Performance against our Strategic Pillars
Delivering against our six strategic pillars and measurement against our balanced scorecard.
We measure performance against the delivery of our key strategic pillars using a balanced scorecard of key financial and non-financial metrics, namely:
- Return on invested capital at a Group and segment level
- EBIT Compound Annual Growth Rate for Loyalty
- Gross annual benefits from Transformation
- Employee engagement
- Net Promoter Score
- Progress on innovation across product, service and operations.
Overview of our six strategic pillars:
FY18 progress on the balance scorecard is provided below.
Operating segment Underlying EBIT
In addition to the Group financial metrics, we measure the performance of our key operating segments using Underlying EBIT. The Group’s domestic airlines (Qantas and Jetstar) and Loyalty business underpin our earnings as we continue to build earnings resilience into our international flying operations.
Measured as Underlying EBIT.
Maximising our leading domestic position
The Qantas Group maintained a leadership position in the Australian domestic market in FY18 through our network and frequency advantage to our competitors as well as our continued investment in customer experience.
Our dual brand strategy saw Qantas retain a clear lead in corporate market share and grow our share of the small-to-medium enterprise market. Jetstar provided 24 million fares domestically or internationally for less than $100 in the price-sensitive market. Between them, these two airlines have generated more than 80 per cent of the Australian domestic profit pool from around two-thirds of total market capacity.
In FY18, Qantas Domestic benefitted from a recovery in the resources market, which had been declining since FY15. As part of our ‘right aircraft, right route’ approach, QantasLink deployed two Airbus A320 aircraft in intra Western Australia to better meet the need of major customers.
The success of the dual brand strategy was reflected in record earnings for both the Qantas and Jetstar brands, even in a higher fuel price environment. Margins also improved as our sophisticated disciplined approach to capacity management optimised earnings.
We continue to invest in the rollout of fast and free domestic Wi-Fi and upgrading our network of lounges.
Building a resilient Qantas International
We have continued to structurally transform Qantas International to build its earnings resilience.
During FY18 we deployed the first five of our Boeing 787-9 Dreamliners and ordered a further six, increasing our total fleet to 14 by the end of 2020, to accelerate the retirement of our remaining 747 aircraft by the end of 2020.
The Dreamliner is a game-changer for Qantas International. It provides greater flying range, substantial cost efficiency and high levels of passenger comfort. Its capabilities have allowed us to change the structure of our network and use our geography to our advantage.
A prime example is the new Perth–London route, flown by the Dreamliner. It is the first (and only) non-stop passenger service to link Australia with Europe and quickly became the route with the highest levels of customer satisfaction on our network after it launched in March 2018.
Work on Project Sunrise – which will unlock direct flights from the east coast of Australia to London and New York by 2022 – continued, with Boeing’s 777X and Airbus’ A350 both under evaluation.
Detailed design for a major cabin upgrade of our A380 fleet is being finalised ahead of embodiment work starting in mid-2019.
We continued to improve our customer proposition with new alliances, including a refreshed partnership with Emirates. This saw Qantas shift the connection for its second London service from Dubai to Singapore, increasing the Group’s capacity into the growing market of Asia while still giving Qantas customers access to Emirates’ extensive network. The hub switch will deliver the Group an estimated $80 million in annual benefits.
Aligning Qantas and Jetstar with Asia's growth
Asia remains the world’s fastest growing aviation market. The Group – through its geography and partnerships – is well placed to capitalise on this growth.
About half of the Qantas Group’s international capacity is focused on Asia, with Qantas and Jetstar flying to key destinations including Bali, Singapore, Tokyo, Osaka, Shanghai, Beijing and Hong Kong.
Jetstar-branded airlines based in Asia now operate almost 60 aircraft. These airlines give the Group a capital-light presence in key markets. Jetstar Japan, which has entered its sixth year of operation with 22 aircraft, has maintained its leadership position in the low cost carrier domestic market of the world’s third largest economy.
Jetstar Asia continues to evolve its network out of Singapore, contributing to the benefits of Qantas’ Singapore hub switch, and Jetstar Pacific’s domestic performance in Vietnam has improved as capacity discipline returned to the broader market.
Investing in Customer, Brand and Digital
The Qantas Group aims to be the first choice for customers in every market we serve. Across our airline brands (Qantas and Jetstar) and the world-leading Qantas Loyalty programs, our investment in customer, product and service has translated into a clear premium over our competitors.
During FY18, we kept investing to maintain this advantage, including:
- Cabin upgrades for QantasLink Turboprops and Jetstar A320s
- New upgraded lounges, including Perth, Melbourne, Brisbane and London. We’ve announced plans to upgrade international lounges in Auckland, Tokyo and Sydney as well as regional lounges in Tamworth and Alice Springs to support demand for premium travel.
- Continued rollout of inflight Wi-Fi on Qantas domestic B737s and A330s, for customers as well as for operational use by crew.
- Launched the digital Qantas Distribution Platform to improve customer experience with trade partners.
- Enhanced Jetstar’s ancillary offering through new products and payment options, dynamic pricing and growth of Club Jetstar.
We have continued to invest in innovation through Qantas Ventures’ AVRO accelerator program (named after our first-ever aircraft type). The second instalment of AVRO launched in July 2018 – a combination of 10 scale-ups and start-ups selected from over 350 applicants.
Diversification and growth at Qantas Loyalty
Qantas Loyalty continues to provide a stable earnings stream while increasing customer retention for the Group overall.
Key to the strength of Loyalty remains demand for Qantas Points. Their ability to shape consumer behaviour (as people pursue earning points) drives value for more than 400 program partners, ranging from supermarkets and restaurants to energy retailers and some 50 airlines.
Our Business Rewards Program enables companies to earn Qantas Points on typical expenses ranging from stationery to accounting services, as well as access flight discounts. It continues to increase the airline’s share of small-to-medium business travel.
More than 35 per cent of Australian consumer credit cards earned Qantas Points in FY18 and growth in these cards outpaced the market.
This strength has extended to Loyalty’s new ventures, like health insurance and financial services, where the ability to earn Qantas Points is a key point of difference to competitors.
Membership of the core Frequent Flyer program grew by four per cent to 12.3 million – the equivalent of approximately half the Australian population.
Qantas Loyalty will continue to innovate and diversify for stable, non-cyclical earnings without exposure to oil prices to target average annual growth of 7–10 per cent through to FY22.
Focus on People, Culture and Leadership
Airlines rely on multiple tasks and supply chains coming together at the right time to deliver a safe, reliable service for customers. Our people are central to making this happen and that’s why we continue to invest heavily in training, engagement and leadership.
The Group undertakes an annual independent survey of employees to measure engagement across the Qantas Group, which was steady at 80 per cent in 2018. Results showed that the vast majority of our people strongly believe in our goals and understand how their team contributes to our success. The results and 11,000 comments provided also help identify areas for improvement.
Some current initiatives to support this are:
- The largest pilot training program in Qantas’ history, as fleet renewal drives career opportunities.
- Creation of a pilot academy spread across two facilities in regional Australia from 2019 to provide a future talent pipeline. The academies will ultimately train up to 500 pilots a year, ensuring a talent pipeline for Qantas Group airlines as well as supporting the industry more broadly.
- Aiming to increase the intake of female pilots to 40 per cent within the next decade - currently, about three percent of commerical pilots globally are women
- Development training for around 1000 people leaders during FY18, subsequently recognised as national best practice.
- A new People Experience Strategy that will make internal processes more user-friendly, create better physical workplace environments and develop new training programs.
- Continued efforts to build a more inclusive and equitable workplace, including tackling the gender pay gap, support for victims of domestic violence, employee advocacy groups or employee networks and advocating for diversity.
Continuous commitment to Safety, Environment and Community
We continue to strengthen our high operational standards, commitment to transparency and social licence to operate. In FY18 the Qantas Group made significant gains in our ongoing commitment to safety, environment and community.
Our number one priority, including:
- Continued focus on highest levels of operational safety standards.
- Improvement in Total Recordable Injury Frequency Rate and Lost Work Case Frequency Rate.
- Supporting government and industry in the region with the co-design and implementation of the Australian “Trusted Trader” program.
- Trialling biometric systems to improve security outcomes for customers and employees.
See more about our safety commitments, targets and key initiatives.
Supporting communities and engaging our people, including:
- Marked the tenth year of our Reconciliation Action Plan with 46 per cent growth in Indigenous supplier spend (compared to FY17) and on boarding of eight new Indigenous suppliers
- More than $7 billion spent on Australian based suppliers, representing 64 per cent of total procurement expenditure and more than 1,100 suppliers in regional areas
- Supporting access and affordability of air travel in regional Australia by launching a discounted resident fare scheme in selected regional cities.
- Commitment to deliver $3 million to support drought relief, partnering with charity Rural Aid.
See more about our community commitments, targets and key initiatives.
Our non-negotiable commitment to environmental sustainability, including:
- 1.3 per cent fuel efficiency improvement (compared to FY17) and on track to meet our commitment to the IATA 2020 industry target.
- Operated the world’s first dedicated Transpacific biofuel flight between Los Angeles and Melbourne.
- Marked the 10th anniversary of carbon offsetting, with a customer offsetting their flight every 53 seconds and more than 25 business partners carbon offsetting through Qantas Future Planet.
- Aligning our climate change-related disclosures with the Taskforce on Climate Related Financial Disclosures (TCFD).
See more about our environment commitments, targets and key initiatives.