Business Case Study

Influences:

Internal sources of finance - retained profits

MC --> PRIMARY source of finance

• capital expenditure including new stores, upgrading old stores, and technology ~ 2020 funds prioritised for 4D’s (Digital, Delivery, Drive-Thru, and Development)

• paying dividends

• share buy backs

⭐ Q --> record performance in 2023, post pandemic boom recoding a profit before tax of $2.47 billion (2023)

- generated $800 million from sale of surplus land near Syd airport

• recently placed a multi billion dollar order to replace domestic and international fleets, estimated cost of $12 billion over the next 5 years

️

Influences:

External sources finance - Debt

MC -->

overdraft

- of US $4 billion as of 31st december 2024 its not been drawn on

Commercial Bill

• uses commercial papers to raise short term funds (basically like an IOU)

Mortgage

Mortgage → can’t mortgage land for restaurants (leased to franchisees) but use it for equipment and machinery

leasing

- rarely own the land of restaurants

- paid $1.5 billion in lease payments world wide ~ reducing capital outlay to retain cash for other purposes

Unsecured notes

• Mcdonalds has borrowed cash using unsecured notes and debentures

Q -->

- 2020 - 2022 raised $2.4 billion in debt through loans ~ to survive during COVID with peak debt of $5.9 billion (2021)

- 2022 - 2023 ~ debt reduction (resumed travel) bringing net debt to $2.89 billion by 2023 [gearing ratio!] [investment banks]

• strategic increase of debt finance in 2025 (fleet renewal)

  • net debt = $5.03 billion, in their range of $4.6 - $5.7 billion

• $720 million Asian loan in 2025 ~ fund fleet renewal

Overdrafts:

- $1.6 billion in standby credit facilities as of (June 2021) , ensuring they can pay bills if cash flow delayed [issued by commercial banks]

• 2025 —> $1.4 billion in Standby credit

Unsecured note:

- don't have to put specific aircraft as collateral

- dec 2025 has $1.11 billion in unsecured bank loans

Leasing:

- June 2025 held $864 million in aircraft lease liabilities ~ less massive upfront cost, overlayed capital expenditure

Influences:

External sources ~ Equity ~ ordinary Shares

MC --> issued 1660 million shares

- Mc is a corporation initially raised public capital on the New York Stock Exchange (NYSE) in 1965

Q -->

paused shareholder distributions in 2020 (COVID), number of ordinary shares had increased (emergency capital raising)

resumed in 2025 paying $800 million total

- institutional placements raised $1.36 billion ordinary shares 2020/2021 [investment banks]

- SPP raised $71.7 million [investment banks]

share buy backs in 2025-23 spent over $2 billion to reduce number of shares on issue: [investment banks]

- FY2023 buy backs = $1.0 billion

- FY2024 buy backs = $869 million

- FY2025 buy backs = $400 million

2025 resumed dividends

- reduced number of ordinary shares by 373 million (nearly 20%) form 2021 --> improver return on equity

Influences:

Financial institutions

Q -->

Commercial Banks:

• (overdraft link) $1.6 billion as standby for immediate cash June 2021)

• 2025 $1 billlion undrawn standby Credit facility

Investment Banks:

Macquarie or Golden Sachs

critical in helping equity raising:

• debt management [debt finance

  • $5.9 billion net debt 2021

  • reduced to $4.34 billion 2025

• help with equity raising -->

  • $1.36 billion in institutional placement (2020/21)

  • SPP of $71.7 million (2020/21)

• advisory on Share Buy Backs spent over $2 billion on buying back shares [ordinary shares]

  • 2023 $1 billion in buy backs /cash to shareholders

  • 2024 $869 million buy backs /cash to shareholders

Finance companies:

• lease companies to source lease liabilities to acquire aircraft

• 2025 held $1.81 billion Right Of Use assets represent aircraft to operate through leases

ASX:

• Q is a publicly listed company

• institutional placements raised $1.36 billion ordinary shares 2020/2021

• spent over $2 billion to reduce number of shares on market during 2023-2025

Superannuation Funds

- in 2025 Qantas Group Superannuation Plan (QGSP) merged with Australian Retirement Trust (ART)

this transferred over 25, 000 members and their balances to ART for greater financial benefit + lower fees for employees

Unit Trust

• (2025) 20 largest shareholders hold 53% of ordinary shares

• e.g HSBC Custody Nominees Limited (aus) 25% , JP Morgan Nominees limited (aus) 12% —> institutional investor influence

Influences:

Government

Q -->

Australian Securities and Investments Commission (ASIC)

• statutory compliance Corporations Act 2001 Cth S 307C producing annual financial reports

• legally required to list every entity inside it corporate group and their tax residency ~ integrity of audits

Company Taxation:

• 2021-23 paid little tax using carried forward tax losses (pandemic —> losses peaked at $2.35 billion 2021)

• 2024/25 profitability returned + tax obligation

  • 2024 paid $45 million in Aus income taxes and surged to $275 million in 2025

• Global taxation —> adoption of OECD Pillar Two, multinational companies pay 15% min effective tax rate

financial support 2021-2022 —> COVID

• Government Grants~ JobKeeper + The International Aviation Support Package subsides to wages of staff —> Qantas benefitted $855 million

• allowed to maintain mass losses $2.35 billion 2021) without insolvency

Influences:

global Market

Q -->

Economic outlook

• ‘the black swan event’ / COVID = negative outlook ~ $2.35 billion statutory loss 2021 (poor profitability)

  • (3 year recovery plan) recovery period 2023-2025 —> travel demand surged

• positive but volatile post-pandemic boom (2023)

  • record performance of profit before tax = $2.47 billion 2023

  • return on Invested Capital (ROIC) = 103.6%, can capitalise a positive global demand shift

availably of funds

• $1.6 billion June 2021) standby credit facilities from banks

• $1.0 billion undrawn standby credit 2025

• 2020/21 accessed $1.36 billion in equity from institutional investors [placements]

• allocates capital for reinvestment in Fleet renewal and ‘Project Sunrise’. 2025 Qantas took delivery of 17 new aircraft for QantasLink and Jetstar

liquidity levels:

• 2021 = $3.8 billion

• 2022 = $4.6 billion (recovery phase)

• 2024 = $3.2 billion including $1.6 billion undrawn standby bank facility [overdraft]

• 2025 = $2.8 billion (shift from cash preservation to capital reinvestment)

  • liquidity current ratio usually well below 1 because tickets are paid for before the flight itself.

Interest Rates

• aim to keep Return on Invested Capital (ROIC) greater than Weighted Average Cost of Capital (WACC)

  • this was achieved in 2023 with ROIC of 103.6% well above the cost of capital influenced by interest rates

  • uses interest rate swaps, capitalises interest rate e.g 2023 $31 million in capitalise interest apart of aircraft assets

• interest rates affect lease liabilities and the value of its $1.56 billion in lease liabilities. fluctuating / variable lease payments

• cash reserves may be subject to higher interest and costs of debt

  • e.g total liquidity/cash reserve in 2024 = $3.2 billion including $1.6 billion undrawn standby bank facility [overdraft]

Processes:

planning and implementing

Q -->

Financial needs

• 2025 identified a need for $3.85 billion in net capital expenditure to fund 17 new aircraft and ‘Project Sunrise’

Budgets

• 2025 Q budgeted for ‘moderation in yields’ (lower ticket prices following 2023) as global capacity returned to normal (2023 = high demand for travel but few planes — 2024/25 = normalised capacity meaning prices fell which needed to be budgeted for)

Record Systems

• accounting systems for statutory and underlying reports

  • e.g using profit before tax as primary reporting to remove ‘one-offs’ e.g $65 million ACCC settlement

Financial Risk

• fuel price risk —> managed through hedging

• foreign exchange risk —> planes bought in US dollars

• liquidity risk —> maintaining %2.8 billion in total liquidity 2025

financial controls

• audit committee —> independent directors oversee reporting integrity

  • in charge of things like = how Qantas calculates the value of its frequent flyer points [links to ensure record systems accurate]

  • ensure compliance with Corporations Act 2001 (Cth)

• internal audit —>

  • ‘Group Audit and Risk

  • audit fuel hedging

• external audits —>

  • KPMG —> 2025 stated that Qantas records provide a ‘true and fair view’ of its financial position

Processes:

planning and implementing

• debt and equity financing – advantages and disadvantages of each

• matching the terms and source of finance to business

Q -->

	debt	equity
+	low cost in low-rate environment: 2021-22 Q secured low interest debt to survive tax deductible interest retained ownership	no repayment: didn’t have to pay dividends in 2021-2022 to shareholders safety buffer: "$1.36 billion equity raised in 2020
-	repayment obligation: stress in 2021 when revenue = 0 but debt = $5.9 billion credit rating risk = increased future interest rate for airline	dilution cost of equity: shareholders may expect higher return: cost of debt 3.4% — cost of equity = 10-11% due to the risk for shareholders risks

Matching term and source to business purpose

Daily operations (fuel, wages) —> short term

• working capital / overdraft / Standby credit ($1.6 billion June 2021 + $1 billion 2025) (cover temporary cash flow)

Fleet Renewal (A220’s, A350s) —> long term (15-20 years)

• long term debt (bonds) / leasing (because the asset is a long term investment)

Strategic Projects (Project Sunrise) —> permanent / long term

• retained profits / equity (high risk, high reward, no pressure for immediate interest payments)

EXAMPLE:

2025 identified a need for $3.85 billion in net capital expenditure to fund 17 new aircraft and ‘Project Sunrise’. sourced form retained profits and lease liabilities ($1.56 billion) (long term finance for long term asset investment)

2024/25 Share buy Backs (share buy backs in 2025-23 spent over $2 billion to reduce number) to reduce amount of equity [increase Return on Equity ROE] to be more attractive to investors

Processes:

monitoring and controlling – cash flow statement, income statement, balance sheet

Q -->

Cash Flow Statement

• 2025 $5.56 billion net cash form operation activities

• invest cash to pay $3.85 billion for fleet renewal of 17 new aircraft + ‘Project Sunrise’

• outflow of over $2 billion between 2023-25 for share buy backs

• control —> deferring aircraft deliveries of pausing share buy backs in case of cash flow drops

income Statement

• revenue vs expenditure —> Revenue Passenger Kilometre (RPK) see if sales are growing

  • 2025 revenue was high, but cost of fuel + labour was rising

• identified the need for cost cutting of $441 million in 2025 to offset he fall in ticket prices —> closing Jetstar Asia = one-off legal costs

  • statutory profit 2025 (legal) = $1.61 billion (includes the impacts of closing Jetstar Asia)

  • underlying profit = $2.39 billion —> normalised earning

Balence Sheet

assets:

• 2025 $21 billion total assets (including Right of Use leased aircrafts)

liabilities:

• net debt 2025 = $5.03 billion

Equity:

• 2025 $1.35 billion

Processes:

Financial Ratios ~Liquidity

Q -->

current ratio

consistently below 1.0 (around 0.3-0.5)

• 2025 low current ratio as a result of Unearned Transportation Revenue (tickets been paid but not used yet)

• maintaining the $1.6 billion undrawn bank facilities (June 2021) + $1 billion undrawn faiclities 2025—> always pay bills

Processes:

Financial Ratios ~Gearing

Q -->

Debt to Equity ratio

target = 2.0x - 2.5x

Debt to equity = 25.92%

ratio is high because total equity is still small after pandemic losses + used Share buy backs which reduces equity further = high gearing

• post pandemic, dangerously high but used record profits to bring net debt 2025 to $5.03 billion

• peak debt of $5.9 billion (2021)

Processes:

Financial Ratios ~Profitability

Q -->

Gross Profit Ratio

• 33.4% 2025

• successful management of COGS (fuel and staff)

Net Profit Ratio

• 2025 = 7%

• 2023 = 8-9%

• the drop is asa result of lower yields (reduced ticket prices) and increased competition post pandemic

• cost cutting program in 2025 save $441 million b

Return on Equity (ROE)

• recorded 206%

  • reliance on debt instead of equity

  • $5.03 billion in net debt 2025

  • as a result of the pandemic

Processes:

Financial Ratios ~ Efficiency

Q-->

Expense Ratio

• monitor inflation + fuel prices

• 2025 targeted $441 million in cost cutting to bring this ratio down

Accounts receivable Turnover

• very high (approx. 18x-20x)

• most customers pay upfront = high turnover and collect cash quickly > liquidity

Processes:

Financial Ratios ~ comparative ratio analysis – over different time periods, against standards, with

similar businesses

Q-->

over time

• compare to the peak in 2023 to normalisation in 2025

• Net Profit Ratio dropped from ~9% in 2023 to 7.1% in 2025, however this is healthier than ratios seen in 2020/2021

  • helps determine if falling ticket prices is one off or long term that needs fixing with cost cutting ($441 million transformation cost-cut)

against standards

• Gearing targets = DTE ratio 2.0x - 2.5x

With similar businesses

competitors:

• Singapore Airlines

• Air New Zealand

• Delta

justifies the dual brand legacy

• Jetstar = low-cost, price sensitive customers

• Qantas = premium service

Processes:

limitations of financial reports – normalised earnings, capitalising expenses, valuing

assets, timing issues, debt repayments, notes to the financial statements

Q-->

Normalised earrings

• identified the need for cost cutting of $441 million in 2025 to offset he fall in ticket prices —> closing Jetstar Asia = one-off legal costs

  • statutory profit 2025 (legal) = $1.61 billion (includes the impacts of closing Jetstar Asia)

  • underlying profit = $2.39 billion —> normalised earning

Capitalising Expenses

• 2022 Qantas reported the carrying cost of leasing aircrafts as capitalised investment

Valuing Assets

• values its fleet and brand to match future earning potentials

Timing issues

• comp

debt repayments

• comp

notes to the finaical statements

• comp

Processes:

Ethical issues related to financial reports

Q-->

Audit accounts

EXTERNAL

• uses KPMG as an external audit and they examine Revenue Recognition and valuation of the aircraft fleet. this provides assurance to shareholders that the numbers aren’t manipulated

  • paid $5.1 million to KPMG for audit + review

Reporting Practises

• Q follows the Australian Accounting Standards (AASB) and Corporations Act 2001

  • annual reports have a Directors declaration stating the statement give a ‘true and fair view’ of the Qantas Groups financial position

• faced significant scrutiny over reporting practises regarding flight cancelations (‘Ghost flights’ —> conflict between financial reporting and operational reporting. Q continued advertising and selling tickets for more than 8,000 flights that had already been cancelled in their internal system)

  • consequence —> under Competition and Consumer Act 2010 in 2024 Q reached a settlement with ACCC to pay $100 million penalty + $20 million in compensation to customers

Record Keeping

• sophisticated Enterprise Resource Planning (ERP) systems to manage transactions form fuel hedging to frequent flyer points

  • frequent flyer points liabilities —> must keep accurate records of unredeemed points as these represent future debt (liability)

    • 2024/25 had a Contract Liability (deferred revenue) of over $3billion related to unredeemed frequent flyer points

    • over 16 million members

Strategies:

Cash Flow Management

• cash flow statements

• distribution of payments, discounts for early payments, factoring

Q-->

Cash flow Statements

cash in:

• Customers buying tickets (often months in advance), Frequent Flyer points sold to banks.

Cash out:

• Paying for jet fuel, staff wages, and airport landing fees

2025/24 —>

operating cash inflows —> $4,253 billion, higher due to an increase in earnings + working capital despite impacts of ACCC penalties.

Net capital expenditure (outflow) —> $3.85 billion on 33 new aircraft deliveries, capitalised maintenance expenditure, investments in customer experience = major outflow.

maintained their Net Free Cash Flow of $440 billion for 2025

• cash flows statements are a planning tool to ensure they have enough operating cash to cover initiatives such as Project Sunrise

Distribution of payments

2025 management of capital expenditure of $3.85 billion while maintaining a $4.25 million operating cash flow

• spread deliveries and payments for aircraft over long periods of time

Discounts for early payments

doesn’t offer customers discounts for early payments

Factoring

Q sells the invoices of loyalty points / frequent flyer points to financial institutions to provide immediate liquidity ~ crucial during COVID.

Strategies:

Working capital management:

• control of current assets - cash, receivables, inventories

• control of current liabilities - payables, loans, overdrafts

• strategies - leasing, sale and lease back

Q-->

Control of Current Assets

• cash balence $2.21B (2025), increase form $1.72B (2024)

• receivables managed down to $1.21 billion using factoring in 2025. —> frequent flyer points

• inventories (spare parts/fuel) stable at aprox $405 million

  • uses JIT to reduces access stock and ordering based on demand e.g leading aircrafts based on demand

Control of Current Liabilties

payables —>

• trade payables reached $3.15 billion (2025)

  • to maintain strong liquidity by delaying payments to suppliers until the due date and negotiating favourable terms

  • 30 day payment terms with fuel suppliers to keep money in own bank account to earn interest before paying bills

Loans —>

• commercial bills of $643 in short term interest bearing liabilities. short term to cover timing gaps

• leasing liabilities —> -$450 million

Overdrafts —>

• maintains a $1.0 billion standby facility from commercial banks (2025)

• $1.6 billion standby facility (June 2021)

strategies - leasing, sale and lease back

LEASING —>

• 30% of airline fleet is leased

  • chooses to lease rather than buy its planes outright because allows to adjust the size of its fleet more easily when demand changes or when new aircraft deliveries are delayed

  • requires less upfront capital than purchasing~ frees up cash for use in other areas of the business

  • Instead of spending $200 million in cash to buy one Boeing 787, they elase it

SALE AND LEASE BACK —>

• allows immediate cash from assets whilst still using them

• Sol Sydney Airport Terminal 3 for $185 million in 2016 and Melbourne Airport Terminal 1 for $355 million in 2019 → both eased back

• 2025 completed a $802 million sale and leaseback of 13.8 hectares of land near Sydney headquarters and distribution centre

• 2025 sale and lease back of Airbus A321LR and A220 aircraft, apart of the $3.85 fleet renewal. sold to companies such as Avolon or AerCap

Strategies:

Profitability management:

- cost controls - fixed and variables, cost centres, expense minimisation

- revenue controls - marketing objectives

Q-->

cost controls

FIXED AND VARIABLES

fixed —>

aircraft depreciation, terminal leases, permanent staff salaries

• 2021 outsourced ground handling (baggage) to turn forma fixed cost to a variable service fee

• 2025 new aircraft (airbus A220) from fleet renewals have longer maintenance intervals and advanced monitoring in comparison to older Boeing 717 with high fixed cost of safety inspections if sits in the hangar, (storage + engineer cost)

  • A220 provides an $8–$10 Million EBITDA benefit per year compared to the 717 it replaces.

Variable —>

jet fuel, landing fees, flight crew overtime

• fuel largest variable cost, estimated at $5.4 billion FY25

• use hedging to treat

COST CENTRES
different cost centres: Qantas Domestic, Qantas International, Jetstar, Qantas Loyalty, and Qantas Freight

• accountability —> each department responsible for own budget

• internal benchmarking —> CASK (Cost per available Seat Kilometre) Qantas Domestic against Jetstar

EXPENSE MINIMISATION

• cut $1 billion i ongoing annual costs (2020-2023) 3 year recovery plan during pandemic by:

  • Stood down 25,000 employees until flying resumed + made 9000 staff redundant

  • Retired the remaining 747s and initially grounding aircraft including most of the international fleetClosing Jetstar Asia in July 2025, cutting 500 jobs, unlocking $500 million in capital, and redeploying aircraft to profitable Australian and New Zealand markets

  • Cancelled its share buy backs and deferred dividends

  • Cut exercise salaries

  • Postponed its fleet replacement program to minimise capital expenditure

  • Insisted on a two-year wage freeze as part of new enterprise agreements

target of $400 million in transformation savings for FY2025

• Arbus A220 burns 25% less fuel per seat than Boing 717’s

• movement to qantas app for check-in and re-bookings —> minimise ‘customer services’ staff + physical kiosks

Strategies:

Global Financial Management

• Exchange rates

• interest rates

• methods of international payment - payment in advance, letter of credit, clean payment, bill of exchange

• hedging

• derivatives

Q-->

Exchange rates

• biggest expenses in USD (fuel + new aircraft)

• if AUD falls, these expenses increase

interest rates

target of 70-80% fixed-rate debt. when interest fluctuated in 2024/25, Q kept most of $5.03 B net debt at fixed-rate bonds

methods of international payment

LETTER OF CREDIT:

• used for the $3.85 billion fleet renewal

  • Boeing + Airbus provide massive assets, require ban guaranteed letter of Credit to protect Q’s credit reputation globally

CLEAN PAYMENT:

• no bank fees, helps expense minimisation

• for long term partners, e.g catering or grounding handling in London

hedging

natural hedging

• 2025 generate significant USD revenue through International flights + freights

• instead of converting back to AUD (and losing money on exchange rates + bank fees) keep it in USD account to par USD denominated expenses, e.g fuel, aircraft leases

derivatives

• 2025 —> Q hedged 81% of fuel for 20205 FY

• uses options —> pay a premium for the option to buy fuel at a fixed price

• price rises = exercise the option and save millions

• prices fall = let option expire and buy at the lower market price

• prevent variable cost (fuel) fluctuating