Welcome to the Qantas Group First Half 2024 Investor and Analyst Briefing. My name is Filip Kidon , and I'm the Head of Investor Relations for the Qantas Group. I'd like to begin today by acknowledging the traditional owners of the land on which we meet, the Gadigal of the Eora Nation. I would also like to pay my respect to elders past, present, and emerging. I will now hand you over to Vanessa Hudson, our Chief Executive Officer, to take you through our results.
Thanks, Filip, and good morning to everyone in the room. We've got a room full of Qantas team here, and also good morning to those on the line. Thank you for joining us for this Qantas First Half 2024 Investor and Analyst Briefing. I am joined here by Rob Marcolina, our Chief Financial Officer, and I'm also joined here by our group leadership team. We have Olivia Wirth, who is here as the CEO of Qantas Loyalty; Andrew Finch, who is our Legal Counsel. We have Catherine Walsh joining us for the first time. She's been in the seat as our new Chief People Officer for 3 weeks. Welcome, Catherine. Stephanie Tully, who is our CEO of Jetstar. Andrew McGinnes, who is at the Head of our Media and also Government Affairs Team.
We have Andrew Parker, our Chief Sustainability Officer. Cam Wallace, who is the CEO of Qantas International. Markus Svensson, who is the CEO of Qantas Domestic. Catriona Larritt, who is our Chief Customer Officer, and also Andrew Monaghan, who is our Chief Risk Officer. The materials lodged on the ASX earlier today will be taken as read. I will take you through briefly some highlights, and then myself and the team will answer any of your questions. Earlier this morning, I spent time at one of our hangars at the Sydney Jet Base with our employees and the media, unveiling our new Airbus A220 aircraft. As we announced, the A220 will operate its first scheduled service in just over a week. It's one of 29 A220s that we have ordered coming over the future years.
At the same event, we also showcased our Jetstar A321neo, and I spoke to one of our pilots who shared firsthand their experience of the incredible efficiencies that we are seeing. With 11 NEOs now in service, they are proving out our business case, delivering substantial benefits for our customers, reducing our emissions, and improving our financial performance. The investment in these aircraft, along with others like the A350s and the A321XLRs, underpins the future of the Qantas Group, and it's our continuing financial strength which will support these investments. Shortly, we'll walk through the details of our first half result, but I wanted to begin with some important reflections on our renewed focus on our customers and our people. It's fair to say that over the past six months, I've spent more time listening than I have spent time speaking.
We've also been acting with AUD 230 million now allocated to new customer investments over this year. As customers, I hope many of you have started to see how things are changing. We're improving our on-time performance, we've invested in our customer product, we've hired and trained more people in our call centers, and we continue to improve the digital experience for our customers. The early results are extremely encouraging. Our customer satisfaction scores have bounced back strongly since December, and we have more service and product improvements in the pipeline. Now turning to the results. For the first half, the Qantas Group reported a statutory profit before tax of AUD 1.25 billion, a statutory profit after tax of AUD 869 million, and earnings per share of AUD 0.52. Across our integrated portfolio, spend on travel remained strong.
All of our flying businesses performed well with Jetstar Group standing out as an underlying EBIT group grew by 85% to AUD 325 million. Strong performance in Jetstar International, a return to profits in Jetstar Japan, and unwind of disruption costs in Jetstar Domestic all contributed to this result. Our dual brand strategy in the domestic market continues to deliver with the group domestic margin of 16%. Qantas Domestic delivered another strong EBIT performance, with strength in resources and also SME business traffic, offsetting shifts to leisure, to international markets. Qantas Loyalty also had a very strong half, with underlying EBIT of over AUD 500 million for the calendar year, and with points earn and burn up about 14%. Rewarding our customers is key to our customer proposition.
In the half, we announced a number of initiatives around additional redemption seats and Points Plus Pay campaigns, and there is more to come. Work is ongoing to look at delivering a substantial improvement to the value of our members, and we'll have more to say on this in the coming months. While overall portfolio earnings were strong, freight performance was not where we thought it would be. We always expected the record yields seen over the last few years to decline, but this has come off quicker than we expected, driven by faster return of belly space and macroeconomic conditions. But the fundamentals of our freight business remain sound, underpinned by e-commerce growth, investment in new fleet, and long-term contracts with domestic customers. With the group capacity 25% higher in the half, our unit cost reduced.
As our operational performance improved, disruption cost unwound, putting downward pressure on fares. Both domestic and international fares were over 10% lower in real terms compared to peaks seen in the second quarter of last financial year. All of our segments are focused on delivering value to customers, especially Jetstar, which has over 12 million fares under AUD 100 last calendar year. Now I'll hand over to Rob to take you through our financial framework and outlook.
Thanks, Vanessa. Well, our financial framework is core to our financial strengths and has served us well since 2015. Post the recovery, we have reviewed its settings to ensure that they remain fit for purpose. And while the review concluded that they are appropriate, what we have recognized is that during the COVID period, it impacted our invested capital, which is now unusually low. This has the potential to impact our optimal leverage targets. As such, we've decided to act to ensure we are not artificially constraining the business by staying under-leveraged. Until our invested capital normalizes, which we expect to happen beyond FY 2026, we will be targeting at or below the middle of the net debt range. As always, the range itself will be dynamic, and we will move up as invested capital rebuilds.
For this particular period, our net debt ended at AUD 4 billion, which is at the bottom of the target range of AUD 4 billion-AUD 5 billion for FY 2024. Liquidity remains exceptionally strong at over AUD 9 billion with various sources. The increase in net debt in the period included significant one-off impacts, approximately AUD 300 million of treasury shares that vested under our employee reward plan, as well as the buyout of 12 operating leases. Our operating cash flow for the period was AUD 1.3 billion. This included a return to normal seasonality, with cash flow historically weighted to the second half, as well as the continuing rundown of COVID credits, with AUD 184 million used or refunded during the first half. Accordingly, we expect our cash flow in the second half to materially step up.
For shareholders, the Board has approved a further on-market share buyback of up to AUD 400 million, and this is in addition to the AUD 48 million of previously announced buybacks that we are still to complete. The buybacks are anticipated to commence during the second half, once the planned improvements to our frequent flyer program are finalized and announced. So now turning to the outlook. The group is seeing second half travel demand remaining strong across the portfolio, with intake trends also remaining strong. We expect the group RASK to continue to moderate versus the prior period as capacity returns, and for net freight revenue in the second half to be largely in line with the first. We have seen an impact from industry costs and accordingly have increased our target for transformation to about AUD 400 million for the year.
Capital expenditure is expected to be AUD 3 billion-AUD 3.2 billion for this year, and we're also announcing our initial investment plans for FY 2025, with a guidance of AUD 3.7 billion-AUD 3.9 billion for next year. We are also expecting franking credits to become available from FY 2025. Our investor slides include further information on the key financial assumptions, and I'll now pass back to Vanessa.
Thanks, Rob. And just concluding, the past six months have been particularly challenging as we faced into rebuilding trust and restoring confidence in, in Qantas and the organization. T here is also a lot to be really proud of. The way our people have responded and continue to deliver for our customers is second to none. The improving customer sentiment and the conversations that I've had with so many customers who've increasingly shared their great experiences with me, and of course, the ongoing support of you, our shareholders. Across the group, we're relentlessly focused on getting back to our best and then beyond. Thank you, and we will now take your questions. I hope there are some.
Thank you. We have a question from Jakob Cakarnis from Jarden. Please go ahead.
Morning, Vanessa. Morning, Rob. Can I just highlight some of the commentary in the pack about returning to historical earnings, which typically in the pre-COVID period, that would mean the first half is around 60% of the full year PBT? If we think about two of the key swing factors into the second half, it sounds like the yield environment you're anticipating maybe gets a little bit worse, worse, given that there's no change to that capacity guidance. But more importantly, can you just focus on cost? 'Cause it seems as though there's some of those ramp-up costs still that need to come out in greater quantum in the second half, and then it looks as though fuel costs might be trending a little bit lower where you expected. Can you just talk to those items, please?
Yeah, so I'll take that. Y ou're right, we do expect that we are getting back now post-COVID to the seasonality that we saw prior to COVID. W hat you asserted is correct. In terms of costs, I think it's important to recognize that in the first half, we have had a number of costs that have hit the business, and probably most significantly has been some of the industry costs and also some of the CPI costs in the first half. So transformation has lagged in the first half, but we expect that for the full year, the transformation will catch up. Y ou are correct. As we discussed before, there will be continuing RASK decline, as we've said across the group level.
We're very confident that given the cost focus and the transformation program that we have focused, for the second half, that that will be able to recover.
Thank you. Your next question comes from Andre Fromyhr from UBS. Please go ahead.
Thank you. Maybe just following up on, you know, the role of costs on your margin and momentum into the second half. I note on your outlook slide, you say management remains committed to the performance targets. A t least on what we can see today, Qantas Domestic, Qantas International, tracking a bit below those targets as they were sort of reiterated last year. I s there anything, you know, driving the margin into the second half that would give us confidence that those targets are achievable?
I think, a couple of points, and I might then pass to the CEOs to have a chat on what they're seeing in their business. A couple of things that we are, as we said, we're very committed to the margin targets, and they remain a focus for us. We still feel very confident about the domestic market structure. A lso, we're still very confident around the transformation work that we have done during COVID, and the ongoing transformation work that the business is committed to offset cost inflation through our business. Rob will talk about how we're focusing on transformation going forward.
There are a couple of call-outs that I think that are impacting the margin targets this year, and one of those call-outs is we've seen a move and a mix in capacity to our regional flying. T hat's because we haven't seen the business market, particularly on the triangle, same-day business market, come back as fast as that we thought. W e're still very confident that it is still in the recovery phase. T hat, with the addition of the new aircraft that are coming in, makes us feel very confident that the pathway to those margin charges, targets are very believable.
We've provided a case study on Jetstar in terms of what we're seeing, that when you get to scale with the new aircraft, just what benefits that you're seeing from both the cost performance but also the route benefits that come from the additional flying that comes from the capacity and the capability of those aircraft. I might break the question into three at the moment. One, I might get Steph to talk about what she's seeing with the new aircraft, and then Markus, the business market, and then Rob can just conclude with the focus on transformation and offsetting the costs that we are seeing coming through the business.
Thanks, Vanessa, and good morning, everyone. Jetstar's result is a record first half result for the Jetstar Group, so everyone at the Jetstar team is really proud of today's result. I think what we're seeing is seeing international meet the margin target, which is fantastic. Domestic, we're absolutely committed to the 15% target. I think just to remind everyone that that 15% is based on Jetstar being one of the leading low-cost carriers in the world. Ryanair, we understand, is at 15%. Jetstar is second in line in the world, which I think, given our size and the airport structure that we work on in Australia, is a outstanding result for Jetstar. T here's four, I think, things that we're focused on to get to that margin target. First one, you'll see the case study on the NEOs in the pack.
The NEOs are delivering cost benefit domestically, but also contribute to Jetstar's excellent, best-ever international result. CASK benefit, scale benefit, obviously, fuel and sustainability benefit as well. T he NEOs are doing what we plan them to do and more, I would say. Secondly, I think for Jetstar this half compared to the half before, you're seeing incredible improvement in operational performance. I nternational, Jetstar's had a nearly 30% increase in on-time performance. Domestically, 10%, we've halved our cancellations. F or Jetstar, we think, can only get better. It's an incredibly important focus for us, and that's removed a lot of the temporary costs out of the business, and it's better for our customers' reliability as well. I t's good news around.
Jetstar has to deliver what we want to do, which is we delivered, as Vanessa said, 12.2 million fares under AUD 100 last year. We have to stay low cost. T here's an unrelenting focus from the Jetstar team on both cost and revenue transformation, and that's delivering and meeting. As Rob said, you've got cases like in New Zealand, where you've got incredibly high industry costs that we need to cover to stay profitable. T he last thing for Jetstar, you're continuing to see ancillary revenue performing at very elevated levels versus pre-COVID, at 36% for domestic. A ll of those things mean it's great to report for the first time in a while that all the Jetstar segments are profitable, including Jetstar Japan, which took a little bit longer to recover from COVID.
T he Jetstar team absolutely committed to the margin targets. I'll hand over to Markus.
Thanks, Steph, and good morning, everyone. L et me just talk a little bit about the demand and particularly for Qantas Domestic, to give a bit more flavor on and building on Vanessa's point around what we're seeing in corporate demand, SME demand, as well as leisure demand. A couple of things when we look at corporate demand. I f you look at corporate demand overall, it's back pre-COVID levels, but the mix has changed. W hat we've seen is resources continue to grow, and that's both RPT as well as charter. C harter you do not see in our RASK numbers. That is continued to grow. We see that market continued being strong. We are investing in that market. We're bringing more A320s, A319s into the west to deliver to that growth.
When you look at non-resource, it is recovering, it's gradually recovering, but there is some demand still missing, particularly on same-day travel on the triangle. That is demand that used to be 10% of our travel, on the triangle pre-COVID, now it's about 5%. A s that demand gradually coming back, we see corporate demand being well above north of 100% as it was pre-COVID. SME. M aybe one more point, so on corporate as well, we are maintaining our share over 80%, 81%, so we are absolutely keeping our share in the corporate segments. When we look at the SMEs, so small medium enterprise, that market is well above 100 as well pre-COVID. It's coming back very strongly and we're seeing gaining share.
We used to be below 50% in market share pre-COVID, and now we're at 54%. O verall, business travel is strong, the mix has changed. On just on premium leisure, it's come off a little bit, but what we're seeing as well is some of that has actually shifted into national. I f you look at our ASK mix as well, we actually redirected some of that domestic capacity, particularly 33s, to fly international to meet that demand. T hat's where we're at on demand side.
Thanks, Markus. M aybe Rob, just commitment to transformation-
Yeah.
-is a key part of our confidence in margins going forward.
Absolutely. I think , obviously, as Steph just said, you know, transformation is part of our DNA, and so we've done it for a number of years, and we all have a relentless focus around transformation. We outlined in Investor Day last year, the way we think about transformation. T here are three categories we talked about: fleet network, digitization, and then obviously an ongoing focus on efficiency. I think from what we've discussed today, and the case study that we've provided, you know, the new fleet is a huge enabler of transformation, and not only from cost transformation, but we've talked also about the benefits it has to our customers, as well as to our, our people love working in these new aircraft, and obviously, the sustainability benefits that come with them as well.
We have 11 of the NEOs in now, which is fantastic, so we're at scale. We've now got two of the A220s and obviously the XLRs to come for Qantas. W e're really excited about the role that fleet can play. O bviously, from a network perspective, these fleet have more seat count, and they and they can get greater utilization, and they can go for longer ranges. W e're really excited around the role that fleet can play, and it'll be significant. In terms of digitization, there's many examples around the company, whether we're talking about revenue management, preventative maintenance in our engineering facilities is very focused on this, and then efficiencies will come all over the organization.
I think it's really important also just to call out the role of AI, because that's kind of the topic du jour, and we are actively looking at where I can play a role in our business, which will create win-wins. Win-win for our people, and win-win in terms of the transformation as well.
Thanks, Rob. Next question?
Thank you. Your next question comes from Anthony Moulder from Jefferies. Please go ahead.
Hi, Anthony.
Good morning, all. Just on, if I can start with international, point one, do international intakes obviously remaining strong, which I guess justifies the competitors increasing activity that they allocate to the Australian market. Are you expecting that capacity to remain here, or you're expecting it to, over time, move into other regions as the intake profile softens here in Australia?
Thanks, Anthony. I'll get Cam to answer that one.
Thanks for the question. Yeah, we've seen some elevated competitive forces, primarily into L.A. T hat's where United and Delta have deployed some capacity, which is only actually seasonal capacity, and some of it actually has been withdrawn from the market earlier than anticipated. We're really confident about the network structure we have, driven by a couple of things: the aircraft type, which allows us to fly ultra-long haul, but also the diversified nature of where we fly. America is a good example. We now serve places like JFK, Dallas, with American Airlines as a really cohesive partner in that market. W e have a network which is well-designed to deal with competitive forces, but our market structure is solid, and we're very confident about the future in both the Americas, Europe, New Zealand, and our wider Asian ports.
I think I'd just add to that. Thanks, Cam. That's a good summary. The one thing that was a key highlight for the international performance was the demand that we're seeing on Perth-London continues to perform incredibly well. It continues to perform actually as the best across the network, and it's also right on the assumptions that we used from that as an example to support the Project Sunrise case. W e're feeling, as Cam said, that our strategy, our network strategy, which is more flying point-to-point with more premium configured aircraft, is a winning strategy. I think the proof is in how we're seeing that Perth-London service continue, but also Perth-Rome is showing very similar signs, and Perth-Paris is doing incredibly well in the early phases as well. Next question.
Thank you. Your next question comes from Anthony Longo, from JP Morgan. Please go ahead.
Hi, Anthony.
Hi, Vanessa. Hi, team. Just had a quick question on cash conversion. I mean, looking at this year, I mean, looking at kind of the low, right? In the low to mid-60s%, sorry, versus probably 120% in the PCP. I mean, take your comments on the revenue received in an advanced balance and how that's sort of tapering off, you know, returning to normal seasonality as you highlighted earlier. But how should we be thinking about cash conversion going forward in the context of, you know, the cost, the booking windows and all those items?
Rob, I think you can take that.
Yeah. It was a bit hard to understand, but I think you're asking about cash. I n terms of the cash position, in the first half, obviously, we have seen a reduction in our operating cash flow, and I think we've talked about the year seasonality. We've also talked about some of the one-offs with regards to the payment of the employee bonuses, as well as the buying out of the leases. W e've also talked about the COVID credits and the refunds and usage. I n terms of your question, which is the cash going forward, as I said, in the opening remarks, we're really confident about the operating cash flow going into the second half and beyond.
As we think about the seasonality, we also, those one-off costs will be rolling off, and also just the underlying growth of the business. We've talked about the capacity growth that we'll see in international as well as in Jetstar, specifically, going forward. A s we think about the second half, then more importantly, as we think about the operating cash flow going forward, I go back to the new aircraft and just the opportunity that they are going to give us with regards to the impact on not only the cash, but the opportunity from a revenue perspective with a grading, flying quite a lot greater. Y es, we have had a cash hit in the first half. It was expected, and we're absolutely committed and see the pathway going forward for the second half and beyond.
The other couple of points that I'd add to that is that we're not seeing any change to our booking window across both Qantas and Jetstar. T here's no change to, I suppose, that conversion point that you are asking. T hen the second point that I think is really important as we look beyond this year and into the coming years, is that our flexibility and the commitment to managing and striking the right balance through any kind of different cycles that we might face is key to our commitment to the financial framework, and it's key to the managing cash, managing reinvesting in our business, and also obviously the way we think about our surplus and distributions to shareholders.
It is all about making sure that every year that we strike that right balance, and that is absolutely the focus of the leadership team. Next question.
Thank you. Your next question comes from Justin Barratt, from CLSA. Please go ahead.
Hi, Justin.
Hi, Vanessa. Hi, Rob. Thanks very much for your time today. Just noted that you aren't going to recommend the buyback for the next few months, by the sounds, per your lead-in remarks, and that's not until you make the announcement of the planned improvements to the frequent flyer program. I was just wondering, could you provide any snippet as to what those frequent flyer improvements could entail? Sorry. W ith that, should we expect the AUD 400 million buyback to be completed in the second half, or could that sort of leak into FY 2025?
I might pass to Liv on the thought that we've put in, in terms of delivering better value for customers through points, and then Rob will follow up.
Yeah.
With the final point.
Thanks for the question. In relation to the frequent flyer program, obviously, we spent a considerable amount of time talking to our members to understand how they want to use their points, and it'd be no surprise that the overwhelming driver really is redemptions on flights. Classic Rewards continues to be a phenomenal way for our customers to use their points. In fact, in the last 12 months, there's been a 37% increase in the number of points that our members have used on Classic Rewards compared to calendar year 2019. So a significant uplift in the number of points. We've had over 2 million Classic Rewards seats redeemed as well, so significant demand there.
However, equally, one of the pain points is that, our members tell us is that the seats aren't always available when they want to travel, particularly in premium cabins, on premium routes internationally. T hat's the problem that we've been really looking at over the last 12 months of: How do we solve this? How do we ensure that we keep our member engagement high? How do we encourage the strive effect in our program so that we can see more members continue to earn and burn? T his is what we've been trying to solve, and today we've indicated that there will be an announcement a few weeks down the track, which will help to solve this pain point and introduce a new flight rewards product. We're not releasing any more details at this stage.
However, we have said that there is no changes to the Classic Rewards program, that this is in addition to that. So it's a wait and see. We do expect that this will be well met by our members. T his is also very much linked to the business strategy. T his will solve for our member, but importantly, also solve for our business. I t solves for our business because we know that the most engaged members are the ones that redeem, and this drives the ecosystem and the flywheel. We really need to hit ongoing redemption and ongoing earn. We have ambitions to grow this business beyond the AUD 500 million that we reached.
We do have ambitions to five in FY 2030 to reach AUD 800 million-AUD 1 billion, and that is why we're going to make this investment, because it will underpin the growth in this business, it will ensure that we can continue to attract more members, and importantly, it will ensure that those members continue to be engaged. W e think it's a win-win-win. We look forward to releasing this in the weeks to come, and we'll leave it at that.
Thanks, Liv. Fantastic answer. Rob?
Yeah. Y eah, we're very excited about the new product, but we are working through, obviously, the implications more broadly on the financials at the moment, and hence the buyback timing. J ust to the question specifically, we are committed to the AUD 400 million that we've announced today. We are committed to that as a buyback. I think what demonstrates that is the end of last year because of certain reasons, liquidity being one of them, that we weren't able to finish the AUD 500 million. W e still got 48 million to go on that. That is a commitment that we have, is to finish the 48, and the commitment is to finish the AUD 400 as well.
There are a number of variables as to the timing and the duration to finish that, mainly around the liquidity in the market, but that's our expectation.
Next question.
Thank you. Your next question comes from Sam Seow from Citi. Please go ahead.
Hi, Sam. Sam, we can't hear you. If you can hear us? We'll go to the next question to keep it moving, and then come back to Sam.
Thank you. Your next question comes from Owen Birrell, from RBC. Please go ahead.
Hi, Owen.
Hi, guys. Just a quick question. Looking at slide 30, where you've got your new aircraft deliveries, the schedule there, and I notice that there's 6 aircraft that were due in FY 2026 that have been, I believe, delayed from the OEMs. I'm just wondering a couple of things. Firstly, has this or was this expected, and/or has it changed your plans for your network rollout through that time period? J ust also just referring to the FY 2025 CapEx guidance of AUD 3.7 billion-AUD 3.9 billion, I'm just wondering, does that exclude the prepayments for these 6 aircraft, or are you prepaying for these 6 aircraft even though they're not coming on time?
I'll answer the first part of the question, Owen, and then pass to Rob. I think you can fair to say that it wasn't well received by us in terms of the delay in aircraft. We don't want to see delays in aircraft. If we talk specifically, we know that our aircraft manufacturers are still having challenges in terms of supply chain and meeting production rates for their commitments. T he one thing that I can say is that we know that working with Airbus, in particular, that we have received the minimum level of delays versus other airlines. I think that we can say that that is a key part of the strategic relationship that we benefit from. A s we manage those delays, obviously, it results in us keeping aircraft for longer.
The 717s, we've, we've kept for longer. T his is also about just managing flexibly, and it comes back to the power of, of the network and the fleet that we have, particularly the fleet, that we are able to absorb these changes over time. Airbus have heard very clearly from us that we want to avoid any further changes of delivery schedule, because clearly we are managing to a very large renewal program in terms of bringing resources on, in terms of training resources, and also in terms of where we're gonna deploy those aircraft. W e want them to schedule, but clearly we are working with Airbus to make sure that that is minimized.
Yeah, and on your question, I mean, the prepayments are lined up with the arrival of the aircraft, so they are flexible in terms of when they're due. A s you can see from that slide that you referenced, just as some aircraft are moving out, some aircraft are moving in, and the flexibility we have with Airbus, as Vanessa just referenced, is great. W e do have an ability to move aircraft around to make sure that we're able to serve the network that we need to fly.
Next question.
Thank you. Your next question comes from Sam Seow from Citi. Please go ahead.
Hi, Sam.
Oh, hey, guys. Yeah.
I can hear you now.
Thank you for taking my question. Look, hey, just, just appreciate your comments regarding the margin targets before, and I just want to clarify, you are reconfirming your domestic and international margin targets? I n terms of timing, is FY 2024 still in play, or are you pushing that into FY 2025?
We are confirming that we are committed to the margin targets and the presentation in terms of long-term margin targets, but I think the presentation highlights, particularly for international, with the faster deterioration in freight revenue, that is gonna impact the margin target for international this year.
Okay. I guess previously, you've also talked to 4.5 billion structurally high EBITDA. Is that still valid? I guess within that, I guess following on from Owen, the CapEx profile, just want to confirm that's 100% supply issues, and we shouldn't imply any view of future EBITDA from that. I guess, you know, you've got CapEx at 3.9 or high 3s in FY 2025 and tax coming back, et cetera. J ust wanna confirm that that's all supply issues and not a view on EBITDA and out years?
Yeah, well, maybe just let me address the EBITDA point, 'cause I think that's an important one. The source of EBITDA growth that we've talked about before is still, still valid. W e talked about the domestic and international EBIT increase from the new aircraft, and I think it's demonstrated by the NEO case example we put in there, so that source still remains. Obviously, the timing of that will be dependent on when the new aircraft arrive. The second source was with regards to domestic freight, and I think the arrival of the freighters into the domestic freight business will unlock for the freight business the incremental AUD 100 million that we talked about. I t's the second one. Excuse me.
The third one is loyalty, and I think Liv just gave a, a sort of a summary of where the loyalty business is at. There's great momentum in the business, and I think the, the announcement of the new product will continue to put us on a, a pathway towards that 2030 target. T hat is the third one. T hen the fourth one, of course, is Sunrise. And we're really excited about Sunrise. W e have talked before about the AUD 400 million of incremental earnings and AUD 400 million of incremental working capital, and that remains the case. I t will be dependent on the timing when those aircraft arrive, but they're very committed to the EBITDA bridge that we've given previously.
Next question.
Thank you. Your next question comes from Matt Ryan, from Barrenjoey. Please go ahead.
Hey, Matt.
Oh, hi, Vanessa. I had a question on the direct spend that you made or you're making on the customers. I t's back in September, I think, that you talked about the AUD 230, and it doesn't sound like that's changed. I guess two-part question. Number one, how do you feel about that number? How do you feel like the spend or how effective do you think the spend been so far? T hen just any thoughts on how permanent you think that spend might be moving forward?
Yeah, great question, and I'll call Catriona up in a minute to give you more flavor in terms of where we're spending that investment and how we're seeing that improve. Y ou can actually see from the investor presentation that we are getting good response to the investments that we're making in terms of on-time performance, but that is also in addition to the incredible experience that is being delivered by our people and our customer satisfaction, and our NPS is responding directly. If I give you a bit of a breakdown in terms of where we're spending the AUD 230 million, it actually breaks down into a number of categories. First of all, we are spending AUD 50 million on improving food and beverage across Qantas Domestic and also international.
That is actually progressively being rolled out, but we are hearing really good things about that. The other component of that AUD 50 million is that we are investing in digital experiences across both Qantas and Jetstar. We think this is not just unlocking a better customer experience, but it's also going to unlock transformation and efficiency benefits going forward. A nother AUD 50 million is on loyalty. We know that, as Liv said, that in advance of us bringing the new product and initiatives to market, that we've been investing in increasing our customers' access to redemptions, both in terms of Points Plus pay discounts, but more access, particularly for Qantas International. That's an investment. Clearly, that is a key part of the 230.
Then the further amount around the AUD 80 million incremental spend that we announced last half has a couple of points. One is that a focus on investing in our call centers. We've got more resources in our call centers. We've invested in operational resilience. We've had more engineers. We've allocated more spares. W e are also investing more in recovery. W hen things don't go to plan, we want our customers to see and to trust Qantas that we recover better when things don't go to plan. We already provide customers a lot of recovery in those moments, but we've improved that, particularly higher ex gratia payments, when customers face really significant disruptions.
We have actually flagged last time that, of the 230, that there was some non-recurring costs as a part of this full year, but we are now saying that we believe that the 230, including the investment that's coming in Qantas Frequent Flyer, will be ongoing, within that envelope, ongoing, across, the future years. I might pass to Catriona to just give a sense of what are we hearing from customers, and what are we seeing in terms of feedback for that investment.
Thanks, Vanessa, and hi, everyone. We are actually all the investments we make are underpinned either through experience, through recovery, or loyalty, and each one of them is really informed by the voice of the people, voice of our people, and voice of customers. We're actually doing a lot of work to understand both customer pain points, what we're seeing through focus groups, through some of the NPS metrics and the direct voice of the customer, but also from our teams, because our teams on board, in the aircraft, and also in the airport, hear from customers every day about what's working and what's not.
If we think about just a couple of the categories Vanessa mentioned, food and beverage and digital. We have a new international menu, which we'll release on the first of March, which really takes into account a lot of the feedback we've received over the last couple of months, and that'll be across all routes and all cabins and really reflects both different recipes, but also different quantities, really trying to get to what people want to see on board. Then in digital, we obviously released a new app in November. We've released bag tracking, and now as we look forward to 2024, we'll continue to build out those features so that we really give customers the right experience that they want to interact with over the course of their traveling experience. Then the other one is just bag tracking.
Obviously, it's been a lot in the news lately, and we've got a whole range of different things that we'll do for when people travel and how they need to sort of see their bag as well. T here's a lot of exciting things to come, but each one of it is underpinned by what we're hearing from our teams and what we're hearing from our customers.
Thanks, Catriona. Next question.
Thank you. Your next question comes from Nathan Gee from Bank of America. Please go ahead.
Hey, morning, team. T hanks for the call. Maybe just a question on freight. L ook, I think your revenue guidance is to second half, freight revenue flat on first half. I s the guide that cargo yields have bottomed? Now, the reason I'm asking, I think your cargo yields are still more than 50% above, pre-COVID, and Asian peers are more about 30% above. So just help me understand that and the yield guide going forward. Thank you.
Sure. I'll get Cam to answer that.
Yeah, thanks for the question, and if you look at our freight business, there's two material pieces to it. The first is the domestic business. The domestic, the business is structurally very, very strong, underpinned by three long-term strategic partnerships and with a very, very sound market position, and that actually has performed very well and to expectations. The parts of the business which have moderated quicker than we had previously expected or forecast are the belly space component of freight, the international freighters, but also our international freight business. B elly space and the freighters have moderated quicker. It still remains over 150% of pre-COVID, and we see early signs of it settling at that rate.
We've got a lot of efficiency gains, too, as we bring in the A321 and the A330 fleet into the freight business. W e're pretty confident about the pathway forward for freight, both in terms of our cost dividend we can bring to the business, but also our market position.
Thanks, Cam. Next question.
Thank you. Your next question comes from Cameron McDonald from Evans and Partners. Please go ahead.
Hi, Cam.
Good morning. Just wanted to circle back on sort of the buyback, the capital structure, and then the comments made earlier around, you know, the generation of franking credits. H ow do we think about this in the context of returns to shareholders, noting that you're sort of guiding that the capital structure framework will top you out, you know, for the foreseeable future in the midpoint, which, with the additional buyback, sort of gets you there? T hen you've got tax payments that you're gonna have to start thinking about, and then the dividend payout. Y ou know, through that transition, how do we think about the mix between buyback and dividend, please?
Yeah, so that's, there's a lot of things in that question. I won't repeat what I said earlier in terms of the financial framework and the IC being artificially low, and so we don't want to constrain, artificially constrain the business, which is why we're moving to at or below the middle of the range. In terms of franking credits, we know how valuable they are to Australian shareholders. We will be in a tax-paying position in the fourth quarter, and so we will then start to get franking credits and be in a position in FY 2025 to be able to have access to franking credits.
In terms of the way the size of the distribution and in terms of the mix of the distribution, that will be a decision for the Board at that point in time. A ll I can say today is that, it's more value with our franking credits in your hands than it is in ours. The one thing I'd just reemphasize, you mentioned CapEx, and you mentioned distribution to shareholders. I think it's really, really important, just to go back to the operating cash flow point, that we are extremely confident in the cash generation of this business.
T hat's why we see the financial framework being able to do both, which is both invest in the business, given the operating cash levels that will be coming in, invest in the business through new aircraft, as well as being able to distribute to shareholders.
Thanks, Rob. Great answer. Next question.
Thank you. Your next question comes from Scott Ryall, from Rimor Equity Research. Please go ahead.
Hi, Scott.
Thank you very much. I have a question on slide eight, and just on the domestic on-time performance, please, which obviously is, you're showing a fair tick-up just in the last couple of months. Earlier this year, the AFR carried an article suggesting that you'd used both BCG and McKinsey on this issue, particularly, and that McKinsey was doing some work around implementation. I guess my question is, I get why Boards use consultants, you know, tick a box and all that sort of stuff, but when it comes to operational issues, I would have thought you would have the in-house capability to improve on your on-time performance. I guess I'm just wondering, firstly, you know, what's the value that they add to what you pay them?
Secondly, you know, how confident are you that you've done everything to keep On-Time Performance at this current, you know, January, well, I guess February levels in particular, given that's quite a differentiator in the Australian market at the moment?
While Markus is coming up to give more flavor, I will make a few comments. I think firstly, we are absolutely confident that we have some of the best operational minds in aviation, and we have spent and worked incredibly hard to get our operational performance across both Jetstar and also Qantas up materially. We can see the value that then translates to our customers when we are on time. The one thing, though, in addition to that, that we know that when we are on time and we are on schedule, that is the best cost outcome for us, and the efficiencies that we derive from that are absolutely material, and it is something that is a key part of what we're gonna focus on going forward.
The reason why, we sometimes look external, to get, other minds and other insights from consultants, and McKinsey particularly, have worked with other airlines that are doing some pretty amazing things with technology and AI, and the use of data and predictive analytics, to actually help us get to what is the most optimal, schedule and operational performance that we can. A s shareholders, I would hope that you would also value that we look outside, our own, organization to get the very best global, examples of who is leading in this space. T hat is what we've done. We're always gonna be an organization that does, doesn't think from, one perspective, which is an internal perspective, and always challenge ourselves to be the very best, across the globe on these matters.
'Cause it does matter, and it matters to not just our customers, it matters to our people, and it also matters, very much to our bottom line. Markus, maybe a bit more flavor.
Yeah, no, thanks, Vanessa. I think it's a very good answer and very comprehensive. I just stress the point, first of all, just around OTP. Obviously, we'd love to be 100% OTP and zero cancellations. That is the best way to run an operations. Obviously, you have weather, you have Air services. A bsolutely where we were is not good enough, and we want to become better. Yes, we are improving. We're absolutely seeing great green shoots of the things we are doing around first wave, around aircraft availability, making sure we have enough spares, and you have spares at the right time, at the right place during the day. A massive piece of program. And we have a very, very competent team here at Qantas.
Bringing someone in outside is not about saying the team is not good enough, that's the opposite. A s Vanessa mentioned, it's really, really important to, to not be insular and just look at Australia. You've got to look outside. What are other carriers doing globally that gets them to improve their performance, and what can we learn from that? I think that is just good business, to bring that capability in to help you. End of the day, we got to deliver it, but looking outside, it is never hurts. T hat's really, I think definitely we'll get the good return for it.
Thanks, Markus. Any more questions? One more question.
Thank you. Your final question comes from Niraj Shah from Goldman Sachs.
Hi, Niraj.
Please go ahead.
Hi Vanessa and Rob. Just a quick one from me, following up on, following on, on slide 8. Can you just remind us for both the domestic OTP and, and the NPS scores, actually, what did they. What were they? What levels were they at pre, pre-COVID?
A couple of things. One is, pre-COVID, OTP, the best OTP period that we had, I think was around 2018, at around 80% for Qantas and Similar for Jetstar. W hen we saw that, we, we had higher, NPS than, than what we, what we are achieving in those slides. W e're still not back to our best, but our focus is to, lift our on-time performance, reduce our cancellations. We know that's what drives best outcomes for customers. W e're not gonna stop, from driving, not just back to our best, but better than that. T hat is everything that is occurring across the operational teams, customer teams, to achieve that. I don't think there's any more questions online, so thank you for everyone online.
We do really appreciate it. We look forward to having more conversations with you over the coming week. The one thing before I sign off, I wanted to pay my thanks to Olivia and Andrew, who this will be their last results for Qantas. I just wanted to say thank you to both of you for an incredible contribution over many, many years, and we wish you the best in your next step. T hank you very much. A I know all investors would say the same. T hank you, everyone, and that's the end of the call.