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Post Market Wrap | Qantas Group Climate Action Plan released

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This Post Market Wrap is presented by KOSEC – Kodari Securities

  • Targeting 25 percent reduction in greenhouse emissions by 2030
  • Sustainable Aviation Fuel can reduce greenhouse emissions by 80 percent
  • Sustainable Aviation Fuel is produced from sugar cane, forestry residues and animal tallow
  • Zero use of single-use plastics by 2027
  • Modernised fleet can burn 15 percent less fuel and improve fleet efficiency by 1.5 percent per year.
  • Sustainability reporting is good for business and explains why Qantas is one of the world’s best managed airlines.   

Qantas, founded in 1920, has been flying passengers internationally since 1935 and is today the world’s third largest airline, with seamless connections to over one hundred global destinations. As Australia’s flagship carrier, Qantas has an approximate 65 percent domestic market share, and operates in a competitive duopoly with Virgin Australia. 

Qantas Group Climate Action Plan

The Qantas Group Climate Action Plan (Plan) released today makes sustainability the basis of decision making across all areas of the business. This includes integrating climate change issues into the Group’s financial framework and linking performance against targets to executive remuneration, including factoring in a cost of carbon in financial decisions. The Plan outlines the Group’s interim targets and initiatives to achieve a 25 percent reduction in greenhouse emissions by 2030.

Sustainable Aviation Fuel (SAF) 

Qantas is driving the development of the sustainable aviation fuel industry in Australia. This initiative is aimed at taking the fuel mix of Qantas flights to 10 percent use of SAF by 2030 and to 60 percent by 2050. This initiative is critical for reaching its net zero emissions target under its market-leading carbon offsetting program. Australia already produces feedstock for SAF that is exported to overseas producers. The feedstock is produced from sugar cane, cooking oil, forestry residues, and animal tallow, before being blended with normal jet fuel. The blended fuel produces up to 80 percent less greenhouse emissions, compared to traditional jet kerosene. Qantas sees value in building a domestic bio-fuels industry, creating jobs and fuel security in Australia. To this end, Qantas has committed $50 million towards the establishment of an Australian-based SAF industry. Today, 15 percent of fuel used out of London comprises SAF and a supply deal has been signed for 20 million litres annually of blended SAF out of Californian airports from 2025.  

Waste Reduction

The airline aims to achieve zero single-use plastics by 2027 and zero general waste to landfill by 2030. This means that every Qantas flight will eventually use products in compostable or recyclable packaging. Qantas anticipate that by 2030, all of its Australian-based operations will be completely free of general waste. 

Fuel Efficiency 

A modernised fleet and more efficient flight planning can burn 15 to 20 percent less fuel and improve fleet efficiency by an average of 1.5 percent per year. Qantas is also undertaking research into hydrogen and battery power. However, it is acknowledged that hydrogen or electric powered aircraft are several decades away.  

Image: File

Carbon Offsets

The offsetting program will continue, especially into key Australian projects. Qantas has entered into a Memorandum of Understanding with ANZ and INPEX for a major reforestation and carbon farming project in Western Australia’s wheatbelt region. The Qantas Fly Carbon Neutral carbon offset program has one of the highest participation rates of any airline in the world.  

Brand Power

Qantas understands the value of a reputable consumer brand and by leading the decarbonisation of the aviation industry, it is strengthening the airline’s consumer brand power. Its proactive response to climate change is well documented in its sustainability reporting to stakeholders and this gives the airline its licence to maintain and grow over the long-term.

Qantas recognises that managing sustainability and transparently reporting this to stakeholders is fundamental to protecting brand value. It isn’t just good for the planet; it’s also good for business, and this partly explains why Qantas is one of the world’s leading and best managed airlines. 

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."

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Money

Boeing CEO to depart with lucrative exit package despite chaos

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Boeing CEO Dave Calhoun is set to step down from his position at the end of the year, walking away with a substantial payout despite challenges faced during his tenure.

Here are the key points:

  • Massive Payout: Despite Boeing’s stock price plummeting by 43% since Calhoun took over as CEO in 2020, he is poised to receive a $24 million payment upon his departure.

  • Additional Compensation: Calhoun holds options that could potentially earn him an additional $45.5 million if his successor manages to boost Boeing’s share price by 37%.

  • Comparative Compensation: Calhoun’s compensation during his tenure exceeds that of CEOs in similar industries, despite Boeing’s stock underperforming in comparison.

Boeing CEO Dave Calhoun’s impending departure at the end of the year has sparked controversy as he stands to walk away with a substantial payout, despite the company’s tumultuous journey under his leadership.

READ MORE: Boeing CEO to step down

Despite inheriting a company reeling from the aftermath of two deadly 737 Max crashes, Calhoun’s tenure has been marred by further setbacks, including the recent Alaska Airlines door blowout incident that further tarnished Boeing’s reputation.

Boeing offers CEO $5.3 million incentive to stay through recovery …

With Boeing’s stock price plummeting by 43% during Calhoun’s time at the helm, questions arise about the correlation between executive compensation and company performance, especially in the face of such significant challenges.

‘Raised eyebrows’

Calhoun’s lucrative exit package, valued at $24 million, has raised eyebrows among shareholders and industry observers alike.

Additionally, the potential for Calhoun to earn an additional $45.5 million based on the future performance of Boeing’s shares has intensified scrutiny over executive compensation practices.

This sizable payout contrasts starkly with Boeing’s stock performance, which has significantly underperformed compared to both industry peers and broader market indices, highlighting the dissonance between executive rewards and shareholder value creation.

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Money

It’s been a record year for CEO compensation

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In 2023, Broadcom’s CEO Hock Tan was granted a stock award worth $161 million, propelling him into the realm of highest-paid CEOs.

However, as the company’s share price surged, the value of Tan’s award skyrocketed to approximately $1.3 billion, outpacing even the shareholders’ annual returns.

Tan’s compensation reflects a broader trend among top executives in the tech sector, where awards of restricted stock and stock options surged in value alongside company share prices.

Notably, CEOs like Charles Robbins of Cisco Systems and Shantanu Narayen of Adobe also saw substantial increases in their compensation, doubling in some cases.

The disclosure of such equity growth in executive compensation is a new requirement by the Securities and Exchange Commission (SEC), providing shareholders with insights into the changing value of executives’ awards throughout the year.

CEO pay is on the rise.

New heights

Overall, CEO pay at major S&P 500 companies reached new heights in 2023, rebounding from slower growth in the previous year. The median pay for these CEOs rose to $15.6 million, up from $14.1 million in 2022, reflecting a surge in equity awards.

Broadcom clarified that Tan’s stock award is designed to span five years, with no plans for additional equity grants or cash bonuses during that period.

Tan’s compensation, which amounts to approximately $33 million annually over five years, is contingent upon his continued tenure and specific share price targets.

While the initial valuation of Tan’s restricted shares stood at $160.5 million, the surge in Broadcom’s share price prompted the company to reassess the likelihood of meeting vesting conditions.

This reassessment suggests that Tan may not receive all the shares initially granted.

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Money

Market forecast: weather whirlwinds influencing investments

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Prime conditions for commodity investments arise from global weather shifts, geological tensions, and rising interest rates.

With global weather patterns causing disruptions in traditional supply chains, coupled with geopolitical tensions over natural resource access, and the anticipation of higher interest rates impacting financial markets, the conditions for commodity investments have reached exceptional levels.

Amidst this backdrop, Farrer Capital has emerged as a standout player, leveraging its unique ‘blue ocean’ approach to capitalize on price dislocations and scarce competition in the market.

Mark Wyld from MW Wealth joins the show to share his insights on the inclement weather impacting the market.

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