Qantas Airways Limited: Sustainability Issues And Financial Performance

History of Qantas Airways Limited

Discuss about the Services reform and manufacturing performance.

Qantas is known to be one of the largest growing international airlines present in Australia. The company was founded in the year 1920 and was originally registered as the Queensland and Northern Territory Aerial Services Limited (QANTAS). It is widely recognized as one of the leading long distance airlines in the world and considered to be the strongest brands within Australia (Qantas.com. 2018). The organization has built an effective reputation for high quality and excellence in the operational reliability, safety, customer services and engineering and maintenance. The main business of the Qantas Group is to facilitate effective transportation of their customers. Moreover, they also operate subsidiary businesses, which include Q Catering in the specialist markets.

In the recent times, Qantas Group is a globally competitive and a strong aviation business that connects the people of Australia to the world. It is the third oldest airways companies of the world. The Qantas Group secret to success is its passionate, diverse and skilled workforces. The organization has the responsibility to work co-coordinately so that they can effectively build their competitive advantage and lay major emphasis for the sustainable growth in long-run (Su et al. 2017). This makes complying fully with all the relevant company to make a shared commitment for maintaining the ethical standards. This makes the organization to fully comply with all the existing regulations and laws (Lopes, Ferraz and Rodrigues 2016).

The report will highlights the sustainability issues faced by Qantas. Moreover, the company financial or economic, social and environmental performances will be evaluated. The Qantas brand provides premium price to its customers and enhances the products value. Security and safety are the main considerations that are within the Qantas aviation industry (Bazargan 2016). Qantas, as per its sustainability report is the leader of safety airlines industry.

The vision of the company is to be the best premium airline in the world. In addition to this, Qantas aims to be the best low fare carrier within the international aviation industry.

The airline brand is effectively managed while operating all the domestic, regional and international services.  Qantas business ranges from Qantas Frequent Flyer to Qantas Freight Enterprises. The company employs more than 30,000 employees of which majority of them are based within the country. The company is supported by honest or committed staffs and loyal customers. The airline continues to facilitate outstanding services and is a forefront of the civil aviation industry at an international level.  The board of Directors of the company is highly responsible to ensure that the company has an adequate corporate governance framework.

Qantas Airways Limited’s Mission and Vision

Qantas airlines are situated in the suburbs region of Mascot in Sydney. The airlines vital hub is at the Sydney Airport. During March 2014, Qantas had majority of shares in the Australian domestic market. Qantas has also operated various passengers’ airlines subsidiaries that includes, Australia Asia Airlines, Impulses Airlines, Australian Airlines, Qantas Link, Jet star Airways, Jet connect, Network Aviation. The board of Qantas also endorses each of the Australian Securities Exchange (ASX) governance council’s, principles and recommendations as ASX Principles. Qantas also discloses their crucial document that showcases the commitment of Qantas to the efficient governance.  Qantas’s procurement is to maximize the value of all the shareholders from all important suppliers’ relationship.

Qantas performed very efficiently in the year 2015 and achieve positive result. The result obtained before Global financial Crisis has enabled the Group to strengthen both its balance sheet and shareholders return. The transformation program in the year 2014-2015 led to the achievement of $894 millions of total benefits, which is more than the total target. Strong performance was the result of the group strategy. This increased the overall performance of the company and resulted in the increase in cost of capital. The operating cash flow between the years 2014-15 was a healthy amount of $2 billion dollars.  The company practiced an optimal capital structure in the year 2105 with an increased liquidity, reduced debt and improved group-wide return on the invested capital to a rate of 16%. Moreover, the board has also proposed $505 million returns of capital to its shareholders. The shareholders also received consolidations at the Annual General Meeting in the year 2015.The shareholders has also shown loyalty and patience due to the renewal of Qantas Board in the year 2014-2015.

The market or economic conditions in Australia is highly complex in nature with continuous growth in majority of the areas. The aviation industry has also continued to gain maximum profit as they highly affect the demand in all the resources-intensive states.  The company in the year 2015 has been reported to have an underlying profit before tax of $975 million. In addition to this the statutory profit after tax was reported to be $560 million. I6% return on the invested capital was obtained with an operating cash flow of around $2 billion.

Qantas Airways Limited
General Financial Information	2015 ($M)
(A)
Total Assets	17,530
Total Liabilities	14,083
Total Owners Equity	3,447
(B)
Profit earned-per share	25
©
Total Ordinary Shares issued	N.A.
(D)
Profit received by Shareholders- per share (DPS)	N.A.
(E)
Net Cash flows from Operating Activities	2048
(F)
Net Cash flows from Investing Activities	-944

As compared to the year 2013-14, the turnaround of $1.6 billion was achieved and also paid more than $1 billion of overall net debt. As a result, Qantas has achieved its optimal capital structure and has enabled to resume the returns for shareholders.  The leverage metrics of the company are within an investment grade target range. The Group furthermore maintains access to all the existing diverse sources of funding that has a strong liquidity, which includes $2.9 billion. The financial framework helps in guiding the thinking of the Shareholder’s value creation for optimal capital allocation and capital structure. The three pillars of the financial performances are also supported by various measurable targets that are aligned with those of their shareholders (Asmussen 2015). The main objective is to maintain effective earnings per share to deliver optimum total shareholders returns (TSR).  While maintaining an optimal capital structure leads to minimize the cost of capital. Overall $1 billion debts were reduced in the year 2014-15 due to return to the optimal capital structure. During the year 2014-15, ordinary shares were not issued to the shareholders. Therefore, no profits were earned by the shareholders during this period.

Qantas Airways Limited’s Aviation Business

The sustainability in the financial performances of Qantas can be seen from the company’s mission and vision. Sustainability is the process of satisfying the needs of the present generation besides being able to satisfy the needs for future generations. This also means that the decisions taken today create long-term values for the Qantas Group and their major stakeholders. This also means that the company ensures to their shareholders, employees, customers and the community at large that they understand the emerging global social and environmental trends (Uyar and Taskinsoy 2017). The opportunities and risks that affect the financial performance of the business are also ascertained.

Qantas has undertaken a well-disciplined approach to renew its capital structure. This would help in enhancing the shareholders value with a perfect mix of shareholders return as well as company’s growth. During the end of the financial year 2014-15, $ 505 million capital return was also declared. The major highlights of the financial year includes Qantas Transformation lead to continuously drive permanent shift in the cost base besides change in the competitive position of the company. Qantas main approach towards sustainability is to provide deliberate response towards the increasing materiality related to the social, environmental and governance threats and opportunities. The company’s leading market positions were strengthened due to investment in the products and services besides innovation (Ater and Orlov 2015).  Qantas also improved its workplace culture by focusing on employees and customer relationship. The operational activities of the business were managed efficiently with capital expenditure flexibility.

QANTAS AIRWAYS LTD  (QAN) CashFlow BALANCE SHEET
Fiscal year ends in June. AUD in millions except per share data.	2015
Assets
Current assets
Cash
Cash and cash equivalents	2908
Short-term investments
Total cash	2908
Receivables	959
Inventories	322
Prepaid expenses	109
Other current assets	751
Total current assets	5049
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	22464
Accumulated Depreciation	-11749
Net property, plant and equipment	10715
Equity and other investments	134
Goodwill	206
Intangible assets	597
Deferred income taxes	333
Other long-term assets	496
Total non-current assets	12481
TOTAL ASSETS	17530
Liabilities and stockholders’ equity
Liabilities
Current liabilities
Short-term debt	678
Capital leases	93
Accounts payable	550
Deferred revenues	3584
Other current liabilities	2565
Total current liabilities	7470
Non-current liabilities
Long-term debt	3386
Capital leases	1405
Deferred taxes liabilities
Deferred revenues	1359
Pensions and other benefits	41
Minority interest	5
Other long-term liabilities	417
Total non-current liabilities	6613
TOTAL LIABILITIES	14083
Stockholders’ equity
Common stock	4628
Other Equity	-37
Retained earnings	-1115
Accumulated other comprehensive income	-29
Total stockholders’ equity	3447
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	17530

The operating segments of the company achieved a higher Return on Invested Capital (ROIC) more than the Weighted Average Cost of Capital (WACC) that contributes to the return on invested capital of more than 16%. The underlying EBIT of $ 267 million was increased by $ 408 million of transformation al benefits that was realized in the present year. The financial framework established by the company aligned its objectives with their shareholders (Pereira et al. 2015). The company aims to generate maintainable Earnings per Share growth over the cycle. The total liquidity of the company increased that included a $ 2.9 billion in cash. Over $1 billion were undrawn in the revolving credit facilities. The net increase of the total 20 unencumbered aircraft lead to the increment of total market for over US$3 billion.  Though there was a high constrained capital expenditure, the targeted investment improved to a great extent. This further resulted in the satisfaction of customer that was measured by the Net Promoter Scores.

Sustainability Issues Faced by Qantas Airways Limited

The operating cash flows almost doubled from the previous financial years of $2 billion.  This reflected the profit that was realized via Qantas Transformation. The improvements lead to a more stable operating environment. The reduction in the AUD fuel prices in the end of the financial year was also one of the major factors for such positive outcome (Mayer, Ryley and Gillingwater 2015). The liquidity position of Qantas also strengthened.  The available undrawn fit lead to the increase in the market value of the organization. The corporation continued to retain the flexibility within the organization financial position (Pereira and Caetano 2017). In addition to this, the fleet plan and funding strategies ensured that it can easily respond to any kind of changes in the market condition.  The on-time performance of Qantas Domestic increased over the years to a rate of 88.3% (Cui et al. 2016). Qantas Domestic now mostly operates on a common wide body aircraft type (A330-200) and narrow body aircraft type (B738).  The focus of the organization is given on the network optimization and increased utilization is given more access to create a higher return.

Qantas has always live up to the expectations of the Australian hospitality, warmth and services. The new generations relate mostly to the technology and aircrafts, therefore, more preferences is given to the customers. Better and high quality services leads to provide better services and creating a high brand value for the product.  The decisions that are made by the organization are aims to create a long-term value for their Group and the other stakeholders by building resilience. In the year 2015, the organization committed to strengthen their sustainability approach relating to the long-term relativity that is crucial for the Qantas Group. The major responsibility of the organization is to give m more emphasis to the sustainability issue. It is ensured by the organization that the issue is included in the strategic planning and reporting process of the organization.

The assessment process that is performed by Qantas is made to identify the most significant issues that are responsible for the profitability of the business.  Qantas continues to make commitment towards the ethics and integrity of the business.  To evaluate the performance of the company, Net Performance Score (NPS) is used which makes the other customers to make a benchmark over their performances. The feedback obtained from customers helps the firm to enhance the performance of the airlines. The feedback is directly given to the frontline employee that helps them to make major strategic decisions by tailoring the travel experiences (Zhu, Liu and Lai 2016).  The airlines have recently initiated premium lounges in Los Angeles and Hong Kong.  The airlines have also adopted latest technology that focuses on saving times besides providing convenience to the customers. The interiors of the 28 Airbus A330 aircraft have new interiors that included flat beds in the business class.  

Financial Performance of Qantas Airways Limited

During February 2015, Qantas also declared its first in-flight digital experience through the partnership with Samsung. Digital transformation has enhanced the travel experiences of the customers that provide them maximum control over their journey. This also led to strengthen the social media customer services and also launched Qantas apps. Furthermore, they also refreshed the in-flight entertainment with more than 200 hours of latest content each and every month. The company also re-designed its in-flight magazines (Tan et al. 2017). Furthermore, Qantas also expanded its digital channels that included initiating AWOL, a new title that would inspire the young people of Australia to travel the world.  The first class customers of Airbus A380 will be provided with the digital facilities that would allow them to have a 360-degree view of the virtual environment. This technology will enable the potential customers to completely enjoy the virtual settings. The customers are also given major control for the operational activities through the company’s mobile technology. Auto Check- In allows more than 7 lace people to check-in via SMS.

The Qantas apps also help in providing the flight information to their customers and facilities in managing all kind of disruptions. Q Streaming allows the customers to stream in-flight entertainment library directly to the tablet devices on the selective aircraft types.  The services performances as well as the brand perceptions improved to a great extent with a high rating. Moreover, the airlines main approach is to own business that ranges from providing high standards of duty and services for their customers. The approach has furthermore led to business sustainability. Qantas still continues to be the first preference of the passengers in Australia searching for domestic business travel. Qantas continues to hold the prominent brand position in the domestic market. The international services facilitate exceptional customer services (Resbeut and Gugler 2016).  Continuous improvement has led the airline to achieve an international record at a new rate of 74%. The perception related to facilitating competitive products has continued to improve and lead to the achievement of a record at 68%. Moreover, the perceptions related to provide a premium full service airlines lead to the continuous improvement and achievement of a new record at 74%.

Qantas has a diverse workforce that showcases the multicultural and contemporary characteristics of the nation. The diversity policy of Qantas for the year 2014-15 included Indigenous employment, gender equality and effective training through partnership with the career trackers as well as workplace flexibility. This flexible working arrangement resulted in enhancing the operational activities of the organization.  Engaging, empowering and supporting its people directly increased the services standards for their customers (Pearson et al., 2015). The Group-wide engagement of the employees resulted in maximum transformation of the employee and customer’s relationship. The organization main focus for the following year is to increase engagement and furthermore also unite all such people behind the shared goals. Qantas has launched two major training programs – Creating Great and the Next Step Together. It is a talent development and leadership initiatives made to achieve the sustainability growth (K?lk?? and K?lk?? 2017).  Employee’s engagement on the Qantas Transformation program has been very constructive and positive in nature. 

Qantas Airways Limited’s Market and Economic Conditions

The security and safety of the customers and the employees working in Qantas is always one of the major priorities. Qantas is one of the first companies in airlines sector to launch an integrated safety management system. This system also helps in guiding the Quanta’s group approach for proper safety. It is also continually updated and reviewed to take into consideration the major technological and regulatory changes. The major success of the company related to the safety management system is completely dependent on a very healthy safety culture as well as the ability to work through major changes while lifting and maintaining safety standards (Blondiau et al. 2016). This is the major reason responsible for the successful delivery of the company’s biggest transformation program since its privatization. Cyber-security in the recent times has also increased at a rapid rate. In the year 2014-15, Qantas has invested almost $ 260 million in the development initiatives and security operations. The company review and enhance its crisis management processes and policies with effective exercise that involves partners, managers, regulators and directors (Gallego-Álvarez, Segura and Martínez-Ferrero 2015).

At Qantas Company, environmental sustainability is an effective guiding principle. The company has an effective innovation techniques, which it is proud of and its long-term environmental sustainability (Seo, Moon and Lee 2015).  The company has made a marvelous progress in decreasing the overall impact on its environment. The company main goal is to be a leading airline that is committed to the environmental sustainability. Qantas main resolution is to embed the environmental performance and effective sustainability principles that is to be followed within all its management policy, systems and practices.  The company also pledges to improve the way it operates in a more sustainable and effective manner (Wang, Wu and Sun 2015). Qantas has also installed recycle bins in all such terminals of the airports they occupy. The organization has also started a composting program for food wastes in their corporate offices.

Qantas has reduced its electricity consumption by the rate of 95 and furthermore reduced the water consumption by 11% and has also reduced the waste to landfill by 20%. The biggest challenge faced by Qantas in the recent times is the emissions that are spread by its jet fuel combustion. The emission accounts to around 98% of their overall 12 million tons.  The emission management plan of the company is uncomplicated that includes measure, reduce and offset (Cui, Wei and Li 2016). Various reporting programs help the management in obtaining a clear understanding of its sustainability information. This includes National Greenhouse and Energy Reporting (NGER) for its annual domestic emissions. The total emissions footprints and the disclosure related to carbon emissions are also ascertained (Arnold et al. 2016). The company has also reduced the usage of fuel use and decreased greenhouse gas emissions. The initiative for aircraft weight reduction is made to improve efficiency.  Such as replacing all kind so hard copy from the aircraft with iPad that provides operational manuals. In addition to this, the pantry equipments that are used are also light weight. Through the application of GPS-based navigation or smart technology, the operational efficiency of the firm is highly improved. Moreover, the company invests an efficient amount in their fuel effective fleet; this includes Boeing 787 and Airbus A380.

Qantas airlines with the help of its carbon offset program have made an effective progress towards the environmental sustainability. The Fly Carbon Neutral program also offsets their ground fuel emissions. The offset that the company source protects all the wildlife mitigate climate change and also nourishes the existing communities (See and Rashid 2016). Qantas was the very first flight to launch in-flight recycling method. The company also encourages their products suppliers to provide sustainable products that involves less packaging. Qantas has also partnered with their suppliers and introduced recycling and packaging solutions. The utensils used are washable and the paper cups are also 35% recycled in form. The noises emitted from the aircrafts are also reduced by using latest technological gadgets (Mellat-Parast et al. 2015). Recently, initiative taken by Canberra Airport has helped in redesigning their flight paths so that noise can be decrease from the residents. Qantas has ensured that its overall 65% of its wastes from their domestic aircraft is transformed from landfills to an alternative waste treatment facility.

The company has made sure that they achieve their water and electricity targets by systematically identifying the areas that requires major changes. Water and electricity saving projects are implemented across all the operational areas. The company has built the largest commercial tri-generation project in Sydney, which includes cooling, heating and electricity (Hannigan, Hamilton and Mudambi 2015). The two power plants that are constructed by Grid X also reduce the carbon dioxide emissions by more than 23,000 tons per year. The company has also finished its major refurbishment of their corporate headquarters situated in Sydney. The lighting efficiency is improved after adopting LED technologies. This also leads to the procurement of such electrical appliances that are highly energy efficient. Furthermore, installing water efficient fixtures will ensure utilities reduction at a rapid rate. The inefficient cooling towers are replaced and furthermore the water leaks if present any are identified and rectified.  The catering centre’s of the organization also installs water efficient industrial dishwaters for their catering services.

Qantas has initiated the Excel Environment ward that is created to ascertain the positive environmental actions and measures by all the employees of the organization. This is awarded annually to all such employees or staffs, who improve the environmental impact of their businesses.  In addition to this, the company also donates their uniforms to such charities so that it can be processed for the manufacturing of mattresses and pillows (Chen, Chen and Wei 2017). The company performance for the year 2104-15 has obtained the maximum profit in all the financial, social and environmental sectors. The Qantas Group has initiated an effective fleet strategy that provides effective flexibility in the long-run and its renewal by prioritizing the simplifications for Group fleet.  In the year 2014-15, the organization was able to remove the 21 aircrafts in all totals that also includes three lease returns. Qantas International improved at great rate with a profit of around $267 million was gained from the underlying EBIT. Qantas Transformation Group led to the delivery of around $408 million cost. Qantas International was able to reshape its cost base through its proper transformation program.

Qantas with the help of their partnership firms makes the positive changes by establishing new sustainability standards that can be used for adoption in various others industries. The company has participated in programs to support the research endeavors to clearly understand the affect of climate changes on the Great Barrier Reef and also increase its resilience. Qantas has also made a long term commitment to support the indigenous land owners by purchasing carbon offsets from their projects.  At Qantas, the people are generally proud of their environmentally sustainability record. They value their overall environmental groups. Qantas has maintained a declining trend for their electricity, water and landfill consumption although the company has high operational growth.

The company has strongly succeeded in reducing their environmental impact between the years 2010 to 2014. Qantas was successful enough to retain a downward trend related to its jet-fuel intensity. The company has set its emission targets for 2050 beyond their compliance or regulatory scheme requirements.  The company has earned global recognition award for the improvement of the Banksia Awards that includes setting well-standards for large organization and leading in sustainability (Eriksson and Steenhuis 2015). Qantas Future Planet helps in reducing the use of plastics in every flight and works to raise awareness to use less plastic so that less waste can be generated.  By using new technology, Qantas is able to meet its utility target.  The company is also keen on inventing a technique to reduce the waste to obtain an effective energy solution and also reuse its quarantine waste (Yu, Chang and Chen 2016). Qantas is also a proud member of the Australian Packaging Covenant and therefore aims to encourage their suppliers to use proper plastic for sustainable growth and thus creates positive impact on the environment.

Conclusion:

Qantas has developed itself as a leading company in the aviation industry since its founding in the year. The Qantas Group is actually a sum total of global and strong competitive aviation business that serves their people and also connect the Australians to the world in a global level.  Qantas has always prioritized the safety of the people and the environment as their first prioritizes by complying with laws and regulations. The Qantas Group has achieved maximum success due to its well skilled and diverse workforce. The sustainable growth of the business is possible due to its well-skilled human resources. They group also makes a shared commitment to retain its high ethical standards. They fully comply with the company’s adequate rules and regulations. The organization is effectively responsible for clearly understanding the present obligations and provides high standards that are generally applied in the local areas. The safety and welfare of their potential stakeholders is efficiently managed. They also protect their brands by operating critical services. The capabilities of the organizations are assured through robust programs. This program helps in creating the confidence level of the effective stakeholders.

It can be concluded that the company sustainability or corporate social responsibility for the year 2015 is healthy and effective for investment. In the recent times, due to the increase in the competition in the global economic level within the aviation industry, Qantas has been able to make a successful plan by building strategic partnership with the strong partners globally. Therefore, they are also optimizing their networks. The aviation industry in the domestic market of Australia still continues to retain the increase in competition. Qantas is liable to various kind if fuel and foreign exchange risks, which are an inherent part of the operations that are undertaken in the airlines.  The operational activities of the Group mostly depend on the communication services and informational technology. Qantas aims to bring a ‘sustainable tomorrow’ with its new Qantas Future Planet. The Qantas Future Planet is their main flagship program that is used for environmental, sustainability and social initiatives. The Qantas Future Planet initiative launched by the organization aims to ultimately make the measurable changes, where the footprints extend.

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