Qantas Airways Limited (QAN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2023 Qantas Investor Day. My name is Filip Kidon, and I am the Head of Investor Relations for the Qantas Group. I'd like to welcome everyone in the room today. It looks very full. Thank you very much for joining us. It's almost like being on a Qantas flight. And I'd also like to welcome everyone online as well. Now before we begin, I'd like to welcome Christina onto the stage for a short safety briefing.

Good morning, everyone. Before we begin today, we will run through a short safety briefing. If there's an emergency anywhere on campus, you will hear 1 of 2 sounds: an alert tone, beep-beep, will be activated if there's an issue that requires further investigation. You don't need to evacuate just yet. If you hear the evacuation tone, this is a woop-woop sound, you will need to leave the building immediately. From the auditorium, you will need to exit via the front and red doors and make your way down to the ground level via the stairs. Once on ground level, take the escalators and proceed through the turnstiles. From then, we will continue outside to the open-air carpark to the right. This will be your emergency assembly area. As you leave, keep an eye out for the fire wardens who will instruct you on where to go. They will be wearing a red, yellow or white hat. Thank you for your attention.

Thank you, Christina. Now our Investor Day is being held during National Reconciliation Week, and at Qantas, we are committed to reconciliation. Today, we are delighted to have La Perouse elder, Aunty Joyce Timbery, join us to give us an official welcome to country. If I can please ask Aunty Joyce onto the stage.

Good morning, everybody. My name is Joyce Timbery and I come from one of the many aboriginal families from the La Perouse community. La Perouse is the oldest aboriginal community in New South Wales. I would like to respectfully acknowledge the traditional custodians and people of the land we are meeting on today, it's Bidjigal and Gadigal land. I pay respect to aboriginal elders both past, present and emerging. I would like to wish all of you in the room a very successful day. Enjoy your day, and thank you very much.

Thank you, Aunty Joyce. Now let me begin today with some brief housekeeping. We would like to remind everyone that today's session will be recorded, and the recording will be posted online at the Qantas website. For those in the room, there is restroom facilities outside and also on the ground floor. And we would ask that phones are switched off during the session. The day will be divided into a number of sessions, and at the end of some of these sessions, we'll also have plenty of opportunity for question-and-answer, Q&A. During the Q&A, we will be taking questions from within the room but also questions can be submitted online through the webcast portal. And finally, and most excitingly, for those of you in the room today, lunch will be served at midday by our favorite chef. Stay tuned. Now what an exciting agenda we have today. It's been over 4 years since many of you last joined us at an Investor Day. And it's fair to say a lot has happened in between, much of it unexpected. But the purpose of today is to look forward. And across the day, our management team will share with you our strategy to generate sustainable growth across the Qantas Group. We'll begin with Markus Svensson who will take you through our strategy to invest in our customers, focusing on the unique value proposition of each of our brands. You will hear from Steph Tully and Andrew David on their exciting plans to deliver new fleet technology across our airline businesses and why it will bring unique advantages to our customers and sustain our industry-leading margins. Qantas Loyalty is the jewel in our crown. And Olivia Wirth will take you through the next stage of growth for this amazing business. This includes exciting plans to engage our members, create new redemption opportunities and ultimately target to double the earnings of that business from where they are today. Andrew Parker is passionate about sustainability and so are our people. And today, Andrew will take you through the next stage of our climate action plan with new announcements that support our targets and catalyze sustainable aviation fuel industry in Australia. Our people are a key competitive advantage. And Rob Marcolina will outline the focus we have on driving culture and engagement across our people and, importantly, the skills and the resources we need to grow over the next decade. And finally, you will hear from Vanessa Hudson, our CFO and soon to be our CEO. She will outline why we are confident we can balance investment with returns to our shareholders which is going to be supported by a structural change in our earnings, an industry-leading balance sheet and a flexible fleet plan. The journey today will be long but exciting, and we encourage you to strap yourselves into your seats. And I'd like to now introduce Alan Joyce for some opening remarks.

Give him a round of applause. I think he deserves a round of applause. Now what Fil hasn't told you is that your favorite chef is me, and I've done a specialized stew for you, and it's going to be my next profession when I retire in November. So it's a big treat for everybody in the room. Stop shaking your head, Andrew. It could be true. Can I also acknowledge the traditional owners of the land on which we meet, the Gadigal of the Eora Nation? I pay my respects to elders past and present. Can I also thank Aunty Joyce for that fantastic welcome to country. And this is, as Fil says, National Reconciliation Week which is an important time to reflect, particularly in this important year for the indigenous community. And I was reflecting on all of the work that Qantas has done on this over the years. We were one of the first companies to actually celebrate indigenous art. We were one of the first companies to have a reconciliation action plan, one of the first companies to get to the elevate status on that, one of the first companies to support recognition of the indigenous community in our constitution back in 2014. So this important year, we will continue in that important role going forward. And now it's great to have everybody in the room. And as Fil said, it's a bit like a packed Qantas flight at the moment, which we have quite a lot of them. And with the intro music, I did feel like I was traveling somewhere. It is not a long-haul flight, so you're not on Project Sunrise. This will only last a short domestic distance. And hopefully, you'll find that as entertaining as you have on a Qantas aircraft. And we hope that you get a lot out of this. This is the first Investor Day that we've held since 2019. It was late in 2019 that we had the last one. And obviously, a lot has happened since then. But some things remain the same. Like our commitment to safety, which remains front and center of everything that we do. Our history of championing the spirit of Australia, particularly the notion of a fair goal, which is why we were big supporters of gender equality, merger quality, LGBTI issues and indigenous reconciliation. And in fact, I think you'll see today that in action. Some companies talk about it, but we live diversity and inclusion. And you're going to see from a gay CEO to the next female CEO to a lot of our senior leadership team the diversity that this company has embraced and it's one of our big advantages. You're going to see that we continue to be an employer of choice. And Rob is going to have some fantastic statistics. And you can imagine during COVID, we were in a period of time where people were not interested in the aviation industry. That's come back with force. Now people want to work for aviation and they particularly want to work for Qantas. And we have some phenomenal statistics on that. As Fil mentioned, we're leading on sustainability, particularly on reducing our emissions. And again, we were one of the first airlines to commit to carbon neutral by 2050. And during COVID, it was one of the few areas that we recruited and established more people because we believe it's a really important part for our future. And having Andrew Parker as the Chief Sustainability Officer with his passion for this shows some of the big announcements of the progress that we're going to be making today. And continuing to deliver for our customers. We've had the period last year where the whole aviation industry and Qantas didn't deliver to what we would -- our customers would have expected. But wow, how we've fixed it since then. And we're going to go through, with Markus' presentations, some of the statistics to show the operation is better than it was before COVID and how the customer reaction has rebounded since those issues last year. And we continue to deliver for shareholders. And what I think COVID shareholders was also the diverse portfolio of businesses and how important they were for us. In the extremities of the borders closing down, we still had the Qantas Loyalty business, the freight business and the charter fly-in fly-out business generating revenue for us to help us get through that period. And reflecting on that time, the COVID time, I remember sitting here in this room, but nobody here in head office, at first twice a week with the GMC doing town halls to 25,000 people across the company, 25,000 people who are suddenly grounded, 25,000 people that didn't know and we didn't know when the airline would start up again, when the borders would open. And we didn't know what demand was going to be like on the other side of that COVID journey. We were all wondering when the flying would start again. Then 3.5 years later, the business has changed a lot. We knew that border closures would do a lot of damage to our company. And we had to make the big tough structural decisions so that we could repair it quickly and come out on the other side. Fortunately, we had assets that we could borrow against. We were one of the few investment-grade airlines, and we had a lot of unencumbered aircraft. And I know some of the lenders that we bought it against those aircraft that are in the room today. We had land that we could sell, land that turned out to be extremely valuable and helped repair our balance sheet. And we had great support from the shareholders in the room. And the one in many airlines around the globe that were able to raise equity in the public markets. So it showed your confidence and your support for us, which we are greatly thankful for. And our people had the benefit of government support, which covered their basic needs when we couldn't. That's something we are all graciously appreciative of. And when the borders did finally open up, demand for travel was enormous. It still is, and I'll come to that in a moment. It's fair to say, as I mentioned, that the restart was challenging for Qantas and for the whole industry. But our teams did an amazing job, and we're emerging with operations that are better than they were before the pandemic. Qantas has been the most on-time domestic major airline for 8 months in a row. We're actually winning 11 -- sorry, 10 of the 11 months of this financial year that's happened so far, which is one of the biggest and best runs that we've ever had. In April, our leading margin was over 10 points, which again is one of the leading on-time performance margins we've ever had. And now that we're back in profit, we're going to be and we are heavily investing in better customer experience, and Markus will take you through that shortly. Now before I hand over to the team, it's worth reflecting briefly on how far we've come as a business now that we're on the other side of COVID. We've taken $1 billion of cost per annum out of the business, which you can see coming through in the financial year '23 numbers, and you'll see it coming through in financial year '24. We've paid back all of the debt we took out during the COVID and then some. Vanessa is going to take you through how strong our balance sheet is. It's the strongest that it's ever been. And we're preparing to take delivery of new aircraft that we ordered just as the recovery started, new aircraft that's going to change our operation going forward, and new aircraft that's very hard to get now that demand has rebounded all over the world. And we've committed over $300 million in bonuses to our people for the huge contribution that they have made. And Rob is going to take you through how that's made our employee value proposition one of the best out there in aviation, and it's giving us strong engagement with our people. And we've also announced returns of $1 billion to shareholders, repaying most of the equity that we raised during the crisis. It's a great foundation to build on. And when you consider our core purpose to fly people where they want to go, demand has never been stronger. As you know, we have access to great data through our Frequent Flyer database, and we continuously do research of people's intent to travel. And we have some of the latest figures up on this slide which shows that even with the increased cost of living and interest rate, people are still prioritizing travel. In fact, the intent to travel overseas in the next year has risen from 60% in January above pre-COVID levels to now 80% above pre-COVID levels just in the last few months. It's actually strengthened. And the intent to travel domestically is 2x what it was before COVID. And that research is remaining consistently strong. The enthusiasm for travel is also reflected in our revenue intakes. And we published these statistics last week based on the rolling 4-week trends, which shows above 120% -- our intakes are 120% above pre-COVID levels with less than 100% of pre-COVID capacity being operated on the international network. This shows you that there is strong confidence into demand for aviation still, and it's not only a trend we're seeing in Australia, it's a trend around the world. For today, it's about looking much further ahead all the way through to financial year '30 and how this business will keep on evolving. And in particular, how we achieved the balance of delivering for our customers, for our people and for our shareholders. With that, I'm going to hand over to Markus, who's going to take you through the first part of our presentations today, which talks about how we're engaging our customers. Thank you very much.

Thank you, Alan. My name is Markus Svensson, I'm the group's Chief Customer Officer since November last year. It also means I'm in charge of -- the team is in charge -- my team is in charge of food and beverage. I can assure you Alan will not be the chef. We will not serve Irish stew and not Swedish meatballs for that matter either. Very fortunate to be in 12 years with Qantas in a lot of different roles. I headed up network planning, revenue management and alliance for Qantas Airline prior to taking this job. And also among other roles as well, I have been based in London for Qantas. So great experience I've had at Qantas. As Alan just mentioned today, I'm going to take you through what we're doing to invest in customers, and we're very committed to do so. And I will talk through both Qantas Loyalty and Jetstar. But before I do so, I would like to play our latest brand campaign. [Presentation]

I hope you all teared up. It's a great story. This is actually a real story of a mother and son who hadn't seen each other for 4 years. And actually, the clip you're seeing here is actually the first time they've met for 4 years. We did that take, and we got it right in the first take. Quite amazing. So this brand campaign is about reinforcing the emotional connection Australia has with Qantas. As Alan mentioned, operational challenges we had 12 months ago did put some strain on that relationship. Having that said, Qantas is an iconic brand and is still incredibly strong. It is still the most preferred airline brand in Australia with a margin, which is a good segue into our brands and our customer value proposition. As a group, we are uniquely positioned with 2 very strong distinctive brand, Qantas and Jetstar. The clarity of what the Qantas and the Jetstar brand stands for in the flying market enable us to target all customer segments effectively, and I would stress the word effectively. Qantas is targeting business and premium leisure traveling, seeking a full-service experience. Jetstar is focused on the cost-conscious traveler seeking great experience at low prices. Qantas Loyalty is the leading airline program -- loyalty airline program in Australia and undoubtedly the most successful brand extension in the Australian market which talks to the strength of the Qantas brand. Our customer value propositions are strongly linked to what the brand represents. Having a clear customer value proposition allow us to be very clear how to win in each segment, but also where and how we are investing in customers. For example, Qantas is all about network schedule, on-time reliability, superior product, all-inclusive and unique Australian service. And in conjunction with loyalty, we're offering unrivaled reward and recognition. But before I go further into the investment today, I would like to share a case study that Alan referred to around Qantas Domestic. So as I said earlier, we've had a long-term focus on investing in the customer experience. As the NPS graph shows on the right, it's something we stayed true to for a long time and over many years. We also know that the inherent strength in the brand we will be able to recover as we did after the engineering dispute, which was a year-long dispute in 2007 and 2008, as well as the industrial dispute that led to the grounding of the Qantas fleet in 2011. However, as the industry restarted, our operational performance wasn't as good as we or our customers expected, and our NPS took a hit, and we apologize for that. So as we know that one of the most important parts of the Qantas value proposition is on-time reliable operations. We knew that action speaks louder than words. So we have had a relentless focus on fixing it and getting it right for the last 12 months. For example, we deliberately had more spare aircraft and crew to ensure operations got back to where it needed to be. And it's paid off. We are the most reliable major domestic airline, so 10 out of 11 months with [ best fleet ], that's including May, we know we're going to win, and lowest average cancellation rate for the last 11 months. We almost have a 20% reduction in mishandled bags pre-COVID. And that said, we are not stopping here. We have the ambition and the line of sight to have the highest baggage completion rates in the industry for full-service carriers. And call wait times are well below pre-COVID, and probably one of the lowest among any large Australian brand. The focus is now on increasing self-service which we know customers are asking for and improving the quality in the customer interaction. So this focus on investment allows us to bring back NPS to pre-COVID levels. But let me now go back to the Qantas Loyalty and Jetstar value proposition. The Qantas loyalty value proposition is well understood. And it is to be the best loyalty ecosystem for frequent flyers and QBR members. Given the strength of the loyalty value proposition, it now lives in symbiosis with a flying business value proposition. And these 2 mutually enforces each other. The Jetstar value proposition is all about democratizing travel for low fares and choice. Before I move on and talk more about customer investments for each brand, I would like to leave you with 2 key takeaways. One, our customer value propositions are clear and competitive and strongly linked and aligned with the brands. How and where we invest is directly linked back to the customer value proposition to ensure it's enhanced and stay competitive. So let me now move to Qantas customer investment. But before I do, it might be worth calling out 3 themes you will see across the group's investments today. First of all, as Alan mentioned, we're going through a significant cycle of investment in terms of the customer experience across all the brands. Across all the 3 brands, we're investing heavily in the customers' digital experience. And thirdly, a number of the investments you will see today are group investments, either across Qantas Airline and Loyalty or Qantas or Jetstar. As you can see in the page here, there's quite a few Qantas investments. I will not cover all of them. I will just touch upon a few ones that I think are worth highlighting. One is the Qantas digital ecosystem. It's being replatformed. This, to drive increased self-service, something I mentioned before that's customers really asking for, and they're asking for it to be done in the app. We also do investments in the digital ecosystem to stay relevant in a world of AI and large language models. And finally, I'm announcing today, we will launch a new app by end of the year that will enable digital services like baggage tracking. We're investing $100 million in lounges over the coming 3 years. We know that lounges is one of the top 3 drivers for our tiered customers and premium customers when traveling with us. So we're -- over the coming 3 years, we are rebuilding Auckland, Sydney and Melbourne International Business as well as opening our first-class Lounge in London in conjunction with the first Sunrise flight. For domestic, we are refreshing and expanding lounges in Adelaide, Hobart, Perth, Port Hedland and Broome. In the air, we're investing in new product for all cabins. We already, a couple of months ago, showcased our new first and business cabin for the A350 on the Sunrise aircraft with more to come for Premium and Economy seats. And some of the innovation we've done for the Economy seats will be available on the A220 when it arrives later this year with the A321XLRs. And also announcing today, we will turn on fast and free WiFi on international flights when they're flying over the Australian land mass. So if you're flying to Bali, Singapore, Jakarta on a 737 or a domestic configured A330, you will have access to free -- fast and free WiFi as you have on domestic today. And finally, we are also investing on something we know is really important for our customers which is waste reduction, targeting to be net zero in single-use plastic by 2027. So now let me move over to Loyalty. Investment in customers for loyalty is all about enhancing the member experience and engagement. I talked about the Qantas app before. It is really the heart of how we engage with our frequent flyers. We have 1.6 million active users a month. And as we are -- as I talked about with the new replatforming of our digital ecosystem and the new app, we will now later this year have an app that enables the full integration of the flying part and the loyalty part to drive further engagement. And we know investment in the app so far has paid off. For example, 20% of new frequent flyer joined us through the app. 25% of hotels and holidays total transaction value come through the app. Another area we're investing in is redemptions. We know it's traditionally been about flying, and Classic Rewards is still our hero product. But over the last 12 months, we have made investments in non-air redemptions with increased breadth and value across hotels, holidays and retail categories. Another one is Qantas Business Rewards. We continue to invest in QBR, which now has 450,000 members, 1 in 5 SMEs in this country. Growing the ecosystem is key, and although we already have 50 partners, we will continue to add more. And you will hear more about that this afternoon from Olivia Wirth. So finally, let me move to Jetstar. So Jetstar's customer investments is all about low fares and choice, investing in low fares and headline-grabbing promotions like the recent Birthday Sale or Jetstar Price Beat Guarantee. It's important to ensure that Jetstar is seen -- remain the low fare leader. In 2023 alone, we're expecting to have 10 million fares under $100 offered to customers. More choice. By investing in smarter and better ancillary bundles, we will give customers the opportunity to tailor their travel more. Steph will later on talk today about operational reliability for Jetstar, but I do want to point out 1 group investment we are doing, which is seamless reaccommodation of customers on Qantas and Jetstar or vice versa in a case of disruption. Having this disruptions management capability to move customers between each of the brand in disruption is a true competitive advantage and hard to replicate to be honest and something for our customers to benefit from. The new aircraft we're getting, for example, the new aircraft has extra large overhead bins, 40% larger. We know this always is a pain point. And to have that new cabin definitely is a customer benefit. We're also investing in entertainment streaming. We know this aircraft is going to fly longer, for example, to Bali. So to offer paid entertainment streaming is a key part of it. This entertainment or this streaming capability also allow us to develop new digital services like food and beverage offering. So before I hand over to Andrew David and Steph Tully to talk about the domestic and international businesses, I just want to finish up on investment in sustainability from Jetstar customers' point of view. The new A321neos reduce carbon emissions as it uses 20% less fuel and is 50% quieter than previous A320s. Also, what we will do is launching in-flight waste separation from June, part of our target to be net zero waste to landfill tagged by 2030. So thank you very much, and I will hand over to Andrew and Steph to talk through domestic and international.

Good morning. I'm Andrew David, CEO of Qantas Domestic and International pending retirement. This section is about the domestic market and why our dual brand strategy gives us a sustainable and profitable competitive advantage. I'm going to talk about the market as a whole and then dive into the Qantas Domestic business. I will then hand to Steph to talk about the Jetstar business. But before I do, I wanted to share some personal reflections with you. I've been in this industry a long time, more decades than I like to count. I've been with -- I held executive roles at Air New Zealand, at Virgin, at Tiger, at Jetstar and at Qantas. I've been with the Qantas Group now for 10 years. I've never seen the industry in such a strong position throughout that time. Why? Structural changes were forced on the industry during COVID. The strong travel demand. Future fleet and technologies are opportunities that provides a platform for profitability, investment and growth. All these elements bode well for the future of the Qantas Group, the industry as a whole and our customers. This graph shows you the Australian domestic aviation market has seen stable growth for the past 20 years with 3.2% growth per annum in domestic RPKs from 2006 to 2019. We are confident this growth will continue going forward. Why? The RBA's forecast for GDP is to return to 2% plus growth by FY '25. We're seeing continued resource growth. Net migration is higher than expected, and inbound tourism will continue to grow. International point-of-sale passengers accounted for 9% of Qantas domestic sectors pre-COVID. And finally, demand has rebounded quickly. And as you heard Alan say, the future intent to travel remains strong. We forecast that the total profit pool will have grown by 80% to $2 billion for domestic market by the end of FY '23 versus the 5 years pre-COVID. The growth has been driven by permanent structural cost transformation from Qantas and Virgin. And the current market environment is considered a sustainable and rational position after Virgin's administration. Qantas has established a structurally advantaged share of industry profits driven by, one, a deliberate dual brand strategy that effectively serves key customer segments, a margin advantage by both brands over peers and growth into carrier capacity share from 61% pre-COVID to 66%. This was due to Tiger exiting the market, Jetstar and Qantas growth and Qantas share gain in corporate and SME traffic. We've seen no indication that the commercial, rational and disciplined market behaviors we've witnessed coming out of COVID will change. We expect our position within the market to be sustainable going forward due to the continued recovery of corporate demand, continued transformation to mitigate inflationary pressures and structural uplift of RASK given network settings through putting the right aircraft on the right route and our targeted marketing strategy, for example, our growth in the SME sector. Markus referred to that when he spoke to the 450,000 members in our QBR program. The Qantas Group has a coordinated dual brand strategy. Qantas works with Jetstar to ensure the best group outcome. With scale in both brands, both Qantas and Jetstar target an 8% to 10% margin advantage over peers but through different ways. Qantas targets an 18% EBIT margin through capturing a revenue premium while being disciplined on cost. Qantas serves the corporate SME and premium leisure segments with this revenue premium achieved through network operational performance product and loyalty. Jetstar targets 15% of EBIT margin through a lower cost base and ancillary revenue which Steph is going to talk us through in a minute. Jetstar serves the price-sensitive business and leisure segments. Qantas' domestic margin structurally increased from 13% pre-COVID to 18%, it was driven by 3 factors: firstly, permanent cost transformation; secondly, our network evolution. We've reduced costs in our network. One example, we've rebased our 71s in the West, we moved them to the east and applied them on more suitable routes in our network. We've grown into existing markets, for example, participating in the growth of the resource sector in intra WA, where we took retiring 320s from Jetstar and applied them there and had -- saw a share gain and market growth in both RPT and charter traffic in the West. This will lead to a record result in FY '23 out of that sector which is 20% higher than the previous record in FY '13 when we saw the last resource burn. We've also grown into new markets. Using the E190s, we now operate into new markets like Cambria Darwin and Melbourne Townsville, and we've increased frequency on routes such as Adelaide, Canberra, where we've replaced 73 flying with smaller E190 aircraft. And the third driver behind the margin increase was a structural permanent growth in RASK. Demand has been ahead of supply as industry recovers. RASK is expected to moderate but remain above pre-COVID levels, given the inflationary effect of 5 years since the pandemic began, structural network changes, as I've already spoken about and the introduction of new fleet, which I will take you through. Meanwhile, CASK is also expected to reduce as temporary costs are removed and fleet gets back to full utilization and we enjoy the full benefit of the transformation that we've undergone. We believe the 18% margin is sustainable going forward due to 4 drivers: further network optimization; our fleet renewal program; our continued transformation initiatives that will mitigate ongoing inflationary pressures; and customer experience which Markus has already talked to. One of the key drivers behind sustaining our margin going forward is network optimization. The Australian market has very diverse needs. We are uniquely positioned to address this with our fleet and network proposition. On high-volume trunk routes, we offer frequency advantage. Sydney and Melbourne, we have 15-minute departures in peak, options for connecting traffic and the best product, service and operational performance. On thinner routes, we have the aircraft that can serve the most profitably. I'm going to focus on 2 route types. First one is sub trunk routes. These are routes between smaller cities and hubs. Using the A220 capability, we will gain a strategic competitive advantage through a combination of superior range and frequency. With regards to range, the 220 has a significant range uplift versus the 71 and it's capable of serving any domestic route in Australia. The smaller gauge also allows us to operate with more frequency. I've already referenced Adelaide, Canberra with the E190. We can double our frequency compared to 71s. Pending the arrival of the A220s later this year, this advantage has already been enabled through our E190 fleet. Regional routes. These are smaller volume routes that are aggregated into major hubs. Using Turboprops, we drive a competitive advantage through offering time-of-day coverage and frequency. And we link those regional centers together. Those markets would be unprofitable if we try to serve them with larger aircraft. Our domestic network offers an unrivaled connectivity proposition for our customers. Customers can fly where they want, when they want. Through Qantas' own metal and our partner network, Qantas can serve 93% of combined domestic and international passenger demand. An example is Bundaberg. In the past year on Brisbane Bundaberg, 106,000 passengers traveled on that route. Of those, Qantas connected 52% to and from 260 destinations outside of Brisbane, 70 domestic and 199 international via Qantas metal and on our partners. Why is this connectivity so important? The breadth of this network benefits the group and our loyalty program as the international network acts as an aspirational element and drives customers to earn and redeem across our domestic network. And Qantas' mix of gauge means it can provide the frequency to minimize connection times and have the convenience of through-check baggage. And customers are willing to pay a premium for that offering. I've spoken about how we have the fleet necessary to service the entire spectrum. This competitive advantage will be sustained by our investment in new fleet and fleet growth. On this slide, you see before you, we've mapped different aircraft types based on their optimal deployment across the different types of routes we see domestically. The dash boxes represent our legacy fleet, and the blue boxes represent new fleet. Working up from the bottom of the slide, we will have 20 A320 family aircraft by FY '24. We currently have 13 to service more resource routes and new mine sites in Western Australia. We will have up to 30 E190s by FY '25. The E190s fill the gap where the 717 was slightly too large and limited by range. We will have 29 A220s by FY '27. The A220s range can cover, as I said earlier, any Australian domestic route unlocking new opportunities that Qantas simply does not have with the 717. And we will have 20 A321 XLRs by FY '27. The XLR provides critical gauge uplift in peak periods while maintaining flexibility to deploy across multiple markets. That next-generation technology is a significant improvement on the existing fleet. We will get improved RASK strength through higher premium mix and improved cost strength through greater gauge, longer range, better utilization, improved fuel burn and lower engineering costs. The fleet will be transitioned over the next few years. By FY '27, new fleet will represent more than half of the ASKs of our domestic narrowbody activity. Now the comparison here is A220s and A321s with 71s and 73s. Over this period, the fleet age will reduce from 16.4 years today to 9.9 years in FY '27. The transformation of our fleet and network is accompanied by a transformation program that aims to redesign and enhance the way we deliver our services across the entire business. Transformation opportunity spans almost all aspects of the airline. But one example I want to focus on is transforming our planning and operations with technology and data. Digitizing our operations and enhancing our planning system will support rapid integration of plans, minimization of inefficiency and enhanced and faster operational decision-making. Our digital operations strategy will bring data and tools such as AI and machine learning to bear over multiple time horizons to enable sophisticated optimization of our workforce and asset deployment and rapid learning from actual performance to refine planning models and drive further continuous improvement. As I mentioned at the beginning, Qantas is only half the story for domestic. Our coordination with Jetstar and our dual brand strategy is a key competitive advantage for the group. I'm now going to pass to Steph to talk you through the strategy for our Jetstar domestic business. Thank you.

Thanks, Andrew, and good morning, everyone. For those I haven't met, my name is Steph Tully, and I've been leading the Jetstar business since November last year. I actually started working for Qantas symbolically about 2 weeks after Jetstar took its first flight in 2004, and I've worked all across the airline, Qantas Airline and Qantas Loyalty business, in various commercial and operational roles. And my last role was in the role that Markus is currently, in leading customer. Prior to Qantas, I worked for Ansett, including through the Air New Zealand merger. So whilst I don't have as many airlines as Mr. David, I do have a few. So I'm going to talk to you today about Jetstar and the domestic market. Jetstar turned 19 last week, and it really is a privilege for me to lead it into its adult life. It's really a fantastic business and brand that has incredible foundations built over those 19 years of the growth that lies ahead. There is absolutely no doubt that Jetstar is the leading low-cost carrier in Australia. It has very high awareness and is absolutely seen as the price leader. The model has sophisticated over the 19 years we've been operating. Jetstar really takes the best from low-cost carriers around the world, but also has some unique benefits that are obtained by being part of the highly successful Qantas Group. Jetstar has many competitive advantage, including its scale and cost base, fleet, including the fantastic new arrivals, its brand and distribution strength and its best-in-class ancillary revenue management. Its recognition, as you can see on the chart, is extremely high. And awareness, the scale, the unrivaled cost base in this market really make it a formidable competitor for new or low-cost carrier entries such as Bonza and Rex to an extent as well. Prior to COVID, we modeled Jetstar's unit cost at 30% lower than Virgin Australia's. We have modeled this again even post Virgin Australia's administration transformation and movement downmarket where they really do attempt to serve both ends of the market and have kept some product but taken away many, and this remains at 25%. We see it increasing closer to 30% as Jetstar's scale and capacity grows and transformation continues. Jetstar's unrivaled strength in ancillary revenue management enables us to be the absolute fare leader in the market. Our leading fares are usually 30% lower than Virgin Australia's, but the revenue gap is closed and bridged significantly through the ancillary choices we offer our customers, thus, a margin advantage and absolute clarity on our value proposition. Jetstar Domestic has a history of delivering low-cost carrier industry-leading margins including in high fuel environments as we are in now. Whilst FY '23 has been a year of restart and ramp-up, we are now operating at over 100% capacity. And in FY '24, we'll be at 115%. We are on track to achieve a 15% margin in FY '24, equaling our FY '19 margin despite fuel being elevated. And this have been compared often with Ryanair, often considered the world's leading low-cost carrier, who recently announced they had achieved 15% in FY '23 and have analysts projecting it to achieve 14% in FY '24. There is potential for the 15% to increase if fuel prices moderate, noting carbon costs into the future. The focus today is really on how we will deliver and sustain that margin premium over time through 4 key priorities. Firstly, scaling to 115% and beyond as the new fleet arrive; removing temporary costs associated with the operational restart; we continue to passionately focus on low cost and transformation, something that's absolutely in the DNA of Jetstar; and by further innovation and growth in the ancillary revenue management. All of this in an environment where travel intention demands have shown no signs of slowing down. Actually, the price-sensitive end of the market is maintaining unprecedented levels of travel intention. And Jetstar's intakes, both domestically and internationally, continue to break records week after week after week. Firstly, on Jetstar's fleet. Jetstar now has 105 aircraft across the portfolio with 2 more arriving in the next couple of weeks. Jetstar has actually been the first airline in Australia to take the latest generation aircraft type, and we will be at 9 by the end of June, as I said, and 18 by the end of next year. The aircraft bring many benefits, as Markus outlined, for the customer, also cost, fuel and environment. And the aircraft have outperformed our expectations on multiple dimensions. They are 50% quieter, the pilots love to fly them. They use 20% less fuel which is great for the environment, but also for the Jetstar cost base. And they have mechanical reliability of 99.8%. The customer feedback on the wider seats, the larger overhead bins and other new features is very strong. The cost efficiency they bring brings unit cost advantage versus our existing fleet, but also really importantly, versus the fleet our competitors are introducing. This is via fuel savings, seat count and increased utilization, including increased international flying. We're rapidly moving through the rollover of the Jetstar fleet and it will exceed 50% by FY '27. Our fleet age is already young at 10 and our fleet investment will ensure this continues and is maintained through FY '27 and beyond. Secondly, to just talk about transformation, something that's really in the heart of Jetstar. It's in the DNA of Jetstar, and we will continue to give it our unrelenting focus. We are pursuing transformation across all cost and revenue lines of the business, from overall planning, from network design through day of operations delivery where we see numerous value buckets to be achieved through uplifting capabilities and processes and tools, including through digitization and AI-enabled better predictive capabilities, various initiatives leading to fuel efficiencies, importantly, how we leverage the advantages of being part of the Qantas Group, those advantages increasing with the fleet commonality into the future, such as in engineering and supply chain. And for aviation charges, which is Jetstar's biggest controllable cost, we're seeing progressive airports partnering, working with us on new models. Jetstar doesn't need all the bells and whistles at every terminal, and Jetstar's customers spend a lot in retail. We'll have more to share on some of those things in the next couple of weeks. We have a mobilized program of work, which really has the attention of everyone at Jetstar from the leadership through to the front line. And our cost base will continue to be unrivaled in this market. Thirdly, to talk about removing the temporary costs associated with our operational restart. We plan to be back at pre-COVID levels of performance by mid this year with the numerous initiatives to support this already leading to some improvements in the current month. Our planning redesign work also suggests that we might exceed pre-COVID performance into the future. Supply chain issues are improving, and there has been a lot of discussion about supply chain issues, so we thought we'd bring one of those to life. The example is the Jetstar APU or auxiliary power unit. It's issued by our supplier called Honeywell, and it's located inside the aircraft tail, provides power to the aircraft when the engines are off. When not serviceable, a manual solution is required, requiring time from our pilots and engineers that puts pressure on turn time performance. There's been a supply design and repair issue with this part. In February this year, APU issues translated to 3,800 minutes of delay impact for Jetstar, that's well over 5%. This has improved to 800 minutes in May as our suppliers improve their supply chain and repairs and set up a new shop at Jetstar's demand. Pre-COVID, this was at 300 minutes. So you can see the improvement coming into the market. And lots of our pilots and engineers are really celebrating the progress with the APU. There are a number of other things we're doing to compensate in a way for the supply chain issues that are still evident. We've changed parts of our customer experience to assist to further improve operational performance. I know everyone here would know this as they're frequent Jetstar customers, but last week, in line with some other low-cost carriers around the world, we extended our check-in and gate closure times. The APU improvement, other supply chain improvements and changes to the operation are examples of the things we're doing to get Jetstar back to its best. In the last 7 days, Jetstar's on-time performance was 66%. Our cancellation rate was 3%, which you will see is our target and what we were achieving pre-COVID. We know we have more work to do, but the signs are looking good, and everyone at Jetstar is behind making these improvements. The final part of the puzzle for Jetstar is ancillary growth. Jetstar really is industry-leading on ancillary revenue, and this is all about, as Markus said, choice for our customers. You can see the growth we have delivered on the graph, but to give you a sense of what this translates to in terms of basket size for our customers, domestically, in FY '19, it was $26.10. In FY '23, it's $35.60. Internationally, $77.20, has grown to $93.50. That's around 40% growth, and we have plans in place to continue that trajectory via new but also optimized offerings. The offerings you see on the right of the slide are those comparing Jetstar to Ryanair, where you will see there are opportunities for not only further products, but also opportunities we are exploring around optimization. One of the opportunities is by working with Liv's Qantas Frequent Flyer team. That's an asset Ryanair don't have and many stand-alone low-cost carriers don't have either. And we see lots more potential for integration with the loyalty business and Jetstar. Also close to my heart from my experience in Markus' role, lots of opportunities to improve the digital ecosystem of Jetstar. In FY '23, ancillary revenue will be 19% of Jetstar revenue, and we expect this to grow to 25% in the future. A few ancillary examples to bring this to life. In response to customers' desire during COVID for more flexibility when purchasing even low-cost fares, we introduced a product called FareCredit, enabling customers to purchase more flexibility. Tens of millions of revenue have already eventuated from that product. We optimize the user experience for the purchase of bundles, key to Jetstar's ancillary revenue offering. We've increased conversion rates and we've saved customers' time in their transaction with Jetstar. And lastly, just a recent example from March this year, we relaunched our seat maps and we've seen a 26% lift in revenue purchasing seats versus FY '19 just through a change in the design of the seat map selection. We really have the best product and digital people working on this. So in summary, before we head to Q&A. We really are 2 arms, Andrew and I, of the same body across Qantas and Jetstar in the way we manage our dual brand and domestic business. We are in a very strong demand environment, and it's a rational market. The fleet transformation is and will deliver a step change in our unit cost reduction. We will be relentlessly focused across all our teams on the customer and on transformation, and the 2 brands will deliver and sustain those leading margins in FY '24 and beyond. Thank you.

Thank you, Steph. Thank you, Andrew, and thank you, Markus. Now we'll begin the first of our Q&A sessions today. So I'd like to invite Steph back onto the stage, Andrew, Markus and also Alan to the lectern. The session will last about 15 minutes. We just need to allocate time across the day. We'll prioritize questions in the room. We would ask if you limit your questions to 1 per person initially just to make sure we can go through everyone. The question-and-answer session will focus on domestic airlines and also customer. Thank you.

Thanks, Fil. And yes, if we can keep -- we're going to have 5 Q&A sessions during the day, covering each of the segments that you get presentations on. So we can keep it to the presentation that you've seen so far. And I will say that while the guys are up on the stage, we do have a number of the senior executives here, including Vanessa, obviously. And we may refer some of the questions to people outside of the panel, if needed, if these guys can't answer, yes. Okay. Jake, you look like you're the first. You got the microphone already. Is that working, that microphone? No? Okay, I'll repeat it just for the people online.

Just one for Steph, can you break down the ancillary between services in-flight, insurance and maybe on the ground, how they're expended, please?

Jake asks to break down the ancillary revenue between in-flight and on the ground and insurance, Steph?

Yes. So we don't disclose the full detail of that, but the predominant source of revenue to Jetstar is the products associated with flying. Sorry, can you hear me? So I was just saying we don't provide the detailed breakdown of that. But the predominant source of the ancillary revenue for Jetstar is the products directly linked to flying, so bags, seats, et cetera. We have a number of other distribution sources through cars, hotels, other things. But you'll find for most low-cost carriers, the products associated with unbundling the airline offer is the primary source.

And I think this is a huge strategic advantage because it's taken us years to get to this stage. We have a lot of investment on the digital application of this. And I think it's going to be hard for other airlines to catch up on this certainly in the near term. So we're seeing this as a big advantage to maintain those margins. Other questions? The guys over here.

It's Niraj from Goldman Sachs. Just another question on Jetstar actually. Maybe just to help us calibrate what would that 15% look like at the pre-COVID average of, I think, AUD 110 per barrel you called out?

Yes. So the margin pre-COVID got up to that level in the past, but the fuel price was a lot lower. And what enables us to get it at the higher fuel price is really the scale and the rollover of our fleet, the energy that we're putting on transformation, that growth in ancillary revenue at unprecedented levels and just really the focus of Jetstar on transformation. So we have achieved nearly that level in the past. So that's sustaining that moving forward.

And if you remember what we did say before COVID, we were aiming for a 22% margin for Jetstar based on the best in the industry, which was what Ryanair were achieving, I think, back in Europe during that period of time. Now of course, that 22%, that not only just depends on fuel, but the economic conditions that you're being at the time and the supply capacity. But we do think that achieving the best in breed was what we were always after domestically. That's why 18% for Qantas is the best, I think, of any domestic airline around the globe. And the 22% would be the best for any low-cost carrier in the low fuel environment, which is what others were achieving before COVID. Other questions?

Owen Birrell from RBC. A question, I guess, directed at Stephanie, but Andrew, feel free to jump in on this one. Stephanie, you mentioned by FY '27, 50% of the fleet will be new aircraft. I think you said average age of about 9 years continuing through that period. Based on your modeling and you've -- so your rivals take on all of their fleet deliveries as well, what average age do you think the comparable fleets will be? And what proportion of their fleet will be new aircraft versus old?

Talking about our domestic competitors?

Your domestic rivals, principally Virgin, I would imagine.

Yes. We have modeled that, and we see Jetstar being the leading fleet age in the market still over that rollover period. So they've obviously got new arrivals, but with our rollover, with the flexibility, I think it's really important to think of the Jetstar fleet in the context of the group as well. So we've -- as Andrew mentioned in his presentation, we've sent a number of fleet to the West that are older aged aircraft where there's lower utilization flying. And the other thing Jetstar has is a business in Singapore, which we'll talk to after and a business in Japan where you've seen fleet movement as well. So we have the ability to control that fleet size and age through movements in the group as well.

Andrew?

Yes. So on that comparison that I highlighted, we have modeled Virgin 737 MAX deliveries, and we expect by FY '27 that our fleet age will be below their fleet age.

This is for the Qantas domestic business?

That's for the Qantas domestic business on that comparison of 73s and 71s replaced by 220s and 321s versus their MAX deliveries.

We should point out and probably taken for granted that we did a competition between the MAX and the NEO and the NEO won. So it's not like-for-like even when you have the same amount of aircraft within the fleet. The neo and particularly the 321, the LRs and the XLRs are a lot more capable aircraft, a lot more cost-effective aircraft and it gave us a major strategic advantage. And we did, through the competition in the middle of COVID, where nobody was ordering aircraft and we got access to very attractive pricing, very attractive. Vanessa led the deal on this, very attractive pricing, very attractive delivery slots. And you talk to Boeing and Airbus now, they're essentially full for most of the rest of this decade. So it's very hard to get aircraft. What we've got is aircraft slots that are as rare as hen's teeth which gives us a very strategic advantage going forward. Other questions?

I'll start. Anthony Moulder from Jefferies. So I wanted to ask on the RASK benefit to Qantas. You talked to that benefit coming from the A321s replacing the 738s as well as that 717 going into an A220. How much of that is the premium seat mix versus the growth outside of that seat mix that you're expecting in RASK?

So Anthony, probably the best way to answer your question is to start with where we are now, which is pre-220s and 321s. We do expect RASK to normalize above pre-COVID levels because of those structural changes that I took you through and because of the inflationary effect over the last 5 years. So a combination of that gets you to a place which is above where we were pre-COVID. We expect to hold that by further optimization of our network, the transformation activity and then the fleet investment. That fleet investment, a lot of it is around capability of aircraft. So the increased range, higher utilization that drives down your CASK, the engineering costs, the fuel costs are all lower. All of those things give you a CASK benefit. But where -- the way we always look at these investments is what it does to margin. So you see a RASK improvement. You do see a greater CASK improvement, but you see that margin improvement coming through. And both these aircraft are really going to change this marketplace. I'm absolutely confident that we've made the right decision. Vanessa led the whole campaign with Airbus and Boeing. And the selection of 220s and 321s is really going to change this marketplace. It's an exciting time for the Qantas business.

A question over here.

Andre Fromyhr from UBS. I understand you're targeting 18% EBIT margin next year in Qantas Domestic. But how could you describe the range of margins that you get across the different route segments, the difference between a trunk and a regional operation? And how might that be impacted by like wet leasing in the case of the Embraers?

So Andre, the benefit of the strategy that we have that I outlined is that we have these multiple aircraft types and operations that allow us to service all these diverse markets. And we are seeing growth come back at a different pace. The regional -- sorry, the resource market is well ahead of what we saw in 2019 and even above what we saw as a record back in 2013. We've grown our share of charter in the West, and we've grown in line with market growth for RPT. So the A320s, we're putting in the West. The reason we're putting another 7 in is a key part of delivering on that margin target of 18%. When you strip it down into corporate and SMEs, our resource market is well ahead pre-COVID. SME is actually slightly above pre-COVID. The SME, perhaps because they don't have CFOs in there managing budgets or maybe because they're building businesses and they need a person-to-person contact, but they're well ahead or ahead of pre-COVID levels. Government is in line with pre-COVID levels, so is construction. The one sector that is behind, which we modeled and expected, is professional services finance sector where we're seeing combination of ESG and technology, replacing some of those day trips. But we modeled that, and we actually communicated. We thought it would come back to about 87% of pre-COVID and it's tracking exactly in line with that. So it is this combination of markets and segments moving at a different speed and the flexibility we have to address that need. In regards to your question on the 190s, the beauty of the deal that we have there is we can flex that capacity up and down. But what that aircraft has done is allowed us to launch new routes that we couldn't operate before. The 71 didn't have the range, it was slightly too big. The E190 can operate a market like Canberra-Darwin daily on a very profitable basis. And that's -- that is the beginning of what you're going to see with the 220s.

I'll maybe just add a little bit to this. I mean, like anything, like what you guys invest in, there is a portfolio here and there's some parts of the portfolio that do really well and some parts at times that don't. In the length of time I've been in this business, it does change over time. And having a diverse portfolio, and Andrew showed that unbelievable route network that's not replicated anywhere else. I mean, for a period of time during COVID, our best routes were actually the interstate routes because that's all people could travel on. And the 190s, they're meeting their business case. We wouldn't be hiring the aircraft and we wouldn't have expanded it recently if they weren't actually recovering the margins that we want from our domestic network. And a great advantage of also the 190s is we get 20% of the profitability back because we also own 20% of Alliance. So we're -- and hopefully, not in the too distant future, we'll own 100% of it because we're still keen on that. But it is for us always a portfolio and get the balance right and things over time changed, and there are some routes within that network that will lose money at times and some routes that will make a lot of money. But if you're that diverse and that risk is spread out much, you're in a very unique position in this market, comparing it to our major competitors. Other questions?

It's Matt Ryan from Barrenjoey. Just had a question about COVID travel behavior and whether you think we're sort of at a steady state now or whether you think anything's going to change into next year in regards to how people travel.

Sorry, an overhang of COVID.

Just travel patterns.

Matt, I think it's still in progress. My reference before to a finance sector, professional services consulting being down against pre-COVID levels, those factors of ESG and technology. But also, if you look at Melbourne versus Sydney, Melbourne has been slower to come back on those 1-day trips than Sydney has simply because of the experience Melbourne had versus what we had here. And that is progressing slightly. We are seeing that confidence come. We are seeing corporate travel growing. We are seeing SME continuing to grow. And we're growing our share of both those markets as well. I think it will take time. It will take time. It will run through this year. Our prediction is for that sector, and I'm talking about professional services, which pre-COVID was about 10% of our market. Right now, it's about 7% of our market. We're saying that's going to take probably 2 to 3 years to get back to 100% and beyond. But we're seeing growth in so many other markets, which is why we have the confidence we do in our margin targets and our RASK position.

It's actually interesting. We're probably a bit ahead of what we're seeing in other countries because I think our same-day trips and those professional firms are a bit ahead of what you're seeing in the U.S. But there is this other market that the U.S. carriers are talking about, which I think we're definitely seeing, which is now people working remotely can go on longer breaks and work from anywhere. And it's sort of a bit more of these leisure weekends and more time available to do that. And that's probably one of the reasons why our leisure intakes are so strong, and that may be a step change. I think the Americans are forecasting arrears. It's a change of dynamic that will live past COVID because of that flexibility to work from anywhere. So we'll see if that continues. I think we have time for one more question in this session. And we'll have plenty of other sessions later. Yes?

Paul Butler from Credit Suisse. Just a question for Markus. Why do I want baggage tracking on the app? I mean I just want my bags to be there when I hop off the aircraft. I don't want to discover 10 minutes after the aircraft's taken off that my bags have been left behind.

It's a good question. And we debated that a lot. And I know we've debated in the team that we have different preferences. But we know from research that the customer do want to see -- the majority of customers do want to see it. And we will give you the opportunity not to turn off that tracking if you don't want to have it so you don't need to worry. But we know from research it's something customers ask for. It's been in the U.S. for the last 10 years talking to the U.S. carriers. It's something that customers absolutely demand in the U.S. market at the moment.

Well, I think the focus is, as Markus said on his slide, that mishandled bags are 18% below where they were before COVID. We've seen a dramatic step change in that. And we have a plan in place to actually to make it the best full-service airline in the world at delivering people's bags, the completions of the bags. The tracking also allows us to be able to identify where the bags are and if they are mishandled to reconcile them back to the customer a lot faster. So that's a big advantage to actually having it as well. But the intent is absolutely that we're going to be relentless on getting those mishandled bags numbers down to be the best in the world. And we're not that far away from it at the moment and a bit more over the next couple of months, a couple of years will get us there. I think that's all we have time for in this section, and we'll come back. We're going to do international now, and we come back and talk about international in the Q&A. And so it's back to Andrew David to do international.

You have to listen to me for a second time. I promise it's the last. So in this section, we're going to be talking about or I'll be speaking about Qantas' international strategy to secure ongoing growth and earnings. Steph is going to come up and talk about Jetstar International and I'm going to begin with a quick summary of the outlook for global aviation, supply and demand. But before I do, like I did in the domestic section, I just want to reflect and provide you with some personal thoughts on the international market. I think every one of us in this room is aware that international airline profitability has been up and down in the past for a variety of factors, one of those, an oversupply of capacity. Similar to my reflections on the domestic market, I'd say I've never seen such favorable international conditions. Demand is well ahead of supply, and we'll continue like that for some time to come. We have new fleet on the way, which will give Qantas and Jetstar a sustainable competitive advantage. We've made structural changes to our cost base. And for Qantas, the performance improvement of freight is significant. All these factors give me confidence that we will consistently deliver profitable EBIT margins in our international business year-on-year. Over the next 20 years, IATA's growth outlook provides confidence in long-term global market demand. This is especially the case in -- thank you. We have a -- doing the slide for me, I forgot to do it. Thank you very much, somebody's paying attention. This is especially the case in Asia Pacific which has the highest forecasted rate of growth out of all regions at 4.9% per annum. We are confident we can take advantage of these long-term trends, and we expect India and China to both recover to long-term average growth rates that are greater than what's seen in other regions. Market supply is expected to be below demand for several years to come. The dark line on this slide titled Estimated Supply on the chart on the left is IATA's estimate of supply through to FY '30. The dotted line represents a projected demand figure, which shows growth at 3% per annum. This is the lower end of global growth below the APAC growth of 4.9% you saw on the previous page. We can see that demand outstrip supply for the immediate future and through to the end of the decade. The reason for supply shortages and the reason for them to continue are driven by 3 main factors. Firstly, existing capacity, that is pre-COVID capacity, has been slow in returning to market. Aircraft and long-term storage have experienced maintenance issues and delays. There are limited maintenance repair and overhaul slots and all airlines and OEMs have experienced engine and spare part shortages. Secondly, new capacity has been delayed from manufacturers. Narrow and widebody production has been impacted with both Boeing and Airbus experiencing delays. And thirdly, labor availability and training has contributed to supply shortages. Constrained labor markets and limited training resources have impacted global ramp-up plans. So I've covered the outlook for international market over the long term across global aviation. What I'm now going to do is talk to the details on Qantas' international strategy. Qantas' international margin has grown from 4% to 11%, driven by 3 factors: firstly, permanent cost transformation; secondly, RASK growth. This is due to a change in network mix. We've got a greater proportion of our flying on higher RASK routes such as U.K. and the U.S. versus lower RASK routes such as Hong Kong and Beijing, which we have now withdrawn from. And we've got an increase in premium mix. Our A380 reconfiguration program increases our premium mix from 23% to 30%. And we've replaced our 74 fleet with all 789s. In FY '19, we had 6 74s and 8 789s. By next month, we will have 14 789s. These aircraft when compared to the 74s improve our RASK and our CASK inclusive of fuel from increased utilization, a greater premium mix and smaller aircraft. And of course, it's enabled success stories like our Perth-London operation which I will go into more detail in a moment. That RASK growth has also been driven by the supply/demand dynamic, with continuing pent-up for demand exceeding capacity. We have seen some moderation of those RASK performance numbers we saw in the first half. But as you referenced the earlier slide, we do expect to see RASK moderation well above pre-COVID levels. Through the medium term, we are targeting an EBIT margin of greater than 8% for the Qantas International business. And growing to 10% to 12% as we introduce the Sunrise fleet and see further improvement in freight. The reason we believe this financial performance is sustainable year in, year out is because of the following drivers, which I'm going to cover in the following section. Further network optimisation, new fleet technology and the performance of our freight business. There, of course, is an ongoing focus on transforming our cost base. I covered that in the domestic section. Qantas is uniquely positioned to capture higher-yielding traffic to and from Australia. This is because we are the only global network operating from Australia that provides access to global destinations where Australians want to fly. Qantas metal flies to all 10 top 10 outbound destinations in 2019 and 16 of the top 20 before we don't cover Jetstar flies to 2 of them, Phuket and Ho Chi Minh City. And of the other 2 ports at Beijing, which we've now withdrawn from and Kuala Lumpur. And we've expanded our network footprint to access more locations, including fleet redeployment into Delhi, Bengaluru and South. We have a comprehensive partnership network with leading international carriers that complements our direct offering. Emirates and American Airlines partnerships provide access to thin routes that are not viable for Qantas to operate by itself or routes where we don't have traffic rights. Emirates provide access to 65 destinations across Europe, the Middle East and Africa. And American Airlines 130 destinations into North America. We have an unrivaled Qantas frequent flyer ecosystem that leverages our home brand strength to deliver a unique customer loyalty proposition that recognizes and rewards our frequent flyers. And we have fleet capabilities that are specifically designed to serve our long-haul markets. This includes premium aircraft configurations, lounges and technical IP. As I mentioned, our partnership network is a key competitive advantage. It means we have the largest network from the Australian market. 1,300 destinations can be directly accessed when including oneworld and loyalty partner networks. On Qantas operated network and codeshare partners, 390 destinations are accessible. This compares with 126 for Virgin. This not only benefits our customers through network access but also through loyalty reward and recognition. Reciprocal status benefits and the ability to earn on codeshares mean frequent flyers of both choice and breadth. The latest Indigo partnership is very important to our new routes into India. On Melbourne-Delhi, we have codeshare on 14 destinations in India beyond Delhi. And on Sydney-Bangalore, we have code share on 18 destinations into India beyond Bengaluru. Now let me turn to new fleet technology. New fleet technology enables profitable participation in markets simply not possible before. It will sustain future margins by opening new market opportunities, increasing the number of direct routes, improving flexibility and resilience and delivering on our sustainability targets. So let me turn to -- our success story was our 789s and our London route profitability. The 789 transformed the profit on London. It enabled the first profits on that route in over a decade. And is a repeatable strategy we can apply to other markets. The 789 transformed profitability by offering long-haul capability with a smaller gauge increased premium cabin mix and a state-of-the-art product, which drove up higher NPS across all cabins. These 3 factors have led to the 20% revenue premium we have seen over a 1 stock alternative. This success gives us confidence in increasing our 789 international footprint. We have repeated this strategy with success, opening 789 routes on Perth-Rome, Melbourne-Dallas and Sydney-Johannesburg, where we have replaced either the [ 74 ] or the 380 with the 789, we have achieved greater than a 20% RASK improvement. This has also enabled frequency increases, improving both margin and premium share. It gives us confidence for Auckland, New York, which starts next month and confidence for the additional fleet. Dreamliner 12 arrived on the first of May, and 2 more to come next month, taking our total fleet to 14 aircraft. We are exploring other potential markets such as Paris, Chicago and Seattle. Given the success of the 789, project Sunrise and the A350 technology is a game changer that will establish an unprecedented structural advantage for Qantas. Today, we are announcing as new information that Sunrise will deliver an incremental EBIT of $400 million per annum and a $400 million permanent working capital benefit at full establishment currently estimated at FY '30. This includes both passenger and freight earnings, unlocking belly freight opportunity and the redeployment of our 789 fleet. The business case also includes the cost to fully offset our carbon footprint from day 1 on all 12 aircraft. This is a growth case with 3 key drivers: Increase in premium mix. The mix on the 350 will be 41% premium seats. This compares with 30% on the 789. We'll get a fair premium for point-to-point travel. As we've seen with Perth-London, we have enjoyed a 20% revenue premium over a one-stop alternative. And we're confident we will win passenger volume and freight from competitors. We've seen the value of point-to-point connections. The Sydney London market is 2.4x, the size of the Perth-London market. And we've seen a willingness for customers to pay for a nonstop service. And our customer proposition will be optimized for long-haul travel. The economy seat will be a 33-inch pitch, 1 inch longer than what we offer on our 789s and there will be a well-being zone with self-serve snack station. Sunrise will deliver a unique, sustainable advantage as the deployment of fleet is unable to be replicated by competitors on our belief that hub carriers are unable to offer a similar network due to traffic rights that we have a unique fuel policy developed over decades of operating at the edge of aircraft's range coupled with the world's most advanced flight planning system that allows us to carry less fuel and more passengers than other airlines. And indeed, we will be seeing that on Auckland, New York with our 789 when you compare our operation with Air New Zealand's operation. And we also believe there is insufficient scale for end-of-line carriers such as Virgin Atlantic and British Airways to invest in a bespoke fleet like the one we're investing in. On top of all of this, there is also the aspirational nature of Sunrise, driving group benefit in loyalty and our domestic business. Leveraging investments in the domestic fleet will transform short-haul international flowing by enabling profitable entry onto routes unable to be served previously. This fleet opens new routes through back at the clock flying into short to mid haul markets, made feasible by range and utilization. We can economically service routes such as Perth Christchurch and Adelaide Auckland with the A320. I and Brisbane Hong Kong and Perth-Bangkok with the A321XLR. This also opens up viable international routes from secondary capital markets such as Canberra. The fleet also drives CASK improvements for our A321XLR due to the commonality we enjoy between Qantas and Jetstar. And the increased premium mix and better unit economics, as I mentioned in the domestic presentation. Fleet configurations will be designed to meet customer and route requirements. Our initial tranche of XLRs will be mainly used to fly domestic routes with the opportunity to fly more internationally with aircraft from future tranches of the XLR and 220. So to close out the discussion on Qantas international fleet plans. Let's recap the core elements of what we've just been through. In short to mid haul markets, that is Asia, New Zealand and the Pacific Islands, we will leverage our domestic strength and fleet versatility to maximize profit available through our integrated network approach. In long-haul markets, Europe, West Coast of North America, South America and South Africa, we will capitalize on our partnerships, traffic rights and home market distribution strength whilst transitioning to a new fleet to better service markets where Australians want to fly. And we will look to build on the success of the nonstop strategy and replicate into new markets. And finally, in ultra long-haul markets, such as Europe and East Coast of North America, we will differentiate ourselves by offering our unique nonstop service with fit-for-purpose aircraft and internal technical IP to open up the final frontiers of modern Aviation. And finally, let me turn to the performance of our freight business. And let me start by giving you a better understanding of the business. Qantas Freight plays a valuable role for the group, delivering more than $1.4 billion of revenue, that comes from the 18 dedicated freighter aircraft we have operating both domestically and internationally. The cargo we carry in the belly space across Qantas and Jetstar and our cargo handling terminals. This value of diversified earnings to the group was demonstrated clearly through COVID, as Alan referred to in his opening remarks, where freight delivered record performance and provided a natural hedge to decreased passenger flying. The freight business operates both domestically and internationally, as I just said. Freight's domestic operation contributes about 1/3 of that revenue. It has a strong competitive position with around 80% market share. It offers an integrated end-to-end air freight solution in the air and on the ground to help service our long-term strategic customers, such as Australia Post and FedEx. For its international operation contributes about 2/3 of that revenue. Hence why freight sits naturally as part of Qantas International. It has a strong brand with premium service offering, long-term customer relationships and traffic rights that are unique into Australia, China, U.S. and back to Australia, freights equivalent of the triangle. It has a ground handling operation that provides a leading market position for global importers. Qantas Freight has seen a structural and permanent shift in earnings versus pre-COVID. That growth has been achieved through 4 pillars. One, e-commerce volume growth. Changes in online purchasing habits have been accelerated by the pandemic. With growth in e-commerce in this country, going from 11% in 2019 to now 20%. This means there are now 1 million more Australian households shopping online versus 2019. This growth benefits air freight versus ground alternatives because we all have expectations of fast and reliable delivery. We've seen strong international yields. International yields like on Australia, China, U.S. markets have been elevated through the pandemic and to settle at around 150% of FY '19 levels. We transformed our customer proposition. We now provide the ability to lodge and collect seamlessly across using doc direct a world-leading digital air freight solution. And we provide a higher degree of shipment visibility and improved on-time performance, driven by technology investments such as handheld smart devices for frontline warehouse staff. And finally, we've commenced our fleet renewal program. We have replaced 3 of our 737, 300 freighters with 3 A321P2F aircraft. These aircraft deliver a 55% greater payload, 30% lower emissions and 20% lower unit cost. All this has led to a structural earnings growth of $150 million, and this is a figure we have not stated publicly before. And finally, what can we expect for future freight earnings. Looking to the future, we are expecting to see a further $100 million increase in earnings by FY '30. This is another number that we are announcing for the first time today. This further uplift is driven by 3 pillars: Continued fleet renewal. We're going to transform our freighter fleet from 6 aircraft types today to a harmonized fleet of A321s and A330 aircraft to service the domestic market and our Asia Pacific region. This enables greater uplift to service growing volumes, unit cost improvements lower carbon emissions, scale benefit in crew and engineering and handling and OTP improvements through fully containerized fleet. Two, e-commerce. We expect e-commerce growth to continue as Australia tracks closer to international peers. I mentioned before that e-commerce in this country sits at 20%. This compares with the U.K. is currently at 29%. And finally, terminals of the future. We're going to open a new freight terminal Western Sydney. This will enable curfew-free operations, delivering further network optimization and benefit -- the network optimization benefits and greater capacity. I'm now going to pass over to Steph to talk about Jetstar International. Thank you for listening.

Thanks, Andrew. Conscious it's just me between you and Alan [ are Irish too ]. So bear with me while we talk to Jetstar International. Just firstly remind you all of Jetstar's international presence, we've optimized now across 4 markets. So we have Jetstar Australia International, Jetstar operating in New Zealand domestically, and we have Jetstar Asia and Singapore and Jetstar Japan, our joint venture in Japan. The portfolio approach of operating across those markets does yield many benefits. It provides network extension for both Qantas and Jetstar. It provides brand reach. A good example is the incredible strength of the Jetstar brand in Jetstar Japan means a customer in Japan is well aware of Jetstar and more likely to fly Jetstar to Australia. Profit diversification, access to growing markets scale cost benefits and obviously, fleet flexibility. And in COVID, that paid dividends when we had 9 aircraft moved from Singapore to Australia and 6 from Japan to Australia. All of these businesses are back in growth mode again. And from April, Jetstar Australia's international business is back at over 100%. And in FY '24, we project this to be 122%. Jetstar Australia has consistently averaged above 10% margin and was the first successful long-haul low-cost carrier in the world. It will increasingly see the A321LRs and XLRs operating in conjunction with the existing 787-8 aircraft providing many opportunities for new markets, but also increased utilization. Jetstar International has the same core drivers of sustained margin delivery as the domestic business, fleet cost, operational performance and ancillary revenue. I spoke to demand cost, operational performance and ancillary revenue in the domestic section, so for this section, I'm going to focus on the fleet and also touch on the Jetstar businesses in Asia. Jetstar International is set up for that continued success in Asia Pacific. We have returned quickly and captured increased market share in key markets such as Bali and Japan. The arrival of the NEOs and their usage on Bali has seen new route opportunities as 787-8s are freed up, such as Korea, where Jetstar has taken 50,000 customers since the November launch with more new routes to be announced shortly. Also, the introduction of new routes on the A321LR NEOs such as flying directly from Australia to Rarotonga in the Cook Islands, which we started in June in time fiscal holidays. We announced this route at 2x weekly and the strong demand we've already moved it 3 times weekly before we've even taken off. Worth touching on Bali given its significance to Jetstar. And while Qantas [indiscernible] Australia to people around the world, Jetstar does [ equal Bali ] to Australians. And a beautiful Balinese people love Jetstar and what it brings to Bali. Jetstar has a market-leading position with network depth and breadth and the NEO usage enabling us to perform with even higher operating margins. I recently visited Bali for the 1-year anniversary of the border opening post COVID and was amazed the joy and faces of people that worked in tourism when I said I worked for Jetstar. Not to mention the joy in our incredible cabin crew based in Bali that Australians have returned to their low-cost island paradise in numbers. Our market share in Bali has increased from 31% in FY '14 to 51% in FY '23. And A321LRs further help us grow that position. On fleet, the new Jetstar fleet are introducing further flexibility and range.The A321LRs a vehicle for routes to around 6 hours, such as Bali, the A321XLRs a vehicle for routes to around 7 to 8 hours, they can fly to Thailand and Vietnam. And the 787-8 freed up for longer flying. All of this brings new route opportunities and new capacity on existing routes and importantly, ongoing CASK improvement. Jetstar International is an exciting part of the business given it's this fleet restructuring. And we also work closely with Olivia's Trip-A-Deal business in loyalty to assess upcoming leisure hotspots. To turn our attention to Jetstar Japan. While slower to recover from COVID, Japan still has many qualities that make it ideal for a growing low-cost carrier. It has a population 5x the size of Australia, and it's the fourth largest domestic travel market in the world. It was a profitable business for us pre-COVID, returning its cost of capital. And whilst the last few years have been tough and the pace of change can be slower in Japan we will return to profitability in FY '24. And recent weeks have seen very strong revenue and performance, including during the all-important Golden Week. It really remains a fantastic asset for the Qantas Group in a market where low-cost carriers are still underrepresented. It does have the potential to be larger than Australia for Jetstar as we now move back into a growth phase in partnership with our joint venture partner, JAL. And finally, on Jetstar Asia, our low-cost carrier business based in Singapore. Jetstar Asia provides a strategic and important asset to the Qantas Group. It is the only airline outside of the Singapore Airlines Group to hold an AOC in Singapore. A number of the Jetstar Asia routes have had the highest RASK in the network as other Asian carriers have restructured during COVID. And we will look to regrow Jetstar Asia in a disciplined stage gated approach. In FY '24, it will grow again from 7 to 9 aircraft, with growth to 13 aircraft plans soon after. We have recently successfully launched flights to Haikou in China, the first part of the Qantas Group to return to China. With that strong growth and aircraft fleet growth enabling further demand and growth between the all-important Singapore to China passage. Andrew and I have talked about the opportunities unlocked by fleet changes across Qantas Freight and Jetstar internationally. New markets, Sunrise, the step change in freight market growth, what the XLR unlocks for both the brands. Also, while we maintain relentless discipline in cost and ongoing transformation to protect the margin performance. The 10% to 12% targets will be achieved and sustained over time. Before we pass to a Q&A session, we're just going to play a video that summarizes some of the things Andrew and I have spoken about this morning. [Presentation]

Thank you, Steph. Now I'm acutely conscious of the words that Steph said regarding lines. So we would just ask for your patience. We have 1 additional Q&A session this morning, and I'd like to invite Steph, Andrew, Markus and now I'm back on stage. We would prioritize those that haven't yet had a question, and I believe we will start with 1 question online as well, if I can ask Alison to read that out.

Thanks, Fil. We've got 1 question online. History suggests periods of abnormal profits in domestic or international across the aviation market globally are unsustainable. Why will this be any different?

Andrew, do you want to?

At the risk of being slightly cheeky, I could say, we listening to the last 20 minutes. So look, I think I explained in the domestic market, why we believe that our earnings are sustainable over the long term. The position we enjoy in the market, the focus we've had on cost transformation, the network and the fleet capability. And our dual brand strategy is why we believe those margins are sustainable. On the international front, I totally understand the question in terms of the variability of profit that one has seen out of the international market. And I myself experienced over my many decades in this industry, I've been involved in conversations where we've been saying, actually, should we even keep an international business. But what you saw this morning is really game changer. We've seen the evidence with the 789. We know how many competitors do we have on Perth-London? None? Because people are willing to pay a premium to fly direct, and it's even more so post COVID. And the premium mix that we've got there and the capability we enjoy, has given us the confidence to repeat that strategy in other markets. And the 350 extends that. That's why we've got the confidence to launch an aircraft that's got 41% of its seats in premium configuration. And that capability we've built over many decades in terms of our fuel policy and our flight planning ability, our partnerships we enjoy, the broader network and the power of our loyalty system gives us the confidence that we will achieve and deliver profitable returns year-on-year from both businesses.

I think that's a great answer. What's next question?

Cameron McDonald from Evans & Partners. Thanks for the future state sort of targets. And when we then look at those charts, whether it's domestic or whether it's international you are taking additional aircraft through later into the decade, which is generating higher premium mix, lower cost, so -- but the guidance doesn't really then show any margin improvement over that time period. Should we infer from that, that you're actually just going to maintain those margins strategically and invest in price to protect your market share?

Yes. Cam, I think that you can assume that the margins that we are targeting is what we want to sustain as we grow. And as Andrew was saying in terms of the market structure that we're seeing and the improvement in that, but also the technology that is coming and that's how that's going to give us greater advantage in those markets with the transformation and with loyalty, all of that combined is how we're actually targeting in managing across that period.

And there is -- I mean, don't underestimate the growth. So the margin will be off of a bigger airline. And we have, for the first time, outlined very clearly the step change in international, which is an improvement in margin from what we're experiencing now by the time we get to 2030, because those freight numbers and the additional numbers that we're going to get from Project Sunrise, are all incremental on top of that. So what you are seeing is a significant continued improvement in profitability over that period of time. And you haven't seen the loyalty numbers yet, where we'll also talk about how that is [ annuity ] going forward and where the opportunities are within that business and will be covering that just after launch. So there is significant growth planned in that over time. Other questions?

Scott Ryall from Rimor Equity Research. Andrew, I was wondering if I could maybe get you to expand on your answer just now. Is it fair to say one of the key changes in international profitability and the variability or cyclicality, whatever you want to call it, through the cycle is actually you're now flying with your own metal more and more on, what I would say, more imaginative routes just to get Australians where they want to go where they don't have a direct competitor through a hub in Asia or something like that. So you've actually become you've increased your market power essentially on those routes because you've not got as much competition. Is that fair? And then I guess by virtue of that to, you're less likely to see the competition come into those routes because it's not feeding hubs in Asia or other things like that?

I think you've perfectly answered your own question. That's absolutely right. That is the strategy. And in addition, I would add to that, the benefits we're seeing from our freight business, which is powered by the growth in e-commerce and the hard yards and all the hard decisions we made during COVID, which took more than $900 million of cost out of the Qantas Airline business, so international and domestic. And as we grow back to full capacity and beyond, we will see and enjoy the full benefits of that transformation. And we are confident that we've got a transformation program that can offset the cost of inflation. And the reason I say that is because of what's in front of us with our ability to leverage technology. In the last 20 years, I've seen 2 technologies that I've gone well, they're going to change the whole of business. First time I saw a smartphone. And this time, when we're all starting to see the power of AI and what's happening with Chat GPT, turn that on this business, and it can improve the whole customer service proposition and Markus has a program of work underway to do that and it can change the way we plan and operate in this business, improve service, increase utilization, improve on-time performance. So it is an exciting time for this business.

And maybe I'll add to that. I mean I think Andrew has taken you through and Steph taken through a combination of a number of things that come together. The technology that Andrew talked about, they're putting routes that we couldn't make work before because we get a premium for people willing to travel direct. And Perth-London, as he explained, was a game changer on the London market for is a very important market. But also we have amazing partnerships. So for the rest of Europe, that was always a loss maker for us. We now have the most amazing partnership, which we call seismic at the time where Emirates which allows those and Emirates to have a win-win on our partnership to Europe and makes the Continental Europe destinations, they fly to over 40 of them profitable for us as well. And it enhances our frequent flyer scheme and our presence here in Australia by having that. Similar with the joint venture with America and in the North American market, we see that as also being critical and a key change. And then don't underestimate going forward and it comes back to the margin changes in international. Well, the headlines have been on the 350s and the 787. So under the sexy routes by nonstop. Those 321XLR routes are another game changer for us because they are routes that we could never have operated before because the technology allows us to do it. And allows us to do in our cost base that we don't believe other carriers will be able to compete against because we'll have the volumes coming out of Australia, the frequent flyers coming out of Australia to make those work. And that is also a game changer in international. And Andrew is right, through 15 years as CEO, we've gone through periods of time where we said, can you ever fix the international problem that was Qantas. There is a fix because the technology is fixing it. The partnerships are fixing it. The products are fixing it and the alliance and the loyalty program has fixed it, and it's a complete change from where we were 15 years ago, and it's a permanent change from where we were 15 years ago. And it's great to see the company having a benefit from international, which is so important to the rest of our businesses, domestic and loyalty and able to make a decent return out today, which is a real game changer for us. Next question.

It's Owen Birrell from RBC. Just a very quick one for Stephanie. It looks like the recovery in Jetstar Asia looks a lot slower than we would have expected. Is that due mostly in part to the move to Terminal 4 at Changi. Does that change that hub strategy for Jetstar Asia?

No. For those that don't know, Jetstar Asia recently moved from T1 to T4 at Changi, that move has been completely seamless. In fact, operational performance is even better at T4 than at T1 and the connectivity for Qantas and Jetstar customers has been without event, which is good. It's working really well. So nothing due of that business, and I think you would all want us to take a very stage-gate disciplined approach to its regrowth. We do see still you have potential long-term growth in line with the middle class in the Asia region and the growth of that. But that is obviously a business we prioritize as a group against our other businesses as well. And if you compare it to the performance in the West, for example, the fleet are going to take priority there because the returns are much higher. So we see growth. It's got a lot of potential, but you also use it as a group asset across the group.

Other questions?

[ Jess Cairns ] from Alphinity. And I just had a question on waste initiatives. So you mentioned quite a few in the earlier presentations for domestic. Is there anything in particular that you can point to for international? And I mean just to understand if there's any challenges in sort of implementing those initiatives in the international business compared to domestic?

If you okay, Andrew Parker will have a session sustainability after lunch. And I think maybe we'll take the question then. I think that's probably the right forum. Yes,.

Let's do that after lunch. We will remember, we'll give you the first question, and we No, I'll ask the question again.

It's a very good question.

You can think about you've got an narrow to ourselves to do. Next question.

Tom Cutler from Ausbil. Just that international freight yield sort of stabilizing 150% of pre-COVID, what sort of gives you confidence to say that? And how concerned you are about some of the Chinese carriers returning?

Look, it's predominantly driven by our confidence in e-commerce growth. And you can see from the numbers in Australia, we still lag both the U.S. and the U.K. And we've all seen that growth. We've probably all experienced it personally ourselves. We all know everybody is getting online more and more. And that, in turn, means people's expectations of getting those goods tomorrow, not in 3 weeks' time, hence, the reason air freight versus road or shipping. What we have seen is we did see a drop because it's taken China opening up. We've now seen that. We've now seen those supply chains turn back on. That's a good thing. What happened in COVID as well is in the U.S.. We saw a lot of companies stockpiling inventory. They worked their way through that inventory. So we've started to see the demand improving in the U.S. and supply improving in China. There's no doubt in short term that we are seeing blips all around the market, and we all understand why that is. But we have confidence in the long-term growth of the freight business because of that e-commerce growth and because of the things that we can control like our investment in fleet, our investment in our terminals, what will happen in Western Sydney, which will give us a care-free operation here, which allows us to complete the transformation of our fleet.

Great. Thanks, Andrew. One more question.

Andre Fromyhr from UBS. Can you give us a sense of the breakdown of the freight revenue that comes from the utilization of belly space and passenger aircraft and whether or not Qantas Domestic as a segment or Jetstar as a segment is getting any of the economic benefits of that capacity?

So I'm not going to do any more of a breakdown than what I've already done in terms of how freight contributes to both belly and through dedicated freighters. It is a combination of those 3 parts. It's the dedicated freighters. It's the freight that we carry on the belly in our passenger and our freight businesses and the revenue we get from our terminals because we service not only our own aircraft, but we service other airlines as well. and we've got a number of airlines that have been using our facilities for some time. So it is a combination of those 3 things that drives the revenue that I referred to and the incremental improvement in earnings that we're now seeing the $150 million and the confidence we have in the $100 million by the end of this decade.

Well, thank you, guys. I think we've come to 15 minutes for this session. So we're going to take a break and Fil will talk about the logistics now. And we'll have another couple of Q&A sessions in the afternoon as well as presentations. Over to you, Filip.

Thanks, Alan. Thanks, Andrew, Steph and Markus. So as Alan said, we're having a break for lunch. The break will be about 1 hour long. I think for those that were listening this morning, there's probably 2 options following Markus for their amazing food or follow Alan, if you want rest. I know which one I'd be following. In terms of the lunchtime session, there is going to be some tools available as well for those interested. So we'll have 2 tours running. There will be 1 of our integrated operations center and 1 of our brand new cabin crew training facility, our Longreach center. The group choice will be limited to 10 people in each just with capacity, and there'll be 3 running each. So they'll be running for about 15-minute loops. So you're welcome to do that. Of course, after lunch, we would ask everyone is back in the room and seated at 1:05 p.m., we will be starting sharp at 1:10 p.m. Thank you. [Break]

Got a full stomach and got some caffeine to see you through this afternoon. There will be a few like stragglers that will kick off. For those of you that I haven't met before, my name is Olivia Wirth, I have the absolute privilege of being the CEO of Qantas Loyalty. I've been at the Qantas Group for 14 years, 12 of those on the DMC and have done a range of roles from government relations to corporate affairs in the last 5 years, CEO of Qantas Loyalty. So today, we've got to come to full areas to start with the fundamentals of the Qantas Loyalty business and spend a little bit of time talking about what makes us unique. And when we're going to talk about the ongoing strategy for diversification at Qantas Loyalty as we work towards this new target in FY'30. We will take a deeper dive into the pathway as I'm sure you'll be interested in how we set out to achieve that target in 2030, both from an earn and burn perspective. And then we'll finish off with a little bit about capabilities. And what you need to believe is required in order to deliver this target. Qantas Loyalty is an integral part of the Qantas Group. We have a strong track record of earnings growth, delivering $1 billion of revenue per annum consistently over the last 5 years. The Qantas Loyalty ecosystem is significant in terms of both scale and active member participation. It provides an everyday on-the-ground touch point for our members. We've got 700 odd partners across all major segments and consumer spend. We actually reached 15 million members in April, which is the highest single growth since 2010. And the ongoing diversification of our business is absolutely critical. The engage and active Qantas Frequent Flyer member is actually -- has actually twice the longer-term value to the Qantas Group than a non-loyalty member. This program provides engagement with our customer base, everyday relevance due to the broad ecosystem, rewards in the air and on the ground. And importantly, recognition for our customers' loyalty. There has been a proliferation of loyalty programs in Australia and globally. And I'm sure if any of you opened your wallet, you'd have a multitude of loyalty cards, 94% of the Australian adult population are a member of one or more loyalty programs. On average, Australian adults are members of 5 loyalty programs, but it's important to say this is that not all loyalty programs are equal. And whilst we have 15 million members, with the base growing by 1.1 million in the last 12 months, it's not just about the size or the scale, we focus on the levels of engagement. Qantas Frequent Flyer is the main loyalty program for 25% of the Australian population. This is up from 19% pre-COVID. Plus the Qantas Frequent Flyer business is also the main burn program for many people who predominantly earn in other programs. So if you're a members, for example, for the Woolworths Everyday reward, but your predominant focus is Qantas Frequent Flyer, that number goes up to 32% as the main program share. This compares to only 2% for Velocity, 2%. Participation across all consumer spend categories also provides a distinct difference to the other airline programs globally. As does the deep and long-standing partnerships that we have with financial services here in Australia with all financial services institutions, it's very rare. Our strategy for Qantas Loyalty is pretty simple. It links member engagement to sustainable financial performance, meaning that the decisions focus on increasing member engagement as the pathway to financial success. This strategy is best illustrated with the flywheel behind me, which maps a member's journey through the program with a focus on increasing this flywheel size and velocity or speed or frequency at which it spins. The loyalty result is a simple function of point's volume, both earned and burned and member growth. This flywheel economy or ecosystem drives our business. Now before we move on to the medium or longer term, we thought it might be worth touching briefly on the performance of the loyalty business in FY '23 and FY '24. In FY '22, we disclosed the breakdown of annual points earned and burned as this directly relates to the financial performance of the business. And this chart shows that the Qantas Loyalty financial performance relative to the number of points earned and redeemed and clearly shows a strong correlation. In the years prior to COVID, Qantas Loyalty demonstrated a strong track record of growth translating into growing earnings and, in fact, stable earnings for the Qantas Group. And it is evident that loyalty has in fact emerged after COVID in a much stronger position. 10% more active members, 7% more points, 20% more points redeemed. Last week, we reaffirmed the loyalty to reach the top end of the previous guidance for full year '23 and we remain firmly on track to deliver the target for FY '24. And it's this momentum that has given us the confidence to talk to you today about our pathway and our new targets for FY '30. So with the current momentum and initiatives underway, we believe that the loyalty business can deliver a balanced flywheel at around 230 billion points earned and burned by FY '30. At this level of points, the loyalty EBIT is expected to be within the range of $800 million to $1 billion by FY '30. This is underpinned by a focus on growth and engagement of our members and increase in the earn and burn per member through diversification of redemptions and a targeted expansion of earn. As well as a focus on investing in capabilities to drive the member experience and program expansion, which will ultimately deliver the financial results. So let's do a double click on this strategy. We're going to start with a core pillar of the strategy and the core focus of our business, which is the member. It really is the heart of our business and our program. As I mentioned earlier, we have reached about 15 million members, and we targeted the growth of this of 3% per annum out into FY '30. Our approach is going to continue to recognize our members, you'll be familiar -- many of you in the room are familiar with this, there are our flying tiers. So you think about the gold, silver and platinum tiers and also about the on-ground recognition for the super earners or the points millionaires through the Points Clubs. These are critical, and they're critical for this reason because they create the strive effect. The strive to earn points, the strive to reach a higher tier, the strive to seek more points so they can get their next redemption. And all of this combined is strive effect influences consumer behavior. And whilst we do have a heavy SKU for affluent members, we also have a focus on bringing through the younger members into our base. In fact, 60% of new QF joined since FY '19 were under 40. So the products, the channels and the sectors in which loyalty operates, we'll continue to broaden through key initiatives around redemption diversification and personalized engagement. We're going to start with redemptions. The growth in redemptions will be driven by the expansion and diversification of our burn options. And here, this chart is a pathway to the 230 billion points burned by 2030. Historically, redemptions have been heavily weighted, no surprise to flight redemptions with a roughly 100 billion points redeemed on flights each year. The flight redemption offering across the Qantas Group network is compelling, as is the partner network through One World, Emirates and other partners. However, we believe that there are significant opportunities beyond flight redemption and the diversification will be key in keeping our members engaged as well as attracting new members into the program. So if you think about travel as a category, hotels and holidays, this is highly valued by our members, and we believe presents a significant opportunity for the group, and we'll touch on this in a little bit more detail later. Similarly, we also believe that the opportunities exist in retail. The expansion in the retail vertical around redemptions would allow our members to redeem directly with Australian retailers, both in-store and online. We have built up a very compelling coalition over the last 10 years, which is all based on -- we now see there is an opportunity through the retail sector with select retailers to do this around burn. We recently launched the online Qantas Marketplace, which is extended to categories into fashion, into beauty as well as technology. It's got about 20,000 products, and these alone provides a great insight into consumer behavior and provides us with confidence that we can more than double the points burned in retail by 2030. So the travel and retail markets are large. You can see that there are significant value pools here in the Australian economy, but the loyalties participation in these verticals is small relative to its potential. We are really confident that travel and retail combined could represent 40% to 50% of points redeemed by FY '30, which would be a step change for our program. Let's touch briefly on travel. So we have the Qantas and Jetstar brands that arguably 2 of Australia's strongest and most loved travel brands. Combine that with the fact that hotels and holidays is actually the second most popular redemption of members beyond flights -- second most popular. So when you ask our members, where do they want to redeem their points. #1 flights, #2 on a hotel or a holiday. The combination of these, the strength of our brand, the dominance in the travel market here, this combination provides a distinct opportunity for our business. During the full year '22, Loyalty commenced executing on this strategy to expand our travel product portfolio. We've expanded the product range. We've improved the value of redemptions for our members in hotels and holidays and this has delivered 3x the uplift for hotels and holidays redemptions in FY '23 compared to before COVID. In May, Qantas Loyalty acquired 51% of triple deal. This delivered an expansion in our touring products. And in January this year, we extended our Qantas Hotels range into luxury hotel offerings. As a result, the TTV or total transaction value in FY '23 will be 3x larger than FY '19, 3x larger. So this ongoing expansion of the travel vertical will continue, we have only just begun, and we're confident that we can double the size of this important vertical by FY '30. Now if we transition over to earn, it's important to understand the correlation between the customer or a member who burns and those that are then going out to seek, I guess their next way to earn a point. So this anticipated increase in redemption activity, which I've just talked about, will also drive -- also drive the strive for our members to earn. The number of points earned each year is simply a function of the number of members, their expenditure, the number of places where members can earn points and the use of affiliated payment options, which are many. While Qantas Loyalty's base represents the majority of the Australian adult population, there still remains a significant opportunity to increase member engagement over the next 5 years. You can see here behind me that we currently have 45% earning on more than 2 categories, and we believe that there is significant upside in this. This is up from 41% 12 months ago. There is definitely room to grow here, and we'll have the partners in place in order to increase the participation of our members in this ecosystem. So let's move on to the other side of the flywheel. We're now on earn. As I mentioned before, it is our ambition to have a target of 230 billion points earned by FY '30, and that will be up from around $180 billion in FY '24 to give you a size of the growth required. And whilst flying is obviously one way that our members earn points, it's important to remember that actually 2/3 of our points are actually earned on the ground -- actually earned on the ground, right? Financial services is obviously a significant contributor to earn a member engagement. We have partnerships with all major banking institutions here in Australia. We're just under 50 direct earned credit card products in the market. This is unique for any loyalty program around the world. Our Qantas point earning credit cards actually participates in 35% of total credit card spend here in Australia. And the Qantas point continues to drive acquisition and retention for our banking partners. In fact, in the last 12 months, we've had the strongest acquisition of Qantas points earning credit card on record. We see increased financial services as a great opportunity to continue to diversify to meet our members' needs. For example, we've been in personal home loans, in personal loans. We've recently launched Qantas Home Loans of Bendigo Bank and Adelaide tech platform, TikTok. We also have our insurance coalition, which includes health, home, car and travel and this too is expected to grow. Equally, the frequent flyer coalition apartments is also well established. Many of you will be familiar to that with major partners across all category spends from groceries to fuel, to telco, and we will continue to invest in this. There will continue to be a core part of our ecosystem as it drives everyday relevance for our members. But the opportunity we want to talk to you about today is actually in the SME sector, the small and medium-sized enterprises. We're taking learnings from all the learnings in our consumer ecosystem to apply them to building out a comprehensive ecosystem for this very important customer. QBR, Qantas Business Rewards is actually the leading SME program in Australia with more than 450,000 members. This generates around $1 billion per annum contribution to the airline revenue, and it will hit 500,000 members by the end of the calendar year. There is significant growth, untapped growth in this important segment. We've focused heavily in investing and building in the relevant ecosystem for our SME members. It is going to be different than our consumers and we recognize that. This, though, will help drive the everyday engagement with the SME program. It will be via earn partners. It will be via financial services products, of which we already have some and it will be via redemption opportunities. This overall ecosystem though importantly, will drive the stickiness back into the airline brands with Jetstar and Qantas. And from a travel perspective, we're also continuing to invest to deliver a more seamless end-to-end business travel and travel management experience for the SME community. So there is significant growth here. This -- which leads us to believe that we can more than double the QBR economic contributions by FY '30. However, none of this can happen without an investment in our core capabilities, which is a unique -- which is unique to our business. All of this underpins the -- which is a combination of a valuable data asset and our core capabilities, which ultimately delivers for our member and drives the business outcomes. So the core of our business is partnerships. We have many varied ways that we operate in partnerships from commercial deals to white label ventures like with our Health & Home insurance businesses. And this means that we can continue to have a greater share in the value that we're creating. We're going to continue to innovate these models to make sure that we deliver for our member, but importantly, it means that we can continue to deliver the right business outcomes for our partners as well. From a digital perspective, as Markus mentioned earlier, we are investing in the Qantas app, which is also the home for our Qantas Frequent Flyers. It will be the 1 mega app for the Qantas brand, including the Frequent Flyer business. And this will be a significant opportunity for us to drive engagement and also revenue from the Frequent Flyer base. And from a data perspective, we absolutely do have best-in-class data and analytics capability. This is going to continue to be the core capability for our business to make sure that we can make increasingly sophisticated decisions to support the innovation that is required. This drives efficiency. It shapes our marketing. It drives personalization, and it makes sure that we're top of game in terms of machine learning and greater automation across our business. So to wrap up, we believe that loyalty has the foundation to continue to grow at a CAGR of 10% and double the business again by FY '30 through targeted investment in the areas that we've outlined today. This will be driven by a target of 3% per annum in member growth, a 7% annum growth in points redeemed and a 6% annual growth in points earned. As a leading loyalty business, we are confident that we can continue to bring new ways to earn and burn their points as well as continuing to improve our member experience and ultimately provide sustainable earnings for the Qantas Group. Thank you.

Thanks, Liv. Now what we thought we'd do this time, we do a specific question-and-answer session on Loyalty. We know that a lot of you in the room have interest in the program. It's an amazing program. The targets are very ambitious, and so we thought we'd do a session on that. So I might ask Alan to come on stage as well, and we'll do a specific 15-minute session on Loyalty.

Yes, I think this is Alan's parting gift to me. It's always been a running joke and we do investor sessions and analyst briefings, but he always encourages questions about Loyalty. There's always a few and far between, but now I'm on my own. So, thank you, Alan.

It can't be on anything else, it's just Loyalty. So here we go. And well done on that one, Liv, that was an amazing presentation. And I thought it really outlined the potential of this. And I think we know a lot of people don't get the loyalty. We've always said there's an annuity. It has had this growth continuously over, over a decade. And over the next period to 2030, you can see that there are plans to continue that going. And I don't think there's another airline in the world, there's not a program in the world that's the strong as this. So well done to you and the team on, it's phenomenal. Next question.

Hey Liv, it's Niraj Shah from Goldman Sachs. Alan just mentioned that sort of loyalty stands apart, not just from loyalty programs in Australia, but other airline loyalty programs globally. So I guess my question is, what business or what types of businesses do you benchmark loyalty against?

It's a good question. And obviously, if you think about the participation in different sectors that I just talked to, we don't necessarily benchmark ourselves just against other airline loyalty programs. We obviously scan the world for any new ideas that are emerging from an airline perspective and more broadly in terms of consumer behavior and loyalty programs. Here in Australia, there's an increased focus for many companies to try and build out their own ecosystem economy as a way of engaging consumers. But this is something that we've done over 3 decades, and we've made mistakes along the way, but we have a very strong and well-rounded ecosystem. So we look to financial services. We look to other retailers to make sure that we can take learnings that we are top of our game. And we're not arrogant to think that we're always going to have the best idea. We want to make sure that we're ahead of consumer trends, and we also talk to our members because frankly, sometimes they've got the better ideas than many of the corporates. And we talk to our members about what are the pain points? Where else would they like to earn points? What are their frustrations. If you think about the category of insurance or financial services more generally, this is a great example of that. Because when we talk to our members, they say, "Oh, it's a grudge purchase. I'm paying insurance every year, perhaps for my health or my home or my car or I'm taking out a home loan. It's a grudge purchase because I'm not being rewarded for my loyalty, I'm not getting anything back." And it was off that insight that we were able to say, actually, maybe there's an opportunity here. There's a way that we can participate to demonstrate your loyalty to us. So it's from a member perspective that we increasingly look for the answers to solve their pain points and participate in new sectors that we may not be participating in.

If you think of the dynamics of it, I don't think there's anything like in the country because every sector is an opportunity for Liv and the team. Every sector of the economy from financial services to retail to holidays, and it is a margin on expenditure. It's not margin on profitability. It's a margin. So the more points that you give for people earning points on expenditure, we get a return on that. And it is a virtuous circle. So what this program does the stats that may weigh was the fact that over 25% if you add the Woolworths and you add the BP on it, it's well over 30% of people up. This is a prime loyalty program, in a crowded market. A major airline competitor where -- and flights are the big thing people want to redeem to, a major domestic competitor is only 2%. That is huge light years between them, and that is a self-reinforcing position that everybody else in the market would love to get into the system.

And the other piece, you're absolutely right, Alan, with that is consumer behavior takes time, considerable time to change. And that has built up over many years of investing in the ecosystem. So we are, in some ways, light years ahead of others in this market, but it's something that we're not taking for granted, and we're going to continue to invest that we have that advantage.

Another question over here.

Anthony Moulder from Jefferies. So if I think about buy now pay later, they're obviously going through a change as far as moving to a credit system. Did you see them as a competitive risk to the growth of Loyalty? And secondly, related to that is these firms that have gone through their own route of developing their own loyalty program, have you started to see some of those switch back to Qantas Loyalty?

Yes. I'll answer the first part of the question. We see that as an opportunity, not a threat. Any new opportunity for us in payments, we always, from a loyalty perspective, have to look to see how we can participate. As Alan said, there's always opportunity. So we actually think that is an opportunity for us. There's obviously a lot of change in that market. We have partnered previously with Afterpay, we're in partnership with Zip. So we'll wait to see that wash through, that regulatory change that's been put into the market, but that's an opportunity for us. Just in terms of a threat, though, I think a lot of people, you remember before COVID, we're talking about the demise of credit cards. There has been a significant resurgence over the last period of time. We've had a record acquisition of credit cards. So I think we've got to be really careful about writing off that product just yet. It's clearly very popular with the consumers, and we expect that trend to consider for the next couple of years. But we're always looking for new payment options. And the reason why new payment options is important is because financial services provides a great engagement for us on everyday transactions. And if there are opportunities in buy now, pay later, which targets a younger audience, and that's something that we would be equally interested in. Second part of the question was around...

Other programs that have we seen...

No, we haven't -- look, what I said before is, look, the saturation in this market, 94% of Australians, are all Australians are member of the program. They've got 5 on average. Alan mentioned the stats before. No, we do see people being members of other programs though, so that they can benefit from ours. So let me explain it like that. So we've built out our own ecosystem, and that's important. But equally, we have partnered with other programs. So we have partner to partner relationships, which means that we can properly engage our consumers across the board. Everyday Rewards is a perfect example of that. They have their own obviously, rewards program, but the participation rate from our members, they participate in that because they want to earn Qantas frequent flyer points. The same with BP, the same with our partner to partner program for core. So the way that we assess the market is, is that we: a, build out our own ecosystem; b, focus on those other programs where we believe that we can: a, deliver business outcomes for them. But secondly, it definitely benefits us as well. So it's self-reinforcing in a way. But we've seen a resurgence back to corners and that's obviously off the back of massive travel demand, which both Steph and Andrew talked about, the demand for travel is off the charts. And it's not abating. And we ask our members every month the same question, and we're not seeing it decline, their intention to travel remains high. And therefore, their search for Qantas Point is going to be high because they want to use them to redeem a flight. So we're at a stage at the moment where we're actually seeing a massive growth. We're not seeing them super weight to others.

And it is, I mean, the one thing that we have that everybody wants in the loyalty program is access to airline seats. That's the biggest thing people want to redeem for. And we've got the partners, Emirates a massive -- Qantas massive, American Airlines and our North American operations and the partners around the globe. And what's going to be a big driver is that aspiration to be able to get on to the projects on rise. When we talked about the $400 million in earnings, we didn't put anything in on domestic and on loyalty. But that is massively aspirational. Those first-class seats, those business class suites, those direct flights that nobody else can offer. We have them. And that is one of the biggest advantages as that links into loyalty.

See ultimate from a strive effect perspective, having a halo product, and it is absolutely unique to our CVP, and that's why the Classic Reward is so valuable to our business, absolute halo product, and will continue to be so.

Any more questions over there.

Tom Cutler from Ausbil. Could you just maybe talk through the profitability or unit economics? Because my understanding is your earned profit margin only on the externally issued profit?

That's correct. Unlike other airline programs where they do make money on internal transfers, we don't. So we make a margin on the points that we sell externally, and we make a margin when the points are redeemed. So that's the essential basics of our business, but there is no internal transfer. And that can't be said for any other airline program here. And so what you saw from the presentation is where we have tried to map out the flywheel to say that what you need to believe is the 230 billion points earned, but importantly, and we've always been talking about that, that redemptions is increasingly important and obviously has an economic upside for us as a business. And if you go back to the slide deck and you can see each of those verticals add up to the 230 billion as to how we're going to get there in 7 years' time.

And is this sort of effective margin on that, that whatever you're selling a point for to an external partner that kind of implied redemption cost is just a margin lower than that?

Yes, correct. And it's fair to say that it's not always the same price of a point either or the VPP. It's different depending on the different sector and depending on the size of the partnership and the longevity of the relationship. So there's a lot of different dynamics at play, but you're absolutely correct around that margin.

Olivia, it's Cameron from E&P. So just going back to the Everyday Rewards relationship, as a member of Everyday Rewards, you can choose to either get a point or a discount on your Woolies build, right? What's been the trend over the COVID period? Did you see people switch away from point collection to discounts? And/or have you seen people switch to points collection now with that travel demand? So can you just talk through some of those? And how active are people in changing their preference on their Everyday Rewards?

Yes, you pretty much find it's set -- set and forget. And so you've got to think about broad demographics of people that are in Everyday Rewards and then you think about the top 2 income brackets, the affluent, more affluent customer that the frequent flier program attracts. And so what you see for them, we don't use to give out the numbers of saturation, but it's quite a high number that are a member of the EDR program that are also members of the Frequent Flyer program. But it's a set and forget. And if you're a member of EDR and have you've been getting the boosts and have you been seeing how they've been driving you, they've actually been using points as a way of demonstrating value. So even though you might think people go to cash back, it doesn't necessarily work like that. People that are actually seeking value. And so those customers that have bought in to Woolworths because of the Qantas Frequent Flyer, you will be receiving what we boost and encouraging you to purchase certain categories because you're going to get a boost in the points that you earn. All the conversations we have with Woolies is that's just about demonstrating value. So even though there may be, I guess, constraints in some sectors from a demographic perspective, points to seem to also be value creating, plus you got this combined effect that everyone wants to travel. So no, we haven't seen a switch, it's set and forget, and it's important for us from an everyday earn perspective.

Is there an opportunity to incentivize people to switch from savings to points if it is then subsequently set and forget?

We do, do that, actually. So we do initiatives throughout the year to encourage people. You would have maybe even seen it in terminal with the advertising. So this is a combined approach from both Woolworths and ourselves. So we do, do campaigns throughout the year to encourage people to: a, to join and also select the Frequent Flyer program. It's pretty successful, and we do see great levels of engagement, which is why Woolworths use the boost activities because it works because it drives behavior to certain categories because people will go and purchase Magnums because they're getting 500 points.

Hope you're not doing that Cameron, not buying Magnums.

Hi, Liv. Jake Cakarnis from Jarden. It seems the harder part actually is controlling the redemption side of the flywheel. So could you just give us a sense of if there's further M&A that you'd potentially look at a...

What do you mean by control?

Your influence. So it sound like it's lighten based on Cameron's example, just there.

Yes. Let's break down that. So that 230 billion there. So you've got, what, around 110 billion of points annually from flights. So that's obviously completely within our control. When we think about redemptions, as Alan mentioned, it's obviously on the group network plus it's on Emirates, plus it's on other redemption partners that we have in One World. So flights is very much, I guess, in that speak under our control. But equally, we don't -- we think about it in different ways. The travel and hotel business is completely within our control. That's a business that we've set up, as you would have seen through multiple opportunities, whether it's hotels, whether it's holidays, whether it's triple deal. Obviously, that was an acquisition because we didn't have to or programming as part of our travel suite. But that is a business that we have set up that is 100% of our control. And equally, the retail component, which will be a significant contributor to burn come 2030. That is also like a coalition program that we will build out with select retailers. So I don't think about it in the same way as control. We just see this as opportunity and upside. And you will have seen from the results that we've got from FY '19 to now in hotels, which demonstrates that, that's 3x. There's a massive opportunity for us in that vertical alone. So hopefully, that answers it.

Yes. And I think you should see them bolters the way of making money. That's the way Liv and the team Markus, because as people earn the points, we make a return out of that from here, we're selling it to financial services and the like. But when we redeem points, we're also making the return out of that. And that's why we like them in unison. And it's not one as a cost, a one that's less relevant for us. They're both equally important in terms of taking those targets over a period of time.

And the flywheel equally is important from a consumer perspective because we know we can -- we've got proven capability to drive the earn and we see that. But equally, as the number of points being earned is increased, we need to make sure that we have produces, experiences that are equally seen as high value and valuable from a redemption perspective. So this is why you've got a balanced flywheel of the 230 billion, 230 billion. because that balance is important. Equally, you make money. But from a membership perspective, it's also critical.

Well, we did fill 15 minutes of the Liv you were on. We have plenty of questions, and we probably could keep on going, but I thought we'd come to the end of this. So we'll give her a big round of applause. We're now going to move on to Andrew Parker, who's going to take us through the Sustainability presentation. Andrew?

Thanks, Liv. Thanks, Alan. Good morning -- good afternoon, sorry. My name is Andrew Parker, and I'm the Chief Sustainability Officer for the group. I'm approaching 20 years in this industry, 10 of which are with the Qantas Group just this month and prior to that Emirates in Dubai. And my roles have included government or public affairs, industry, international affairs and sustainability and ESG. COVID for me was working with the team here at the group and with governments to create almost an airline within an airline as we ran thousands of repatriation and a dedicated freighter network for government. But as we came out of the pandemic, the opportunity emerged and the decision taken that we needed and wanted a dedicated focus on sustainability and ESG. And it's a real passion of mine. We have an incredible sustainability team. So that brings us to this presentation on our plans. And I'd really like to begin with a short film that I hope captures the passion on this topic at the Qantas Group. [Presentation]

Can I begin by thanking Matti. She's not only the star of that film, but a true exemplary Qantas of the passion that our whole workforce, particularly frontline employees have for this topic and how they're going to help us get to net zero. Qantas is committed to ambitious credible sustainability targets. And given the criticality that Matti just mentioned, the air travel to this country and the impact of climate change on us, it is imperative that we get decarbonization right and with haste. We're witnessing climate change occur right in front of us. It's why we make this statement sincerely that it is our role to help protect the future of travel. We are a hard-to-abate sector, so our share of emissions will only increase if we are not meeting our climate targets. So 15 months ago, with many of you in this room, we launched our climate action plan, a clear and detailed plan to decarbonize. And so today is very much about progress against these commitments that we have made. So let's begin with the progress of perhaps the most important lever for us to get to net zero, and that's sustainable aviation fuel. Qantas picks up about 70% of our fuel domestically, and that's why any iteration of our glide path to 2050, we must have a competitive domestic SAF industry. The last 12 months has seen real progress on SAF via a significant effort to catalyze a domestic industry, particularly through our partnership with Airbus and our USD 200 million partnership to help create this sector. We established a SAF program for our corporate customers. We strongly advocated for public policy with governments, and we continue to procure offtakes were available globally. On the supply side, we made our first investment last month with Airbus investing in the first alcohol to Jet refinery in Queensland. And we're currently in active discussions with over a dozen other projects around the country and we'll announce more investments in the coming months. On the demand side, as mentioned, we finalized the inaugural year of our SAF coalition with 5 foundation partners Australia Post, BCG, KPMG, Macquarie and Woodside. And they're all helping us to support SAF development in this country, and they received their first SAF abatement reports. And 10,000 of their employees became incremental members of our Green tier. The SAF coalition program is also just beginning, and we'll continue to evolve the proposition to meet customers' needs, the Scope 3 decarbonization and also manage our exposure to the green premium that is associated with SAF. We're seeing early but encouraging signs from governments as they acknowledge that SAF and liquid fuels are critical to Australia's own climate goals. The recently released Bioenergy Australia report highlighted that 45% of Australia's current total energy use comes from liquid fuels, which underscores the importance to develop a renewable liquid fuels sector. But this advocacy is far from over. However, the creation of our first industry SAF coalition council with government a dedicated resources at federal and state level, new funding mechanisms announced in recent budgets and specific commitments from state governments, especially Queensland is heartening. So let's take a brief moment to look at the first project that received monies from the Qantas Airbus partnership. We're both keen to target our support to a variety of production pathways used to make SAF and encourage diversification of feedstock suppliers. And we've spoken to dozens of project originators in the last 12 months. The most common hurdle they raised with us is the lack of access to development or seed capital. And we believe, together with governments, we must assist the right projects with this early funding. And projects around the country are developing their own unique technology and feedstock combinations that speak to the specific strategic advantages of their geography. And in the case of Queensland, it's sugarcane. This is backed by the recent SAF feedstock road map that was developed by the CSIRO, another one of our SAF partners. Because of the scale and the existing aggregation of the sugarcane biomass in Queensland, SAF is a prime opportunity in that part of Australia. And this potential can be unlocked with the right technology. In this case, LanzaJet alcohol to Jet pathway. The technology, coupled with a strongly supportive state government gives us confidence that this project can produce 100 million liters of SAF per year before 2030. And 100 million liters is 20% of our 2030 SAF target from one project with the potential to produce more. So we think it's a blueprint of an aligned supply chain that begins to derisk these otherwise complex projects. But there's no doubt there are costs to decarbonization in a sector where we don't have off-the-shelf solutions or technology. So we've spent a lot of time considering planning for and implementing against these cost mitigations. We also know there is an enormous upside for airlines with credible plans and action who can bring customers along on this decarbonization journey. So we're taking a proactive approach to managing these transition costs in 3 key areas: enhancing customer and product offerings, strategic direct investment and government advocacy. So customers, in addition to our customer and corporate carbon offsetting products and launching our South coalition, as well as the Frequent Flyer green tier, we have significant plans to grow customer participation in SAF. Our research shows that customers want these options. From freight and loyalty to our largest corporate and government customers. We'll also be soon expanding our fly carbon-neutral offsetting program to give our customers the ability to contribute towards the increase use of SAF for the first time and support industry development. Investment. We need to have control over our own destiny, pricing, transparency and access. And that's why direct investment is critical to decarbonize for Qantas. It also speaks to the role of us as a national carrier, namely that we need to invest and support projects and technology here and to help meet our compliance and commitments. And it's why today, we are launching the Qantas Group Climate Fund and more on this significant announcement in a moment. And finally, government. We know we must play a lead role in our sector's transition. It's in our social license, but we also can't do it alone. And there is real momentum in our wider industry, foreign and domestic, that we're all in this together, and that includes government. We're certainly seeing how government policies in the EU, the U.S., the U.K. are accelerating and high policy priority. The U.S., as many of you know, has adopted a whole of government approach in introducing ambitious production targets with extensive financial incentives for producers. The EU has introduced a progressive blending mandate whilst the U.K. is on the cusp of formally launching a hybrid policy mix of both that is very ambitious. Regional APAC countries like Singapore, Canada, New Zealand and Japan just last week are launching their own stimulatory policy responses. So we are more confident that Australia will develop constructive public policy soon because we need them to. Decarbonization for the aviation sector is not just for airlines, but is liquid fuels for other hard-to-abate sectors, like mining and shipping. It will help ensure long-term fuel security in this country. We can become a critical producer of renewable fuels for the APAC region, and there are very significant employment and economic opportunities, particularly for Australia's regions. So that's why we are asking the government today to introduce a progressive, sustainable aviation fuel blending mandate and linked industry policy of economic support. And we think it's actually pretty hard to argue again such a mandate and early year backing of this nascent industry, given the shared view of SAF's climate criticality and Australia's consistent policy position of competitive neutrality. So this policy do a mandate and economic support can help enshrine the best elements of global policy to date and unlock significant benefits for our economy. The jurisdictions with the most advanced policies are typically setting mandates of 5% to 10% by 2030. And that's a range we're keen to discuss with government as they settle their own SAF policy this year. So as mentioned, today, we are announcing the largest dedicated climate investment fund of any airline in the world. That's a very significant statement. It includes $290 million of the SAF co-investment partnership that you heard earlier with Airbus and Qantas, plus an additional $110 million of our investment to support all pillars of our climate action plan over the coming years with a special focus in the lead-up to our 2030 interim targets. Today's announcement is a recognition that direct investment is a critical strategic lever to airlines to manage their climate transition. Because we know, as the market for Climate Solutions becomes increasingly competitive and it will simply being an end-user or an offtaker increases our risk. But by investing directly, we can ensure access to the most desirable technology, transparency and pricing, priority offtake access and a greater competitive environment. The Qantas Climate Fund will provide us with the ability to stimulate the development of SAF that we need and secure supply at more commercially competitive pricing. The majority of the fund will focus on capitalizing SAF supply domestically and at strategic international ports as well as nature-based offsetting solutions to manage our voluntary and with compliance requirements. Additional smaller investments will be made in emerging carbon removal technology to support both high integrity offsets as well as power to liquid SAF and technologies to progress our operational efficiency and waste targets where needed. For prospective investments, the Qantas Group direct investment carries significant strategic benefits. It leverages the strength of the Qantas brands, our industry expertise, it will be Australia's largest SAF volumes, and we are a leader in end-consumer solutions. In addressing climate change, most certainly requires collective action. So through this climate fund, we will be looking for opportunities to partner with others right across the supply chain, and information on our investment priorities is now live on our website today. The first investment that is going to sit within the fund is the development of a native reforestation and carbon farming project to generate aqueous in the wheat belt of Western Australia. As some of you might remember, at the launch of our climate action plan, we also announced that we would be entering into a nonbinding MOU with impacts of Japan and ANZ to investigate the formation of this joint venture and project. That work is now complete, and we've given the go ahead to commence implementation and deep project testing, including first plantings. The project uniquely adopts a reforestation approach utilizing native species to this region of Australia, the mallee trees. And they can be used to both generate aqueous as part of the carbon farming project as well as potential biomass for SAF. Because mallees can be harvested and regrown, the biomass plantings are therefore renewable, and they're targeted at marginal or degraded land, using integrated belt plantings so as not to displace food production. The plantings assist with the return of carbon to the soil and the growing solidity issue of this region as well as improving very importantly, biodiversity. And there's also a potential social co-benefits for landholders. The initial lab results conducted in Amsterdam, converting the Mallee biomass into a bio crude for upgrading into SAF have been very promising from both the yield and stability perspective. So we hope in the coming years as you fly over the wheat belt, it's an area of the size of Belgium that we hope you begin to notice these green corridors of eucalypt. High-quality carbon offsetting, like that in the wheat belt, will remain a key tool for us in achieving net zero alongside our other levers. But we know increased and ongoing scrutiny of carbon markets is important to ensure offsetting remains an effective and credible lever within our mitigation hierarchy. As such, we are implementing additional layers of governance, due diligence and assurance to an already strong approach to offsetting through the introduction of an integrity-focused strategic framework to govern sourcing and our portfolio management. We are also currently scoping the market for independent scientific and technical-based carbon rating -- carbon credit rating agencies to integrate credible third-party verification and will be one of Australia's first companies to do so. We're also transparently communicating to our expectations of carbon investments to our suppliers that we source credits through our carbon offsetting investment principles, and we're embedding these into our supply contracts. And co-benefits also remain an important component of the group's carbon portfolio and wider ESG strategy. A great example is today the Yalu river water from Northern New South Wales run by First Nations group. It's why we're developing new procurement strategies for First Nations projects and are increasingly focused also on nature-positive and biodiversity initiatives like what you saw in the film with the Great Barrier Roof. So to finish, 2023, we hope you share with us has been a real year of action. Progress against our glide path to 0 and those commitments we detailed in our climate plan. This year, you will see more investments that enable progress towards both our 2030 and 2050 targets. You'll see a nature strategy that will work in harmony with our climate plan, you will see a new sustainability report to update you on our performance on emissions, on waste, on offset, social license and governance. That report and our wider engagement is part of our efforts to be clear and transparent. We're very conscious of greenwashing and vows that make claims without substance. Flimsy declarations in action against targets, these behaviors risk, the confidence we need and that so many in this room are working towards as we respond to climate change. So we believe that our reporting, the funds that we have launched, the investments that are happening right now and our ongoing use of staffing Heathrow and soon California, the additional layers of assurance and integrity in our offsets portfolio that these are all evidence of the substance and seriousness of our plan. 2023 will also be a year of significant progress in operational efficiency against our 1.5% annual efficiency target as well as our very ambitious waste targets that you saw Matty outlined in the film. And as you heard from Stephan and Drew, the arrival of new aircraft will play a very significant role to get to net zero. Our people are at the heart of this plan. So it's now my great pleasure to welcome Rob Marcolina, who's our Group Executive of People, Strategy and Technology to take you through our people plan. Please welcome, Rob.

Thank you, Andrew, and good afternoon to everyone. I'm Rob Marcolina, I'm Group Executive of the Strategy, People and Technology and being here at Qantas for 10 years. And it's really my privilege today to talk about our people. And throughout our history, our core business has always been our people. It's their relentless focus on safety, their focus on innovation and their focus on excellence. And it's really the pride in our purpose to take the spirit of Australia further. So there's no better way than to introduce this section on people and culture than to hear from one of our dedicated team members. So I am going to introduce Gabrielle Gould. She's one of our first lounge supervisors and Gabrielle has been with us for over 30 years, and she's going to share her perspective. So Gabrielle, welcome you.

Thank you, Rob, and hello, everyone. I came to Qantas fresh from backpacking through Europe after finishing a university degree. I had no idea what I wanted to do with my life. So when a friend started as a Christmas temp for Qantas, I thought, why not? So my Qantas journey began at Sydney Airport on the 13th of November 1992. One of the great things about working for such an iconic company like Qantas is the ability to be able to diversify into so many departments. I've worked in reservations at both our domestic and international terminals and within our integrated operations center. However, it is within lounges that I have found my Qantas home. So as you can imagine, I was very happily coasting along in my Qantas work bubble, when suddenly a virus out of nowhere turned my world upside down. Initially, I thought, well, this is the nice well-deserved break I need. That sentiment was very short-lived as every border around me closed from the Australian border, to state borders, to municipal council borders. The reality was everything was closing around me. For the first time, I had genuine fear as to what the future held for my colleagues and I. Those fears were short-lived as the Qantas family kicked into gear, and we are all embraced like never before. Our talent acquisition team worked tirelessly to secure secondary employment opportunities for as many team members as possible. It was through this that I was able to secure a full-time role working for BuildCorp, a high-end commercial building company as their receptionist and office manager in Camperdown. The hustle and bustle of Monday to Friday, 9 to 5, traffic jams and weekend chaos became my new normal as a die-hard shift worker. This was a huge transition for myself and my family and one I never truly accepted. So when I received the call from Qantas to be stood back up for the opening of the Trans-Tasman bubble, the excitement was real. My uniform is resurrected from the back of the wardrobe, and my Qantas ID was attached to my jacket with great joy and pride. Walking back into the terminal on that first day was surreal. Shops were closed, cafes were stripped to tables and chairs. There was barely a sole about, and those you did see were often in head-to-toe PPE gear. I felt like an extremely strange movie set. Walking through the glass doors to the first-class lounge was very emotional for me. I was home. And regardless of everything going on in the world, I was hopeful of what lay ahead. This temporary return to my norm was short-lived, some 3 weeks later, the Trans-Tasman bubble abruptly burst. My brief return to stability was gone and I felt fear, apprehension and uncertainty once more. But without fail, the Qantas community was there to pick my colleagues and I back up. The care and communication from our Qantas management team was there again to keep me informed and connected from regular teams coffee catch-ups to virtual cooking classes, the arms of Qantas management wrapped us all up again. Thankfully, after a few short months, our team was reunited and I was back doing what I love, working with amazing colleagues and welcoming back our passengers. It was a wonderful time with passengers sharing their COVID towels of missing loved ones overseas and what the journey ahead meant to them. It was truly special. To finally see the red row back on the tarmac to see the iconic flapper board in the first lounge have a full display of flights was awesome. We were back, and we had so much to look forward to. With the recent new announcements, my future feels once again secure. To hear of our network expansion, new aircraft and new destinations excites me. To hear a Project Sunrise back at the top of the agenda excites me. To hear our commitment to sustainability and what it means for the next generation excites me. But closest to my heart is the reinvestment back into our lounges, which means so much to our people and passengers. I have so much to look forward to, and I cannot wait to play my part in the journey ahead. It's going to be incredible. Thank you for listening to my story, and I hope to welcome each and every one of you into our lounges very soon. Now it's time to hear from some of my colleagues across the network. [Presentation]

Well, it's always inspiring to hear from our people. As you heard, they've been through so much over the last few years. They've really been so resilient, and it's great to hear how excited they are about what lies ahead. So can you please put your hands together and join me for thanking Matty for her perspective today. Well, I'd like to start by referencing our employee value proposition. We know that our value proposition is very strong. We know that it's unique and we know that it's differentiated, not only against other organizations, but against other airlines. And it really starts with connection. It's connection to our history, its connection to our purpose, and it's also the iconic status that only Qantas enjoys. And that connection really enables our people to do extraordinary things each and every day through the good times, but also through adversity. And our focus is really to create a safe and inclusive culture across all parts of the organization, allowing our people to be their best to be able to do their best for our customers and also for their teams. And we support this culture by investing in training and development. In fact, in calendar year 2023, we have over 2 million hours of training currently scheduled. Another important part of our employee value proposition is also focused on sustainability is people want to work for an airline that's focused on protecting the future of travel. They want to play a role.They want to reduce waste. They want to make sure that we get to that single-use plastic elimination by 2027. And Andrew mentioned Maddy in the video that you've just seen. She is a member of our REGENERATE group, which is our latest employee network, which we've just launched. It's been extremely popular with people joining wanting to really make a difference in ensuring that we meet those sustainability targets. From a benefits perspective, they're really unrivaled, particularly around our core product, which is travel. Our people love to travel. That's why they're at Qantas Group, and we're always looking for ways to facilitate this. And so we've introduced a number of initiatives over the last few years to help our people be able to travel. We've expanded the eligibility criteria for access to staff travel, extremely popular part of our value proposition. In fact, across current and former employees and their families, we now have about 1% of the Australian population that actually have access to staff travel. Now of course, that's all through stand-by facilities. And for our current employees, we've done a number of things. We've introduced 25% of discount on confirmed Qantas flights, the 20% discount on Qantas and Jetstar hotels and complementary membership of Club Jetstar. And again, these have been extremely popular, particularly the flights where we're now up to $1.4 million in discounts that have gone to our people. We've also continued with our commitment to share the financial rewards with our people. And we've made 2 announcements over the last 6 months that are now in the process of implementation. The first being the boost payment on the successful closure of EBAs and that being $5,000 and secondly, was awarding rights to 1,000 Qantas shares for over 20,000 of our nonexecutive workforce. And these are due to vest in August and currently valued around $6.50, hopefully a little more after today. And combined, this represents about 11% bonus for [ Allegiant ] employees when you consider that the average pay for nonexecutive employees at Qantas is just over $100,000, which is the highest in the Australian aviation industry. This takes our cumulative distributions to our employees, since 2015 to $450 million. So across all elements of the value proposition, we know that it's compelling. And we also know that we are an employer of choice. From a recruiting and retention perspective, there were periods over the last 3 years that have been extremely difficult for our people, and you heard some of that in the video. And this did have an impact on our ability to recruit and also our ability to retain our employees. But this is certainly not the case now. Our recruiting pipeline is as strong as ever. Across all of our work groups over the last 12 months, as you can see on the slide, the ratio of applicants to available jobs has been very high. A couple to point out would be in our airport space as well as in our engineering space, we had over 25 applicants for each role. And in many of our corporate areas, these numbers have been even higher. And across all work groups, we know, given the demand in recruiting that there are many people that want to join the Qantas crew and be part of the exciting future that you've heard today. We've also seen a significant reduction in attrition rates over this corresponding period. After peaking at the group level, mostly in late-2021, the current attrition rates are now down to the long-term average of about 5%. And pilots, which are typically being lower, are now at 2%. I did want to call out our Digitec area. These are skills and capabilities that have been in high demand over the last few years across all organizations. And our attrition rate in 2021 in this group was running at over 30% and again, that is now down to 4%. These are very low attrition rates versus an industry average of about 9%, and Qantas has traditionally been lower, but now we are back to those low attrition rates. And this has been driven by many of the things that I talked about on the previous page in terms of our value proposition. We're very confident, given where we are with recruiting and given, where we are with retention that we can meet those growth targets that I'm going to talk about a little later on. With regards to culture, I spoke earlier about our focus to create a safe and inclusive culture. Culture plays such a significant role in why people come to conscious and why people want to stay at Qantas. And our IND initiatives that we're rolling out across the organization are critical enablers to reinforce this culture and a range of those being rolled out now. For example, our First Nation's cultural confidence training, which we're rolling out to all levels of management, including 10,000 of our customer-facing employees. The employee networks that you see there on the right-hand side of the slide play an important role in evolving our culture. And these have been reactivated post-COVID, and there's a huge amount of momentum going on right now within each 1 of these groups. I also wanted to point out that each of these groups has a senior leader sponsor to ensure that inclusion and diversity is always front and center with regards to decision-making. And there's a lot of work going on within each of these networks with a goal to drive awareness, engagement, but also to bring to life the lived experience of these various groups. We want all of our people to come to work with a strong sense of belonging at all times. We're really proud of the culture that we've created here at the Qantas Group, and we will continue to evolve it and also to celebrate over time. On growth, we've talked a lot today about fleet, and we're really excited of what's coming down the pipe. And you heard from Gabrielle and a number of other team members about how excited they are with the new fleet that's coming. It's not only an enabler to drive our financial performance, which you've heard about, but it also provides not only an improved product for our customers, but also an improved working environment for our people. And our business is growing, and we need a lot more people. We need engineers, we need pilots, we need people across the organization. And the numbers are quite significant 8,500 new Australian-based roles over the next 10 years with 2,300 of those over the next 18 months. And we're confident that we can deliver against these growth targets. As I mentioned earlier, our pipeline is quite strong, and we know it will only get stronger as the business continues to perform well. And this growth also offers an opportunity of a promotion for many of our existing staff. As we go into this growth period, we've restored our overall EBA position with 38 of our 55 EBAs now closed, and this includes all EBAs that had an expiry date during COVID. And for those OBAs that have opened, since COVID, we've been systematically working through closing those agreements typically within 9 months of the start of bargaining, which is much quicker than it was pre-COVID. To support this growth, there's a significant amount of training that needs to take place, and we're already investing in the training infrastructure to make sure that, that happens well in advance of needing these particular work groups. For example, the Longreach Center for cabin crew training, which has been established just next door with an ability to train up to 200 cabin crew per day. And hopefully, some of you had the opportunity to ought to go on a tour during lunch. Also, our purpose-built, Sydney flight training center is also under construction with an ability to train 4,500 pilots and carbon crew across the group, including, obviously, Qantas and Jetstar. So there's lots of planning going on, not just around the recruiting standpoint, but also with regards to the training that's going to be required. So looking forward with those numbers in mind, we recognize that we can't only rely on the market for our recruiting needs. We need to do all we can to grow and to train our own. And we've got history in doing this. The engineering apprenticeship program as an example, which has been running since 1927. So we're really confident that we can train the requisite people that we need to meet these growth targets. And there's a number of critical initiatives underway. I'll firstly talk about the Pilot Academy, which is now well established in Toowoomba delivering a strong pipeline of skilled pilots. And this pilot academy has been set up not just to meet our needs, but also to be able to supply pilots to the broader aviation market. And we know that it's now well set up to enable us to generate the number of recruits we need on a go-forward basis. I also wanted to point out that recently, we did announce 50 scholarships over the next 5 years, which is, again, to support our commitment to further diversity in our pilot community. On the engineering academy, we recently made an announcement back in February to set up an engineering academy with a capacity to train up to 300 engineers per year. And again, this is surplus to our needs. So we are also training engineers to be able to work in the broader aviation market. There's a lot of planning going on with regards to the Academy, and we are working closely with the industry. We're also working closely with the unions to help us design the curriculum. And we'll be making a number of announcements about the Engineering Academy in June. Just finally on this slide, I also wanted to point out that we do have an eye on the longer term. We know that a technical career in aviation usually begins at a very young age. And so we are going into high schools. We are encouraging the study of mass, the study of science. We're also doing that at the tertiary level. Our technical needs are quite significant over time. So we're going to make sure that we tap into all pipelines to ensure we get those numbers. And we'll be doing this always with an eye on diversity and trying to get and encouraging more women to enter math and science to get more women into our technical work groups. So as you heard from Gabrielle and others in the video, last few years has been extremely challenging. Their story has really demonstrated the resilience that they have, the commitment to Qantas and also the excitement they have about our future. And we'll continue to listen to our people and will continue to have a bias for action. And it all starts with connection having the regular forums in place, whether that be at the group level, the team level or the individual manager level. And these forms are really, really important to not only build strong relationships, but also it builds trust with our workforce and trust with individual employees. And COVID really provided a catalyst for us to think differently, to think creatively about how we connect with our people. And many of those things are stuck and we'll continue to do those. More holistically, we've done a lot of work around understanding the employee life cycle, really understand the moments that matter to our people, everything from onboarding through to the different stages of a person's career. And we partnered with [ Cultrex ] to really understand this employee life cycle and our listening strategy, and that has given us access to data and insights. And we'll use this to make sure we're acting what matters most. Fixing the pain points and making sure that we're investing, where we can really make a difference. And some of the other things we're doing now firstly, around recognition. Our people have told us, it's really, really important to them. We're upgrading what we call our Thank You Program, is aptly named, in order for it to be easier to use and also to have the rewards in there that they really appreciate. And on training development, I mentioned earlier that we have over 2 million hours of training and development, on the job training in 2023. We're also investing in professional development of our people as individuals and making over 100,000 courses available on our Academy Q platform. You've heard a lot today about data and insights and how that's going to drive better customer outcomes, better people outcomes. We're going to make sure that we've got the right data available at the right time, the right devices in the right context to ensure that Gabrielle and people are amongst our customer-facing operations have the right information at their fingertips to be able to make the right decision for our customers. So in summary, we recognize the critical role that our people play in the organization. They are our competitive advantage, and they do embody the spirit of Australia and we're committed to continuing to invest in our people to ensure that we build a stronger Qantas going forward. Thank you very much.

Thank you, Rob. Thank you, Andrew, and thank you, Gabrielle. We have our next Q&A session now, so I invite Alan to the stage. And I might offer the first question to [ Jess ] , I know that we paused that. So [ Jess ] first question over to you.

Thank you. Do you need me to ask it again, Andrew?

No, no. I remember.

Because I have feel like you would have remembered that.

Whole teams were working on the answer for me, out at the lunch. I know, it's a great question. And in fact, it's a slightly disappointing answer in the sense of one of our frustrations internationally is we are covered by a whole lot of jurisdictions, including Australia, that have a propensity for that waste to be treated as quarantine, which usually means incineration. We're working closely with the Department of Agriculture in Australia to try to change that, because we don't think it's a consistent risk profile for all markets. But therefore, to try to solve the problem, we've got to do 2 things. One is the design of products onboard themselves and being more thoughtful in the contents of those products, the materials that we use. And if you flow in recently, you would have seen a lot of evidence of that change, particularly removing plastics. Related to that, for example, is organics we've introduced, for the first time, very significant organic management, which we had not done prior. And then I think the second point is working with the supply chain because globally, we're in this together. So whether it's [ dnata ] or others in the supply chain, we all have to work together in terms of design of products, different jurisdictions. And a good example is this weekend in Istanbul, it's the annual IATA meeting of all airlines. And one of the sessions is how we collaborate more deeply on waste removal on international flights. So there's a lot of work to do, and it's a slightly disappointing answer, but it's a priority.

I might just add, I mentioned REGENERATE before, which is our employee network. So we've set up an ideas forum and ideas platform. And so it's actually an engagement tool for us with our people, but it's also creating a lot of great ideas that we can then act on and closely with our people.

Michael, before we go to one of the questions, can I also say, Gabrielle well done. I've heard these guys speak lots of times, and they can board a hell out me. But when I hear Gabrielle speak and the way she speaks that they have passion of their Qantas about her role, that's why we're all here is to make sure that this great company survive for people like you Gab, you do a great job every day, and I thank you for standing up here wouldn't have been easy and doing that. So can I say on behalf of the management. Give her a big round of applause. We'll direct all the rest of the questions to you, he deals with difficult customers all the day. And I think there's a few of them in this room. Okay. Next question.

It's Justin Barratt from CLSA. Just got a question for you, Andrew. Just coming back to the SAF industry. I just wanted to understand over the last sort of 6 months or so, how discussions have gone with government? Have you made any material progress there? Or has there only been any setbacks in relation to, I guess, their support for growing the SAF industry here in Australia?

Yes. Look, it's been a huge priority. Alan, Andrew and I were in Canberra, I think, just a few weeks ago, and it is the subject [ to show ] with all of our engagement. Look, it's genuine progress, which is, I think if he had asked us 8, 9 months ago, we were probably more concern that SAF wasn't of the profile and knowledge that we would have hoped, but it is definitely moving and I think it's twofold. One is it's the states. So I think you are waking up to the economic opportunity. So Queensland, and I really can't overstate this, have gone very quickly into we want a major SAP industry in our state. And I think, therefore, that federalism competitiveness is going to kick in of other states wanting some of that, too. But I think at a federal level, we have the industry council for the first time. We had our establishment meeting at the Avalon Air Show. The first meeting is due to take place very soon. I mentioned you've got some dedicated public servants, who are just focused on SAF now. So whilst there's been some budget line items, so Arena has some funding, there's a hard-to-abate line item that was in the last budget for our rail and aviation. Yes, there's a lot of work to do, and I don't want to overstate it, but it's definitely heading in the right direction.

I'll just add to [indiscernible] . I think one of the things that's getting a bit of traction also is energy security on an Island. I mean we're talking about working with defense on their requirements, which I think there's a lot of opportunities for defense to get sustainable aviation fuel here, which they're interested in. The Americans have moved massively in this space. And I think the other thing that's getting traction is the amount of jobs that this could create. We think it's in the tens of thousands. And the sad thing that we're all disappointed in is that the feedstock is here in Australia, and we're exporting it and it's creating foreign jobs, when it could be created here. And I think all of those messages are getting through and I think, I can agree more with Andrew in the last -- since the new government came in, there's been a step change, and I think it's changing quite rapidly. And it needs to because we need to have massive movement on this to get this established before everywhere else in the world grabs the feedstocking gets contracts laid in for the longer term. Other questions? At the very back.

Scott Ryall again. Hey, Andrew, I won't ask about SAF today. I wanted to ask you about offsets and what proportion of offsets over, let's say, the remainder of this decade DC coming from Australia versus offshore. And then the second question, if I can be a bit cheeky is on plastic waste and your waste targets. Am I correct that your single-use plastic targets are essentially, because you saw no path for either separation and recycling. And so can you tell us how that will differ. You're not going to stop creating waste. So how will the collection and processing of that waste happened so that you hit a 0 to landfill by 2030, please?

Yes. On offsetting, at the moment, the portfolio is approximately balanced of about 20% ACU and then 80% internationally. We would like that waiting to increase to the domestic side, and that is the plan. And that's why things like direct investment are going to be so important because we have costs to manage, but we also have assurance and all of those other elements of integrity to manage. And we think also for customers, their passion when they see iconic Australian projects like reforestation like what we're doing in Charleville, like the Savanna Burn in the Northern Territory and now the reef credits changes behavior. You promote those projects attached to our voluntary offsetting program for flights and you get an immediate uptick. So we want access to those volumes and the plan through to 2030 is that percentage will increase. I won't put an absolute number on it, and it is a diversified portfolio. But yes, we're very encouraged and we've met -- we have Tanya Plibersek and others and Chris following on. Also Australia's plans to capture particularly nature-based projects into ACU market that really excites us as well. And then I think on the second question, in terms of waste, yes, it is complex. We've removed about 150 million single-use plastic items so far out of the supply chain, and we should hit about 180 million, 184 million by the end of the year. The plan is we must remove single-use plastics entirely. That's '27 and then 2030, the target is no waste to landfill at all. So it's ambitious. So it requires a couple of things. One is absolute recycling, and it was one of the disappointments of COVID that we had to turn off some of these projects like onboard recycling, but they're all coming back on now Brisbane, Sydney, Melbourne, Canberra, a lot more ports in the coming months. As Steph mentioned, the Jetstar June this year and we will have that segregation. And then the second thing is reuse and repurpose and then there's a whole organic stream as well of those materials. So it's an absolute eradication of all plastic are a tiny percentage of things like medical equipment that are onboard aircraft that we can't. And then it is a very sophisticated project working with the supply chain that by 2030, it is 0 waste to landfill. And just to give you an example, it was pre-COVID, but it was one of the great days that Andrew David and I had. We flew Sydney to Adelaide and we did a 0 waste flight. It was fantastic in terms of the art of the possible, but we've got to do that on an industrial scale with our supply chain, and that's the plan in the coming years.

So just on that, sorry, outside there, there's 4 bins. If you go and have a look at the container deposit scheme bin, it's got virtually no container deposit material in there, and most of it's just random stuff. So are you going to control the collection? Is it the -- so onboard recycling, that will be Qantas employees coming around and making sure that my bottle goes in the right place, so that everyone in this room that's missed the really clear sign for container deposit scheme material.

Are you saying to get [ a bit ] your colleagues.

Absolutely am. No. So it will be your control, right?

Yes, absolutely. And look, I think if you've been on flights recently, where you're seeing that, you are seeing that it's a relatively simple process of segregation, because we've got simplicity in what is served and therefore, what is collected. And it is built into contracts, for example, with our suppliers that they must meet that separation and sorting. Look, the program we've just introduced on campus is brand new, and it is going to be brilliant. There's always teething issues. But there's a role of technology in a lot of this as well, which is not on this scale, but sometimes you don't see the back end of these processes, where you are using waste collection industrially to have technology help you sort things that are getting through the human system. So yes. Look, it is part of contracts. We have made very high-profile targets. We are working with governments, who are setting very ambitious targets. So it's going to be heavily regulated as well.

I'm just conscious of the time we -- if there's any people questions as well, because we offer [indiscernible] to do it. Over here.

Andre Fromyhr from UBS. So on people, we've previously seen your report that there were about 9,800 exits through the COVID disruption. And then in the content today, we can see that you've hired about 7,000 roles back so far, and there's another 2,300 to come in the next 18 months. So am I right in thinking that, where you get in 18 months' time is actually a similar size of overall workforce versus pre-COVID but maybe you could also comment on how the composition of that workforce has changed.

Yes. Well, in terms of the numbers, so June -- yes, in a month's time, we'll be back at about 24,500 FTEs. So it's about sort of similar to where we were before. And I think if you think about that 7,000 number that you saw before, some of those are backfill, so I think it's about 3,600 of those are backfill of attrition. And as I said, the attrition rates coming into the late '21 into '22 were quite high. So there was a lot of backfill with about 3,400 of those in new roles. And that's in getting back to the 100% that we were at pre-COVID as well as new growth such as the 789s that we've got arriving at this point in time. So that's the mix. But now as of June, it's about back to that 24,500.

Yes, I think you have to be careful with the attrition that were happening anyway that was ongoing that we are replacing them, and they will include the 7,000 numbers. So you can't add them to the total number, where we started with and I think Rob showed that for a period of time, the attrition was actually quite high. So you need to take that into consideration and before we can come to the numbers that we've been seeing. Any other questions? No, okay. Over here, yes.

Can I just sink one more in, before you finish. So yes, I just wanted to ask about the numbers you quoted in terms of the recruitment. So I think you said some of the sort of higher end was like 25:1 in terms of -- just sort of curious whether that's a good outcome for the business and sort of how that compares to pre-COVID just to put it in context.

Yes, a [indiscernible] said, was that for your job, Alan, was at 23:1. Probably thought that was a good outcome.

We've always been an employer of choice. So I don't have the -- so in terms of the statistics, we've always had high applications to roles that we've been advertising. But in terms of where we are now, I think there's just so much confidence in the industry, but also in the Qantas strategy. I must say Andrew's strategy that was presented last year, the Climate Action Plan had a huge impact on our value proposition. We saw that in recruiting. We saw it in assessment centers. And so those numbers are not unusual, given that we are an employer of choice. But we expect that they will probably even get in even higher as we continue to do well and do better. So thank you.

What was really pleasing about them is actually the high skill set jobs or in some places around the world, we've talked about a shortage of pilots in the United States as an example. You've seen our attrition rate for pilots is down to 2%. It's very, very low. And what we're seeing is when we're advertising for pilots, because we are the most attractive employer, where all of the growth with Sunrise, with the new aircraft arriving. We're getting a lot of people interested, including from some very large carriers in the region that have actually applied for jobs here with skilled labor, skilled pilots that want to work for us. That is a great position to be in where other people are finding hard to attract talents, other people are finding hard to retain talents for the particular ones that are the high skill ones, our attrition is very low and the attraction is very high, which gives us the confidence of us being able to do that [ 1,500 ] recruitment. I will point out though as well. We're very conscious that we do and John Gissing is a big proponent of this. We do attract people from regional operations and general aviation as well. And we believe that as the national carrier, we have a role to play and making sure that we are training enough people to supply not only our needs for future needs of the aviation industry. That's why we established a pilot skill before COVID. That pilot skill is now ramping up to produce a lot of pilots, not just for roles, but for general aviation as well. And now with the engineering school, we'll be producing over 300 engineers a year, and that's a lot more than our requirements going forward. And we could sit back as the employer of choice and just take everything else from the industry. We've decided as national carrier, that's not the right thing to do and that we need to invest in training Australians for the future in each of those categories to help the entire industry, which I think is the right thing for us to do. We had over time, again, and we'll have plenty of time at the very end to ask some more questions. We have now 5 minute break until 3:00 this afternoon tea outside. And so please go out, stretch your legs and come back here for the final session. [Break]

Good afternoon, everyone, and we are finally in that final home stretch. And I know that a lot of you are going to say, Thank God, it's now the final exciting part of the Investor Day, which is the finance section. And thank you for those who share your enthusiasm and excitement to hear about the balance sheet over lunch. I have to disclose that it was a few bankers, but that's fine. We know and in finance, we live for the balance sheet, but also we do find this the exciting part because this is what is going to create value for us going forward. And importantly, what we hope that you have heard today is that even though the last 3 years, after COVID has been tough, we have come through it stronger for it. And also, we really do hope that you leave today with a deeper understanding of us, as we look forward, why are we looking forward with confidence? So please, there are 4 takeaways from the finance part of our presentation today. The first one is that our balance sheet is stronger than it has ever been in our history. It has recovered really quickly from COVID. And what that will give us is not only the capacity, it will give us the flexibility, but it will also give us the resilience to manage through the years to come. The second point to take from today is that not only has our cash flow structurally lifted it's going to continue to grow from here. And that's not just because we've made the hard decisions during COVID to transform our cost base. But you heard from Andrew, you heard from Steph and also Liv that we are seeing a structural improvement in the markets that we operate but also that our position and our advantage in those markets is also improving. And thirdly, we believe that we are making the right investments. We're making the right investments in customer, in loyalty, but also in new aircraft technology that's going to strengthen that competitive advantage. It's going to help drive improvement across our segments. It's going to help lower our emissions whilst we maintain flexibility to be able to adapt if we need to. And then the final part is that we have, as you would know, a well-established capital allocation discipline. And we are committed moving forward to strike the right balance in terms of investing in our business, but also ensuring returns to shareholders during that -- those periods ahead. And this is what we have and what we will adhere to going forward in the decisions that we make around capital allocation. Now turning to that balance sheet, and here is the sexy part. As I said, it has never been stronger than it is now in our history. And there are a number of features of our balance sheet that I wanted to call out today. The first one is that we currently have $10 billion in liquidity on our balance sheet. Now that is 20% more than where it was when we entered the COVID crisis. Our cash balance is around $3.5 billion, and we do expect that this is going to reduce in time as we use cash to purchase aircraft, but as we also repaid debt. We do retain an undrawn revolver of $1 billion, which still has no financial covenants. And I do think in calling out our treasury team, that has been an amazing thing to achieve on an ongoing basis during COVID, before and also after. And there are many people here today that we would like to thank to support that refinancing of that revolver that was completed last week. And also, we now have $5.5 billion of unencumbered assets on our balance sheet. And this is because we own over 85% of our fleet across both Qantas and Jetstar. Not only does this give us additional liquidity if we need it, but it also provides us enormous operational flexibility, which we don't think that is shared by our major competitor here in Australia. Throughout COVID, but also after COVID, we have been absolutely disciplined in focusing on optimizing our debt profile. And this is actually a really important part of our capacity moving forward. We have prepaid debt over $650 million of debt that we've prepaid, but we've also paid off our most expensive debt. And particularly, recently, we have bought back a lot of our leases that has reduced that expensive debt but has also contributed to our unencumbered assets. We have extended you will see in the graph, we have extended our tenor profile of our debt maturity to now well beyond 10 years. This is a really, really important part of how in any 1 year, we have now reduced the refinancing and maturity profile of our debt, building capacity in any 1 year to fund all the business, but also deliver surplus in our net debt. We have been very deliberate as well as you will see across '26, '27 and '28 to minimize those debt towers in that period because this coincides with what is our Sunrise peak. So again, building in capacity through our debt profile. As Alan said this morning, we are very proud to have been only one of a handful of airlines to have retained its Investment Grade Credit Rating during COVID. And we now see this position is a very strong Investment Grade Credit Rating. And we've achieved most of this, which I think is, again, to the credit of our team during COVID. And also, I think it reflects the confidence and the trust that you have placed in us to not only apply the financial framework but actually act within it. And that is the one thing that you can rely on us going forward is that we will behave in line with that financial framework. As you know, one of the principles of our financial framework is that we will manage our net debt to the bottom of our net debt range is defined by the financial framework. In the market update that we gave last week, we are substantially below that range, almost $800 million to $1 billion below that range. We think that, that is appropriate right now. because we are still burning through COVID credits, but also we're going to be using cash as we updated in February to buy the shares that will accrue to our employees as a part of those reward and recognition programs that Rob talked about. So balance sheet strength, we believe gives us a significant competitive advantage by not only giving us the flexibility and the confidence to invest in the business to grow, but also the resilience and the optionality to manage better through the cycle if that were to occur. We are very confident that our cash flow is now structurally changed. And as I said before, it will grow from here. We've already delivered a part of that step change in cash flow, $1.2 billion has already been delivered from the transformation program as a part of our recovery from COVID. But what you heard Olivia and Andrew talked about, which is the step change in profitability in our Freight and our Loyalty business. There is going to be a RASK moderation between '23 and '24, but there's also going to be a CASK moderation to a greater extent, a really important thing to take away. We do expect that, that CASK moderation is going to occur as capacity increases, but also as capacity increases, so will the ability for us to defer our fixed costs over a greater activity base, but also the temporary costs that Steph and Andrew talked about earlier, will reverse between '23 and '24, and we can already see that the $400 million of temporary costs in '23 are reversing and will albeit delivered out of the business in '24. But it is from this base. So the lower cost base and also the moderated revenue base, albeit that RASK is going to be at a substantially higher level than what it was in '19. This is the point where we're going to grow, both in terms of the fleet renewal, across Qantas and Jetstar is going to step change our ability to open new routes, reduce our cost, drive utilization, but also grow, particularly grow with Project Sunrise. Our freight business as well will continue to participate in the growing e-commerce demand that we're seeing across our network, but also the investment that we are making in our freight fleet will continue to drive profitability in that business. You heard from Olivia that we remain focused in loyalty to drive ongoing growth in that business, both in terms of driving earn and burn across our portfolio and ecosystem but activating more members. And finally, and this is a continued focus that we have had at Qantas for many years, is an ongoing commitment to driving transformation within our business and we will be targeting from FY '24 a further $300 million per annum of transformation that will be focused on both revenue and cost to offset the impact of inflation. Now we do have a proven history of driving transformation at Qantas. This isn't just talk. You know this. We have delivered an accumulative $4 billion of transformation across the business since 2015. $2 billion are part of the turnaround program up till 2017, a further $900 million to just before COVID, and then, as you know, the further $1 billion that we did after or during COVID is a part of our recovery plan. But the job for a transformation is never finished. And I get lots of questions all the time is that surely, there's no more to be done. But there's never finished lines of transformation. There is always something more to do. It's like painting, the Harbour Bridge, you start on one end, get to the other and then you start again. And this is going to be a part of our culture it has been and it will be going forward. And it is just the way we work. You heard from Steph and Andrew earlier, that the focus of transformation, the enablers for that will vary across segments. But the one thing that is now constant going forward is the role that technology is going to play in unlocking value, data and smart use of data, but also digitization right across the group. So this will include ancillary revenue growth in Jetstar, optimizing term performance across all airlines, improved disruption management, predictive maintenance, inventory management, but also optimizing sales and distribution to just name a few. The one thing that we have talked about today, and I wanted to reemphasize is that we are really fortunate to be renewing our fleet at the time that there is another step change in aircraft technology. And this gives us a generational opportunity to do a few things to extend our competitive advantage across both domestic and international to drive transformation through network but also operations and to reduce our operating costs but also reduce our carbon footprint at the same time. I think Alan mentioned at the beginning that we went to market at a time where we felt we had maximum leverage. Maximum leverage, particularly on the narrow-body campaign Project Winton that enabled us to get the lowest cost per aircraft, but also to reserve and secure really precious slots that now are full through to the end of the decade. And finally, we had the ability to negotiate flexibility. And this, we have spoken a lot about this, but how important this is going forward. And when we talk about fleet flexibility, we talk about 4 unique characteristics. The first characteristic I've already spoken about, which is that we predominantly own our fleet. And this gives us an enormous operational flexibility, particularly if demand changes. The second is that we move aircraft commonly across the group. And we've seen this in our past and we've demonstrated that we've done this. For example, the 330s has flown in Jetstar are currently now flying in Qantas, 2 of those 330s are now being converted into freighters to capture the demand that we're seeing in freight. This is what we think creates enormous shareholder value because we are using the aircraft to their maximum capacity. We've also used aircraft from Jetstar the A320ceo aircraft we have transferred into network aviation are the perfect vehicle for Qantas to capitalize on the growth that we're seeing in the resource markets and also Western Australia. Andrew talked at length about the breadth of our fleet, which is also the third and very important part of why we see flexibility is a unique part of our fleet because that gives us the ability to deploy the right aircraft on the right route at the right time to make sure that we are participating fully across all demand pools, but also be able to move those aircraft if those demand pools were to change. And then finally, and we've spoken a lot about the unprecedented level of flexibility that we have with Airbus. And we are deploying that as we speak in terms of many parts of that relationship. We can actually move aircraft forward or delay aircraft if we need. We can swap aircraft between brands between Qantas and Jetstar. We can also change the fleet type, we've just recently done that where we've actually committed to more 220s as a part of that evolving and dynamic relationship that we have with Airbus but we are also negotiating with Airbus flexibility around our PDP payments, so our predelivery payments to Airbus as a unique part of the relationship and flexibility that we have with Airbus. Many people asked me at lunch, in terms of downside scenarios that, of course, you are running, and we know things don't always go to plan. I think the one thing that we want to say to you today is that we're never going to be complacent, we are always going to keep looking forward. We are always going to keep looking around corners and this is always going to ensure that the group is in the best possible position to be resilient, to absorb an unexpected event. And key to this will be, first and foremost, our mature and well-tested risk management system covering operational risk, strategic risk, external risk. Maintaining balance sheet strength is a key part of that, targeting the bottom of our net debt range is absolutely a way that we create and keep headroom if we were to need it. You would know about our disciplined approach to fuel hedging. That is not going to change. We're going to continue to do that, and that's been proven successful over decades. And then finally, the fleet flexibility is also another part of what enables us to adapt to different environments. It's all these factors together that we think that gives us the resilience and readiness to manage if we need to. But also, we think that by investing in Qantas, you are buying into this risk management culture. And we think that, that and believe that, that stands us apart from our competitors. So in closing, I'd like to return to our financial framework or else Greg will kill me. It has and it will continue to guide our capital decisions. And this is our commitment to you. And as we look forward, we believe that we have reason to be confident and that we can strike the right balance between investing in the business and also enabling returns to shareholders. I have used a crude expression in the past that we can walk in to gum. So how do we believe this? First of all, the group is in a great position as we head forward from here. With the balance sheet strength, with a structural change in our cash flow, we believe that this is placing us in an excellent position as we head into the renewal and the growth phase. Secondly, we do have that substantial headroom in our net debt. And that is a net debt range as defined by our financial framework. So this is the net debt range from the financial framework that we do expect that, that range will increase as we invest in our business and increase as our earnings increase. And then it will return to levels that we were at pre-COVID. And if you compare the lower end of that range to where our debt -- net debt position is today. That's at least $2 billion of headroom that we have. We have also been deliberate in creating capacity in our debt profile, which is another part of why we're confident, we have the levers, as I spoke about, to manage flexibly if we need to adapt. But also and finally, we've demonstrated that we're prepared to act and live within that financial framework, which, at the end of the day, I believe, is the most critical part of that. So we are excited about the future, and we think it is a great time to own Qantas. So I might pass to Alan for some final remarks.

Can I thank Vanessa for that. And I think that was a fantastic presentation, and I think it shows the financial strength that the group is in. I would have thought that after a number of years of COVID when the revenue was switched off completely to the group in certain parts of our operation that we'll be coming out of it this strong. Certainly, we didn't back down. And that brings us to the end of our presentations. So I hope that you've enjoyed it and you have learned a lot out of it. I want to wrap up by saying a few words, and then I'm going to pass over to Vanessa to wrap up with a few words as well symbolic of handing over the baton as well to Vanessa and through the CEO successful phase that we're in. And first of all, I want to thank everybody that was involved in pulling this together. Vanessa, Rob, their teams, but all the GMs say, which I think shows the depth and strength that we have on people in the group. Fil, in particular, has been working unbelievable hours. I think he's e-mailing people at 2 a.m. I don't know why that would they. Mackenzie, who's here, who put a lot here and Adam from his team, going to thank all those people for putting a huge effort because the quality of [indiscernible]. Now internally, as you know, we all talk about the individual parts of the strategy, and you saw it them today. But when you look at it holistically, as we've done today, you realize that Qantas is more than the sum of the parts. And a lot of what we do really comes together to produce an outstanding airline group that's more than an airline group. This is obviously my last Investor Day. I do not smiling because it's my last Investor Day. I'm smiling because of what we were able to present to people today. And at the last Investor Day at the end of '19, I thought that we're getting pretty close to my time as group's CEO. Finishing at the end of 2020 and our century year felt like there was a good symmetry to it. But COVID obviously scuppered that. So along with some very key members of the group that are here today, and you all know about Andrew David. I extended my time to help see the company true in those 3 years. And I know a number of airline executives around the world, other CEOs did the same thing. The best part is that now I know I'm handing over the reins of a company that is extremely well positioned because we have retooled and restructured a lot of it. I'm thrilled that we have Vanessa taking over as CEO as I retire. Many of you know Vanessa. An incredible job she did as CFO, helping us manage through COVID and to the other side. And you may have not seen her in the other roles that she did in the group, but she equally tribute massively over that period. She is supported by an extremely strong executive team. And you could see that today, I thought Liv gave an amazing presentation. Andrew, Rob, and even the oldies of Andrew David. But he is, I hasn't staff. I hasn't staffed brought new youth and energy to the team, so that I rescue that ones there. And of course Markus is new to the team as well has done, I think, a phenomenal job. Now I'm going to hand over to Vanessa to really summarize what you've seen today. And I hope that I'll be over the next few months, I'm still 5 months left in the job, they will have plenty of opportunities when we report our full year results to meet with you again to talk through what you've seen here today and to continue to build on it. Because what we want is a company that survived for over 100 years is to continue to build and make sure this is stronger for the future. It's been an absolute honor to be CEO of the national carrier. It's been absolutely a massive honor to be CEO of a company that's an iconic Australian brand. And it's an absolutely honored to lead an amazing management team that I think has taken this company through the toughest period in its history. And I think we're in a strong position now coming out of it. And I look forward to see what Vanessa does over the next months. You still have me for 5 months. But I'd like to hand over that Vanessa to wrap up.

Thank you, Alan. No, you haven't messed up my notes and so. Can I also say what an incredible honor that it is for me to be taking over from you in November I couldn't have learned from someone more strong as a leader, particularly through COVID. And to be taking over the company in such amazing shape is a privilege, but it's also incredibly exciting. Next year will almost be 30 years that I would have been at Qantas. And I am as passionate about this company as I've ever had. And I agree listening to Gabi today and the energy and the reputation that our people have with our customers is just second to none. And that's what makes me get up out of bed every day is to deliver what we have spoken to you today about. And the strategy that you've seen today is a strategy that has evolved not just over the last month, it's evolved over years. And it is collectively owned by the management team across all levels, which makes it so powerful in terms of the alignment that exists within the group. It is what we all know at our core will make us successful. The one thing I think is really important not to miss today is the fact that we've done an Investor Day as a part of our transition period, and it is very symbolic because it demonstrates that we are committed to the strategy, it demonstrates there's a continuity to the strategy and that, that is enduring. And I think that that's actually really important because it's the right way forward, and we believe that deeply. You've heard very clearly today what the drivers of our growth are in terms of Qantas Loyalty delivering on Project Sunrise, Qantas Freight, but also the incredible position that our flying businesses are in, not just in terms of today, but also with what the new technology is going to bring to those businesses. We are also very clear on what the enablers are for that growth, and we will never forget that. First and foremost, it's about delivering for our customers on every flight in every interaction. We know that we are only as good as our last flight. Enabling our people to do and to be their best is absolutely what we are going to continue to make sure that we live by every day. Renewing our fleet is obviously going to be one of the most important things that we execute on and do that really well and continuing to innovate and transform as we go, will be the core of how we go about doing our work. And then finally, hitting our climate targets, we know is not just going to be important for us, but it's going to be important for our customers. It's going to be important for our people. Always getting talent right is going to be really critical, and that's something that we talk about as a leadership team all the time. The depth of talent that we have within Qantas is second to none and it really amazes me, nearly every day the incredible people that we've got in this organization and their passion that they bring every day. But as Rob talked about, our ability to attract new talent is also incredibly strong, which is really important because we are going through a period of renewal. Our Chairman recently announced Doug Parker, the former CEO of American Airlines will be joining our Board and really excited to have his steerage and leadership going forward. We're also looking forward to welcoming Cam Wallace in July, who's stepping into the role of CEO for Qantas International. And in the coming months, there will be more announcements about the new CEO of Qantas Domestic and who will be replacing me. But finally, our future is really bright. We're really confident about it, and we're also really appreciate the time that you've taken to be with us here today. We really hope that you've got something new, a deeper understanding of our business, but also Alan and I are happy to answer your questions now. Before I hand over, I would also like to extend my thanks to the team that built the background behind today. It is incredibly comforting to have you as a key part of the support network, not just IR, but strategy, our corporate comms team, the events team, the individual leadership teams in the segments. It has been a fantastic journey, and you should be really proud of what we have delivered today. So thank you.

We have questions?

Okay. It's Matt Ryan again. I just had a question about the ongoing transformation costs, you sort of try to achieve to offset inflation. So I think you're going for $300 million now. Pre-COVID, I think that was about $250 million. And from my recollection, that was sort of the nonfuel costs that you incur, you're trying to offset the inflation on that. Why is it that you don't try to achieve a greater number? Is that possible in a steady state? Or how do you land on a number of $300 million moving forward?

So before COVID, it was $400 million, and it was $250 million that we were targeting as the offset of inflation. So moving forward, we think $300 million is sized appropriately, given the amount of transformation that we've done during COVID. And what we can see is the impact of general inflation on our business, we believe it's going to be around $250 million. So the $300 million is being sized to give some headroom for us to be able to contribute to ongoing margin. We've always said in transformation that it is a split between revenue and cost and that is what it was before COVID and what it will be going forward. And the teams are really energized around this, particularly, as I said, the role that technology is going to play the role that digitization is going to play, but also the smart use of data. That's going to help us drive productivity and it's going to help our people actually have better roles and more meaningful roles because they're going to be focused on what matters, which is our customers and also driving growth.

It's Jake Cakarnis from Jarden again. Vanessa, when you made the commentary about the RASK score yield outlook coming down from as high as, I guess, but settling above pre-COVID levels. Is there a part of the business specifically that you're talking to there is a propensity that you'll hang on to some of those COVID gains more in Group Domestic or more in Group International when you talk about that shape?

We're seeing that happen across all of our flying segments at the moment. And I think that it's driven by a couple of things. One, as Andrew said, it's being driven by our network optimization. It's being driven by as well what we're seeing in terms of the rational demand and also capacity settings in the domestic market but also in the international market. And also, I think that if we look forward, that level of RASK performance is, in our view, the new baseline to go forward with because since FY '19, we can't forget that there has been inflation in the underlying economy, but also fuel prices being a lot higher is also a key driver of that. So we feel very confident that, that is now the new norm and how we are going to manage forward.

Jake, can I also say, I mean, this is not unusual. Nobody is forecasting anywhere in the world that RASK will go back to '19 levels. I think you even say and Michael O'Leary of Ryanair, talking about how affairs are going to have to be higher and are going to be higher in the European market. And we got a combination in each of our markets here. We have markets where we are above 100% of pre-COVID level. But we are in a position where all of the players are on an equal playing pitch, where all of the domestic players need to recover that inflation. All of the players need to recover that fuel and everybody is focused on how will they achieved that. And you've had this dramatic change in the marketplace it's before COVID, which you shouldn't underestimate gives Qantas a significant RASK advantage and that is going to be there and the significant change that Steph took you through on the step-up in ancillary revenue, which is also a big difference from where we were before. And then in international, Andrew David took you through the shortage of capacity that's going to be there for a long time. That is not something that's going to be resolved overnight. And with the supply chain issues that we're hearing with the manufacturers and what we can see, we're being pretty accurate of forecasting, what every carrier was able to put into the international market in and out of Australia for some time, and those forecasts have come true. So we think our forecasts have shown that we're not going to get back to even of '19 levels of capacity for some years in a total market means that RASK will have to be higher because demand is massively as stretching supply.

Anthony Moulder from Jefferies. Just question on the $300 million back to Matt's question. So is the component of that, the growth in seats that you're getting from the new aircraft?

In -- sorry, Anthony?

The growth in seats that you get from the new aircraft, is that a component of the growth that you're expecting for the $300 million?

No, it's not. No. So it will be predominantly a cost-driven efficiencies that we get out of deploying new technology and also digitization, but also revenue, particularly, as I said, Steph talked a lot about driving ancillary revenue. But also as we're deploying new technology into our distribution channels and also new technology into revenue management techniques, we are seeing substantial revenue benefits also coming through. So it's really right across the system. But rather than focusing on the $300 million. I think what you should focus on is that the margins for each business that we're targeting because this is all going to be a key part of why we feel confident that hitting the FY '24 targets within reach, but also how we're going to maintain that going forward.

And just lastly, if I could, on the balance sheet, obviously, the strength of the balance sheet, indicated by the tenure of the debt being pushed out. But you're talking to now getting to the bottom end of that range considerably that without franking credit is going to come from buybacks through FY '24. Is that how you're thinking to get to the bottom end of that range.

So I think I'm clear about your question. So we expect to have franking credits by 2025. And that is because of the obviously, the profit that we're generating at the moment and the ability to consume the losses that we incurred during COVID. Our net debt position now is substantially below the range. And if the question is how do we get our current net debt to the bottom of the financial framework range, predominantly that's going to be paying for aircraft, so the capital, but then there is surplus. And that is obviously a key part of the financial framework and one of the reasons why we think that we can strike the right balance between investing in the business and also providing returns to shareholders.

It's Paul Butler, Credit Suisse again. In the financial framework, you've had the ROIC number at, I think, 10% since you brought in that framework. And so I'm wondering, given the earnings upside that you see in loyalty in the higher margins being sustainable going forward. Why isn't that number higher than what it has been before.

So the financial framework, the 10%, which is a proxy for the weighted average cost of capital in that framework, we still believe that, that's appropriate, given that we're making such long-term capital decisions predominantly aircraft decisions. But when we have a business case, we have a hurdle rate that's a lot higher than 10%. And that's -- and we don't disclose that, but we do have a much higher hurdle rate. And that is to ensure that the investments that we are making is actually generating a step change in our return on invested capital. And as you would see in our financial framework now that we also have a carbon cost, so that's bringing accountability into our business cases to make sure that we are investing in the right technology that also hits our sustainability targets.

Andre Fromyhr from UBS. I was wondering, Vanessa, if you could elaborate a bit more on the Sunrise business case. Obviously, we've seen the $400 million estimate provided today. But can you share what sort of returns you're expecting on that project? And maybe the risks around what the overall CapEx spend will be or what fair premiums you're assuming or just any more color to help us sort of piece that together?

So when we announced Project Sunrise, we did give an indication that the internal rate of return on that project was mid-teens. And that's very much aligned to what we've disclosed today in terms of the profit from Project Sunrise. We haven't disclosed the total CapEx for Project Sunrise because that is commercial and in confidence with Airbus. But we have actually disclosed that the peak our CapEx window for Project Sunrise will be from FY '26 through to FY '28. Importantly, if we think about the business case for Project Sunrise, this is a growth case. So it's 100% growth. And the revenue part of that case is driven by 4 key drivers. The first one, which Andrew spoke about, is that the business case assumes that we will get very similar yield premium to the one-stop, I suppose, competition routes that we actually have, which is very similar to what we're getting on Perth-London. So there's not a leap of faith there. We're basically assuming that our customers will be prepared to pay the premium for that one-stop proposition that we have seen with Perth-London. The second part of that is that the seat mix is a higher premium seat mix and more than what we've got on Perth-London. I think Andrew spoke about 40% versus 30% on Perth-London. So there is a premium uplift that you get from that yield. The third and probably the most significant part of that business case that as we deploy the 350s on London and also New York, and also routes that the 787 is currently flying. What that enables us to do is that enables us to redeploy the 787s to markets that we're not currently operating on, such as Chicago, Seattle and Paris. And then the fourth part of that is that because the payload of the 350 is significantly higher than it is for the [ 78 ], we get freight uplift as well. So that's the key components of the revenue part of that business case. And the cost part of the business case is very simple. We're very clear on what all of the cost inputs are in terms of aviation charges, our crewing assumptions. In the business case, again, as Andrew said, includes the cost of carbon is 100% offset. And therefore, we've actually run a number of scenarios of what could be the possible downside and I think that when we stare into that, because the 350 is such an incredible aircraft, we can't see any situation or any scenario that there is a regret risk that we've purchased the 350s because in an environment, for example, where demand collapses, you want that 350 versus the 4-engine, say, A380. So we think that this is an investment that will always return to the Qantas Group and be an integral part of the international fleet going forward.

Thank you, Vanessa. And thank you, Alan, if I can just ask for one last round of applause for both Vanessa and Alan. Now we have had a late question in the room. Somebody is texted us, and Vanessa, asking who is Greg and why is he trying to kill you. Greg is our Group Treasurer, and here's a copy of that financial framework attached on his back. So if you see him mate, you say hello. Now our wise CEO once said, don't stand in between investors and a drink after Investor Day. So with that in mind, we will wrap up today. Huge thank you to everyone. There'll be networking drinks outside on the floor there. Please stay behind for those getting a bus to the airport, there's been -- we've organized that at 4:30 p.m. Please get in touch with Adam. He's at the back as got his hand up. So if you're on that list, please find Adam at 4:30. Thank you.