Syllabus Qantas Case Study
Role of financial management Role of Financial Management
Strategic role of financial Financial management refers to managing the financial resources of a business effectively and efficiently. It plays a crucial and
management strategic role in every aspect of Qantas.
Objectives of financial Effective financial management has enabled Qantas to achieve its strategic goals of liquidity, solvency, profitability, efficiency and
management growth.
– profitability, growth,
efficiency, liquidity, Interdependence with other key business functions
solvency Finance depends on marketing to generate funds – also marketing strategies like Qantas’ new lounges, new check in facilities, new
– short-term and long-term carriers flying into Asia are expensive and need to be funded.
Interdependence with other Qantas’ marketing plan includes a major financial dimension – budgets for each of its business segments such as Qantas, Jetstar,
key business functions freight etc and its related marketing strategies are judged using financial criteria like sales, market share and profitability analysis.
Human resources require funds to remunerate staff as well as funding effective human resource strategies like training and
development.
Qantas spends in excess of $275 million a year on staff training.
Recent financial management decisions at Qantas like outsourcing, cutting flights, launching new airlines in Asia have affected staff
levels and the levels of the industrial disputation.
Staff is Qantas’ biggest expense and effective management of staff is essential for Qantas to maintain profitability and
productivity.
The operations functions at Qantas also requires. For example Qantas has budgeted to spend billions on fleet renewal.
Budget and cost controls are also required by each operational department.
Influences on financial Sources of Finance
management Qantas needs funds to operate and grow, especially with its fleet renewal.
Internal sources of finance – Qantas intends to place an order with either Boeing or Airbus by the end of 2020 to renew its domestic fleet estimated to be more
retained profits than $5 billion.
External sources of finance Qantas already is replacing the last of its 747s with Dreamliner’s in 2020 and has 99 Airbus A321 neo aircraft on order for Jetstar
– debt – short-term with the first 18 to be delivered between 2020 and 2022.
borrowing (overdraft, Options include a mix of equity and debt finance:
commercial bills, o Qantas uses equity finance such as retained earnings (internal) and selling shares through the ASX (external).
factoring), long-term - Qantas’s recent high levels of profitability since 2014 has enabled record levels of retained earnings to be invested
borrowing (mortgage, back onto the business as well as returned to shareholders through dividends.
debentures, unsecured - Qantas’ last equity raising was in 2009 when it raised $500 million in an issue of new shares to combat the effects
notes, leasing) of the GFC.
– equity – ordinary shares o Qantas uses mostly debt both long and short term (borrows funds) and in 2019 its debt portfolio totalled $4.7 billion.
(new issues, rights issues, - Recently Qantas has taken advantage of low interest rates and a higher credit rating saving it millions of dollars in
placements, share interest payments.
purchase plans), private
equity Financial Institutions
, financial institutions – banks, Qantas taps into these institutions (financial intermediaries) to invest their surplus funds and obtain finance particularly from
investment banks, finance banks and investment banks.
companies, superannuation
funds, life insurance Government Influences
companies, unit trusts and The government influences Qantas financial decision making through economic policies like Monetary Policy and Fiscal Policy and
the Australian Securities through the ASIC which enforces and administers the Corporations Act.
Exchange Qantas also pays company tax to the government on profit it earns.
Influence of government –
Australian Securities and Global Market Influences
Investments Commission, Qantas must respond to challenges in the global economic outlook, availability of funds (ease to which Qantas can borrow) and
company taxation interest rates (cost of borrowing money).
Global market influences – In 2009, the GFC caused rapid revenue declines especially in international markets leading to an 88% fall in net profit.
economic outlook, availability Air travel particularly international was the ultimate discretionary item and when it came to belt tightening it was the first place to
of funds, interest rates start.
Businesses too readily cut back on their corporate travel to cut back on expenses.
Qantas responded by cutting flight capacity, deferring and cancelling orders for new planes, restructuring, raising $500 million
from investors and replacing Qantas with Jetstar on some routes.
Processes of financial Planning and Implementing
management determining financial needs like purchasing new planes.
Planning and implementing – Developing budgets (forecasts of future costs and revenues).
financial needs, budgets, Maintain record systems (accounting).
record systems, financial Identify financial controls (policies and procedures).
risks, financial controls Advantages and Disadvantages of Qantas’ sources of finance:
– debt and equity financing Advantages Disadvantages
– advantages and Debt Finance 1. No change to ownership structure 1. Involves greater risk.
disadvantages of each of Qantas. 2. Qantas must pay interest on its borrowed
– matching the terms and 2. Interest payments are a tax money.
source of finance to deduction for Qantas.
business purpose 3. Debt can be flexible/varied to suit
Monitoring and controlling – Qantas’ changing circumstances.
cash flow statement, income Equity Finance 1. Involves less risk because it doesn’t 1. Dividends are not tax deductible.
statement, balance sheet add to Qantas’ debt levels. 2. Shareholders have voting rights.
Financial ratios 2. No interest payments.
– liquidity – current ratio Lease Finance 1. Frees up Qantas funds which can be 1. Qantas never owns the assets.
(current assets ÷ current used elsewhere. 2. Over a long period of time it may work out more
liabilities) 2. Gives Qantas greater flexibility with expensive for Qantas.
– gearing – debt to equity its aircraft fleet. 3. Qantas is still responsible for the fleets
Role of financial management Role of Financial Management
Strategic role of financial Financial management refers to managing the financial resources of a business effectively and efficiently. It plays a crucial and
management strategic role in every aspect of Qantas.
Objectives of financial Effective financial management has enabled Qantas to achieve its strategic goals of liquidity, solvency, profitability, efficiency and
management growth.
– profitability, growth,
efficiency, liquidity, Interdependence with other key business functions
solvency Finance depends on marketing to generate funds – also marketing strategies like Qantas’ new lounges, new check in facilities, new
– short-term and long-term carriers flying into Asia are expensive and need to be funded.
Interdependence with other Qantas’ marketing plan includes a major financial dimension – budgets for each of its business segments such as Qantas, Jetstar,
key business functions freight etc and its related marketing strategies are judged using financial criteria like sales, market share and profitability analysis.
Human resources require funds to remunerate staff as well as funding effective human resource strategies like training and
development.
Qantas spends in excess of $275 million a year on staff training.
Recent financial management decisions at Qantas like outsourcing, cutting flights, launching new airlines in Asia have affected staff
levels and the levels of the industrial disputation.
Staff is Qantas’ biggest expense and effective management of staff is essential for Qantas to maintain profitability and
productivity.
The operations functions at Qantas also requires. For example Qantas has budgeted to spend billions on fleet renewal.
Budget and cost controls are also required by each operational department.
Influences on financial Sources of Finance
management Qantas needs funds to operate and grow, especially with its fleet renewal.
Internal sources of finance – Qantas intends to place an order with either Boeing or Airbus by the end of 2020 to renew its domestic fleet estimated to be more
retained profits than $5 billion.
External sources of finance Qantas already is replacing the last of its 747s with Dreamliner’s in 2020 and has 99 Airbus A321 neo aircraft on order for Jetstar
– debt – short-term with the first 18 to be delivered between 2020 and 2022.
borrowing (overdraft, Options include a mix of equity and debt finance:
commercial bills, o Qantas uses equity finance such as retained earnings (internal) and selling shares through the ASX (external).
factoring), long-term - Qantas’s recent high levels of profitability since 2014 has enabled record levels of retained earnings to be invested
borrowing (mortgage, back onto the business as well as returned to shareholders through dividends.
debentures, unsecured - Qantas’ last equity raising was in 2009 when it raised $500 million in an issue of new shares to combat the effects
notes, leasing) of the GFC.
– equity – ordinary shares o Qantas uses mostly debt both long and short term (borrows funds) and in 2019 its debt portfolio totalled $4.7 billion.
(new issues, rights issues, - Recently Qantas has taken advantage of low interest rates and a higher credit rating saving it millions of dollars in
placements, share interest payments.
purchase plans), private
equity Financial Institutions
, financial institutions – banks, Qantas taps into these institutions (financial intermediaries) to invest their surplus funds and obtain finance particularly from
investment banks, finance banks and investment banks.
companies, superannuation
funds, life insurance Government Influences
companies, unit trusts and The government influences Qantas financial decision making through economic policies like Monetary Policy and Fiscal Policy and
the Australian Securities through the ASIC which enforces and administers the Corporations Act.
Exchange Qantas also pays company tax to the government on profit it earns.
Influence of government –
Australian Securities and Global Market Influences
Investments Commission, Qantas must respond to challenges in the global economic outlook, availability of funds (ease to which Qantas can borrow) and
company taxation interest rates (cost of borrowing money).
Global market influences – In 2009, the GFC caused rapid revenue declines especially in international markets leading to an 88% fall in net profit.
economic outlook, availability Air travel particularly international was the ultimate discretionary item and when it came to belt tightening it was the first place to
of funds, interest rates start.
Businesses too readily cut back on their corporate travel to cut back on expenses.
Qantas responded by cutting flight capacity, deferring and cancelling orders for new planes, restructuring, raising $500 million
from investors and replacing Qantas with Jetstar on some routes.
Processes of financial Planning and Implementing
management determining financial needs like purchasing new planes.
Planning and implementing – Developing budgets (forecasts of future costs and revenues).
financial needs, budgets, Maintain record systems (accounting).
record systems, financial Identify financial controls (policies and procedures).
risks, financial controls Advantages and Disadvantages of Qantas’ sources of finance:
– debt and equity financing Advantages Disadvantages
– advantages and Debt Finance 1. No change to ownership structure 1. Involves greater risk.
disadvantages of each of Qantas. 2. Qantas must pay interest on its borrowed
– matching the terms and 2. Interest payments are a tax money.
source of finance to deduction for Qantas.
business purpose 3. Debt can be flexible/varied to suit
Monitoring and controlling – Qantas’ changing circumstances.
cash flow statement, income Equity Finance 1. Involves less risk because it doesn’t 1. Dividends are not tax deductible.
statement, balance sheet add to Qantas’ debt levels. 2. Shareholders have voting rights.
Financial ratios 2. No interest payments.
– liquidity – current ratio Lease Finance 1. Frees up Qantas funds which can be 1. Qantas never owns the assets.
(current assets ÷ current used elsewhere. 2. Over a long period of time it may work out more
liabilities) 2. Gives Qantas greater flexibility with expensive for Qantas.
– gearing – debt to equity its aircraft fleet. 3. Qantas is still responsible for the fleets
