ACCT2060- Accounting for Organisations and Society Marking Rubric for Individual assignment Semester 1 2016

	High distinction 10	Distinction 7.5	Credit 6.5	Pass 5	Below standards 2.5
Title page, and Table of Contents 5%	Title page, and table of contents are provided with an outstanding/ creative format. (Title page must include the title of assignment, student name, student ID, with an appropriate format)	Title page, and table of contents? format show some creativity. (Title page must include the title of assignment, student name, student ID, with an appropriate format)	Title page, and table of contents are attractive, display a clear and formal approach, and meet all the requirements. (Title page must include the title of assignment, student name, student ID, with an appropriate format)	Title page, and table of contents display a formal approach or they only meet the minimum standards. (Title page must include the title of assignment, student name, student ID, with an appropriate format)	Title page, and table of contents provided are below standards. (Title page must include the title of assignment, student name, student ID, with an appropriate format)
Introduction 10%	Introduction is clearly written with very interesting observations within the appropriate word length. (You are required to briefly summarize the following features about the organisation: ? Very brief history of the organisation; ? Structure (e.g. size, number of employees, line of business, locations); ? Key words in mission/plans; ? Financial and other performance trends; ? Concern for social and environmental/sustainability issues.)	Introduction is written clearly with some interesting observations within the appropriate word length. (You are required to briefly summarize the following features about the organisation: ? Very brief history of the organisation; ? Structure (e.g. size, number of employees, line of business, locations); ? Key words in mission/plans; ? Financial and other performance trends; ? Concern for social and environmental/sustainability issues.)	Introduction is written clearly, within the appropriate word length. (You are required to briefly summarize the following features about the organisation: ? Very brief history of the organisation; ? Structure (e.g. size, number of employees, line of business, locations); ? Key words in mission/plans; ? Financial and other performance trends; ? Concern for social and environmental/sustainability issues.)	Reasonable introduction. Requirements are reasonably met. (You are required to briefly summarize the following features about the organisation: ? Very brief history of the organisation; ? Structure (e.g. size, number of employees, line of business, locations); ? Key words in mission/plans; ? Financial and other performance trends; ? Concern for social and environmental/sustainability issues.)	Introduction is below standards. (You are required to briefly summarize the following features about the organisation: ? Very brief history of the organisation; ? Structure (e.g. size, number of employees, line of business, locations); ? Key words in mission/plans; ? Financial and other performance trends; ? Concern for social and environmental/sustainability issues.)

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ACCT2060- Accounting for Organisations and Society Marking Rubric for Individual assignment Semester 1 2016

Financial /Economics 20% (Discuss on financial statements of the company)	Financial section is clearly written with very interesting observations within the appropriate word length. Very thoroughly researched, effective use of material; Thorough discussion on financial statements.	Financial section is written very well, with some interesting observations; Well researched, appropriate use of materials; financial statements very well discussed. statements.	Financial section is well- written. Competently researched; good use of materials; good discussion points on financial statements.	Financial section is mainly descriptive with little analysis of issues. Limited research, some materials overlooked or misunderstood; or poor discussion on financial statements.	Financial section is written below standards; research is very limited; failure to identify and discuss relevant issues; argument is lacking or unsound.
Social 20% (Discuss on social responsibility of the company)	Social Section is written very thoroughly. Very thoroughly researched, effective use of material; Comprehensive identification and discussion of social issues; persuasively argued throughout; Clear and logical structure; precise and concise writing.	Social section is written clearly. Well researched, appropriate use of materials; Very good identification and discussion of social issues; argument well developed and supported; some critical evaluation of materials; suitable and coherent structure.	Social section is generally well-written. Competently researched; good use of materials; social issues are identified and discussed appropriately; some arguments may be underdeveloped; reasonable writing, easy to follow.	Social section is mainly descriptive with little analysis of the social issues. Limited research, some materials overlooked or misunderstood.	Social section is written below standards; research is very limited; failure to identify and discuss relevant issues; argument is lacking or unsound
Environmental 20% Discuss on environmental responsibility of the company	Environmental section is clearly written with some interesting observations within the appropriate word length. Very thoroughly researched, effective use of material; Comprehensive identification and discussion of environmental issues; persuasively argued throughout; Clear and	Environmental section is written very well. Well researched, appropriate use of materials; Very good identification and discussion of environmental issues; argument well developed and supported; some critical evaluation of materials; suitable and coherent structure.	Environmental section is well-written Competently researched; good use of materials; issues are identified and discussed appropriately; some arguments may be underdeveloped; reasonable writing, is easy to follow.	Environmental section is mainly descriptive with little analysis of environmental issues. Limited research, some materials overlooked or misunderstood.	Environmental section is written below standards; research is very limited; failure to identify and discuss relevant issues; argument is lacking or unsound

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ACCT2060- Accounting for Organisations and Society Marking Rubric for Individual assignment Semester 1 2016

	logical structure; precise and concise writing
Conclusion 10%	The conclusion creatively summarizes the ideas, with very interesting observations within the appropriate word length.	The conclusion summarizes the ideas clearly; with some interesting observations within the appropriate word length.	The conclusion summarizes the ideas appropriately, within the appropriate word length.	The conclusion repeats ideas in the Paragraph, or begins new idea.	Conclusion is written below standards; and/or relevant materials overlooked; and/or Writing is difficult to follow.
Referencing 10%	Excellent referencing. All sources (information and graphics) are accurately documented in the desired format. More than 5 reputable sources are referenced. (The report must be fully referenced (in-text) using the Harvard referencing style, and include reference list formatted correctly.)	Very well referenced. All sources (information and graphics) are accurately documented, but a few are not in the desired format. At least 3-4 reputable sources are referenced. (The report must be fully referenced (in-text) using the Harvard referencing style, and include a reference list formatted correctly.)	Good referencing. All sources (information and graphics) are accurately documented, but many are not in the desired format. At least 3-4 reputable sources are referenced. (The report must be fully referenced (in-text) using the Harvard referencing style, and include a reference list formatted correctly.)	Some of sources are not accurately documented. Less than 2 reputable sources are referenced. (The report must be fully referenced (in-text) using the Harvard referencing style, and include a reference list formatted correctly.)	In-text citation or reference list is missing.
Formatting 5%	Creative formatting. All requirements met. (Report format must be used for the written submission. Appropriate headings and sub-headings must be used to structure the report. The following formatting style is recommended: 1.5 line	Formatting shows some creativity, and meets all requirements. (Report format must be used for the written submission. Appropriate headings and sub-headings must be used to structure the report. The following formatting style is	Formatting displays a clear and formal approach, and meets all the requirements. (Report format must be used for the written submission. Appropriate headings and sub-headings must be used to structure the report. The following formatting style is	Reasonable formatting. Formatting meets some requirements. (Report format must be used for the written submission. Appropriate headings and sub-headings must be used to structure the report. The following formatting style is	The report is not formatted appropriately.

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ACCT2060- Accounting for Organisations and Society Marking Rubric for Individual assignment Semester 1 2016

spacing, 11 point font, minimum 3 cm margin on left-hand side of paper.)

recommended: 1.5 line spacing, 11 point font, minimum 3 cm margin on left-hand side of paper.)

recommended: 1.5 line spacing, 11 point font, minimum 3 cm margin on left-hand side of paper.)

recommended: 1.5 line spacing, 11 point font, minimum 3 cm margin on left-hand side of paper.)

ACCT2060 Individual Assignment- Semester 1 2016 ACCT2060 Individual Assignment Sustainability/Corporate Social Responsibility Report Semester 1, 2016 DUE DATE: Monday 28 March 2016, 7 pm (Singapore time) (You may submit the assignment more than once, before the due date. Only the latest submission will be marked. Please be advised that it could take a few hours for Turnitin's Originality Report to be generated. Please also note that Turnitin will only generate one Originality Report in any 24 hour period - so you may have to wait longer to see a report on a resubmitted assignment than on your first submission.) LENGTH: 2000 - 2500 words (excluding table of contents, reference list and Appendix (if anyappendix is optional)) (Note: penalties apply to assignments that do not keep to the word limit) MARKS: This assignment is worth 30% of the total assessment for this course. (Note: This assignment is to be completed as an individual assignment) Objectives of the Assignment This assignment develops your capabilities to analyse, reason logically and conceptualise financial, social and environmental issues; and is aligned with the Course Learning Outcomes of identifying, understanding and interpreting accounting concepts. The use of Sustainability and/or Corporate Social Responsibility (CSR) Report enables you to apply your accounting knowledge to a real world context. The assignment is aligned with the following course learning objectives: - Understand the ethics of business, corporate governance, and corporate social responsibility (CSR) - Reflect on financial information use in a business context - Interpret business reports and accounting information to support business decision-making processes At the completion of the assignment you are also expected to achieve the following Program Learning Outcome (PLO): - Apply a broad theoretical and technical knowledge of business practice in diverse contexts. - Apply reasoned judgements to solve problems in a variety of business contexts with reference to ethical, regulatory and global perspectives. Overview of assignment requirements Assume you are preparing the report for a friend who wishes to invest in a business which conducts itself in a socially and environmentally responsible way. In your report, you are required to advise your friend on the economical/financial, social and environmental performance of the business. You should choose and analyse the financial and Sustainability/CSR reports of one of the specified below organisations (Please note that a marking rubric/guide will be available on RMIT Blackboard); and advise your friend whether or not to invest in the business in the report conclusion. You should demonstrate that you have undertaken research, and cite the sources you have used through appropriate in-text referencing and bibliography. Page 1 of 3 ACCT2060 Individual Assignment- Semester 1 2016 We highly suggest you go through the sustainability chapter in the text book before you commence writing the assignment. Then go through the annual reports of your chosen company as well as other online resources which provide extra support for financial, social and environmental performance of your chosen company. It is important that you follow the assignment template to write your report. You are required to prepare a report on one of the following specific organisations below: Qantas (Financial year 2015) Adidas (Financial year 2014) Myer (Financial year 2014) The assignment's template is as follows: Title Page Table of contents Introduction Financial/Economic performance Social performance Environmental performance Conclusion Reference List Appendix (optional) With the financial/Economic performance section of your assignment, the minimum requirement is to locate and summarise the company's basic financial information as outlined below. Then, most importantly you should discuss the financial performance (particularly profitability) of the company using the management reports, online resources, financial and sustainability reports. It's highly recommended to provide some comparison analysis with company's previous financial years (up to 2 years) and/or competitors or industry averages to support your report analysis. Company name: xxx General financial information (A) Total Assets Total Liabilities Total Owners Equity (B) (Basic) Profit earned- per share (EPS) (C) Total Ordinary Shares issued (D) Profit received by Shareholders- per share (DPS) (E) Net Cash flows from Operating Activities (F) Net Cash flows from Investing Activities Financial year xxx Page 2 of 3 ACCT2060 Individual Assignment- Semester 1 2016 As a result of reading your chosen company's CSR and/or Sustainability Report, you should discuss matters relating to the company's sustainability practices and reporting in your report including but not limited to the following issues: Aspects of company's environmental performance -related to natural capital- including but not limited to environmental protection, energy and carbon emission concerns, and waste production concerns. Aspects of company's social performance -related to human capital and society wealth creation potential- including but not limited to the employee health, human rights protection, contributions to the community, customer involvement, and product responsibility. Other appropriate issues in completing this assignment: A report format should be used for your written submission. Please ensure you use headings and sub-headings to structure your report. Please ensure that your report is typed with the following formatting style recommended: 1.5 line spacing, 11 point font, minimum 3 cm margin on left-hand side of paper. Your assignment must be appropriately referenced using the Harvard Style referencing system. Both in-text citations, as well as a reference list at the end of your assignment, are required. You should refer to the referencing guidelines provided at: https://www.dlsweb.rmit.edu.au/bus/public/referencing/index.html o Note that when citing an annual report, either by paraphrasing or using direct quotes, you must reference the annual report (in your reference list) according to the following format: Name of company. (Year of publication) Title of annual report (in italics). Place of publication: Publisher. (To cite an annual report in-text, you will generally have to use the organisation's name, as an author name is usually not present.) Penalties for inadequate or incorrect referencing will apply. This assignment is to be completed as an individual assignment. All electronically submitted assignments will be automatically forwarded to Turnitin and subjected to an assessment of authenticity/originality, so please ensure your submission is your own individual work - severe penalties will apply for work that is not original/individual. You are allowed to submit your work prior to the due date to obtain an originality report. If the report requires revision you are allowed to adjust your assignment and resubmit. Please note: Any resubmissions into Turnitin takes 48 hrs to obtain a new Originality Report. Late submissions due to this process will incur late penalties. Please aim to submit your assignment a week prior to assessment due date. Your assignment must be submitted electronically (via the course Blackboard site, at 'Assessment') by Monday 28 March 2016, 7 pm. This deadline will be strictly enforced. Late submissions will be marked as if submitted on time, and then the mark awarded will be reduced by 10% (of the total available marks) for each day or part-day that the assignment is late. For example, if your assignment is one day late then you will be penalised 10% of 30 marks which is 3 marks. Assignments that are late by 7 days or more will not be marked and will be awarded zero unless a formal extension of time has been granted. Please refer to the Academic Integrity presentation available at 'Assessment' on the course Blackboard site. o Do not include the wording of the assignment instructions in your submission o A hard copy submission is not required. Page 3 of 3 A STRONG, SUSTAINABLE FUTURE Q A N TA S A N N U A L R E P O R T 2 015 Q A N TA S A NNUA L REPOR T 2015 CONTENTS QANTAS ANNUAL REPORT Chairman's Report 02 CEO's Report 04 Financial Overview 06 Board of Directors 08 Review of Operations 11 Corporate Governance Statement 22 Directors' Report 24 Financial Report 49 Shareholder Information 103 Financial Calendar and Additional Information 104 01 Q A N TA S A NNUA L REPOR T 2015 CHAIRMAN'S REPORT Qantas performed strongly in 2014/2015 to achieve its best result since before the Global Financial Crisis, enabling the Group to both strengthen its balance sheet and resume shareholder returns. On behalf of the Board, I would like to thank all Qantas Group employees for their hard work and commitment in turning the business' performance around and laying the foundations for future growth. Strong Performance Proposed Capital Return Alan Joyce and his leadership team deserve great credit for the progress the Group made with its $2 billion Qantas Transformation program in 2014/2015. The program realised $894 million in benets, ahead of targets. Qantas returned to an optimal capital structure in 2014/2015, having reduced debt, increased liquidity and improved Group-wide return on invested capital to 16 per cent. There were tailwinds in the operating environment - including lower fuel prices and a weaker Australian dollar - which benetted the Group. However, it was the implementation of the Group's strategy that had most bearing on the result. The Group reduced costs, grew revenue and continued to improve the experience for Qantas and Jetstar customers. Each of the Group's businesses made a good contribution to the overall performance and returned its cost of capital. Operating cash ow in 2014/2015 was a healthy $2 billion. \"The Group reduced costs, grew revenue and continued to improve the experience for Qantas and Jetstar customers.\" LEIGH CLIFFORD AO CHAIRMAN AND INDEPENDENT NON-EXECUTIVE DIRECTOR 02 As a result, the Board has proposed a $505 million capital return to shareholders and related share consolidation, subject to approval by shareholders at the Annual General Meeting in October 2015. Shareholders have shown patience and loyalty through a period of necessary transformation for Qantas. The Board has been committed to resuming a form of shareholder returns at the appropriate time and we are pleased that the Group's performance and nancial position enable us to do so now. Board Changes The renewal of the Qantas Board continued in 2014/2015. We welcomed a new Director in Todd Sampson, one of Australia's foremost brand and marketing experts, while Garry Hounsell retired after a decade on the Board. I thank Garry for his outstanding service and wise counsel at an important and challenging time in Qantas' history. Q A N TA S A NNUA L REPOR T 2015 Australian & Global Outlook Market conditions globally and in Australia are complex, with steady growth in some regions and a weaker outlook in others. Australia's economy continues to transition from the peak of the mining boom, affecting demand in resources-intensive states, while demand is stronger in east coast states and other industry sectors. The Group is managing its assets and capacity in response to this change. Internationally, the North American and Asia-Pacic markets have strengthened, with growth opportunities for both Qantas and Jetstar. The Group has limited capital invested in Europe but extensive access to European markets through the Emirates partnership. Overall, the Group's diverse brands, revenue streams and customer base are signicant competitive advantages to build on in 2015/2016. Once again, I pay tribute to the Group's employees for their contribution to this result and their dedication to building a strong future for Qantas. August 2015 03 Q A N TA S A NNUA L REPOR T 2015 CEO'S REPORT Qantas' underlying prot before tax of $975 million was a turnaround of $1.6 billion compared with 2013/2014 - including the best secondhalf performance in our history. I'm incredibly proud of our people, who have driven the Qantas Transformation program forward with passion, skill and determination. Without their hard work this outstanding result would not have been possible. Laying Strong Foundations Putting Customers First Since announcing the Qantas Transformation program in December 2013, we have unlocked $1.1 billion in cumulative transformation benets. These are permanent improvements in our cost base and ability to generate revenue. Customers have always been at the heart of the Group's strategy. We've invested in aircraft, lounges, service innovations and training for our people, who have continued to earn record customer satisfaction. We had to make tough decisions as part of what is the biggest and fastest transition in our history. But because we made and implemented those decisions early, we have strong foundations to build on today. The diversity and quality of the Qantas Group - with Australia's best airlines and loyalty brands - remains our greatest strategic advantage. What's different today is that we are smarter and faster in the way we make decisions, foster innovation and serve customers. \"We've invested in aircraft, lounges, service innovations, and training for our people, who have continued to earn record customer satisfaction.\" ALAN JOYCE CHIEF EXECUTIVE OFFICER 04 Today we're looking to the next frontier of customer service. Speeding up our adoption of new technology is a priority, but what's truly exciting is the opportunity we have to use the relationships we have with our customers - and the insights they entrust to us - to shape service and create new businesses. Next Generation Long Haul Fleet Qantas' rapid progress with transformation - and the nancial discipline we've applied - means we can look to the future and a new generation of long-haul aircraft. The announcement that the Boeing 7879 Dreamliner will join the Qantas International eet from 2017 is exciting and energising for all of us. Throughout Qantas' history, new eet types have symbolised renewal and ambition - from the Boeing 707 and 747 to the Airbus A380. The iconic Qantas Dreamliner will signify a new era of global opportunities, technology and passenger comfort. And like all Qantas aircraft, it will be a proud emblem of Australia wherever it ies. Q A N TA S A NNUA L REPOR T 2015 A Sustainable Future The goal of the Qantas Transformation program is to build a strong, sustainable business for the long-term. And today more than ever, sustainability in the broadest sense of the word is central to our strategy, our values and our aspirations for the future. It unites our commitment to safety; to innovation; to service; to social responsibility; and to minimising our environmental footprint. This year's Annual Review reects and reports on that commitment to embedding sustainability in everything we do. In November 2015, Qantas marks 95 years of continuous operations. It's a privilege to lead this great Australian company and its wonderful people as we shape Qantas' future in the 21st century. August 2015 05 Q A N TA S A NNUA L REPOR T 2015 FINANCIAL OVERVIEW A Strong Result Qantas reported an underlying prot before tax of $975 million and a statutory prot after tax of $560 million for 2014/2015. The underlying result was a turnaround of $1.6 billion compared with 2013/2014, including Qantas' best ever second half performance, with all segments of the Qantas Group protable and returning their cost of capital for the year. HIGHLIGHTS Underlying prot before tax2 $975 Statutory prot after tax $560 Return on invested capital $1.1 Transformation benets realised $894 All segments of the Qantas Group reported strong prots with record results for Jetstar, Qantas Loyalty and Qantas Freight4 on an underlying earnings before interest and tax (EBIT) basis. Combined Group domestic underlying EBIT - Qantas and Jetstar - was more than $600 million and Qantas International was protable on a full-year basis for the rst time since before the Global Financial Crisis. $2 Net free cash ow Group Performance 16 Operating cash ow The largest driver of the improved result was progress with the Qantas Transformation program, which unlocked $894 million in transformation benets during the year and saw Qantas meet its target of paying down more than $1 billion of net debt3. As a result, Qantas has reached its optimal capital structure - enabling it to resume shareholder returns. Net debt reduction Statutory earnings per share (EPS) MILLION MILLION PER CENT BILLION 25.4 CENTS The Group's leverage metrics are now within an investment-grade target range, with debt-to-EBITDA of 2.9x, compared with 5.1x in 2013/2014. The Group retains access to diverse sources of funding and strong liquidity, including $2.9 billion in cash, $1 billion in available undrawn facilities and a pool of unencumbered aircraft totalling more than US$3 billion (at market values). Proposed Capital Return A proposed capital return of $505 million, equivalent to 23 cents per share, is proposed to be paid to shareholders in early November 2015. The cash payment is subject to shareholder approval at the Qantas Annual General Meeting on 23 October 2015 of both the capital return and a related share consolidation, which is designed to provide shareholders with an earnings per share outcome similar to an equivalent-sized share buy-back. Q ANTAS INTERNATIONAL Underlying EBIT. Up from $30 million in 2013/2014 Underlying EBIT. Up from a loss of $497 million in 2013/2014 $480m BILLION $1 Financial Position Q ANTAS DOMESTIC BILLION MILLION 1 JETSTAR GROUP $230m record Underlying EBIT. Up from a loss of $116 million in 2013/2014 $267m Q ANTAS LOYALTY $315m record Underlying EBIT. Up from $286 million in 2013/2014 Q ANTAS FREIGHT $114m record Underlying EBIT4. Up from $24 million in 2013/2014 1 Refer to the Review of Operations section in the Qantas Annual Report 2015 for denition and explanation of non-statutory measures. Unless otherwise stated, amounts are reported on an underlying basis. 2 Underlying Prot Before Tax (PBT) is a non-statutory measure and is the primary reporting measure used by the Qantas Group's chief operating decision-making bodies (being the Chief Executive Ofcer, Group Management Committee and the Board of Directors) for the purpose of assessing the performance of the Group. 3 $1.1 billion since 2012/2013. Net debt including present value of operating lease obligations. 4 Since separate segmentation of Freight result in 2007/2008. 06 Q A N TA S A NNUA L REPOR T 2015 The Financial Framework for a Stronger Qantas Group At the 2015 Qantas Investor Day, we outlined the nancial framework that guides the Group's thinking on shareholder value creation, our optimal capital structure, and capital allocation. The three pillars of the nancial framework are supported by measureable targets, aligned with those of our shareholders. Our overarching objective is maintainable earnings per share growth over the cycle, to deliver total shareholder returns (TSR) in the top quartile of the ASX100 and a peer group of global listed airlines3. Maintaining an optimal capital structure, consistent with investment grade-level leverage metrics, will minimise Qantas' cost of capital. Delivering return on invested capital above our weighted average cost of capital will ensure we can continue to reinvest in our business for sustainable returns. And by growing the Group's invested capital over time, and returning surplus capital to shareholders, we will continue to create long-term value for our shareholders. Financial Framework Aligned with Shareholder Objectives Enhancing long-term shareholder value 1 2 3 MAINTAINING AN OPTIMAL CAPITAL STRUCTURE ROIC > WACC THROUGH THE CYCLE DISCIPLINED ALLOCATION OF CAPITAL Target: minimise WACC Target: ROIC > 10%1 Target: grow Invested Capital with disciplined investment, return surplus capital 2014/2015: >$1 billion debt reduction, return to optimal capital structure 2014/2015: ROIC of 16% 2014/2015: Proposed $505 million capital return MAINTAINABLE EPS 2 GROWTH OVER THE CYCLE TOTAL SHAREHOLER RETURNS IN THE TOP QUARTILE 3 1 2 3 Target of 10% ROIC allows ROIC to be greater than pre-tax WACC through the cycle. Earnings Per Share. Target Total Shareholder Returns with the top quartile of the ASX100 and global listed airline peer group as stated in the 2014/2015 Remuneration Report in reference to the 2015-2017 LTIP. 07 Q A N TA S A NNUA L REPOR T 2015 BOARD OF DIRECTORS FOR THE YEAR ENDED 30 JUNE 2015 Leigh Clifford AO Alan Joyce Maxine Brenner BEng, MEngSci Chairman and Independent Non-Executive Director BApplSc(Phy)(Math)(Hons), MSc(MgtSc), MA, FRAeS, FTSE Chief Executive Ofcer BA, LLB Independent Non-Executive Director Leigh Clifford was appointed to the Qantas Board in August 2007 and as Chairman in November 2007. Alan Joyce was appointed Chief Executive Ofcer and Managing Director of Qantas in November 2008. He is Chair of the Nominations Committee. He is a Member of the Safety, Health, Environment and Security Committee. Mr Clifford is a Director of Bechtel Group Inc and Chairman of Bechtel Australia Pty Ltd, the Murdoch Childrens Research Institute and the National Gallery of Victoria Foundation. He is a Senior Advisor to Kohlberg Kravis Roberts & Co and a Member of the Council of Trustees of the National Gallery of Victoria. Mr Clifford was previously a Director of Barclays Bank plc and FreeportMcMoRan Inc. Mr Joyce is a Director of the Business Council of Australia and a Member of the International Air Transport Association's Board of Governors, having served as Chairman from 2012 to 2013. He is also a Director of a number of controlled entities of the Qantas Group. Mr Clifford was Chief Executive of Rio Tinto from 2000 to 2007. He retired from the Board of Rio Tinto in 2007 after serving as a Director of Rio Tinto plc and Rio Tinto Limited for 13 and 12 years respectively. His executive and board career with Rio Tinto spanned some 37 years, in Australia and overseas. Mr Joyce was the Chief Executive Ofcer of Jetstar from 2003 to 2008. Before that, he spent over 15 years in leadership positions with Qantas, Ansett and Aer Lingus. At both Qantas and Ansett, he led the network planning, schedules planning and network strategy functions. Prior to that, Mr Joyce spent eight years at Aer Lingus, where he held roles in sales, marketing, IT, network planning, operations research, revenue management and eet planning. Age: 67 Age: 49 Maxine Brenner was appointed to the Qantas Board in August 2013. She is a Member of the Remuneration Committee and the Audit Committee. Ms Brenner is a Director of Origin Energy Limited, Orica Limited and Growthpoint Properties Australia Limited. She is a Trustee of the State Library of NSW and a Member of the Advisory Panel of the Centre for Social Impact at the University of New South Wales. Ms Brenner was formerly a Managing Director of Investment Banking at Investec Bank (Australia) Limited. She has extensive experience in corporate advisory work, particularly in relation to mergers and acquisitions, corporate restructures and general corporate activity. She also practised as a lawyer with Freehill Hollingdale & Page (now Herbert Smith Freehills) where she specialised in corporate work, and spent several years as a lecturer in the Faculty of Law at both the University of NSW and the University of Sydney. Ms Brenner was the Deputy Chairman of the Federal Airports Corporation and a Director of Neverfail Springwater Limited, Bulmer Australia Limited and Treasury Corporation of NSW. She also served as a Member of the Australian Government's Takeovers Panel. Age: 53 08 Q A N TA S A NNUA L REPOR T 2015 Richard Goodmanson Jacqueline Hey William Meaney BCom, BEc, MBA, MCE Independent Non-Executive Director BCom, Grad Cert (Mgmt), GAICD Independent Non-Executive Director BScMEng, MSIA Independent Non-Executive Director Richard Goodmanson was appointed to the Qantas Board in June 2008. Jacqueline Hey was appointed to the Qantas Board in August 2013. William Meaney was appointed to the Qantas Board in February 2012. He is Chair of the Safety, Health, Environment and Security Committee and a Member of the Nominations Committee. She is a Member of the Audit Committee. He is a Member of the Safety, Health, Environment and Security Committee and the Remuneration Committee. Mr Goodmanson is a Director of Rio Tinto plc and Rio Tinto Limited. From 1999 to 2009 he was Executive Vice President and Chief Operating Ofcer of E.I. du Pont de Nemours and Company. Previous to this role, he was President and Chief Executive Ofcer of America West Airlines. Mr Goodmanson was also Chief Operations ofcer for Frito-Lay Inc, a subsidiary of PepsiCo and a Principal at McKinsey & Company Inc. He spent 10 years in heavy civil engineering project management, principally in South East Asia. Additionally, Mr Goodmanson was an Economic Adviser to the Governor of Guangdong Province, China from 2003 until 2009. Mr Goodmanson was born in Australia and is a citizen of both Australia and the United States. Age: 68 Ms Hey is a Director of Bendigo and Adelaide Bank Limited and is Chairman of its Change & Technology Committee and a Member of its Audit and Governance and HR Committees. She is also a Director of the Australian Foundation Investment Company Limited, Special Broadcasting Service, Melbourne Business School and Cricket Australia, and a Member of the ASIC Director Advisory Panel. Ms Hey is the Honorary Consul for Sweden in Victoria. Between 2004 and 2010, Ms Hey was Managing Director of various Ericsson entities in Australia and New Zealand, the United Kingdom and Ireland, and the Middle East. Her executive career with Ericsson spanned more than 20 years in which she held nance, marketing, sales and leadership roles. Age: 49 Mr Meaney is the President and Chief Executive Ofcer of Iron Mountain Inc. He is a Member of the Asia Business Council and also serves as Trustee of Carnegie Mellon University and Rensselaer Polytechnic Institute. Mr Meaney was formerly the Chief Executive Ofcer of The Zuellig Group and a Director of moksha8 Pharmaceuticals Inc. He was also the Managing Director and Chief Commercial Ofcer of Swiss International Airlines and Executive Vice President of South African Airways responsible for sales, alliances and network management. Prior to these roles, Mr Meaney spent 11 years providing strategic advisory services at Genhro Management Consultancy as the Founder and Managing Director, and as a Principal with Strategic Planning Associates. Mr Meaney holds United States, Swiss and Irish citizenships. Age: 55 09 Q A N TA S A NNUA L REPOR T 2015 BOARD OF DIRECTORS CONTINUED FOR THE YEAR ENDED 30 JUNE 2015 Paul Rayner Todd Sampson Barbara Ward AM BEc, MAdmin, FAICD Independent Non-Executive Director MBA, BA(Hons) Independent Non-Executive Director BEc, MPolEc Independent Non-Executive Director Paul Rayner was appointed to the Qantas Board in July 2008. Todd Sampson was appointed to the Qantas Board in February 2015. Barbara Ward was appointed to the Qantas Board in June 2008. He is Chair of the Remuneration Committee and a Member of the Nominations Committee. He is a Member of the Remuneration Committee. She is Chair of the Audit Committee, a Member of the Safety, Health, Environment and Security Committee and a Member of the Nominations Committee. Mr Rayner is Chairman of Treasury Wine Estates Limited, a Director of Boral Limited and Chairman of its Audit Committee, and a Director of the Murdoch Childrens Research Institute. Mr Rayner was formerly a Director of Centrica plc from 2004 to 2014 and Chairman of its Audit Committee from 2004 to 2013. From 2002 to 2008, Mr Rayner was Finance Director of British American Tobacco plc based in London. Mr Rayner joined Rothmans Holdings Limited in 1991 as its Chief Financial Ofcer and held other senior executive positions within the Group, including Chief Operating Ofcer of British American Tobacco Australasia Limited from 1999 to 2001. Previously, Mr Rayner worked for 17 years in various nance and project roles with General Electric, Rank Industries and the Elders IXL Group. Age: 61 He has been the National CEO of the Leo Burnett Group since 2008 and also sits on the board of Fairfax Media Limited. Mr Sampson has close to 20 years' experience across marketing, communication, new media and digital transformation. He has held senior leadership and strategy roles for a number of leading communication companies in Australia and overseas, including as Managing Partner for D'Arcy, Strategy Director for The Campaign Palace and Head of Strategy for DDB Needham Worldwide. Age: 45 Ms Ward is a Director of Caltex Australia Limited, a number of Brookeld Multiplex Group companies, and the Sydney Children's Hospital Foundation. She was formerly a Director of the Commonwealth Bank of Australia, Lion Nathan Limited, Brookeld Multiplex Limited, Data Advantage Limited, O'Connell Street Associates Pty Ltd, Allco Finance Group Limited, Rail Infrastructure Corporation, Delta Electricity, Ausgrid, Endeavour Energy and Essential Energy. She was also Chairman of Country Energy and NorthPower and HWW Limited, a Board Member of Allens Arthur Robinson and the Sydney Opera House Trust and on the Advisory Board of LEK Consulting. Ms Ward was Chief Executive Ofcer of Ansett Worldwide Aviation Services from 1993 to 1998. Before that, Ms Ward held various positions at TNT Limited, including General Manager Finance, and also served as a Senior Ministerial Advisor to The Hon PJ Keating. Age: 61 10 Q A N TA S A NNUA L REPOR T 2015 REVIEW OF OPERATIONS FOR THE YEAR ENDED 30 JUNE 2015 The Qantas Group reported an Underlying Prot Before Tax1 of $975 million for the 12 months ended 30 June 2015, an improvement of over $1.6 billion from 2013/2014. The Group's Statutory Prot After Tax of $560 million included $186 million of costs which were not included in Underlying PBT1 primarily driven by redundancies, restructuring and other costs associated with the Qantas Transformation program. The Underlying PBT result is a strong turnaround from the 2013/2014 nancial year, driven by cost and revenue benets2 from the Qantas Transformation program and a more favourable operating environment. Qantas continued to deliver on all of its major strategic and operational commitments over the 2014/2015 nancial year, resulting in the rapid recovery in earnings and return to a strong balance sheet position. The Qantas Transformation program was the major driver of the result delivering benets of $894 million. Other drivers of the result included: - Improved Revenue per ASK3 - Reduced fuel cost, beneting from lower AUD fuel prices - The positive impact of reduced depreciation expense resulting from the non-cash write down of Qantas International Fleet in 2013/2014 and the removal of the carbon tax Qantas takes a disciplined approach to continually reviewing its optimal capital structure and, where there is surplus capital, to assess how to enhance shareholder value with the appropriate mix of growth and shareholder returns. Having returned to our optimal capital structure as at the end of 2014/2015, a $505 million capital return was declared. The shareholder distribution is in the form of 23 cents per share capital return combined with a share consolidation. Subject to shareholder approval of the capital return of $505 million at Qantas' Annual General Meeting in October 2015, the 23 cents per share payment will be made in November 2015. Strategic highlights of the 2014/2015 nancial year included: - - - - - Qantas Transformation continuing to drive permanent shift in cost base and competitive position Disciplined capital allocation facilitated debt reduction and recommencement of shareholder returns Investment in product and innovation strengthened the Group's leading market positions Focus on engaging our people and improving workplace culture Management of external volatility with robust hedging program, capacity and capital expenditure exibility All operating segments achieved Return on Invested Capital (ROIC)4 greater than the Group's Weighted Average Cost of Capital (WACC), contributing to Group ROIC of 16 per cent. Qantas International Underlying EBIT1 of $267 million was a $764 million improvement from the prior year, driven by $408 million of Transformation benets realised in the year. Jetstar Group, Qantas Loyalty5 and Qantas Freight all achieved record Underlying EBIT, while the combined Qantas Domestic and Qantas International Underlying EBIT result was the highest since nancial year 2007/2008. The $894 million of Qantas Transformation benets realised during 2014/2015 was ahead of guidance of at least $675 million, with all planned initiatives being delivered on or ahead of schedule. Transformation benets included $576 million of non-fuel expenditure reduction, $136 million from fuel efciency6, and revenue benets2 of $182 million from initiatives including increased utilisation7 of international and domestic aircraft. Qantas transformation continues to drive a sustainable improvement in earnings. 1 Underlying Prot Before Tax (Underlying PBT) is the primary reporting measure used by the Qantas Group's chief operating decision-making bodies, being the Chief Executive Ofcer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Group. The primary reporting measure of the Qantas International, Qantas Domestic, Jetstar Group, Qantas Loyalty and Qantas Freight operating segments is Underlying Earnings Before Net Finance Costs and Tax (Underlying EBIT). The primary reporting measure of the Corporate segment is Underlying PBT as net nance costs are managed centrally. Refer to the reconciliation of Underlying PBT to Statutory Prot/(Loss) Before Tax 2 Any incremental costs associated with revenue benets are netted in the overall cost benets attributed to the Qantas Transformation program 3 Passenger Revenue per Available Seat Kilometre 4 Return on Invested Capital (ROIC) is a non-statutory measure and is the nancial return measure of the Group. ROIC is calculated as Return on Invested Capital EBIT (ROIC EBIT) divided by Average Invested Capital. ROIC EBIT is derived by adjusting Underlying EBIT to exclude non-cancellable aircraft operating lease rentals and include notional depreciation for these aircraft to account for them as if they were owned aircraft. Invested Capital includes the net assets of the business other than cash, debt, other nancial assets and liabilities, tax balances and includes the capitalised value of operating leased aircraft assets. Average Invested Capital is equal to the 12 month average of the monthly Invested Capital 5 Qantas Loyalty record Underlying EBIT result compared to prior periods normalised for changes in accounting estimates of the fair value of points and breakage expectations effective 1 January 2009. 6 Fuel efciency includes reduction in consumption from fuel efciency and reduction in into-plane costs following transformation initiatives 7 Aircraft utilisation is based on average block hours per aircraft 11 Q A N TA S A NNUA L REPOR T 2015 REVIEW OF OPERATIONS CONTINUED FOR THE YEAR ENDED 30 JUNE 2015 Qantas has established a nancial framework to align our objectives with our shareholders. With the aim of generating maintainable Earnings Per Share growth over the cycle, which in turn should translate into Total Shareholder Returns in the top quartile of the ASX100 and a basket of global airlines8, the nancial framework has three clear priorities and associated long-term targets: Priorities and long-term targets Delivery against priorities and long-term targets Maintain an optimal capital structure, with a target to minimise WACC Qantas returned to its optimal capital structure after completing net debt9 reduction of $1.1 billion since the 2012/2013 nancial year. With the concurrent increase in earnings, leverage metrics are within the targeted BBB- to BBB range. Total liquidity10 increased, including $2.9 billion in cash, $1 billion in undrawn revolving credit facilities and a net increase of 20 unencumbered aircraft to total market value over US$3 billion. Deliver ROIC greater than WACC11 through the cycle, ensured by a target of ROIC > 10 per cent Return on Invested Capital of 16 percent. The Group ROIC outcome was consistent with the Group's target to deliver ROIC above 10 per cent through the cycle. Disciplined allocation of capital, with the aim of growing Invested Capital with disciplined investment Qantas continued to demonstrate disciplined allocation of capital over 2014/2015, with constrained net capital expenditure12 of $944 million facilitating $1.1 billion net debt reduction since 2012/2013 and the return of $505 million surplus capital to shareholders. Despite the constrained level of capital expenditure, targeted investment across the Group in product, service and training resulted in customer satisfaction and advocacy, measured by Net Promoter Scores, improving to record levels. The Group's balanced scorecard through the Qantas Transformation program ensures a net benet for the customer experience. This was seen in customer and brand highlights for the year including: - Record13 customer advocacy (NPS) results at Qantas Domestic and Qantas International - The opening of new First and Business lounges in Los Angeles - Commencement of the A330 reconguration program, progressively adding 'Business Suites' with lie-at beds on 28 A330 family aircraft - B787 aircraft with enhanced customer offering in the Jetstar International eet with two further aircraft already delivered since 30 June 2015 - Ongoing customer service training programs completed by more than 10,000 staff - Digital innovation focused on improving speed and ease of travel including auto check-in on mobile for Qantas Domestic and nextgen online retailing and boarding at Jetstar UNDERLYING PBT The Qantas Group's full-year 2014/2015 Underlying PBT increased to $975 million, compared to an Underlying Loss Before Tax of $646 million in 2013/2014. The signicant improvement in earnings was driven by the delivery of a reduction in operating expenses, fuel efciency initiatives, and revenue benets from the $2 billion Qantas Transformation program14. Net passenger revenue increased by three per cent, reecting improved yields15 and passenger loads in most markets. This stronger performance was supported by network changes and capacity management in a mixed domestic market, as well as a more benign international competitive environment with the lower Australian dollar resulting in a steep reduction in the pace of international competitor capacity growth. The fuel cost reduction of $597 million resulted from lower AUD fuel prices and fuel efciency measures in the Qantas Transformation program. Depreciation and amortisation expenses were lower with $195 million of the reduction resulting from the non-cash impairment to the Qantas International eet taken in the 2013/2014 full year results. The remaining reduction is the net impact from aircraft retirements offset by deliveries. Net nance costs increased by $52 million largely due to reduced capitalised interest and an increase in the average cost of new debt and the signicant extension of the Group's debt maturity prole. 8 Compared to global airline peer group as stated in the Notice of Meeting for the 2014 Annual General Meeting, with reference to the 2015-2017 LTIP. 9 Net debt including present value of operating lease liabilities. The present value of operating lease liabilities for aircraft operating leases in accordance with AASB 117: Leases, are not recognised on balance sheet. The operating lease liability has been calculated as the present value of future non-cancellable operating lease rentals of aircraft in service, using a discount rate of seven per cent applied in Standard and Poor's methodology 10 Includes cash and cash equivalents and $1 billion in undrawn facilities as at 7 July 2015 11 Calculated on a pre-tax basis 12 Net capital expenditure represents investing cash ows 13 Net Promoter Score (record achieved in June 2015) 14 $2 billion of gross benets excluding ination 15 Yield - passenger revenue divided by RPKs (both current year and prior year have been calculated using current foreign exchange rates) 12 Q A N TA S A NNUA L REPOR T 2015 June 2015 $M Net passenger revenue Net freight revenue June 2014 $M Change $M Change % 13,667 Group Underlying Income Statement Summary 13,242 425 3 936 (19) (2) 1,155 58 5 15,816 Revenue 955 1,213 Other revenue 15,352 464 3 Operating expenses (excluding fuel) (9,064) (9,288) 224 2 Fuel16 (3,899) (4,496) 597 13 Depreciation and amortisation (1,096) (1,422) 326 23 (495) (520) 25 5 (29) (66) 37 56 (14,583) 16 Non-cancellable aircraft operating lease rentals Share of net loss of investments accounted for under the equity method16 Expenses (15,792) 1,209 8 1,233 (440) 1,673 >100 Net nance costs16 (258) (206) (52) (25) Underlying PBT 975 (646) 1,621 >100 Operating Statistics June 2015 June 2014 Change Change % M 142,287 141,715 572 0.4 Revenue Passenger Kilometres (RPK) M 112,543 109,659 2,884 2.6 Passengers Carried '000 49,181 48,776 405 0.8 Revenue Seat Factor 19 % 79.1 77.4 1.7pts Yield15 c/RPK 10.40 10.29 0.11 1.1 c/ASK 4.79 5.05 (0.26) (5.1) Underlying EBIT Available Seat Kilometres (ASK)17 18 Comparable unit cost 20 Group capacity (Available Seat Kilometres) increased by 0.4 per cent, and demand (Revenue Passenger Kilometres) increased by 2.6 per cent, resulting in a 1.7 percentage point increase in Revenue Seat Factor. Yield from ticketed passenger revenue increased 1.1 per cent on a constant currency basis, and the Group's comparable unit cost improved by 5.1 per cent. 16 Underlying operating expenses (excluding fuel) - total Underlying expenses excluding share of net loss of investments accounted for under the equity method, fuel and net nance costs. These Underlying expenses differ from equivalent statutory expenses due to items excluded from Underlying PBT, such as adjustments for impacts of AASB 9 which relate to other reporting periods and other items identied by Management. Refer to the reconciliation of Underlying PBT to Statutory (Loss)/Prot Before Tax 17 ASK - total number of seats available for passengers, multiplied by the number of kilometres own 18 RPK - total number of passengers carried, multiplied by the number of kilometres own 19 Revenue Seat Factor - RPKs divided by ASKs. Also known as seat factor, load factor or load 20 Comparable unit cost - unit cost is adjusted to aid comparability between reporting periods. Comparable unit cost is calculated as Underlying PBT less passenger revenue and fuel, adjusted for the impact of the Qantas International eet write-down, changes in discount rates, changes in foreign exchange rates, share of net loss of investments accounted for under the equity method. If adjusted for movements in average sector length per ASK comparable unit cost improvement is 4.2 per cent and if adjusted further for the impact of the carbon tax repeal, the comparable unit cost improvement is 2.6 per cent. 13 Q A N TA S A NNUA L REPOR T 2015 REVIEW OF OPERATIONS CONTINUED FOR THE YEAR ENDED 30 JUNE 2015 Segment Performance Summary June 2015 $M June 2014 $M Change $M Change % Qantas Domestic 480 30 450 >100 Qantas International 267 (497) 764 >100 Qantas Freight 114 24 90 >100 Jetstar Group 230 (116) 346 >100 Qantas Loyalty 315 286 29 10 Corporate (163) (163) - - (10) (4) (6) >(100) 1,233 (440) 1,673 >100 Unallocated/Eliminations Underlying EBIT1 Net nance costs (258) (206) (52) (25) Underlying PBT1 975 (646) 1,621 >100 Qantas Domestic reported 2014/2015 Underlying EBIT of $480 million, a $450 million improvement from the prior year. The main driver of the improved performance was realisation of $302 million of Transformation benets. Qantas International reported a $764 million turnaround from 2013/2014, a major milestone that met the Group's target for the segment to return to protability in 2014/2015. This major milestone was the result of several years of signicant restructuring initiatives, and included $408 million of Transformation benets realised in 2014/2015. The segment result beneted from a $195 million reduction in depreciation from the non-cash impairment to the Qantas International eet taken in the 2013/2014 full year results. Jetstar Group recognised a record Underlying EBIT of $230 million, compared to an Underlying EBIT loss of $116 million in the prior year. This reected signicant improvement across the Jetstar Group, with continued cost transformation and revenue recovery. Qantas Loyalty Underlying EBIT increased 10 per cent to a record $315 million, driven by a ve per cent increase in billings21 and the growth of new and adjacent business ventures including Qantas Cash, Aquire, Accumulate and Red Planet. Qantas Freight reported record Underlying EBIT of $114 million, with Transformation benets of $38 million and yield22 reductions offset by higher loads. DISCIPLINED INVESTMENT TO ENHANCE LONG-TERM SHAREHOLDER VALUE With the Group having returned to its optimal capital structure, and no further net debt reduction required, disciplined investment will grow Invested Capital over time and maximise long-term shareholder value by: - Building on the Group's competitive advantages Integrated portfolio of premier brands Superior domestic market position Improving customer experience Leveraging customer insights - Positioning the Group to succeed in future growth markets Loyalty growth initiatives Jetstar in Asia - Strengthening long-term Group ROIC Next-generation eet Transformation - Aligning with our brand values and vision 21 Billings represent point sales to partners 22 Yield is calculated as freight revenue excluding foreign exchange divided by revenue freight tonne kilometres (RFTKs) 14 Q A N TA S A NNUA L REPOR T 2015 QANTAS TRANSFORMATION - DELIVERING AGAINST A BALANCED SCORECARD The accelerated Qantas Transformation program is targeting the delivery of $2 billion of gross benets by the end of nancial year 2016/2017, with all milestones to date having been met or exceeded. Within the $2 billion target, the program is sized and structured to achieve important strategic outcomes. Strategic outcomes by 2016/2017 include: - - - - - - Group ex-fuel expenditure reduced by > 10 per cent23 Qantas Domestic unit cost gap24 to competitor to close to 10 per cent25 Ex-fuel expenditure26 reduced by six per cent 5,000 FTE reduction Reduction of 4,00027 full time equivalent staff out of targeted 5,000 reduction by 2016/2017 Greater than $1 billion debt reduction $1.1 billion of net debt reduction since nancial year 2012/2013 Debt/EBITDA 100 Financing cash ows (1,218) 173 (1,391) >(100) Cash at beginning of period 3,001 2,829 172 6 21 (1) 22 >100 2,908 3,001 June 2015 $M June 2014 $M Net on balance sheet debt32 2,558 3,455 (897) (26) Net debt including present value of operating lease liabilities9 3,742 4,751 (1,009) (21) (1,037) (14) Effect of foreign exchange on cash Cash at period end Debt Analysis Net debt including capitalised operating lease liabilities FFOet debt34 Debt/adjusted EBITDA28 6,306 7,343 % 46% 2.9 Change $M (3) Change % 17% times (93) 5.1 33 Operating cash ows of $2 billion almost doubled from the prior year, reecting benets realised through Qantas Transformation, yield improvements across the Group in a more stable operating environment, and lower AUD fuel prices in the second half of the nancial year in particular. Net cash capital expenditure12 of $944 million included investment in replacement eet such as the Boeing 787 for Jetstar International and customer experience initiatives including airport lounges and the commencement of Airbus A330 cabin recongurations. Qantas generated $1.1 billion of net free cash ow in the period - a rapid improvement from the neutral net free cash ow outcome in 2013/2014 - facilitating the completion of the Group's targeted net debt reduction of at least $1 billion. The Group's liquidity position strengthened, with $2.9 billion in cash, a $410 million increase35 in available undrawn facilities to $1 billion, and the pool of unencumbered aircraft growing to a total of more than US$3 billion (at market value). Qantas continues to retain signicant exibility in its nancial position, funding strategies and eet plan to ensure that it can respond to any change in market conditions. As a result of improved earnings through the achievement of milestones under the Qantas Transformation program, the Group is now within the target optimal capital structure range. At 30 June 2015, the Group's leverage metrics were within or better than investment grade (BBB/Baa range) with FFOet debt of 46 per cent (2013/2014: 17 per cent) and Debt/adjusted EBITDA of 2.9 times (2013/2014: 5.1 times). 31 Net free cash ow - operating cash ows less investing cash ows. Net free cash ow is a measure of the amount of operating cash ows that are available (i.e. after investing activities) to fund reductions in net debt or payments to shareholders 32 Net on balance sheet debt includes interest-bearing liabilities and the fair value of hedges related to debt reduced by cash and cash equivalents and aircraft security deposits 33 Net debt including operating lease liability under the Group's Financial Framework includes net on balance sheet debt and off balance sheet aircraft operating lease liabilities. Capitalised operating lease liability is measured at fair value at the lease commencement date and remeasured over lease term on a principal and interest basis akin to a nance lease 34 Funds From Operations (FFO) to net debt based on Standard and Poor's methodology 35 From 30 June 2014 to 7 July 2015 16 Q A N TA S A NNUA L REPOR T 2015 FLEET The Qantas Group remains committed to a eet strategy that provides for long-term exibility and renewal, and that prioritises Group eet simplication. The eet strategy is designed to support the strategic objectives of the Group's two ying brands and the overarching targets of the Qantas Transformation program. At all times, the Group retains signicant exibility to respond to any changes in market conditions and the competitive environment. At 30 June 2015, the Qantas Group eet36 totalled 299 aircraft. During 2014/2015, the Group purchased 11 aircraft and leased one aircraft: - Qantas - ve B737-800s, one Bombardier Q400 and one Fokker100 - Jetstar (including Jetstar Asia) - four B787-8s and one A320-200 The Group removed 21 aircraft from service in 2014/2015 including three lease returns. These inclu