Welcome to the 2024 Qantas Full Year Results Investor and Analyst Briefing. My name is Filip Kidon, and I am 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 today, the Gadigal of the Eora Nation, and pay my respects to elders, past and present. I'll now hand over to Vanessa Hudson, our CEO, to take you through the results. Thank you.
Thanks, Phil, and good morning, everyone. Good morning to those online and also those that are here in the room. Thank you for joining us for what is the full year twenty twenty-four Investor and Analyst Briefing. I'm joined here by Rob Marcolina, who is the Chief Financial Officer, who will assist me in talking you through the results. But also we have in the room the Qantas Group leadership team. So let me just introduce who we have here. We have Stephanie Tully, who is the CEO of Jetstar. We have Markus Svensson, who is the CEO of Qantas Domestic. Cam Wallace, the CEO of Qantas International. Rachel Yangoyan, the CEO of QantasLink. Andrew Glance, the CEO of Qantas Loyalty. Danielle Keighery, who is our new Chief Corporate Affairs Officer. This is her first result, so far, so good, Danielle. Catriona Larritt, our Chief Customer Officer.
Catherine Walsh, our new Chief People Officer. Andrew Monaghan, who is our Chief Risk Officer. We are also joined by Andrew Finch, our General Counsel, and Andrew Parker, our Chief Sustainability Officers. And as you would know, that Andrew and or both Andrews are leaving the group, but I'd like to take this opportunity to just my sincere thanks for what has been over a decade of work, for the group across your areas and, we will miss you, so thank you. We have evolved the format today, so format from where we were last time, and whilst you will have seen, that we have lodged quite an extensive, pack today, we are gonna take that as read.
But we are going to also, though, change the format and step you through some specific slides in that pack before we open up to questions. So slide master, if you can change, that would be great. Earlier today, we announced an underlying profit of AUD 2.08 billion for the financial year 2 This was an underlying EPS of AUD 0.88 per share. And this is a strong result, and I think what it does recognize is the value of our dual airline brands, but also the role that Qantas Loyalty plays as a part of that integrated group. It is testament to the value creation from this group, but as we have communicated many times, our focus this year has been about getting the balance right across all of our stakeholders, customers, our people, and also, of course, most importantly, our shareholders.
While there is still work to do, we have made significant progress in what is been a short period of time. We have invested in customer, AUD 230 million of additional investment this year, and the specific initiatives that we focused on included on-time performance, reliability, delivering a more seamless experience, the in-flight experience, but most importantly, a new reward product called Classic Plus, which launched in April this year. You will be able to see that this investment have paid dividends in terms of improved on-time performance, but also improved satisfaction with customers and reputation. We've seen that across the board, seen that for Jetstar and also Qantas, both domestic and international. We have seen investment step up this year, as we foreshadowed of AUD 3.1 billion in CapEx across the fleet and other projects.
We've seen sixteen aircraft join the fleet this year, with eight new deliveries across Jetstar and Qantas. We are excited by the benefits that we've seen, and Rob will take you through what we are seeing across Jetstar in particular, but also what we are seeing with Qantas. The growth of the new fleet and the restoration of the existing fleet saw group ASK increases of around 20%. While the continued restoration of capacity resulted in some decline in unit revenue, this was expected and was offset by the unwind of the temporary costs that occurred in full year 2023. We saw positive momentum in the second half, which has continued and is continuing momentum into this financial year, 2025.
Our forward bookings and travel demand remain stable, and intention to travel and the revenue intakes that we are seeing are positive across all of our flying brands. Before we get into the performance of the segments, I just wanted to acknowledge some of the challenges that we have had this year, and thank you all for your support. Restoring trust and pride in Qantas as the national carrier is our priority, and while there is more work to do, we'll get there by delivering for our customers, our people, and consistently doing that into the future. If we get that right, we'll be able to continue to deliver sustainable earnings growth for you, our shareholders. So if we turn now to the group financial metrics. Underlying profit before tax was AUD 2.08 billion.
This was down AUD 387 million, predominantly driven by a number of things: the increased customer investment that I mentioned before, the impact of declining freight yields that we saw in the first half, and also the moderating fare environment that we've seen across domestic and international. Statutory profit after tax was AUD 1.25 billion. This was down AUD 493 million on the prior year. This was driven by one-off impacts from our ACCC settlement as well as legal provisions for our ground handling case, for which penalties and compensation is yet to be determined. The group's operating margin was 10.4%, and this continues to represent one of the strongest margins globally across the airline industry. Guided by our financial framework, the group's balance sheet remains exceptionally strong.
Net debt ended the year at AUD 4.1 billion, at the bottom of the group's target net debt range. Operating cash flow was also strong at AUD 3.4 billion, supported by a rebound in the second half, as we expected. The group continued its focus on balancing investment with shareholders' return, with a net capital expenditure of AUD 3.1 billion and completed buybacks of AUD 869 million. The continued restoration of group and market capacity resulted in ongoing unit revenue moderation, with a fall of 8.9% for the year. Costs also fell 5.8%, supported by the unwind of temporary costs and scale benefits from returning fleet, offset by customer investments and the impact of freight performance that was predominantly in the first half.
Group RASK grew 10% and were 93% of pre-COVID levels for the year. And now let's look at the segment results. Firstly, Qantas Domestic. Qantas Domestic recorded an underlying EBIT of over AUD 1 billion, AUD 1.06 billion for the year, a fall of 16% on the prior period. The decline in EBIT was predominantly in the first half, with strong momentum in the second half as RASK grew 5% for that half. Total demand remained steady despite the challenging economic conditions. Premium leisure demand moderated, but this was as expected, but pleasingly, it was offset by ongoing growth in corporate and SME travel. Qantas Domestic maintained its share of the corporate market but grew its share of the domestic SME market. The resource market continued to perform very strongly, with charter revenue up 18%.
This was supported by ongoing fleet growth, with the delivery of three mid-life A319s to customers in Western Australia and Queensland. Unit costs increased 4% in the year impacted by the customer investments, entry into service costs associated with the new fleet that is coming, and temporary inefficiencies from delayed exit of the 717 fleet. This saw a reduction in operating margin to 15%. One of the key highlights this year was the improvement in operational performance that saw very strong increases in on-time performance, and NPS jumped 24 points during the year. New initiatives in the year included group boarding and baggage tracking. Excitingly, fleet renewal has commenced with the first of our A220s now delivered and in operation, and our first A321XLR, which is expected in April next year.
We also announced exciting plans to renew our turboprop fleet to simplify this type and to grow the Q400 to a fleet of 45 aircraft. Qantas International, which includes Freight, recorded underlying EBIT of AUD 556 million. While this was a reduction of the prior period, this was still a strong performance for the segment. The fall in the full-year earnings was driven predominantly by three factors: Freight yields declined in the first half, predominantly continued restoration of international market capacity, resulting in RASK moderation, and also the investment that we've made in the customer. Starting with Freight, we've previously outlined our performance in the first half was disappointing, as yields moderated faster than what we had expected, but they have stabilized now in the second half.
This was supported by really strong e-commerce trends in Asia, and we anticipate freight revenue to grow into the first half of FY 2025. Capacity for Qantas International grew 30% with ASKs for the year at approximately now 85% of pre-COVID levels. Growth in ASK continued to contribute from new 787s, the commencement of the Finnair wet lease, and the ongoing return to service of the A380. As capacity returned, RASK moderated 11% in the year and 9% in the second half. This was in line with expectation. Partially offsetting this decline was a 5% improvement in unit cost. The weaker yield environment has also seen forward competitor capacity removed from the market, with RASKs expected to grow from quarter four this financial year as we see that capacity moderate.
Also pleasingly, we continue to see strong performance across all our ultra-long-haul routes. Routes like Perth, London, continue to demonstrate strong revenue premiums being sustained and RASK increasing 5% versus the prior year, despite what has been the overall reduction in RASK across the rest of the market. These proof points give us the continued confidence as we start to approach the delivery of Project Sunrise. You will see in our investor material today that we have reiterated the earnings growth expectation for Project Sunrise of over AUD 400 million of incremental EBIT when we get all of the aircraft into the network. The Jetstar Group. This was a record result for Jetstar, with underlying EBIT of AUD 497 million for the year. This was up 23%, almost AUD 100 million versus the prior year, with demand for low-fare travel remaining really strong.
New fleet played an important role in delivering this result for Jetstar. With 13 new A321LRs delivered, they now represent 25% of Jetstar domestic capacity. On a replacement basis, these tails are delivering AUD 7 million in incremental EBIT per hull. The new fleet also unlocked profitable growth, with the group capacity increasing 27%. This includes new routes like Sydney to Busselton, Melbourne to Fiji, as well as redeployment of 787 flying onto longer routes in Asia. While Jetstar RASK moderated versus 2023, unit cost also improved, allowing operating margin at Jetstar domestic and also international to maintain at 11%. These margins remain industry-leading when compared to other global low-cost carrier peers. Improved operational performance was a feature for Jetstar as well, and we saw on-time performance increase substantially, as was NPS followed as a result.
Commensurately, we saw this NPS improve 16 points for Jetstar and 23 points for Jetstar international. Underlying profitability in the Asian business improved year-on-year, despite almost AUD 20 million of negative foreign exchange impact from the depreciation of the yen impacting Jetstar Japan leases. New deliveries are expected to underpin strong growth in ASK in the next financial year, with a stronger RASK environment likely to emerge in the second half, underpinned by a lower capacity growth. Looking forward, Jetstar continues to have a relentless focus on its key priority areas of transformation, fleet renewal, and ancillary revenue transformation. Loyalty. Qantas Loyalty delivered an underlying EBIT of AUD 511 million, in line with guidance, and includes this year's financial impact from the launch of Classic Plus. Total points earned in FY 2024 were 202 billion, and 171 billion redeemed.
This is both growing at double-digit rates on the prior year. At its core, loyalty is about our members, and this year we saw strong growth in both members growing by 8%, but more importantly, the active level of members grew by 19%. This was led by initiatives like the relaunch of Qantas mobile app, but of course, Classic Plus. While still early days, customer feedback has been very positive and has been very pleasing to see engagement starting to improve. With one in five Classic Plus redeemers having not redeemed an airline product in the last five years, it gives us a lot of confidence that this product is going to accelerate our flywheel.
Earnings performance continues to be driven by the strength in our financial services portfolio, with new card acquisitions up 25% and Qantas Points earning credit cards still maintaining over 35% of market share. The strength in our loyalty program continues to be replicated in the amazing growth of our Qantas Business Rewards program. With membership now above 500,000, it is a key part of our group offering in the SME segment, and we have further development plans for this year. Performances in our insurance businesses was also strong, seeing a 32% growth versus last year. And during the year, the group acquired its remaining stake in TripADeal, accelerating its expansion in the holiday packages market, with the group on track to realize synergies from this acquisition. This supported hotels, holidays, and tours TTV to reach AUD 867 million in the year.
Looking forward, we are very confident in our plans for loyalty and remain focused on the business achieving its target of AUD 800 million-AUD 1 billion of underlying EBIT by 2030. So I'm going to now hand to Rob to take the next lead.
Yes. So thanks, Vanessa, and good morning, everyone. I think it's still morning. So if we go to the next slide. So our financial framework continues to guide our decision-making and capital allocation principles. As Vanessa said earlier, our balance sheet remains exceptionally strong, and this is shown in our financial framework slides in our investor presentation. We continue to maintain AUD 10 billion of liquidity, minimal refinancing risks, and good access to debt funding. Under our financial framework, we maintain significant balance sheet capacity and also flexibility to support investment in fleet and return to shareholders whilst maintaining a strong investment-grade credit. We understand that investing in our people and our customers helps to drive return on investment that's greater than WACC through the cycle. And we're always looking to strike the right balance between investing in our business and also distributing to shareholders.
Every dollar we invest in the business is guided by a strong discipline on returns, and we will always look to optimize capital in the business and dispose of non-performing or non-strategic assets to allocate to stronger earning outcomes. Our FY 2025 net CapEx guidance remains unchanged at AUD 3.7 billion-AUD 3.9 billion. These investments generate ROIC greater than WACC, and as we will shortly outline, as Vanessa's indicated, the new fleet have already begun to drive significant benefits and opportunities. Today, we're also announcing a further AUD 400 million on-market share buyback, in addition to completing the remaining AUD 31 million for FY 2024. With tax payments having commenced, we anticipate having a franking credit balance sufficient to reinstate a fully franked base dividend in the second half, subject to board approval.
Going forward, our CapEx and distributions will continue to be guided by the financial framework. So I'd like to now turn to fleet, which is really a hero of today's presentation. As we've previously outlined, we are entering a significant and exciting period of fleet renewal for the group, and we're on track to receive over 40 new aircraft in the next two years. And again, that's one every three weeks. This new fleet technology improves cash generation, profitability, and also the experience for our customers and our employees. At our half-year results, we showcased the new A321LR at Jetstar, and in today's full-year presentation, as Vanessa has mentioned, we affirmed AUD 7 million in EBIT benefit per hull on a replacement basis, as well as unlocking significant profitable growth opportunities.
We're also already seeing the proof points from the beginning of our fleet replacement. Now, slide 23 and 24 in our supplementary presentations, which I won't go through now, but it does outline the categories that will drive this EBIT uplift and how they will accrue over time. To summarize those slides, on the cost side, these include fuel efficiency, reduced maintenance and scale cost benefits, offset by the increased depreciation from the new capital cost of the fleet. On the revenue side, benefits are driven by growth opportunities, including from seat count and better utilization and yield premium, including the premium seat mix and point-to-point offerings. Of course, we've talked a lot about sustainability, the benefits of lower emissions, which are important contributions to us achieving our sustainability targets. We're also seeing NPS uplift from the cabin design, better reliability, and IFE improvements.
Importantly, all new fleet types have some element of upfront entry into service costs that are required to bring the new fleet into the organization. This is part of the capital costs of any business case, but generally these accrue as operating expenses. These include dedicated project teams, spares, and importantly, pilot training ahead of delivery. The amounts will vary by fleet and will be higher in new fleet types or OEMs that are being introduced for the first time. For example, as Qantas Domestic moves from the 737 fleet to the Airbus XLRs over time. Turning back to this particular slide, because we've tried to bring this all together for you in one place.
This slide outlines what profit drivers are relevant to each of the new fleet types, the relative level of entry into service, and the absolute cost benefit that we're seeing on a replacement basis. We will continue to report this in the future as we introduce and scale each of our new fleet types. I think the statistic that should excite you the most, both for investors but also for customers, is by FY 2027, we expect about 50% of our narrow-body flying will be on new fleet technology, and this will drive significant benefits for our customers, for our people, for our shareholders, as well as for the environment. I'd like to return to travel intentions, as Vanessa mentioned earlier. This is important as before we get to the outlook.
We know it's a key area of focus, particularly with what's been happening in the broader economy. Pleasingly, on the left-hand side, you'll notice that the latest data shows continued strong intent to travel for both domestic and international travel across the Australian population. Our Qantas frequent flyers continue to prioritize both domestic and international travel in an environment where we know cost of living pressures persist, demonstrating the value of our loyalty business to our integrated portfolio. And this is further supported by the leisure travel intent, which remains stable, including in the price-conscious end of the market. And on the right-hand side, you've seen this play out in our latest intakes. We've seen a good start to the year, with six-week intakes compared to last year, up 4% for Group Domestic and 13% for Group International.
Our dual brand strategy remains well-placed to capture both premium and low-fare demand in the market. Additionally, as we have said when discussing Qantas Domestic, we're seeing a shift in customer mix with business purpose travel, particularly in corporate, offsetting the softening in premium leisure, and low-fare travel continues to support Jetstar's growth as the Australian domestic LCC market only returned to 92% of pre-COVID levels in FY 2024. I'd like to now go to the outlook statement, so firstly, starting on the left-hand side with the business outlook, so the group continues to see stable demand across the portfolio, with positive revenue momentum heading into the first half of 2025. Group Domestic RASK is expected to increase 2%-4% in the first half versus the corresponding period in FY 2024.
Group International RASK is expected to fall between 7%-10% in the first half of 2025 versus the first half of 2024, as market capacity continues to be restored. And the rate of decline in Qantas International RASK is expected to slow in FY 2025, with RASK expected to turn positive in Q4 versus Q4 in 2024, and total international market capacity into Australia is expected to be restored to about 100% of pre-COVID levels in FY 2025. On Freight, we see net freight revenue in the first half is expected to be AUD 20 million-AUD 40 million higher than the first half of 2024. And on Qantas Loyalty, underlying EBIT is expected to deliver at least 10% underlying growth in FY 2025 versus FY 2024, and this is consistent with the guidance we provided at the Classic Plus introduction.
This will include previously disclosed impacts from the fair value increase from the launch of Classic Plus and the upturn in the flywheel benefits, which are expected in the second half of 2025. It's also important to note that business performance is expected to be in line with historical seasonality, and that's both across profitability and also cash flow. If I move to the right-hand side, the financial outlook. In terms of fuel, the fuel cost for the first half of FY 2025 is at AUD 2.7 billion, and that's inclusive of hedging as well as gross carbon costs of AUD 35 million. And this is based on prices taken at the August 1st, with the assumed market price and consumption included, in the outlook slide.
FY 2025 depreciation and amortization is expected to be AUD 2 billion, and FY 2025 net financing costs at AUD 0.27 billion. On transformation, the group will continue to target transformation in FY 2025 of AUD 400 million to offset CPI, and as always, this will include a mix of both revenue and cost initiatives. EIS costs, which we've talked about today, will grow by AUD 30 million in FY 2025, in line with the acceleration of our new fleet deliveries, particularly the XLR, as I flagged earlier, coming into Qantas Domestic. The gross impact of Same Job Same Pay announcement that we made today is expected to be AUD 60 million in FY 2025, and the group will be looking to offset this with costs through revenue and cost initiatives.
And finally, management remain committed to the airline margins and loyalty EBIT target that we outlined in Investor Day in 2023. Additionally, on the following slide, we have outlined the group's capacity and our expected loyalty points, earn and burn projections that are part of the investor presentation. So with that, I'll hand back to Vanessa.
Thanks, Rob. We wanted to close the presentation where we started. Today's result reflects the value that our integrated portfolio of businesses delivers to our customers, our people, and to you, our shareholders. We see it as our competitive advantage that allows our stakeholders to benefit. This includes our dual brand strategy in both our domestic and international markets, which enables us to serve customers at both ends of the market with flexibility to deal with various market conditions, as we've seen this year. We have one of the world's leading airline loyalty programs, but its secret is its coupling with the strength of our domestic and international airline offerings. It provides unique customer propositions, supports our revenue premium, and drives our member engagement. Finally, in the scale and the diversity of the group, we bring improved cash generation and reduced earnings volatility.
Coupled with our financial framework, this ensures we have the capacity, resilience, and flexibility to deliver consistently across all stakeholders. Thank you for that, and I'm very happy to open up to questions. We have our group leadership team here today that will help, and first question?
Thank you. Your first question comes from Jakob Cakarnis with Jarden Australia.
Hi, Jakob.
Please go ahead.
Hi, Vanessa. Hi, Rob. I'd just like to direct one to Cam and Stephanie, if I could, please. Can you just get both the business leaders to talk about why there's confidence about that improving second half RASK outlook? It sounds like you've partly answered this, that there's a moderation of what you're seeing in terms of competitive capacity coming online. But can you talk to some of the other dynamics that we need to consider as well, please?
Yeah, of course. So, Cam, stepping up first and then, Steph.
Thanks for the question. Take a step back and look at the macro capacity conditions. They've been quite fluid into Australia, and if I look at even the last few weeks, we had previously expected total market capacity into Australia to be around 105%. Our expectation now, in the last 48 hours, that'll be between 99% and 100%. So if I look at some examples, we've got Air Canada pulling out of Melbourne-Vancouver. We've got Etihad not flying from Brisbane to Abu Dhabi. Turkish Airlines haven't loaded their capacity from Sydney to Istanbul. Virgin have pulled out of Cairns-Haneda, and United Airlines have pulled out of Brisbane-L.A.
So we are seeing a moderation of capacity, and we've also been seeing more seasonality, so that gives us the confidence. Also, when we're stimulating the market through tactical activity, even seven, nine, 12 months out, we're seeing a great response. So our bookings into Q4 give us confidence. The other thing I'd talk to is our premium strategy. Our premium cabins, premium economy, business, and first, have been more robust than our economy cabins. They're building better, and our load factors are building better in those cabins as well. The other thing I'd say is our ultra-long haul, nonstop services. If you look at the portfolio that we've got, they continue to perform well.
Mm-hmm.
So Perth, London, seasonal services to Rome, JFK.
... Dallas, those markets are performing in the top quartile of our city peers. So all of those things combined, but probably the biggest single determiner for us is the moderating, international market capacity. I'll hand over to Steph.
Hey, Jakob. Cam answered that quite extensively, but I'll just add a couple of points from the low fares end, obviously. Firstly, you look at your own performance, and if you look at Jetstar, if you look at our travel intention, it's incredibly strong, stronger than it's been at the low fares end, and also our intakes. The last six weeks have been very strong internationally. Last week, we had our best week ever at Jetstar, so Jetstar's record result last week was driven by international. And importantly for Jetstar, you're seeing some real underlying strength in some of those key markets. Japan already has a positive RASK. Indonesia's strength in Indonesia, which is obviously critical for Jetstar, we've seen Virgin moderating capacity, as Cam said, on Japan, but also on Bali.
So, you have all those signals that point to, I think, great confidence for us that RASK will be positive in the second half.
Thanks, Steph. Next question.
Your next question comes from Andre Fromyhr with UBS. Please go ahead.
Thank you. Hi, everyone. Just wondering if you could help me understand some of the cost drivers as we look into FY 2025. Obviously, there's a decent step-up expected in your capacity, so should we be firstly scaling by that capacity change, maybe applying some inflation? You called out AUD 400 million of savings to combat that inflation. I know that you've commented that that also includes fleet benefits. Curious to understand how much of the fleet benefits explain of the AUD 400 million, and then we add the AUD 60 million and the AUD 30 million extra items that you've called out.
I'm just wondering if that's a reasonable logic, or is there anything else that we need to adjust for in the, you know, in the 2024 numbers, for example, as we sort of bridge from this year to next?
Thanks, Andre. I'll give that one to Rob.
Yeah, thanks, Andre. I think, I mean, in terms of the cost environment, as we're obviously seeing, and we have seen in FY 2024, there are a number of categories that continue to grow greater than inflation, such as food and beverage, in-flight services, those type of things. But as you mentioned, the transformation, the AUD 400 million, is our commitment to be able to cover those costs in FY 2025. So that is our... That's what we've done in the past, and that's what our commitment is going forward. You are correct, though. We are seeing new costs come into the business, so today we've called out the EIS costs and also the 717s and the inefficiency that has come as we exit those fleets.
Also Same Job Same Pay, that is another cost that has come into business. Our commitment is to continue to drive transformation. We'll obviously be looking for other forms of revenue, not just cost transformation, but other forms of revenue transformation as we think about use of technology as well. I think the way you've summarized it, though, is correct.
Next question.
Your next question comes from Anthony Moulder with Jefferies. Please go ahead.
Hi. Good afternoon, all. If I can ask about Jetstar, the record results, and an increase on last year, it's less than I guess that slide 29 is a very useful slide as we think about the profile of new aircraft coming into the fleet, and you've reiterated that AUD 7 million EBIT benefit per hull. But can you just talk to how you saw FY 2024 and the benefits of those new aircraft within that stronger, that strong result in the FY 2024 plans?
So I'll get Steph to come up and cover, but while she's doing that, I think that the benefit of the new aircraft is multidimensional in terms of the EBIT driving better customer outcomes, better route optimization, better efficiency. But it comes to the way in which the Jetstar team and Steph are flying those aircraft and using them to drive that value.
Yeah. Thanks, Anthony, for the question. I think you've got to think about the new fleet twofold for Jetstar, and obviously the results coming through in that record result that we're really proud of. But for domestic, obviously, on a unit cost basis, they deliver a better result. They fit more people on them, and we're flying them to not only replace existing aircraft, but also to new routes. But a big part of the Jetstar role has been the way those aircraft can fly in range and fly internationally. So we're obviously flying them a lot to Bali, Rarotonga, Fiji. Looking forward to going over to Perth on Monday, where they're flying to Southeast Asia with a new pilot base in Perth.
We're opening up new markets, and that's critical for Jetstar in being the number one low-cost carrier for international travel for Australians. They're playing that critical growth role, which has been profitable growth internationally. They also do amazing things for our people. Our people love new planes. It means new people working for Jetstar. Every second person at Jetstar is basically new since COVID, so you've got an incredible energy that new fleet bring, which I know will happen with Qantas now as the fleet starts to roll in. It has that positive effect for all of our stakeholders, but importantly, our people as well.
Yeah, and, I think, just to add to that, and Steph touched on it, the role that the investment that we're making in our Perth hub, is going to be really fundamental, with the new aircraft that are coming in, not just for Jetstar with the new pilot base, but for Qantas particularly, in the way in which we're going to be able to use those aircraft, but both the wide-body and also the narrow-body, to fly further west than we've ever done before. So, you know, this is new fleet in conjunction with, making some very important strategic, infrastructure decisions as well. Next question.
Your next question comes from Justin Barratt with CLSA. Please go ahead.
... Hi, Vanessa. Hi, team. Thanks very much for your time today. Just, can you get to talk a little bit more about the strong improvement that you've seen in active members and increased members overall in your loyalty business? Is this, I guess, Classic Plus playing out as you anticipated, or is it a little bit over and above your expectations when you started the program? Thanks very much.
I'll call Andrew up, but as he's doing that, I'll comment that this is the heart of the strategy in loyalty, which is to drive this flywheel and engagement, and it is multidimensional across everything that you do.
That it is, Vanessa, and thanks for the question, Justin. That's absolutely right. I think it really is, effectively a reflection of the value across the entire program, and probably more importantly, the portfolio of businesses. When you think about the strength of QFF, it does come back to essentially depth of program. Most certainly, Classic Plus has been a major improvement with regards to active members across the course of the financial year, but I like to think of it more in terms of the holistic value and probably more importantly, the integrated value across the entire group.
Mm-hmm.
So for us, the journey is very much, I suppose, beginning, and the focus moving forward is ensuring that we can drive that active member base even deeper and more meaningful across the audience.
Mm-hmm. I think as well, we're very committed to the FY 2030 target still, which is, as I said before, AUD 800 million- AUD 1 billion. The way to do that, this will be about organic growth. This will be about driving more engagement, more engaged members participating across the portfolio that's going to continue to kind of drive that value. I think that the result that the team have achieved this year is fantastic, and it's a proof point on our journey to that target. Next question.
Your next question comes from Anthony Longo with JP Morgan. Please go ahead.
Good afternoon, Vanessa. Good afternoon, Rob. Just perhaps building on a couple of the earlier questions. So in the context of both the capacity settings that you've tabled and the revenue and RASK expectations, and then also on the costs, you know, given the amount of investment that is coming this year and what is ultimately likely to still be required over the next few years, how do we sort of get comfort around those margin targets? And over what timeframe how do you expect to achieve them? Appreciate you have recommitted to achieving them, but you know, starting from the FY 2024 base, it seems like a reasonable bridge to pass, irrespective of the benefits that you're expected to get through.
Make a few comments about that. I'll first start with loyalty, because we have achieved the margin target, and we are driving and have a very clear pathway to the FY 2030 margin targets. As the comment that we mentioned before is that the key indicators that we'll bring to you and the proof points about that will be around the outlook statement of a growth of 10% in earnings for this year, but all of those metrics pointing towards that flywheel spinning faster. I think that you should take from the results today that those proof points are there, and that's what we'll continue to drive going forward with investing in earn and burn opportunities.
I'll also start with the Jetstar International margin target has been delivered this year, so congratulations to the Jetstar team, because the margin target for Jetstar International was 10%-12%, and Jetstar has delivered 11%. If I step into the domestic market, I say, as I said, and as Rob said, we are committed to those margin targets. On Qantas, we delivered this year around 15%.
Yep.
In reflecting on what was a key driver for the reduction in that margin target was the investment in the customer experience. We think that that is absolutely fundamental and foundational for sustainable earnings growth from here on in. And so why do we believe that we can get there? I think a couple of things. One is that we have said, and we said at the half, that one of the shortfalls in the domestic margin target is still the recovery of the corporate market, which is growing and which we are seeing recover, but it is more slow than what we would have thought, when we were at the Investor Day, what we thought was gonna be the speed of that recovery. So we have rebaselined that.
We are forecasting that is gonna get back in the next couple of years to where we had anticipated it to be, and that's gonna be a substantial part of the delivery of that margin target. The second thing that you need to believe is that the domestic market remains rational, and we believe that. I think that we've seen that in terms of the way the airlines are operating in this market. That should enable all airlines, at a minimum, to get a RASK increase year- on- year in line with CPI. That's what is in our outlook statement this year in terms of what we expect for the domestic airlines, and there's no reason that we wouldn't continue to see that happening.
We will continue to deliver transformation that offsets CPI, and really, if you just kind of believe in those three proof points, that'll enable Qantas Domestic to get to its margin targets. But that transformation benefit is gonna come with the new investment that we are making in the new fleet. It would be very similar for Jetstar. Steph's just spoken about the incredible value that the new fleet is providing in a market that is rational as well, and also a market that is starting to see some fuel moderation. And then finally, Qantas International, we are seeing that there will be a headwind for some time with the announcement that we've made today with the Same Job Same Pay.
That is a cost input without an immediate productivity offset, but we are going to be very focused to mitigate the impact of that cost. We also know that with the transformation in the fleet, with the benefits flowing for Qantas Freight, we see upside in profitability from Qantas Freight. Also, the growth in the e-commerce in those business is gonna continue to drive growth in our domestic freight business. But then we've got the rollout of the new fleet for Qantas International that will play to our strength, that will enable us to serve our premium markets more direct with a configuration that has a higher premium density than the past. And as I said, we've reconfirmed Project Sunrise uplift of AUD 400 million once that fleet reaches scale.
But also, the proof points that we're seeing today, as Cam spoke to around the revenue performance that we are getting on those ultra-long-range routes such as Perth-London, Perth-Rome, gives us the ongoing confidence that that we will be building what will be a competitive advantage in the international market. Oh, next question. I'm sorry.
Your next question comes from Cameron McDonald with E&P. Please go ahead.
Good afternoon. Maybe can I ask that in another sort of way around, and maybe coming from the financial framework? So you've had increased invested capital of, you know, AUD 1.3 billion this year. You're guiding to effectively another, you know, year of pretty heavy investment, you know, AUD 3.7 billion of CapEx and depreciation of AUD 2 billion. So the average capital is gonna go up again. And then combining that with the outlook statements, you know, should we be thinking that you're gonna get that return, that 10% return in FY 2025, which would be additive to the result you've had this year?
Then how do we think about that in terms of the comments you've made around the distribution with that CapEx investment task that's growing and what the base level of that, which, Rob, you referred to as a base level of dividend. What’s the guardrails that you can point to about how we think about that dividend?
Yeah, that's a pretty complicated question, but let me have a go at it. So I think, well, first of all, in terms of the financial framework, so we'll always be guided by the financial framework as we look at the projected cash flows of the business, think about the capital and the CapEx that we can afford, and then obviously with the distribution, which I'll come back to. So the AUD 3.7 billion-AUD 3.9 billion that we put out for this financial year, that is the guidance in terms of the capital. But in terms of the way you should... I'm not gonna give proper guidance today, so obviously that's a key component of the way the financial framework works.
But in terms of the dividend, what we have announced today is AUD 400 million in distributions through buybacks. We feel quite confident as we think about the financial framework, that creates the right balance with investment we're doing in customer, with investment that we're doing in fleet. In terms of the dividend, as you're right, on that particular slide, we have flagged that it is our intention to reinstate a base dividend. We're not providing that information today. The reason for that, and we're not announcing that today, is because of the franking credits. And whilst we are in a tax-paying situation, we're starting to accumulate franking credits, we're not in a position yet to declare that base dividend.
But as we go into the second half, obviously with board approval, we will be looking to size and to communicate what that base dividend is. But at this point in time, we're not giving that communication. But as I said, it's all governed by the financial framework. So I think the investors should feel confident that our CapEx guidance is always gonna be as we think about an eye towards profitability, projected profitability, and with an eye towards distribution back to the shareholders, which we're also committed to do.
Next question.
Your next question comes from Sam Seow with Citi. Please go ahead.
Good morning, all. Thanks for taking my question. Just a quick one on the incremental AUD 7 million EBIT per hull on the A 321 . Just wondering, would that be reflective of what the Red Tail is expecting? I appreciate-
Mm-hmm.
We're talking LRs and XLRs and obviously different parts of the market, but high level, anything you'd call out that would make the economics materially different?
The AUD 7 million is specific to Jetstar, and it's specific comparing the new aircraft type to the classic, the A320 , so that is specific to Jetstar. What we have done, though, is on slide 29, I think it is, but we've tried to give you a bit more information with regards to the comparison to the A220s , to the 717s , and also the A321 XLRs to the 737 . I think it is important to note that the 737 is an excellent aircraft. We do expect to get incremental profitability, as we've outlined, on that particular slide on the Qantas side as well, but we're not giving any projections at this point in terms of a specific dollar number per hull.
Thanks, Rob. Next question.
Your next question comes from Matt Ryan with Barrenjoey. Please go ahead.
... Oh, thank you. Just coming back to the capital management framework, I just want to be clear on how you're framing your distribution. So is the primary objective to be at or below the middle end of your target gearing range? Or are you taking into account how much free cash that you're actually able to pay out as dividends and buybacks each year?
Yeah, so it's nothing's changed, Matt. So what we said at the half is that our goal was to be at or the middle of the net debt range. That remains consistent. Obviously, the net debt range and the bottom of the net debt range we flagged will go up AUD 700 million-AUD 900 million this year based on the increase in CapEx. So there's no change to that guidance, and we'll be aiming for that as we look into this financial year as well.
Next question.
Your next question comes from Owen Birrell with RBC. Please go ahead.
Hi, just a quick question around the seasonality of the business as you're expecting this year in the context of, I guess you're talking to an improving second half international environment. Usually profit before tax is roughly sort of 60/40, first half/second half.
Just wondering whether you're expecting it to be around that same sort of skew, or whether we should be expecting a stronger second half skew?
Yeah, Owen, thanks for the question. As per the guidance, we have reiterated that we do expect that we will return to seasonality, which has typically been, as you said, 60/40 with regards to profitability and the reverse, essentially with regards to cashflow. That's obviously at the group level, so the different businesses will vary, but in most parts, the airlines are more geared towards the first half from a profitability standpoint.
Next question.
Your next question comes from Ian Myles with Macquarie. Please go ahead.
Hi, Ian.
Yeah. Hi, guys. Can you just talk about your on-time performance? You historically referred to, if you can lift it up, you can actually get some productivity savings and actually benefits out of the business. I'm just wondering, have they actually started to materialize or are they still yet to flow?
So I'm gonna get Markus to step up and maybe Steph as well. The one thing with on-time performance, it's a win, win, win. It's a win for our customers, it's a win for our people, but it is, as you say, it's a win for the business because the most efficient way for an airline to operate is that it operates on time. So Marcus, absolutely focused on this.
Yeah. Thanks, Vanessa. Hi, Ian. I think Vanessa almost answered the question for me.
Ah.
Which was a great answer. No, it is very true. Focus on OTP. Focus on on-time performance is the best way to run an efficient and a cost-effective airline, and we are very focused on that. You've seen in that, in our numbers. We're up ten points into quarter four, versus the quarter four last year. So we will continue that drive because we know it drives customer satisfaction, it drives NPS, and it keeps our costs down. And it takes away all those temporary costs around disruption. You have crew out of base, you have to pay for overtime. So it is absolutely the best way to run the business, and we are seeing that coming through, in the second half.
There's not much left to say, but I will say Jetstar is a proof point.
Because the difference in our financial performance from 2023 to 2024 includes the removal of about AUD 60 million of temporary costs, which were all associated with poorer on-time and cancellation performance. So the step change is really important for the business. The other thing it does, not only for Jetstar, but for Qantas, too, is just means your utilization goes up. So that's critical, obviously, from a unit cost perspective, that we are flying our planes as much as they can, with customers on board, you know, paying for their fare. So utilization is a key output of on-time performance as well.
Yeah. Thanks, guys. And I think the one thing that I would say in recognition to what the entire group leadership team has done, I mean, on-time performance comes from reliable aircraft engineering effort. And across Jetstar and Qantas, our teams have been completely focused on that. It's been a part of the investment in the AUD 230 million that we outlined this year across Jetstar and Qantas. But I would also call out the work that we are doing with our people and our culture is going to increasingly be at the heart of our ability to continue to deliver this consistently and improve on it. The call-out I have, you know, our airports team, they've just implemented a new boarding regime that is Jetstar and also Qantas have seen better customer outcomes, but better on-time performance outcomes.
Our pilots, the engagement with our pilots is enormous. We're running a program called Every Minute Matters, right across the group and particularly with Qantas. We are seeing that level of engagement with our people and with our pilots lift substantially. And so there is a people power that we are very focused on in unlocking to continue to deliver this, but continue to improve going forward. And don't underestimate the value that will exist in the business for that. Oh, next question. I'm not doing very well with the-
It's okay.
With the moderator. Next question.
Your next question comes from Nathan Gee with Bank of America. Please go ahead.
Hey, hey, team. Thanks for the call. Just a question on Qantas Domestic leisure intake. So that was down 3% year- on- year. Just help us better understand what's driving this. Is this maybe some down trading to Jetstar, or is this maybe some inflationary pressure hitting consumption? Thanks.
Markus, will take that one.
Thank you, Nathan, for your question. It's a good question. Obviously, we have seen premium leisure demand moderating, but the good thing and the really important part for us, it's made up and more with corporate and speed travel coming back and being strong. What's driving this is probably a factor of two. Yes, you're seeing some down trade, and that definitely is something Jetstar is benefiting from. But also, we have seen some shift into international as international fares comes down. So it's probably a factor of both.
Yeah, and I think as well, what Markus said is absolutely right. The one thing that Markus's team have done is that they've quickly changed our schedule to make sure that our network and capacity is optimized. 'Cause we saw that leisure reduction come through probably on North Queensland coast. So we changed out some frequency, but also aircraft size, and we've redeployed that aircraft to international. So again, I think it comes back to the way we're flexibly optimizing our network to the changing demand patterns, and we'll continue to do that going forward. Next question.
Your next question comes from Billy Boulton with Morgans. Please go ahead.
Hi, guys. Just following on from the question on on-time performance, I would have thought that could have been a decent driver of margin improvement into the FY 2025, and it just hasn't been called out in the outlook. Is that the case, or is that all included in the transformation number? Thanks.
I think you can assume that the outlook statements accurately cover what are the large movements and benefits that are gonna flow through the business in FY 2025. It will be a key part of our transformation effort as well, because you know, offsetting that CPI is significant and on-time performance, reliability, driving ancillary revenue, driving automation, revenue management optimization will all be key inputs into delivering that AUD 400 million transformation benefits, which is pretty substantial. And if we reflect on years past, this is probably one of the largest transformation numbers we've had.
Yeah, I mean, maybe just to pick up on Markus's point, but in terms of the 737 s, and there's been a lot of work done on where they're based, how they fly, where our pilots are based, getting them home at night, et cetera. And so I think it's just running the network in a more efficient way, as we said, drives a better outcome for everyone, customers and obviously the bottom line as well. But it's included in the outlook statement.
I think we've got the last question, so over to you.
Your next question comes from Scott Ryall with Rimor Equity Research. Please go ahead.
Hi, thanks very much. I jumped on a bit late, so apologies. I don't think you'd answered this, but on slide 21, you give the number of AUD 7 million in incremental EBIT per hull for the new for the replacement Jetstar planes, which you talked to in answer to Anthony's question before. Is there any reason that that's not indicative of the kind of upside when you introduce the fleet gradually into Qantas? You've obviously given on slide 29 some indicative unit cost metrics that show that the A321 s are kind of in the middle relative to the new fleet coming in. But is it kind of indicative, if we adjust to that, to think about that as the benefit when you are using it as replacement?
And is there any difference if you buy them versus were you to lease them at some point? Thank you.
Yeah. Rob, I think, did touch on this before, but I'll get him to-
Yeah. So, Scott, I did answer before. It will be different. We're not giving guidance today on a dollar number for Qantas. The thing that I said before is that the 737 fleet is an excellent one, and the incremental profitability will be different than what we're seeing in Jetstar at the moment. That slide in particular that identifies where the profit drivers are gonna come from is a really important one. This is a conversation we're gonna have every six months, and we will quantify and bring case studies to investors as we get more information.
So just as we did at the half with the LRs, as we get more scale into the A220 s, we will definitely start telling a quantifiable story on the A220 s, and we'll do the same with the A321 XLRs as we see how they perform within the fleet, which we're really excited about.
Okay. Unless there's any more questions, I think that that's a wrap. Thanks again for those on the line, but most importantly, thanks again for the team in the room, because they've been a key part of the journey this year, and we look forward to catching up with you all over the coming week. Thank you.