Financial Analysis of Qantas: Sustainability Initiatives and Improvement in Financial Position

This report provides an analysis of the financial performance of Qantas Airways over the last two years and discusses the sustainability initiatives of the company. The report highlights the improvement in the financial position of Qantas Airways in 2018 as compared to 2017. The report also discusses the sustainability initiatives taken by Qantas Airways for promoting the growth and development of its business. The report concludes that Qantas Airways has achieved a distinct competitive position within the airline sector of Australia.

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Financial Analysis of Qantas

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Introduction
The present report is developed for carrying out an analysis of the financial performance
of a company listed on the ASX. This is done by providing a comparison of the financial
information of the selected company over the last two years. This is done for providing a
comparison of the financial information of the company in their annual reports over the year
2017-2018. This is followed by providing a discussion of the sustainability initiatives of the
selected company. The company selected for the purpose is Qantas Airways, a leading and one
of the largest airline of the Australia.
Answer 1
Discussion in the Improvement within the Financial Position of Qantas over 2017-2018
As analyzed on the basis of financial information provided in the airline annual report, its
profit before tax has recorded an increase of $203 million in the year 2018 as compared with that
of the year 2017. This is on account of the successful turnaround of its ambitious three-year
program that has emphasized on managing its rising fuel costs. The increase was mainly due to
the higher revenue realized from the customers and transformation achieved by it by re-
structuring its business. This mainly included the initiatives taken by the Qantas Group through
introducing Dreamliner and restructuring of its Singapore hub. The introduction of technological
innovations has also resulted in decreasing the fuel costs that has enabled it to maximize its fuel
efficiency and thereby realizing higher revenue. There has also been depicted a strong
performance in its balance sheet with achieving a control over its net debt at $4.9 billion
indicating that it has maintained an optimum capital structure (Qantas Group : Annual Report,
2018). The net debt has depicted a decrease of about 33% in the year 2018 as compared with
previous year as stated from the results of its net debt ratio:
Also, there has been increase in its return on investment in the year 2018 as compared with
previous year. The ratio has depicted an increase of about 10% by depicting a rise from 20 to
22% during the financial year 2017-2018. There has also been depicted an increase in the

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Earning per share from the year 2017-2018 from 56 to 64 and thus depicted a rise of about 5.3
per cent over the financial year 2017-2018 (Qantas Group: Annual Report, 2017) & (Qantas
Group: Annual Report, 2018). The same can be depicted through the following graph:
Key Financial Ratios
Financial Data
Particulars 2017 2018
$M $M
Net Profit $ 853.00 $ 980.00
Net Sales $ 16,057.00 $ 17,060.00
Shareholder's Equity $ 3,540.00 $ 3,959.00
Current Assets $ 3,119.00 $ 3,712.00
Current Liabilities $ 7,095.00 $ 7,596.00
Total Liabilities $ 13,681.00 $ 14,688.00
Financial Ratios
Ratios 2017 2018
Net Profit Ratio 5.31% 5.74%
Return on Equity 24.10% 24.75%
Current ratio 0.44 0.49
Debt to equity Ratio 3.86 3.71
(Damodaran, 2011)
Thus, it can be said that there has been improvement in the financial performance of
Qantas Airways over the financial period 2017-2018. This is primarily on account of higher
profitability achieved by the airline through re-structuring of its business operations (Davies &
Crawford, 2011). This has enabled it to reduced debt in its capital structure and providing larger
return to the shareholders (Brigham & Michael, 2013).
Answer 2

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i. Examination of the Company’s Sustainability Initiatives in the Retail Business
Qantas Airways places long-term focus on establishing looking ahead and acting
responsibly towards the environment. It aims to become a global environment sustainability
leader across the aviation industry. The airline is responding to the environment challenges by
working in active co-operation with the government, business and individuals. The company has
developed its philosophy of measure, reduce and influence that emphasis on renewing the fleet
with the use of most advanced aircraft, engaging the people in fuel optimization and adopting the
use of bio-fuel. It is also actively involved in promoting the engagement of its customers,
employees and community in the world largest airline carbon offset program. It works actively in
supporting the growth of sustainable tourism across (Qantas Group, 2018).
The airline places strong focus on protection of environment as a means of achieving
sustainability. It recognizes human-induced climatic change as a major sustainability issue that
can impact the long-term growth of the aviation industry. As such, it places strong focus on
reducing the carbon emission by finding the most efficient ways of using fuel and implementing
the use of new technologies for reducing the emissions. Apart from the environmental, the airline
is also placing strong focus on promoting its social development for ensuring its sustainable
growth. In this context, it places strong focus on promoting the development of the workforce
and thus has developed a Talent Advisory Group. This is done mainly to prepare the employees
for meeting the global challenges of the aviation industry. It is also promoting the development
of its social media channels for reaching to wider potential employees and customers. As such, it
can be said that the airline is taking various sustainability initiatives for promoting the growth
and development of its business (Qantas: Our Commitment to Environmental Sustainability,
2018).
ii. Discussion of New Initiatives
The airline has developed a flagship program known as Qantas Future Planet that focuses
on achieving its sustainability, environment and social initiatives. It involves the coordination
between investors, partners, employees and customers in creation of a profitable and sustainable
airline. It has also taken initiative for developing a fuel efficiency program for developing a fuel-
efficient fleet and also developed partnership with Australian businesses for minimizing their
environment footprint. It is also attributed to be first airline for introducing the concept of in-
flight recycling. The recycling solutions introduced by the airline include development of
washable utensils and recycled paper cups. In addition to this, it has also introduced the waste
recycling program that directs the landfill into an alternative waste treatment facility (Qantas:
Our Commitment to Environmental Sustainability, 2018).
iii. Sustainability Rating of Company
The airline can be rated higher in terms of sustainability by looking at its sustainability
initiatives taken for protection of society and environment. The airline has taken several major

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sustainability initiatives by promotion of fuel efficiency, use of bio-fuel, developing a carbon
offsetting program, recycling of waste and water. Thus, it can be said that the airline is working
actively for minimizing the environment impact for ensuring its long-term sustainable growth.
The innovative projects and partnerships’ have developed new sustainability standards to be
implemented within other industries (Qantas Group – Positioned for Growth and Sustainable
Returns, 2018).
Conclusion
It can be stated on the basis of overall analysis carried out within the report that Qantas
have recorded a higher financial performance in the year 2018 as compared with that of the year
2017. Also, its sustainability initiatives have enabled it to achieve a distinct competitive position
within the airline sector of Australia. The initiatives taken by for promotion of environment
development have enabled it to achieve a good brand image among its customers around the
world.

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References
Brigham, F., & Michael C. (2013). Financial management: Theory & practice. Boston, USA:
Cengage Learning.
Damodaran, A, (2011). Applied corporate finance. USA: John Wiley & sons.
Davies, T. & Crawford, I., (2011). Business accounting and finance. London: Pearson.
Qantas Group – Positioned for Growth and Sustainable Returns. (2018). Retrieved 23 January,
2019, from
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgy
w/file/presentations/Macquarie_Conference_Final_20180503.pdf
Qantas Group. (2018). Sustainability. Retrieved 23 January, 2019, from
https://investor.qantas.com/sustainability/
Qantas Group. 2017. Annual Report. Retrieved 23 January, 2019, from
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgy
w/file/annual-reports/2017AnnualReport.pdf
Qantas Group. 2018. Annual Report. Retrieved 23 January, 2019, from
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgy
w/file/annual-reports/2018-Annual-Report-ASX.pdf
Qantas: Our Commitment to Environmental Sustainability. (2018). Retrieved 23 January, 2019,
from https://www.qantas.com/infodetail/about/environment/our-commitment-to-
environmental-sustainability.pdf