Product Number: 7B18N021

Title: Qantas Airways: Financial Modelling and Dividend Policy-Student

Spreadsheet
This spreadsheet supports the product "Qantas Airways: Financial
Modelling and Dividend Policy" (9B18N021)
Prepared by: Angelo Aspris

Last Revised: October 3, 2018

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© 2018 Ivey Business School Foundation

Qantas Pro-forma Financial Statements
Historical

(AU$ million, June year end) FY2010 FY2011 FY2012

1.0 Income Statement

Operating Revenue 13,312 14,367 14,913
Other Revenue 460 527 811
Total Revenue 13,772 14,894 15,724
Operating Expenses -12,261 -13,197 -14,069
EBITDA 1,511 1,697 1,655
Depreciation -1,199 -1,249 -1,325
Amortization 0 0 -59
EBIT 312 448 271
Interest Revenue 181 192 181
Interest Expense -256 -305 -357
Pre-Tax Profit 237 335 95
Tax Expense -62 -74 105
Net Profit after Tax before Abnormals 175 261 200
Abnormals -59 -12 -444
Outside Equity Interests (Minorities) -4 1 -1
Reported NPAT 112 250 -245

2.0 Balance Sheet

Current Assets
Cash 3,704 3,496 3,398
Receivables 1,088 1,027 1,111
Prepaid Expenses 138 148 107
Inventories 319 372 376
Investments 233 318 88
NCA Held Sale 91 20 73
Other 259 260 307
Total Current Assets 5,832 5,641 5,460
Non-current Assets
Receivables 407 423 472
Inventories 0 0 0
Investments 483 546 474
PP&E 12,516 13,652 14,139
Intangibles (Excludes Goodwill) 449 429 464
Goodwill 219 164 146
Future Tax Benefit 0 0 0
Other 4 3 23
Total NCA 14,078 15,217 15,718
Total Assets 19,910 20,858 21,178
Current Liabilities
Account Payable 1,750 1,738 1,876
Short-Term Debt 619 577 1,119
Provisions 448 456 939
NCL Held Sale 4 0 12
Other 3,420 3,464 3,172
Total Current Liabilities 6,241 6,235 7,118
 Non-Current Liabilities
Account Payable 0 0 0
Long-Term Debt 5,099 5,454 5,430
Provisions 1,275 1,414 1,605
Other 1,314 1,604 1,136
Total NCL 7,688 8,472 8,171
Total Liabilities 13,929 14,707 15,289
Shareholders' Equity
Share Capital 4,675 4,657 4,687
Reserves 109 85 36
Retained Earnings 1,155 1,405 1,162
Outside Equity 42 4 4
Total Equity 5,981 6,151 5,889

Balance Check YES YES YES

3.0 Cash Flow Statement

Operating Cash Flow
Receipts from Customers 14,376 15,545 16,699
Payments to Suppliers and Employees -13,125 -13,727 -14,795
Dividends Received 16 21 22
Interest Received 149 180 170
Interest Paid -238 -239 -285
Tax Paid 129 2 -1
Other Operating Cash Flow 0 0 0
Net Operating Cash Flow 1,307 1,782 1,810
Investing Cash Flow
Payment for Purchase of PPE -1,688 -2,407 -2,221
Proceeds from Sale of PPE 101 116 66
Investments Purchased -14 0 -33
Proceeds from Sale of Investments 0 0 0
Payments for Purchase of Subsidiaries 0 -21 -11
Proceeds from Sale of Subsidiaries 0 24 0
Loans Granted 0 0 0
Loans Repaid 0 0 0
Other Investing Cash Flow 0 -190 -83
Net Investing Cash Flow -1,601 -2,478 -2,282
Financing Cash Flow
Proceeds from Issues -16 -65 0
Proceeds from Borrowings 1,352 1,359 688
Repayment of Borrowings -974 -784 -566
Dividends Paid -4 -1 -1
Other Financing Cash Flow 23 -1 249
Net Financing Cash Flow 381 508 370

Net Increase in Cash 87 -188 -102

Cash at Beginning of Period 3,617 3,704 3,496
Exchange Rate Adj 0 -20 4
Cash at End of Period 3,704 3,496 3,398
Source: Morningstar
Historical Forecast

FY2013 FY2014 FY2015E FY2016E FY2017E

15,902 15,155
0 197
15,902 15,352
-14,031 -14,372
1,871 980
-1,450 -1,351
0 -71
421 -442
109 82
-296 -286
234 -646
-11 1,133
223 487
-217 -3,330
-1 0
5 -2,843

2,829 3,001
1,436 1,196
102 0
364 317
180 172
42 134
292 112
5,245 4,932

174 158
0 0
217 177
13,827 10,500
517 546
197 195
0 548
23 262
14,955 12,386
20,200 17,318

1,859 1,851
835 1,210
644 876
0 0
3,032 3,588
6,370 7,525
 0 0
5,245 5,273
1,445 405
1,186 1,249
7,876 6,927
14,246 14,452

4,650 4,614
128 -81
1,171 -1,671
5 4
5,954 2,866

YES YES

16,582 16,720
-15,185 -15,473
142 4
110 74
-229 -254
-3 -2
0 0
1,417 1,069

-1,247 -1,161
50 141
-85 -93
322 8
-24 0
0 70
0 0
0 0
-61 -34
-1,045 -1,069

0 0
846 717
-1,494 -1,027
0 -1
-305 484
-953 173

-581 173
3,398 2,829
12 -1
2,829 3,001
Qantas Pro-Forma Financial Statements
Historical

(AU$ million, June year end) FY2010 FY2011 FY2012

1.0 Income Statement Assumptions

Revenue Growth Rate %
Operating Ratio %
Depreciation Rate %
Amortization Rate %
Tax Rate %
Interest Revenue %
Interest Expense %

2.0 Income Statement

Operating Revenue 13,312 14,367 14,913
Other Revenue 460 527 811
Total Revenue 13,772 14,894 15,724
Operating Expenses -12,261 -13,197 -14,069
EBITDA 1,511 1,697 1,655
Depreciation -1,199 -1,249 -1,325
Amortization 0 0 -59
EBIT 312 448 271
Interest Revenue 181 192 181
Interest Expense -256 -305 -357
Pre-tax Profit 237 335 95
Tax Expense -62 -74 105
Net Profit after Tax before Abnormals 175 261 200
Abnormals -59 -12 -444
Outside Equity Interests (Minorities) -4 1 -1
Reported NPAT 112 250 -245

3.0 Balance Sheet Assumptions

Cash as % of Revenue
Days Sales Outstanding
Prepaid Expenses as % of Expenses
Days Inventory Outstanding
Growth CAPEX
Days Payable Outstanding
Short-Term Debt as % of Revenue
Long-Term Debt Changes

4.0 Balance Sheet

Current Assets
Cash 3,704 3,496 3,398
Excess Cash
Receivables 1,088 1,027 1,111
Prepaid Expenses 138 148 107
Inventories 319 372 376
Investments 233 318 88
 NCA Held Sale 91 20 73
Other 259 260 307
Total Current Assets 5,832 5,641 5,460
Non-current Assets
Receivables 407 423 472
Inventories 0 0 0
Investments 483 546 474
PP&E 12,516 13,652 14,139
Intangibles (Excludes Goodwill) 449 429 464
Goodwill 219 164 146
Future Tax Benefit 0 0 0
Other 4 3 23
Total NCA 14,078 15,217 15,718
Total Assets 19,910 20,858 21,178
Current Liabilities
Account Payable 1,750 1,738 1,876
Short-Term Debt 619 577 1,119
Overdraft
Provisions 448 456 939
NCL Held Sale 4 0 12
Other 3,420 3,464 3,172
Total Current Liabilities 6,241 6,235 7,118
Non-current Liabilities
Account Payable 0 0 0
Long-Term Debt 5,099 5,454 5,430
Provisions 1,275 1,414 1,605
Other 1,314 1,604 1,136
Total NCL 7,688 8,472 8,171
Total Liabilities 13,929 14,707 15,289
Shareholders Equity
Share Capital 4,675 4,657 4,687
Reserves 109 85 36
Retained Earnings 1,155 1,405 1,162
Outside Equity 42 4 4
Total Equity 5,981 6,151 5,889

Balance Check YES YES YES

5.0 The Plug

Balance Check
Trial Assets 19,910 20,858 21,178
Trail Liabilities + Owners' Equity 19,910 20,858 21,178
Plug 0 0 0

6.0 Cash Flow Statement

Operating Cash Flow
Receipts from Customers 14,376 15,545 16,699
Payments to Suppliers and Employees -13,125 -13,727 -14,795
Dividends Received 16 21 22
 Interest Received 149 180 170
Interest Paid -238 -239 -285
Tax Paid 129 2 -1
Other Operating Cash Flow 0 0 0
Net Operating Cash Flow 1,307 1,782 1,810
Investing Cash Flow
Payment for Purchase of PPE -1,688 -2,407 -2,221
Proceeds from Sale of PPE 101 116 66
Investments Purchased -14 0 -33
Proceeds from Sale of Investments 0 0 0
Payments for Purchase of Subsidiaries 0 -21 -11
Proceeds from Sale of Subsidiaries 0 24 0
Loans Granted 0 0 0
Loans Repaid 0 0 0
Other Investing Cash Flow 0 -190 -83
Net Investing Cash Flow -1,601 -2,478 -2,282
Financing Cash Flow
Proceeds from Issues -16 -65 0
Proceeds from Borrowings 1,352 1,359 688
Repayment of Borrowings -974 -784 -566
Dividends Paid -4 -1 -1
Other Financing Cash Flow 23 -1 249
Net Financing Cash Flow 381 508 370

Net Increase in Cash 87 -188 -102

Cash at Beginning of Period 3,617 3,704 3,496
Exchange Rate Adjustment 0 -20 4
Cash at End of Period 3,704 3,496 3,398

Source: Morningstar

Scenario Analysis: Impact on Financin

Change in Assumption
1% Increase in Revenue Growth
1% Increase in OPEX / Revenue
10% Increase in Maturing Debt Being Rolled Over
Historical Forecast

FY2013 FY2014 FY2015E FY2016E FY2017E

15,902 15,155
0 197
15,902 15,352
-14,031 -14,372
1,871 980
-1,450 -1,351
0 -71
421 -442
109 82
-296 -286
234 -646
-11 1,133
223 487
-217 -3,330
-1 0
5 -2,843

2,829 3,001

1,436 1,196
102 0
364 317
180 172
 42 134
292 112
5,245 4,932

174 158
0 0
217 177
13,827 10,500
517 546
197 195
0 548
23 262
14,955 12,386
20,200 17,318

1,859 1,851
835 1,210

644 876
0 0
3,032 3,588
6,370 7,525

0 0
5,245 5,273
1,445 405
1,186 1,249
7,876 6,927
14,246 14,452

4,650 4,614
128 -81
1,171 -1,671
5 4
5,954 2,866

YES YES

20,200 17,318
20,200 17,318
0 0

16,582 16,720
-15,185 -15,473
142 4
 110 74
-229 -254
-3 -2
0 0
1,417 1,069

-1,247 -1,161
50 141
-85 -93
322 8
-24 0
0 70
0 0
0 0
-61 -34
-1,045 -1,069

0 0
846 717
-1,494 -1,027
0 -1
-305 484
-953 173

-581 173
3,398 2,829
12 -1
2,829 3,001

alysis: Impact on Financing Requirement (AU$ millions)

FY2015 FY2016 FY2017
wth 15 14 14
nue 129 131 122
bt Being Rolled Over -71 -77 -99
Qantas Exhibits
1.0 EBITDA Margin
Year FY2010 FY2011 FY2012 FY2013 FY2014
Total Revenue 13,772 14,894 15,724 15,902 15,352
EBITDA 1,511 1,697 1,655 1,871 980
Margin % 11.0% 11.4% 10.5% 11.8% 6.4%

2.0 Interest Coverage Ratio

Year FY2010 FY2011 FY2012 FY2013 FY2014
EBIT 312 448 271 421 -442
Interest Expense 256 305 357 296 286
Interest Coverage Ratio 1.22 1.47 0.76 1.42 -1.55

2.0 Long-Term Debt

Year FY2010 FY2011 FY2012 FY2013 FY2014
Long-Term Debt 5,099 5,454 5,430 5,245 5,273
CAGR 0.67% 0.67% 0.67% 0.67% 0.67%

3.0 Revenue Segmentation

Revenue
Net passenger revenue 13242
Net freight revenue 955
Frequent Flyer marketing revenue 300
Frequent Flyer store revenue 275
Contract work revenue 227
Figure 1 Figure 2

EBITDA Margin % Long-Term Debt

14.0% 5,500
12.0% 5,400
10.0% 5,300
5,200
8.0% 5,100
6.0% 5,000
4.0% 4,900
FY2010 FY2011 FY2012 FY2013 FY2014 FY2010 FY2011 FY2012 FY2013
Figure 3 Figure 4

Interest Coverage Ratio Revenue Segmentation

2.00 $300 $2
Net passenger revenue
$955
1.00 Net freight revenue
Frequent Flyer marketing revenue
0.00
FY2010 FY2011 FY2012 FY2013 FY2014 Frequent Flyer store revenue $13,
-1.00 Contract work revenue 2
-2.00
 Long-Term Debt

FY2011 FY2012 FY2013 FY2014

mentation
$300 $275 $227
nue
$955
e
keting revenue
e revenue $13,24
nue 2
QAN Segmental Information

FY2014 (June y/e)

1.0 Revenue
Net passenger revenue
Net freight revenue
Frequent Flyer marketing revenue, membership fees, and other revenue
Frequent Flyer store and other redemption revenue
Contract work revenue
Operating Revenue (Sales)

Retailing, advertising, and other property value

Finance income
Other non-operating revenue

2.0 Expenses
Net impairment of property, plant, and equipment
Impairment of investments
Impairment of Tangible Assets

Aircraft operating variable

Fuel
Cost of Goods Sold

Property
Capacity hire
Occupancy Expenses

Non-aircraft operating lease rentals

Non-cancellable operating lease rentals
Operating Lease Expenses

Audit and review of Financial Report - KPMG

Other regulatory audit services - KPMG
In relation to other assurance, taxation and due diligence services - KPMG
Other non-audit services - KPMG
Audit Fees

Net impairment of goodwill and intangible assets

Ineffective and non-designated derivatives
Net gain on sale of controlled entity and related assets
Impairment of property, plant and equipment
Redundancies
Selling and marketing
Manpower and staff related
Directors' remuneration
Airport security charges
Contract work material
Other expense
Computer and communication
 Depreciation expenses
Amortization expenses
Inventory write-off

3.0 Non-recurring Items

B787-8 introduction costs
Fleet restructuring
Impairment of goodwill and other intangibles
Impairment of Qantas International CGU
Ineffectiveness and non-designated derivatives relating to other reporting periods
Net impairment of investment
Net profit on disposal of investments
Other
Redundancies, restructuring, and other transformation costs

FY 2013 (June year end)

4.0 Revenue
Contract work revenue
Frequent Flyer marketing revenue, membership fees, and other revenue
Frequent Flyer store and other redemption revenue
Net passenger revenue
Net freight revenue
Operating Revenue

Other revenue
Retailing, advertising, and other property value
Other Operating Revenue

Interest income on financial assets measured at amortized cost

Interest income from jointly controlled entity
Unwind of discount on receivables
Gross Interest Income
5.0 Expenses
Net impairment of property, plant, and equipment
Impairment of investments
Impairment of Tangible Assets

Fuel
Aircraft operating variable
Cost of Goods Sold

Property
Capacity hire
Occupancy Expenses

KPMG - audit and review of financial report

Overseas KPMG firms - audit and review of financial report
KPMG - other audit related services
KPMG - taxation services
Overseas KPMG firms - taxation services
KPMG - other non-audit services
Overseas KPMG firms - other non-audit services
 KPMG - other regulatory audit services
Audit Fees

Net impairment of goodwill and intangible assets

Ineffective and non-designated derivatives
Net gain on sale of jointly controlled entity
Redundancies and restructuring
Capitalized interest
Selling and marketing
Manpower and staff related
Non-cancellable operating lease rentals
Directors' remuneration
Computer and communication
Other expense
Contract work material
Airport security charges
Depreciation and amortization

6.0 Non-recurring Items

Adjusted for ineffectiveness and non-designated derivatives relating to other reporting periods
Impairment of goodwill and other intangible assets
Net impairment of investments
Net impairment of property, plant and equipment
Net profit on disposal of investment in jointly controlled entity
Other items not included in Underlying PBT
Redundancies and restructuring
Write down of inventory

FY 2012 (June year end)

7.0 Revenue
Charter revenue
Tours and travel revenue
Net passenger revenue
Net freight revenue
Contract work revenue
Ancillary passenger revenue
Frequent Flyer store and other redemption revenue
Frequent Flyer marketing revenue
Operating Revenue

Other revenue
Retailing, advertising, and other property value
Other Operating Revenue

Passenger service fees

Frequent Flyer membership fees and other revenues
Qantas Club membership fees
Freight terminal fee revenue
Commissions and Fees Earned

Lease revenue
Finance income
Liquidated damages
8.0 Expenses
Impairment of investments
Net impairment of property, plant, and equipment
Impairment of Tangible Assets

Fuel
Selling and marketing
Cost of goods sold

Property
Capacity hire
Occupancy Expenses

Overseas KPMG firms - audit and review of financial report

KPMG Australia - audit and review of financial report
KPMG Australia - other regulatory audit services
KPMG Australia - due diligence service
KPMG Australia - other audit related services
KPMG Australia - taxation services
KPMG Australia - other non-audit services
Overseas KPMG firms - taxation services
Overseas KPMG firms - other non-audit services
Audit Fees

Buildings
Leasehold improvements
Plant and equipment
Aircraft and engines
Aircraft spare parts
Depreciation

Software
Customer contracts/relationships
Amortization

Net impairment of goodwill and intangible assets

Ineffective and non-designated derivatives
Redundancies and restructuring
Aircraft operating variable
Manpower and staff related
Non-cancellable operating lease rentals
Directors' remuneration
Airport security charges
Contract work material
Other expense
Computer and communication

9.0 Non-recurring Items

Adjusted for ineffectiveness and non-designated derivatives relating to other reporting periods
Impairment of goodwill
Impairment of investments
Impairment of property, plant, and equipment
 Legal provisions
Other redundancies and restructuring
Qantas International Transformation - redundancies and restructuring
Write down of inventory

FY 2011 (June year end)

10.0 Revenue
Ancillary passenger revenue
Tours and travel revenue
Qantas Club membership fees
Freight terminal fee revenue
Frequent Flyer membership feees and other revenues
Net passenger revenue
Net freight revenue
Contract work revenue
Frequent Flyer store and other redemption revenue
Frequent Flyer marketing revenue
Operating revenue

Other
Rolls-Royce settlement revenue
Retailing, advertising, and other property value
Other Operating Revenue

Interest income on financial assets measured at amortized cost

Interest income from jointly controlled entity
Unwind of discount on receivables
Gross Interest Income

Lease revenue
Passenger service fees

11.0 Expenses
Ineffective portion of cash flow hedges
Components of derivatives not hedge accounted (including time value of options)
Loss / (Gain) in Value of Derivatives

Fuel
Aircraft operating variable
Cost of Goods Sold

Property
Capacity hire
Occupancy Expenses

KPMG - audit and review of financial report

KPMG - audit and review of financial report - Qantas Group (excluding Jetset Travelworld Group)
KPMG - other regulatory audit services - Qantas Group (excluding Jetset Travelworld Group)
KPMG - due diligence services - Qantas Group (excluding Jetset Travelworld Group)
Other audit related services - Qantas Group (excluding Jetset Travelworld Group)
KPMG - taxation services - Qantas Group (excluding Jetset Travelworld Group)
KPMG - taxation services
Other non-audit services - Qantas Group (excluding Jetset Travelworld Group)
 KPMG - other non-audit services
Audit Fees

Net impairment of property, plant, and equipment

Selling and marketing
Manpower and staff related
Airport security charges
Non-cancellable operating lease rentals
Directors' remuneration
Contract work material
Other
Computer and communication
Depreciation and amortization

12.0 Non-recurring Items

Legal provisions
Net impairment of property, plant, and equipment
Net loss on disposal of investments and related transaction costs
Redundancies, restructuring, and other provisions
Rolls-Royce settlement revenue

FY 2010 (June year end)

13.0 Revenue
Net passenger revenue
Net freight revenue
Contract work revenue
Ancillary passenger revenue
Tours and travel revenue
Operating Revenue

Related parties - associates and jointly controlled entities

Unwinding of discount on receivables
Interest income on financial assets measured at amortized cost
Gross Interest Income

Other
Lease revenue
Passenger service fees

14.0 Expenses
Fuel
Aircraft operating variable
Cost of Goods Sold

Property
Capacity hire
Occupancy Expenses

KPMG Australia - other non-audit services - Qantas Group (excluding Jetset Travelworld Group)
Overseas KPMG firms - audit and review of financial report
Overseas KPMG firms - other non-audit services
KPMG Australia - audit and review of financial report - Qantas Group (excluding Jetset Travelworld G
KPMG Australia - audit and review of financial report - Jetset Travelworld Group
 KPMG Australia - other regulatory audit services - Qantas Group (excluding Jetset Travelworld Group
KPMG Australia - other regulatory audit services - Jetset Travelworld Group
KPMG Australia - due diligence services - Qantas Group (excluding Jetset Travelworld Group)
KPMG Australia - due diligence services - Jetset Travelworld Group
KPMG Australia - other audit related services - Qantas Group (excluding Jetset Travelworld Group)
KPMG Australia - taxation services - Qantas Group (excluding Jetset Travelworld Group)
KPMG Australia - taxation services - Jetset Travelworld Group
Overseas KPMG firms - taxation services
Audit Fees

Ineffective and non-designated derivatives

Finance leases
Capitalized interest
Selling and marketing
Manpower and staff related
Non-cancellable operating lease rentals
Directors' remuneration
Other
Computer and communication
Depreciation and amortization
15.0 Non-recurring Items
Impairment reversal - PPE
Redundancies, restructuring, and other provisions

Source: Morningstar
 AU$ million

13,242
955
300
275
227
14,999

156
82
197

- 328
- 50
- 378

- 3,142
- 4,461
- 7,603

- 245
- 331
- 576

- 238
- 520
- 758

- 3
- 0
- 1
- 0
- 4

- 9
8
62
- 2,560
- 370
- 636
- 3,717
- 2
- 161
- 57
- 426
- 394
- 1,351
- 71
- 61

- 14
- 394
- 9
- 2,560
72
- 50
62
- 9
- 428

AU$ million

296
268
257
13,673
935
15,429

325
148
473

99
5
5
109

(93)
2
(91)

(4,154)
(3,066)
(7,220)

(482)
(311)
(793)

(3)
(0)
(1)
(0)
(0)
(0)
(0)
 (0)
(5)

(24)
(76)
30
(122)
(61)
(598)
(3,825)
(525)
(3)
(418)
(337)
(65)
(145)
(1,450)

(32)
(24)
2
(86)
30
7
(118)
4

AU$ million

89
48
12,494
784
380
346
245
226
14,612

247
54
301

397
9
85
77
568

215
181
28
 (19)
(157)
(176)

(4,220)
(635)
(4,855)

(429)
(266)
(695)

(0)
(3)
(0)
(0)
(1)
(0)
(0)
(0)
(0)
(6)

(13)
(53)
(82)
(1,123)
(54)
(1,325)

(57)
(2)
(59)

(20)
(165)
(206)
(2,980)
(3,774)
(549)
(3)
(131)
(79)
(449)
(437)

(46)
(18)
(19)
(147)
 2
(5)
(198)
(13)

AU$ million

90
84
84
73
10
12,042
842
347
204
193
13,969

249
95
54
398

166
10
16
192

186
341

25
(145)
(120)

(3,627)
(2,749)

(398)
(258)
(656)

(0)
(3)
(0)
(0)
(1)
(0)
(0)
(0)
 (0)
(5)

(44)
(626)
(3,739)
(135)
(566)
(3)
(111)
(449)
(409)
(1,249)

(25)
(34)
(20)
(28)
95

AU$ million

10,938
821
402
334
172
12,667

10
19
152
181

645
165
295

(3,283)
(2,675)
(5,958)

(396)
(249)
(645)

(0)
(0)
(0)
(3)
(1)
 (0)
(0)
(0)
(2)
(1)
(0)
(0)
(0)
(7)

(173)
(11)
(44)
(572)
(3,405)
(525)
(6)
(633)
(405)
(1,199)

(48)
(11)