunities in mainland China as they develop.

All this is good news for Australian tourism today and in the future.

We will be using the leverage of that strong Jetstar brand to promote Australia all over Asia.
There will be more potential for passengers to transfer within the Jetstar Group, and onto Qantas Group.

So all up, this is a big exciting year for the Qantas Group.

We've got the right strategies for our two airlines and we are implementing at pace.

As Qantas is renewed, and Jetstar comes of age, the benefits will flow through to our
customers, our people and our shareholders - and also to the many hardworking

Australian businesses right around our country that make up our Australian tourism
industry.