1998 ANNUAL REPORT

1998 Annual Report

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 1998 Annual Report

Registered Office Financial Calendar Notice of Meeting

Qantas Airways Limited 1998 The Annual General Meeting of
ACN 009 661 901 30 June Year end Qantas Airways Limited will be held
Qantas Centre 20 August Preliminary final result at 2:00 pm on Wednesday
Level 9 Building A announcement 18 November 1998 in the
203 Coward Street 4 November Record date for final Grand Ballroom at the
Mascot NSW 2020 dividend Sheraton Brisbane Hotel & Towers,
Australia 18 November Annual General Meeting 249 Turbot Street, Brisbane.
Telephone 61 2 9691 3636 Brisbane
Facsimile 61 2 9691 3339 2 December Final dividend payable
31 December Half year end
Qantas Share Registry
60 Carrington Street 1999
Sydney NSW 1115 18 February Half year result
Australia announcement
Telephone 61 2 8234 5470 3 March Record date for interim
Facsimile 61 2 8234 5050 dividend
31 March Interim dividend payable
Depositary for American 30 June Year end
Depositary Receipts 19 August Preliminary final result
The Bank of New York announcement
ADR Division 3 November Record date for final
101 Barclay Street dividend
New York NY USA 17 November Annual General Meeting
Telephone 1 212 815 2218 Adelaide
Facsimile 1 212 571 3050 1 December Final dividend payable

General Counsel
& Company Secretary
Brett Johnson

Internet Address
http://www.qantas.com.au All amounts are expressed in Australian dollars
unless otherwise stated.

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 Operating profit before abnormals and tax
of $478 million, up 13.6 percent on the
prior year

Profit after tax of $305 million, up

20.7 percent

Total dividend 13.5 cents per share fully

franked, 0.5 cents higher than the previous
year, including a final dividend of 7 cents
per share

Revenue increased by 3.8 percent to

$8.13 billion

$475 million in new cost reduction,

cost avoidance, productivity and revenue
enhancement initiatives achieved

Cash flow from operations up 9.7 percent

to $1.22 billion

Debt to equity ratio improved by

9 percentage points to 40:60

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 1
 Our Commitment
Qantas, one of the world’s leading airlines, operates a
domestic and international fleet of 144 aircraft linking
108 destinations in 32 countries.
Qantas is committed to maintaining the Airline’s strong
brand and focus on customer service while preserving its
international reputation for technical expertise and reliability.
Qantas is committed to managing the Airline’s operations,
costs and productivity to ensure profitability for shareholders.
Qantas is investing more than $350 million on new product
worldwide, including lounges, terminals and a refit of its
international jet aircraft with new seats in First, Business and
Economy Classes, new interiors and new standards in service
and cuisine.

2 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Contents
Chairman’s Report PAGE 4
Gary Pemberton - “The 1997/98
result was an excellent achievement in
difficult trading conditions.”
New Horizons PAGE 10
Attention to individual route
performance, timely suspension of
services on non-profitable routes,
redirection of capacity
to markets with better
commercial prospects and
entry into new markets
have characterised the
year’s route and scheduling
developments at Qantas.
Technology PAGE 16
Qantas is harnessing the best available
technology to serve its customers and
ensure it is in a position to maintain
the highest
possible level of
operations
through the Year
2000 and beyond.
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Chief Executive’s Report PAGE 6
James Strong - “For the 1997/98
financial year, Qantas produced its
fourth successive increased profit, a
record $305 million after tax.”
Alliances PAGE 12
In line with the worldwide
commercial airline trend towards
forming alliances, Qantas moved to
strengthen its association with its
existing alliance partners during the
year, as well as forming a number of
new associations, culminating in
September 1998 with the creation of
the oneworld alliance.
Building the Fleet PAGE 18
With fleet expansion plans announced
in 1997/98 and continuing terminal
development, Qantas signalled its
intention to develop its assets and
facilities to provide for anticipated
growth over the next three years.
Record Profit PAGE 8
Qantas earned an operating profit
before abnormals and tax of $478
million for the year ended 30 June
1998, an increase of 13.6 percent
over the prior year. Profit after tax of
$305 million was 20.7 percent higher
than 1996/97.
Style and Service PAGE 14
Qantas began a $250 million-plus
program of reinvestment in its inflight
product and service, redesigning its
inflight cuisine, dedicating 350 merit-
selected Flight Attendants
to the First Class cabins
and progressively unveiling
a new international three-
class configuration.
Information on Directors PAGE 22
Board of Directors, Corporate
Governance and Directors’ Meetings.
Financial Statements PAGE 27
Directors’ Report, Profit and Loss
Accounts, Balance Sheets, Statements
of Cash Flows, Notes to and forming
part of the Financial Statements,
Statement by Directors, Independent
Auditors’ Report, Shareholder
Information, Five Year Summary
and Glossary.
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 3
 C H A I R M A N ’ S R E P O RT

The bottom The 1997/98 result was an

excellent achievement in difficult
trading conditions. Operating
profit before abnormals and tax
of $478 million was an increase
of 13.6 percent over 1996/97.
Profit after tax of $305 million
was 20.7 percent higher than
1996/97.
The timely rationalisation of Asian
services, together with the
reallocation of capacity to stronger
routes, reduced the potential impact
of the Asian financial crisis.
Gary Pemberton Chairman The reactions by other carriers, in
terms of reduced prices and increased
capacity, as a result of conditions in
Asia have been well documented and
will lead to more volatility and
uncertainty in market conditions in
1998/99.
all indications are that it will be
difficult to match this year’s record
profit in 1998/99.
The Directors declared a fully
franked final dividend of 7 cents per
share, bringing fully franked
dividends for the year to 13.5 cents
per share – 0.5 cents per share higher
than last year.
On behalf of the Qantas Board,
I would like to thank and
congratulate management and staff
on the 1997/98 trading result. ■
Operating profit before
abnormals and tax
($million)
478.0

The response by Qantas will

420.9

include the continuation of planned

401.4

investment in new product, services

320.4

and aircraft, and entry into new

301.8

markets in Latin America

and Europe.
These strategies will reinforce the
Airline’s position as a leading
international carrier and ensure
Qantas remains competitive. Qantas
will continue to do what it has done
in the last five years – manage
capacity, control costs and selectively
develop the network.
Because of the uncertain market
conditions, the Board is not making 94 95 96 97 98
specific profit predictions. However,

4 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 “Qantas will continue to
do what it has done for
the last five years -
manage capacity, control
costs and selectively
develop the network.”
m line

Poll Honours for Qantas

Qantas was identified as the “most admired
company” in Australia in an independent
study of consumer attitudes towards major
corporations.
The Airline scored highly in categories
relating to efficiency, customer satisfaction,
respect for customers, product quality and
service.
Qantas was also voted as the company with
the best corporate image for the ninth
consecutive year in a poll conducted by
Australia’s National Business Bulletin.The
magazine canvassed the views of Australia’s
corporate leaders on more than 300 business
organisations and their products.

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 5
 C H I E F E X E C U T I V E ’ S R E P O RT
Planning
James Strong
Chief Executive and Managing Director
Fourth Year of Improvement
For the 1997/98 financial year,
Qantas produced its fourth successive
increased profit, a record $305
million after tax.
This was an excellent result in a
climate of severe economic
downturn in Asian markets. The
rapid deterioration in a number of
economies affected passenger traffic
growth levels and prices of air fares,
initially within Asia, but subsequently
flowing on to other routes.
It followed the significant
downturn the previous year in the
Japanese market. But for these two
adverse trends, Qantas would have
achieved even better results over the
past two years.
Certainly the Qantas performance
has been ahead of most other airlines
6 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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based in the Asia-Pacific region.This
has been due to two major factors,
the first being a quick operating
response to the Asian situation, and
the second being steps taken over the
last four years to make the business
more resilient to cyclical factors.
Rapid Responses
Qantas acted quickly to move aircraft
from markets where traffic and
pricing falls occurred, to other routes
within Australia and overseas.
Conclusions had been formed
previously within Qantas that its
expansion in the Asia region over the
previous 10 years or so had not
achieved acceptable profitability.This
was caused by excessive growth in
capacity throughout Asia depressing
pricing in a rapidly growing market.
The Asian region has seen too much
emphasis on chasing expansion and
enlarging aircraft fleets as part of
attempts to build larger route
structures and market share,
characteristics of an “immature
market”.
Reducing Cyclicality
The second factor refers to the
unrelenting focus applied over the
last four years to strategies which can
reduce the impact on the business of
cyclical factors.
The emphasis has been on cost
control, improving efficiency in
utilisation of assets, lifting
productivity, reducing
debt, controlling capital
expenditure, limiting
commitments to future aircraft
orders, carefully monitoring
individual route profitability and
seeking to meet hurdle rates of
return for each aircraft.
More airlines today appear to be
moving in these directions, which
should improve industry financial
performance. It merely reflects
emphasis on a more commercial
approach, which unfortunately has
not always been the first priority of
some airlines.
Investment for the Future
Qantas has continued to invest in
its product, services and people for
the future.
A huge program of aircraft
refurbishment is well under way, with
installation of First Class sleeper
seating, and new Business and
Economy seating throughout the
international fleet by the end
of 1999.
Aircraft purchases have been
planned for the next three years with
emphasis on long-haul routes which
have demonstrated superior returns,
as well as preserving leadership in the
domestic market.
Year 2000
Qantas is investing $147 million to
prepare computer systems for the
 Internal Bid Winners
Qantas has used competitive
tendering to review a number of key
areas of its business over the past
few years to improve work practices
and contain costs.
In some of these instances –
such as printing, some security
services, baggage container repairs
and the maintenance of aircraft
wheels and brakes – contracts have
been awarded to outside operators.
Qantas internal bid teams were
announced as the preferred
tenderers for the Airline’s passenger
and ramp handling services at ASKs per employee (000)
Melbourne, Brisbane and Perth
airports in February 1998, and at

g
Sydney, Coolangatta, Cairns and

2,818
Townsville airports in June 1998. The

2,707
Airline expects the third and final

2,563
phase of competitive tendering to be

2,493
completed in late 1998.

2,427
for tomorrow
94 95 96 97 98

advent of the Year 2000. Progress to
date has met targets, with continuing
effort and attention necessary to
ensure a smooth transition.
oneworld
A very major step forward since the
close of the financial year has been
the announcement of the oneworld
alliance.This important part of
building a sound foundation for the
future will be discussed in greater
detail throughout the current
financial year.
People
The financial discipline instilled
throughout Qantas over the last four
years brought with it some impact
within Qantas. Management has
invested a great deal of time and
energy in explaining to people
within the Airline the absolute
necessity to improve our competitive
position as market access
is liberalised.
With the obvious financial distress
of many airlines becoming apparent,
many people now appreciate the
strengthened position of Qantas as a
result of the changes made.
Steps such as competitive
tendering have initially caused
trauma. However, the process has
delivered very significant cultural
change. People are being given the
scope to take responsibility for
delivering services at prescribed levels
of cost and service standards in
their area.
The way in which people in
Qantas are taking ownership and
delivering results augurs very well for
the future of the Airline, and is a
great credit to all of the staff
involved. ■
Bringing Our Commonwealth Games
Athletes Home
Qantas was the official Airline of the
Australian team to the 1998
Commonwealth Games, held in Kuala
Lumpur, Malaysia.
In September, Qantas arranged a
welcome home ceremony for the Australian
athletes in a hangar at the Airline’s Sydney
engineering base.
Family and friends joined with national
and state government representatives to
salute the victorious team.
Qantas has been a supporter of
Commonwealth Games teams and athletes
since the 1950s, and currently supports
more than 45 individual athletes and more
than 40 sports including swimming, netball,
basketball, women’s hockey, gymnastics,
cycling, rugby union and tennis.

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 7
 R E V I E W O F O P E R AT I O N S
Record
Increased revenue
Sales and operating revenue of $8.13
billion reflected growth of 3.8 percent
over the prior year.The growth in
revenue included the favourable
impact of movements in foreign
exchange rates. Passenger yield
improved by four percent overall, or
1.5 percent after excluding favourable
foreign exchange movements.
The record result for 1997/98
represented an outstanding
achievement in the face of adverse
economic conditions in Asia.These
conditions affected the performance
of many routes including the loss of
some feeder traffic onto domestic
services. Swift action in suspending
services to Korea as well as some
Indonesian and Thailand services was
followed by the rationalisation of
flights to Japan and adjustments
elsewhere in the network. Aircraft
have been redeployed to other routes
where demand supports additional
capacity.
Expenditure and cost savings
Operating expenditure for the
1997/98 financial year was $7.55
billion, an increase of 3.2 percent on
the prior year.The growth in costs
was lower than the revenue growth
due to the continued focus on cost
containment and efficiency.
The result for the year included
operating costs of $44 million in
relation to the Year 2000 computer
8 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Qantas earned an operating
profit before abnormals and
tax of $478 million for the
year ended 30 June 1998, an
increase of 13.6 percent over
1996/97. Profit after tax of
$305 million was 20.7
percent higher than 1996/97.
systems issue. Substantial resources
have been allocated to this project to
ensure operations will not be
adversely affected.The overall Year
2000 program, which includes
operating and capital costs estimated
to be in excess of $140 million, is on
target for completion well before 31
December 1999.
During the year, $475 million in
new cost reduction, cost avoidance,
productivity and revenue
enhancement initiatives were
achieved.These cost savings included
$150 million from improved labour
productivity and manpower cost
reductions, $125 million attributable
to reductions in materials and variable
operating costs and $124 million of
savings in property, sales, marketing,
overhead and other services costs.
Redundancy costs of $45 million
have been included in the operating
result.These costs predominantly
related to competitive tendering
activities, mainly at domestic airports,
and the new inflight customer service
program.These actions reflect the
commitment to improving
productivity and efficiency.
Redundancy costs in the first half of
the year of $27.5 million were treated
as an abnormal cost due to their size
in relation to the half year result.
However, the full year cost of $45
million has been treated as an
operating expense.
Overall, excluding the impact of
unfavourable foreign exchange
movements, cost per Available Seat
Kilometre (ASK) fell by 1.4 percent.
Increased contribution
Profits from domestic routes were
higher than the prior year due to
improvements in the mix of traffic
and better yields.
Domestic airline operations
contributed $213.4 million in
Earnings Before Interest and Tax
(EBIT), an increase of 26.8 percent
over the previous year. Load factors
were steady compared to last year.
International operations
contributed $271.9 million in EBIT, a
similar result to last year. Excluding
the effect of movements in foreign
exchange rates, international passenger
revenues declined by 2.3 percent over
the prior year and Revenue Passenger
Kilometres (RPKs) decreased by 1.7
percent.Yield, excluding favourable
foreign exchange movements, was
down 0.7 percent and load factors
declined by 1.1 percentage points.
International freight performance
was strong, with revenue growth of
more than 8 percent.
The favourable foreign exchange
effect on revenues was offset by an
adverse effect on foreign currency
denominated expenditures during the
year, producing a small net
unfavourable foreign currency impact
on total profits.
Subsidiary operations contributed
 Cash flows from operating
activities ($million)
1,218.4
1,110.8
936.4
853.8
729.0
94 95 96 97 98
profit
$96.4 million to the Group’s EBIT, an
increase of 29.9 percent on the
contribution from the prior year.
These increased returns were due to
improved performances from regional
airline operations, Qantas Flight
Catering and Qantas Holidays. All
regional airlines (Airlink, Eastern
Australia, Southern Australia and
Sunstate) recorded performance
improvements on the prior year
largely due to both yield and load
improvements.
Route profitability
Internationally, services to the USA
and the UK continued to be the best
performers. Results from Asia were
lower than the prior year, with
Europe and Africa recording slight
improvements.
On domestic services, East Coast,
East West, Queensland Coast and
Northern Territory showed the
greatest improvement, with other
services in line with 1996/97.
Cash flows applied to reduce
debt
Cash flows from operations totalled
$1.22 billion, up 9.7 percent on the
prior year, after including increased
income tax payments of $128 million.
Excess cash generated has been
used to further improve the balance
sheet through the reduction of net
debt.The debt to debt plus equity
ratio (including non-cancellable
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Revenue Debt to equity * (%)
71
68
Net passenger revenue (76%)
Net freight revenue (7%)
Tour and travel sales (6%)
Other sources (11%)
94 95
∗Includes off balance sheet
debt and revenue hedge
receivables
operating leases and on a hedged
basis) decreased by nine points from
49:51 at 30 June 1997 to 40:60 at
30 June 1998.
Capital expenditure for the year
was $673 million, an increase of
10.2 percent over the prior year.
This increase reflected additional
expenditure on aircraft acquisitions
(including progress payments),
modifications and aircraft spares and
terminal improvements, notably the
new domestic terminal in Sydney.
Qantas is committed to a program
of aircraft acquisition in line with its
strategy of carefully managed
expansion and entering new long-
haul markets.
During the year, Qantas purchased
a Boeing 747-400 from Korea’s Asiana
Airlines and took delivery of two new
Boeing 767-300s in July 1997.Two
more new Boeing 767-300s have
been delivered since the end of the
1997/98 financial year, and the
purchase of two Boeing 747-400s
from another airline is currently being
negotiated. In addition, Qantas has
firm orders for one new Boeing 767-
300 and three new Boeing 747-400s,
scheduled for delivery in 1999
and 2000.
Commitment to shareholder
returns
Qantas is committed to the consistent
delivery of attractive returns to
shareholders.
Expenditure
61
49
40
Manpower and staff-related (29%)
Aircraft operating variable (20%)
Selling and marketing (12%)
Fuel and oil (12%)
Depreciation and amortisation (7%)
96 97 98 Capacity hire, insurance and other (6%)
Tour and travel cost of sales (5%)
Computer and communication (4%)
Property (3%)
Non-cancellable operating
lease rentals (2%)
The Directors declared a fully
franked final dividend of 7 cents per
share.This brings dividends for the
year to 13.5 cents per share, 0.5 cents
higher than last year.
The fully franked final dividend
of 7 cents per share is payable on
2 December 1998, with a record date
(books close) of 4 November 1998.
Qantas continues to place a strong
emphasis upon the generation of
shareholder returns, ensuring that
future investment projects offer
returns above the cost of capital.
Outlook
The economic situation in the Asian
region will affect future profitability.
The reactions by other carriers in
terms of prices and capacity as a result
of conditions in Asia will lead to more
volatility and uncertainty in market
conditions in 1998/99.
The Airline’s response to these
conditions includes the continuation
of its planned investment in new
product, services and aircraft, and
entry into new markets in Latin
America and Europe.
These strategies will reinforce
the Airline’s position as a leading
international carrier and ensure
Qantas retains competitive
standards. ■
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 9
 R E V I E W O F O P E R AT I O N S
New
Reaching new markets
In July 1998, Qantas announced an
expansion of its network, with the
introduction of services to Paris from
October 1998 and to Buenos Aires
from November 1998.
With the addition of Paris, Qantas
will provide services to four major
European cities. As well as the three
new one-stop weekly services to Paris
via Singapore, Qantas flies 14 return
services a week to London, daily
services to Frankfurt, and three flights
a week to Rome.
Qantas will also continue to
codeshare on selected British Airways
flights between London and Paris.
The Buenos Aires services –
initially twice a week, increasing to
three a week from mid-1999 – mark
the Airline’s return to Latin America
after an absence of nearly 24 years.
Moving capacity around the world
Qantas increased the frequency of its
Manila flights from five Boeing 767
services a week to daily Boeing 747
services when Philippine Airlines
withdrew its services to Australia in
June 1998.
The Airline announced plans to
boost its services to the USA, adding
two non-stop services a week
between Sydney and Los Angeles
from September 1998, and a third
daily service to Los Angeles each
Wednesday from October 1998.The
new services will take to 31 the
10 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Attention to individual route performance, timely
suspension of services on non-profitable routes, redirection
of capacity to markets with better commercial prospects
and entry into new markets have characterised the year’s
route and scheduling developments.
number of return services Qantas
offers each week between Australia
and the USA.
Qantas introduced non-stop
daylight flights between Brisbane and
Bali from August 1998, using Boeing
767 aircraft. It also increased its
services to India, adding a seventh
flight between Sydney and Mumbai
(Bombay) in August 1998. Qantas
returned to India in 1996 after a six
year absence, initially offering two
flights a week.
The Airline also announced:
■ a fifth weekly service between
Adelaide and Singapore from
August 1998;
■ new direct services from Brisbane
to Rome via Bangkok three times
a week;
■ a fourth weekly service to Tahiti,
timed to connect with a fourth
weekly LanChile codeshare flight
to Santiago via Easter Island from
December 1998; and
■ an additional service between
Sydney and Bali, and between
Bali and Singapore from
October 1998.
On the trans-Tasman route, Qantas
announced new weekly services
between Melbourne and
Christchurch, Melbourne and
Wellington, and Brisbane and
Auckland, from October 1998.
The Airline had earlier – in June
1998 – added 10 New Zealand
services to its schedules, and now
offers more than 80 return flights a
week on the route.
A successful initiative was the
introduction of a non-stop weekly
return service between Sydney and
Queenstown for the 1998 ski season –
the first time Qantas has flown into
Queenstown.
Timely changes to Asian services
Qantas rationalised its Asian routes in
response to the sharp drop in demand
in many parts of the region.This
included suspension of services to
Korea from February 1998 following
a drop of nearly 65 percent in
demand for seats on the route, as well
as some Jakarta and Bangkok services.
Qantas also announced the suspension
of one Sydney-Tokyo service from
August 1998, two weekly services
to Vietnam from August 1998, and
five weekly services between Sydney
and Cairns and Fukuoka from
October 1998.
As well, Qantas announced that its
Boeing 767 services to Malaysia
would be replaced from October
1998 by thrice-weekly three-class
Boeing 747-400 British Airways
flights, operating from Sydney to
London via Kuala Lumpur.
Qantas also announced that it
would replace its Osaka flights with
daily codeshare services on Japan
Airlines aircraft from November 1998.
Notwithstanding these changes to
its Asian services, Qantas remains

horizons
committed to the region.The Airline
still provides – in its own right –
more than 130 services a week to Asia
as well as a number of intra-Asian
services. It also offers more than 40
Asian services through codeshare
arrangements with airline partners
British Airways, Asiana Airlines,
Vietnam Airlines and Japan Airlines.
The Airline continues to monitor
the situation in Asia so that it can take
appropriate action to respond to
competitive trading conditions and to
restore services when demand returns.
More Australian capacity
Qantas announced that it would
introduce new daily Boeing 737
services between Sydney and
Queensland’s Whitsunday Passage
through Hamilton Island Airport from
October 1998.The timetable will
enable passengers to make convenient
connections with launch services to
other island resorts in the region.The
Airline will also provide connecting
return services from Melbourne to
link with the Sydney-Hamilton Island
flights.
In other scheduling moves, Qantas
introduced Boeing 747 services on
key Australian routes in June 1998,
between Sydney and Cairns and
Sydney and Perth.The Airline
announced it would use the larger
aircraft domestically during peak
periods of demand.
Qantas added services to key
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More than Two and a Half Million
Passengers on the Regional Network
Airlink carried more than one million
passengers in 1997/98 across its network
of 18 destinations throughout Australia
including regional Western Australia, the
Northern Territory, Queensland and the
Australian Capital Territory.
Eastern Australia carried more than
535,000 passengers to 12 regional
destinations in New South Wales and the
Australian Capital Territory.
Southern Australia, which flies to 10
destinations in South Eastern Australia,
carried more than 495,000 passengers
during the year.
Sunstate carried more than 455,000
passengers across its network of 22
destinations in regional Queensland and to
Newcastle and Lord Howe Island.
routes such as Brisbane-Melbourne,
Sydney-Sunshine Coast, Sydney-
Adelaide, Brisbane-Townsville, Perth-
Melbourne and Brisbane-Perth.
Qantas regional subsidiary, Airlink,
began daily charter services to Barrow
Island in Western Australia in
September 1997. It also increased
capacity between Adelaide and
Kalgoorlie, moving to daily services
on the route.
Eastern Australia replaced its 17-
seat Jetstream 31 services between
Sydney and Dubbo in western New
South Wales with 36-seat Dash 8
services in March 1998, increasing by
47 percent the capacity offered each
week on the route. ■
A Proud History on the
Kangaroo Route
Qantas celebrated its 50th anniversary
of Kangaroo Route services on 1
December 1997. Qantas commenced
operations on the world’s longest regular
air route between Australia and the
United Kingdom with the departure of
the Lockheed Constellation Charles
Kingsford Smith from Sydney’s Mascot
airport on 1 December 1947. On board
were 29 passengers, 11 crew and 2,000
lbs of food parcels donated by Qantas
staff for Britain which was experiencing
post war shortages. The 12,000-mile,
four-night journey via Darwin, Singapore,
Calcutta, Karachi and Tripoli involved
some 55 hours in the air.
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 11
 R E V I E W O F O P E R AT I O N S
In line with the worldwide commercial airline trend towards forming alliances,
Qantas moved to strengthen its association with its existing alliance partners
during the year, as well as forming a number of new associations, culminating
in September 1998 with the creation of the oneworld alliance. These
relationships have included improving codeshare services, giving Qantas
Frequent Flyers more options for earning and redeeming points and increasing
the shareholding in Air Pacific.
Strength Strengthening existing alliances
Qantas bought an additional 28.55
percent shareholding in Air Pacific
from the Fiji Government in May
1998, lifting its stake to more than
46 percent.
The purchase came six months
after the signing – in November 1997
– of a 10-year Strategic Commercial
Agreement between the airlines to
co-operate on aspects of schedule and
fleet co-ordination, engineering,
marketing, ground handling, customer
service, fuel purchase and freight.
Qantas and Air Pacific have one of
the longest histories in modern airline
alliances, dating from 1973 when the
Australian and Fiji Governments
signed an Air Services Agreement.The
two airlines operate extensive
codeshare services between Australia
and Fiji, as well as between Fiji and
Los Angeles and Nadi and Honolulu.
Qantas and British Airways also
strengthened their alliance, particularly
on their Kangaroo Route operations
between Australia and the UK.
The two airlines began
codesharing on each other’s services
between Australia and the UK via
Singapore in November 1997.The
services included flights from seven
Australian cities – Sydney, Melbourne,
Brisbane, Adelaide, Perth, Cairns and
Darwin. In May 1998, the airlines
extended their codesharing
partnership on the route, introducing
codeshare services on all flights to the
12 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
Brought to you by Global Reports
UK via Bangkok.
Qantas and British
Airways now offer customers a choice
of 38 return services each week
between Australia and the UK.
Qantas started codesharing on
British Airways flights from London
to five cities in the UK – Manchester,
Belfast, Edinburgh, Glasgow and
Aberdeen – and to three cities in
Europe – Paris, Amsterdam and
Vienna – in July 1997.
British Airways began offering its
customers codeshare services on
Australian domestic services in July
1997 and now offers more than 85
codeshare flights a week.
Qantas also expanded its codeshare
arrangements with Japan Airlines
(JAL). In addition to daily codeshare
services with JAL between Brisbane
and Tokyo, Qantas announced in May
1998 the replacement of its suspended
Osaka services with a daily codeshare
service on JAL from November 1998.
JAL codeshares on seven Qantas
services a week between Cairns
and Tokyo.
New alliances
Qantas signed a Commercial
Agreement with the United States
airline, Reno Air, in October 1997,
codesharing on its services between
Los Angeles and San Francisco from
January 1998. Reno Air’s flights to
San Francisco connect twice daily
with Qantas services from Sydney to
Los Angeles and with
flights from Melbourne
and Auckland three times a week.
In October 1997, Qantas began a
new codeshare service on three
Emirates services between Melbourne
and Dubai in the United Arab
Emirates.This increased to four
codeshare flights a week in December
1997.
In March 1998, Qantas began a
codeshare arrangement with Vietnam
Airlines for services between Sydney
and Ho Chi Minh City.
Qantas has announced recently
details of new codeshare arrangements
with LanChile, Swissair and Aerolineas
Argentinas.
The agreement between Qantas
and LanChile includes codeshare
services between Australia, New
Zealand and Chile via Tahiti from
October 1998, a planned increase in
frequency from three to four services
a week from December 1998 and
reciprocal participation in each other’s
frequent flyer program.
The Boeing 767-300 services
operate on Qantas aircraft to Tahiti via
Auckland, where passengers connect
with the LanChile services to
Santiago via Easter Island.
Qantas expanded further the South
American schedule choices for its
customers with a codeshare
agreement with Aerolineas Argentinas
signed in September 1998.The two
airlines will codeshare on each other’s

The New Hong Kong Qantas/BA Lounge
Qantas and British Airways opened their newest joint lounge in July 1998, at the
Hong Kong international airport. Designed to accommodate the specific needs
of today’s business travellers, the modernistic facility features buffet and
More Frequent Flyer Opportunities
Ansett New Zealand joined the Qantas Frequent Flyer
program in February 1998, enabling Qantas Frequent
Flyers to earn and redeem points for travel on the
Ansett New Zealand network.
Mt Gambier-based O’Connor Airlines – which
operates to Mt Gambier, South Australia from
Melbourne and Adelaide – joined the Qantas Frequent
Flyer program in May 1998.
Qantas and LanChile began participating in each
other’s frequent flyer program in October 1998.
The addition of these three airlines brings to 17
the number of airlines participating in the Qantas
Frequent flyer program, including British Airways,
Canadian Airlines, American Airlines, US Airways, Air
Pacific, SAS, Norfolk Jet Express, Airlink, Eastern
Australia, Southern Australia, Sunstate, National Jet

h
and Airlines of South Australia.
cocktail areas, “TV zones”, showers, and a comprehensive business area with
computers with complimentary internet access, laptop modem ports and fax
machines. It covers 965 square metres, comprising a First Class lounge with
seating for around 90 passengers, and a Business Class lounge with seating for
around 190 people.

through alliances
flights between Sydney and Buenos
Aires via Auckland from November
1998, involving two Aerolineas
Argentinas Boeing 747-200 services
and two Qantas Boeing 747-400
services each week.
In September 1998, Qantas and
Swissair announced that they would
codeshare on each other’s services
between Australia and Switzerland via
Singapore, with Swissair codesharing
on three Qantas flights a week
between Sydney and Singapore, and
Qantas codesharing on three Swissair
flights between Singapore and Zurich.
oneworld™ revolves around you
In September 1998, Qantas joined
British Airways, American Airlines,
Canadian Airlines and Cathay Pacific
in the oneworld alliance.The alliance
is designed to raise the standard of
global air travel through a range of
customer benefits scheduled for
British Airways, American Airlines, A Range of Airline Partners
Canadian Airlines and Cathay Pacific. As well as operating its own services to a wide range of
One of the world's biggest destinations in Australia and around the world, Qantas has
employee communication and increased the choices it offers customers through a number
of codeshare arrangements with other airlines - British
training programs, involving virtually Airways, American Airlines, Air Pacific, Japan Airlines, Reno
all of the 220,000 people working Air, Vietnam Airlines, Canadian Airlines, Air Niugini, Aircalin,
for the five partner airlines, has Air Vanuatu, Emirates, Solomon Airlines, Asiana, LanChile,
already begun. Swissair and Aerolineas Argentinas.
The oneworld name and logo
will not replace the Qantas brand. It
will supplement each airline's own
corporate identity, appearing
alongside their logos on airport
and other signage, timetables and
printed materials.
The five airline members of
oneworld, with their franchise and
partner airlines covered by the alliance
agreement, have networks that serve
632 destinations in 138 countries.
They operate a total of 1,524
aircraft and fly nearly six million miles
- equivalent to 240 times around the
world’s circumference - every day. ■ R

introduction in early 1999.

These benefits will include:
■ smoother transfers for passengers
travelling across the networks of
the five airlines;
■ greater support, with employees of
each airline equipped to assist and
care for customers travelling with
any of the oneworld airlines;
■ greater value, through a range of
round-the-world products; and
■ enhanced frequent flyer benefits.
The shared oneworld brand augments
existing relationships between Qantas,

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 13
 R E V I E W O F O P E R AT I O N S
Reinvestment The first of the Airline’s reconfigured
Boeing 747-400s – the spectacularly
painted Wunala Dreaming – was rolled
out in June 1998.
The Boeing 747-400 aircraft are
being fitted with luxurious full-recline
sleeper seats in First Class.
International aircraft are being fitted
with electronically-adjustable
Dreamtime seats in Business Class and
new ergonomically-designed seats in
Economy Class.
The other 747 and 767 aircraft
will be progressively reconfigured at
Avalon, near Geelong in Victoria.
It took more than 140 engineers
and mechanics, using more than 2,000
individual sets of job instructions and
320 drawings, 14,000 hours work over
33 days to complete the refit of
Wunala Dreaming.
As well as introducing new seating
in all classes, Qantas restyled the
galleys and washrooms, and revamped
the aircraft interior colours and fabrics
using designs inspired by Australia’s
reefs and waterways to invigorate
the cabins.
The reconfiguration is the largest
single project of its kind ever
undertaken by Qantas. It followed the
unveiling of the Airline’s international
First Class food and service at
Sydney’s Museum of Contemporary
Art in March 1998.
The personalised service in First
Class is focused on restaurant-style
dining. Qantas is working with chef
14 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Qantas began a $250 million-
plus program of reinvestment
in its inflight product and
service, redesigning its
inflight cuisine, dedicating
350 merit-selected Flight
Attendants to the First Class
cabins and progressively
unveiling a new international
three-class configuration.
Neil Perry of the Rockpool Group
to re-engineer its inflight cuisine.
The aim is to progress beyond the
traditional approach to airline food,
sourcing quality produce and
ingredients from around the Airline’s
international network, undertaking
more food preparation in the air than
ever before, plating meals in the
galleys and serving them to passengers
in a more personalised way.
The new approach to inflight
cuisine is being extended to Business
Class later this year and to Economy
Class next year. ■
Food Preparation
The introduction of restaurant-style
inflight cuisine for international
First Class flights was embraced
enthusiastically by staff at Qantas
Flight Catering Limited (QFCL).
A dedicated team of QFCL chefs
received training from Rockpool
chefs in the preparation of
premium fresh produce for the
style, presentation and flavour
profiles of the new Qantas
product.
QFCL chefs also spent time in
the Rockpool kitchens to obtain
first-hand experience of the new
concepts.
QFCL operates from five major
Australian locations. Its core
business is the preparation and
handling of airline meals for
Qantas and 33 other international
carriers. Other activities include
servicing the rail sector in South
Australia and Queensland and the
supply of fresh meals to the
retail sector.
 First Class Seats
The 14 full-recline sleeper
seats on the Qantas
Boeing 747-400s fold down
to a flat 198cm (6’6”) bed
at the touch of a button.
The configuration provides
each passenger with aisle
access. The seats also
feature individual ottomans,
an entertainment centre
and two foldaway tables
for dining, working
and cocktails.

t in style and service

First Class Flight Attendants Business Class Seats Economy Class Seats
The concept of Flight Attendants The advanced, electronically- These slim-line,
dedicated to First Class evolved from operated Dreamtime seat ergonomically-designed
Qantas research into customer has five-way electronic seats have built-in lumbar
expectations regarding inflight service, adjustment with touch pad support and adjustable
and the need for individual recognition controls allowing passengers headrests with “wings”
and personal attention. to select the most for additional neck and
Key selection criteria included comfortable legrest, lumbar head support.
prior work experience, customer support, seat recline and
service performance reviews, headrest positions.
standards of personal presentation
and communication skills.
The successful applicants
underwent a comprehensive training
program which included instruction in
the principles of fine dining, food
preparation and presentation,
wine appreciation and personal
presentation.

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 15
 R E V I E W O F O P E R AT I O N S
Technology Infrastructure projects
As new technology-based services
(such as E-Ticket) are introduced, and
as Qantas improves its productivity in
all areas, Information Technology (IT)
systems become increasingly
important.To serve its customers,
Qantas needs its IT systems to work
24 hours a day, 365 days a year all
around the world.
Qantas has undertaken a series of
projects to strengthen its IT
infrastructure and bring availability to
as close to 100 percent as possible.
The Qantas reservation system,
QUBE, routinely operates to 99.8
percent availability - or less than three
minutes per day unavailable, including
scheduled downtime.These projects,
which cover all aspects of the Qantas
IT environment, are combining to
build a rock solid platform for
the future.
A controlled plan for Year 2000
The Airline’s $147 million risk
management program to ensure the
continued operation of all of the
Qantas critical computer systems
during the changeover to the next
century is well advanced.
The plan covers the Year 2000
readiness of aircraft systems, building
facilities, computer applications, key
suppliers and other critical service
providers such as utilities, airports and
air traffic control authorities.
A team of independent senior
16 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
Brought to you by Global Reports
Qantas is harnessing the
best available technology to
serve its customers and
ensure it is in a position to
maintain the highest possible
level of operations through
the Year 2000 and beyond.
managers from other companies
regularly perform ‘health checks’ on
the Qantas program. In addition, the
Airline’s external auditors, KPMG, are
undertaking an external audit review
of the program.
Qantas is also working with a
number of other Australian and
international organisations – including
the International Air Transport
Association (IATA), the Association of
Asia Pacific Airlines and the
Association of South Pacific Airlines –
to identify needs, develop solutions
and bring about the implementation
of necessary remedial measures.
The Airline is also working with
key alliance partners – primarily
British Airways and American Airlines
– and with a steering committee
established by the Australian
Department of Transport and
Regional Development.
Qantas will be ready
Assessment and remediation, covering
the centrally-supported computer
systems and applications on which
Qantas relies, is well under way.
The program, which is assisted and
supported by IBM, comprises 124
discrete projects covering an inventory
of more than 1,300 software
components.
Qantas plans to have all of its own
critical systems Year 2000 ready by the
end of 1998, with testing for the
transition continuing until June 1999.
Qantas is working closely with
Boeing and other suppliers. Aircraft
will undergo stringent testing and
meet normal certification standards
well before the end of 1999 -
although very few computer and
electronic systems on modern aircraft
have date critical functions.
The Qantas program has a strong
focus on the Year 2000 readiness of
the airports to which the Airline
operates, together with relevant air
traffic control operations.
Qantas/Telstra/SITA
telecommunications contracts
To ensure Qantas is equipped to meet
customer growth well into the next
century, Qantas signed contracts in
August 1998 with Telstra and SITA
for the building and management of
new, high-speed, high-capacity
telecommunications networks for
the Airline.
The six-year project will give
Qantas one of the most advanced
telephone, computer, internet and
intranet networks, connecting all of its
operational and administrative offices.
It will increase the size and stability of
the Airline’s existing voice and
communication systems, enhancing
service to customers – most tangibly
through improvements at travel and
reservations centres and airport
check-in.

http://www.qantas.com.au
for the future
Freighting the electronic way
Qantas Freight streamlined customer
service with enhanced electronic
capabilities within its Australian
international freight terminals during
the year.
Freight forwarders are now
applying barcoding to all export
shipments and will begin using
electronic freight waybills exclusively
from January 1999. Qantas will issue
automatic freight status updates so that
forwarders can trace the progress of
their shipments at all stages of the
consignment process.
Qantas Freight believes the growth
of electronic commerce is a key
development within the air freight
industry, and will provide a
competitive advantage for customers
who harness its potential.
The Airline already has its own
interactive freight tracking facility
accessible through the Qantas web site
(http://www.qantas.com.au), adding to
the established network of Cargo
Community Systems which
forwarders use to communicate
electronically with Qantas.
E-Ticket growth market
Qantas launched its E-Ticket product
in July 1997 for sales direct from the
Airline, followed by a travel agency
roll-out of the product in March
1998.
Within eight months of the
launch, the Airline had sold 500,000
Brought to you by Global Reports
E-Tickets. Qantas reached the one
millionth E-Ticket milestone in
July 1998.
Qantas E-Ticket is available on
virtually all of the Qantas domestic
network, including services offered by
regional carriers Airlink, Eastern
Australia, Southern Australia
and Sunstate.The Airline extended
E-Ticket sales to trans-Tasman flights
in October 1998.
Holiday planning on the net
Qantas Holidays launched an internet
service on the Airline’s web site
providing around-the-clock
information on package holidays
within Australia and around
the world.
The new service allows people to
research their holiday options
whenever they like, ask for and receive
a quote by e-mail within 24 hours,
and then go to their travel agent
armed with a reference number to
make the booking process easier.
Qantas Holidays also streamlined
the booking process for travel agents.
In March 1998, Qantas Holidays
integrated its international and
domestic systems for a one-stop travel
shop for agency bookings. It
introduced E-Doc in April 1998 for
last minute domestic bookings. Before
E-Doc, travel agents had to hand
write complicated vouchers for late
bookings.
New travel products introduced by
Frequent Flying on the Net
The Qantas web site was selected as the best lifestyle
and travel site in the 1997 Australian Financial
Review/Telstra Australian Internet Awards.
The Airline’s latest internet initiative is a facility
allowing Qantas Frequent Flyers to book their own
award flights for Australian domestic services.
It follows the successful introduction of facilities for
Frequent Flyers to obtain their points
balance, view reservations that contain at
least one Qantas segment and check their
profile online and e-mail amendments to
the Airline.
Promoting Tourism on the Qantas
Web Site
In June 1998, Qantas unveiled its web site
Events service, allowing people anywhere in
the world to access information on a range of
special events at any time of the day or night
from work or home.
This service enables people to plan travel
itineraries around major events with which
the Airline is involved, including a wide range
of sporting events such as the Qantas Australian
Grand Prix, charity events and entertainment options
such as opera, dance and theatre shows.
Telephone Sales Development
Qantas opened its new telephone call centre
in Brisbane in July 1998. The new centre,
which is fitted with high-technology
communications equipment, handles
international and domestic telephone sales
inquiries and bookings from Queensland and
shares calls to Qantas from the rest of
Australia. The centre will build up to service
calls from overseas customers telephoning
outside their local business hours.
Customers will be switched automatically to
a telephone sales agent in Australia for the
cost of a local call in their own country.
Qantas Holidays in 1998 include
South American packages, featuring
Argentina, Bolivia, Brazil, Chile and
Peru;Whitsundays holidays, including
Hayman and Hamilton islands; and
the Short Escapes range of domestic
and international packages. ■
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 17
 R E V I E W O F O P E R AT I O N S
With its fleet purchase plans announced in 1997/98 and continuing terminal
development, Qantas has signalled its intention to develop its assets and
facilities to provide for anticipated growth over the next three years.
Building New aircraft to meet growth
Qantas announced in May 1998
plans for the development of its
aircraft fleet, which would result in
capacity growth at an average of about
four percent during each of the next
three years.
In addition to existing orders for
three Boeing 747-400s and two 767-
300s, planned purchases include three
used Boeing 747-400s from other
airlines and an additional new Boeing
767-300.
The new Boeing 747-400 aircraft
will be delivered in 1999 and 2000.
Two Boeing 767-300s were delivered
in July and August 1998, with the
third due in 2000.
The fleet plan includes the disposal
of the Airline’s four Airbus A300s –
the first of which left the domestic
fleet in August 1998.The sale of the
A300s eliminates one aircraft type
from the Qantas fleet, improving the
economies of scale for Boeing 767
and 747 operations and reducing the
average age of the Qantas fleet.
Over the last four years, Qantas has
followed a disciplined approach to
aircraft acquisition, focusing on
increased aircraft utilisation.
The Airline expects to continue to
maintain one of the most efficient and
integrated core fleets in the world.
The planned fleet expansion will be
achieved at a very effective cost.
In other fleet developments, Qantas
will lease a second Boeing 747-200
18 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
Brought to you by Global Reports
to its airline partner, Air Pacific.The
first Boeing 747-200 aircraft was
leased to Air Pacific in August 1996.
The wholly owned Qantas regional
subsidiaries, Sunstate and Eastern
Australia, have each taken delivery of
a new Dash 8 aircraft.
Sunstate is operating its Dash 8
on Brisbane-Newcastle services as
a replacement for the retiring of a
Shorts aircraft.
Eastern Australia dedicated its new
Dash 8 to the Sydney-Dubbo route. It
has signalled a gradual replacement of
its Jetstream 31 aircraft. ■
New Terminals Emerge
Qantas commenced work on a major
development of its Melbourne
Domestic Terminal in November
1997, as part of a $357 million
upgrade of its Australian terminal
facilities. The Airline is spending $76
million to double the size of its
existing terminal in Melbourne which
will feature a new concourse area
and four new gate lounges capable
of handling widebody aircraft up to
the size of a Boeing 747. Stage One
of the project is scheduled for
completion in April 1999.
The Sydney Domestic Terminal
development continues.
The new departures level, with 32
walk-through check-in counters and a
new retail concourse, is scheduled
for completion in early 1999.
The Airline’s new Canberra
terminal, expanded at a cost of $8.9
million, opened in August 1997.
 Millionth Passenger Clears Sydney
Immigration Faster
The millionth Qantas passenger to use computerised
express immigration clearance flew into Sydney in
September 1997, marking a milestone in the world-first
system’s short history.
The express system was jointly developed by Qantas,
the Australian Customs Service and the Department of
Immigration and Multicultural Affairs. Boeing 747
It was introduced in 1995 to provide passengers with a
faster and easier passage through Customs and
Immigration and has proved increasingly popular –
particularly with business travellers.
The system allows passenger information to be passed

g
between Qantas check-in computers in designated
countries and the Department of Immigration and
Multicultural Affairs.
Boeing 767

the fleet Details

Details correct
correct as at 30 as
Juneat 30 June 1998.
1998.
Boeing 737

Owned Extendable Other

HP & finance operating operating Total
Aircraft type leases leases leases in service
Boeing 747-438 12 * 6 – 18
Boeing 747-338 4 2 – 6
Boeing 747-238B 4 ** – – 4
Boeing 747SP-38 2 – – 2
Airbus A300-B4 4 – – 4
Boeing 767-338ER 14 5 – 19
Boeing 767-238ER 7 – – 7
Boeing 737-476 21 – 1 22
Boeing 737-376 16 – – 16

Total core fleet 84 13 1 98

British Aerospace BAe 146 – – 14 14

de Havilland Canada Dash 8 16 – – 16
de Havilland Canada Twin Otter 5 – – 5
British Aerospace Jetstream 31 4 – – 4
Shorts SD360 7 – – 7
Cessna C404 Titan 2 – – 2
Total regional fleet 34 – 14 48

Total Qantas fleet 118 13 15 146

* Excludes one B747-48E aircraft delivered in May 1998, which did not commence operation until August 1998.
** Excludes one B747-238B aircraft on a two-year lease to Air Pacific.

Japanese Maintenance
In February 1998, Qantas became the first airline
outside Japan to gain certification by the Japan Civil
Aviation Bureau and Japan Airlines to per form line
maintenance on Japanese-registered aircraft. The
approval permits Qantas to undertake the pre-flight
certification and engineering release on Japanese
aircraft operating to Sydney. Japan Airlines provides
technical assistance to Qantas in Japan.

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 19
 R E V I E W O F O P E R AT I O N S

People are our strength

Of all the elements that make up Qantas,
it is our people customers remember
the most.
The experience Qantas delivers is
dependent on the combined efforts of a
vast team, and we believe that
consistency requires that all links in the
service chain be equally strong.
One of our sayings is “when you work
for Qantas, if you are not looking after a
customer, you are looking after someone
who does”.
Understanding our customers and their
expectations, and understanding how to
meet those expectations, are the keys to
enhancing our position as one of the
world’s best airlines.

20 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

Brought to you by Global Reports
Brought to you by Global Reports
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 21
 B OA R D O F D I R E C TO R S

Board of Directors
Gary Pemberton James Strong Gary Toomey Bob Ayling
Chairman, Age 58 Chief Executive and Chief Financial Officer & Non-Executive Director,
Managing Director, Age 54 Executive General Age 52
Member of the Safety, Manager Operations,
Environment & Security Age 43
Committee

Trevor Eastwood, AM Margaret Jackson Jim Kennedy, AO, CBE Trevor Kennedy, AM
Non-Executive Director, Non-Executive Director, Non-Executive Director, Non-Executive Director,
Age 56 Age 45 Age 64 Age 56
Chairman of the Audit
Committee

22 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

Brought to you by Global Reports
 Senior Management Group
James Strong *
Chief Executive and Managing Director
Gary Toomey *
Chief Financial Officer & Executive General Manager
Operations
David Burden *
Executive General Manager Corporate Services
Geoff Dixon *
Executive General Manager Commercial
Doug Gillies *
Executive General Manager Aircraft Operations
Steve Mann *
Executive General Manager Strategic Planning
Denis Adams
Group General Manager Commercial Policy
John Anderson
Group General Manager Airports
Geoff Askew
Group General Manager Security & Investigation Services
Greg Bee
Group General Manager Cabin Services
John Borghetti
Group General Manager Australia Sales
Mike Caldwell
Group General Manager Purchasing
Trevor Crabtree
Group General Manager Engineering & Maintenance
George Dalidakis
Deputy Chief Financial Officer & Group General Manager
Finance
Paul Edwards
Group General Manager Commercial Strategy & Policy
George Elsey
Group General Manager Human Resources
Peter Frampton
Group General Manager Freight
Mike Codd, AC John Ducker, AO Peter Gregg
Non-Executive Director, Non-Executive Director, Group Treasurer

Age 58 Age 66 David Hawes

Member of the Audit Chairman of the Safety,
Committee Environment & Security
Committee and a member
of the Audit Committee
Group General Manager Government & International
Relations
Ray Heiniger
Group General Manager Flight Operations
Col Hughes
Group General Manager Pacific & Tasman Sales
Brett Johnson
General Counsel & Company Secretary
Ken Lewis
Group General Manager Safety & Environment
Alan Loke
Group General Manager North Asia Sales
Sandra McPhee
Group General Manager Europe/South East Asia Sales
Andrew Pondekas
Group General Manager QFCL
Ken Ryan
Group General Manager Marketing
Bernard Shirley
Group General Manager Public Affairs

* Executive Committee Members

Roger Maynard Nick Tait

Non-Executive Director, Non-Executive Director,
Age 55 Age 59
Member of the Audit Member of the Safety,
Committee Environment & Security
Committee

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 23
 C O R P O R AT E G O V E R N A N C E
The Board’s Obligation
In fulfilling its responsibility to protect and enhance
shareholder value, the Board:
■ sets and regularly reviews corporate strategies;
■ ensures appropriately skilled management are
employed to implement these strategies;
■ identifies areas of significant business risk and ensures
management takes appropriate action to manage those
risks;
■ supervises and monitors the operation of the business;
■ monitors the performance of management; and
■ reports to shareholders.
Board Structure
The Qantas Board comprises:
■ seven independent Non-Executive Directors elected
by shareholders other than British Airways;
■ three Non-Executive Directors who are appointed by
British Airways (BA Directors).This right was
acquired when British Airways purchased its 25
percent shareholding in Qantas; and
■ two Executive Directors (the Chief Executive and
Chief Financial Officer & Executive General Manager
Operations).
The Chairman is an independent Non-Executive
Director.
In accordance with the Constitution and the Listing
Rules, the independent Non-Executive Directors are
subject to re-election by shareholders every three years.
Neither the BA Directors nor the Executive Directors are
subject to this requirement.
Any new independent Non-Executive Director would
be chosen by the other non-BA Directors.The Board
would first review the mix of skills and experience of the
existing Directors, then choose a candidate who would
enhance the ability of the Board to maximise shareholder
return.
Shareholders would then be asked to re-elect this
Director at the next General Meeting.
The Board formally reviews its performance annually. At
that review, the Non-Executive Directors discuss the
performance of the Board and the Committees.The Non-
Executive Directors then meet with the Chief Executive to
review governance issues and the working relationship
between the Board and management.
Board Meetings
The Board holds 11 formal meetings a year. Given the
significant domestic and international operations of the
Airline, the Board travels to Qantas operations outside
Sydney. During the year, the Board held meetings in Perth,
Adelaide, Cairns and the USA.
The Board spends a considerable amount of time at
each meeting reviewing the strategic issues facing the
Airline. A two-day meeting is held each year to review and
approve the financial plan.
24 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Committees
The Board believes that all Directors should participate in
the consideration of matters relating to corporate
governance, remuneration, succession planning and Board
nominations. As such, only two formal Committees have
been established: the Audit Committee and the Safety,
Environment & Security Committee.
Members of these Committees are responsible for the
review of certain detailed technical areas of the Airline’s
operations, identifying areas of significant business risk in
these areas and ensuring that arrangements are in place to
manage these risks. Committees make recommendations on
these issues for decision by the full Board. All Directors
have an open invitation to attend Committee Meetings.
When appropriate, the Board has formed ad hoc
working groups to consider specific issues and report back
to the Board.
Audit Committee
The primary objective of the Audit Committee is to assist
the Board in fulfilling its responsibilities in regard to the
accounting and reporting practices of the Qantas Group. In
addition, the Committee:
■ reviews the financial information presented by
management to the market, shareholders and
regulators with particular regard to compliance with
statutory obligations;
■ evaluates the effectiveness of administrative, operating
and accounting controls used by the Qantas Group;
■ oversees and appraises the quality of the audits
conducted by the Qantas internal and external
auditors; and
■ maintains, by regular scheduled meetings, open lines
of communication with the internal and external
auditors.
Four Directors serve on the Audit Committee.Three
(including the Chairman of the Committee) are
independent Non-Executive Directors and the fourth
is a BA Director.The Committee usually meets four
times a year.
At each meeting, the Committee members meet
privately with the internal and external auditors.This
allows the auditors to raise any issues they would prefer
not to discuss in the presence of management.
Safety, Environment & Security Committee
The Board places particular focus on the safety,
environment and security aspects of the Airline.The Safety,
Environment & Security Committee is responsible for
reviewing these critical areas and reporting to the Board.
The Committee receives detailed reports on all safety,
environment and security aspects of the Airline and ensures
that the appropriate procedures are in place to protect the
Airline, its passengers and the community.
Particular matters for the attention of the Committee
include:
■ compliance with all safety, environment, security and
associated legal and regulatory requirements;
 ■ review of preventative steps and procedures;
■ review of contingency and emergency planning
strategies;
■ adequacy of reporting systems for actual or potential
accidents, breaches and incidents; and
■ subsequent investigation and remedial action.
External Advice
Should the Board or an individual Director consider it
necessary to obtain independent professional advice in
carrying out their duties, the matter is discussed with the
Chairman and any advice considered necessary is obtained
at the expense of Qantas.

Three Directors serve on the Safety, Environment &
Security Committee.The Chairman of the Committee is
an independent Non-Executive Director.The other
members are the Chief Executive and a BA Director.The
Committee usually meets four times a year.
Compensation
The Board sets the compensation of the Chief Executive
and reviews the compensation arrangements of the Chief
Financial Officer and other members of the Qantas
Executive Committee. External advice is obtained to ensure
compensation is reasonable and in line with market
practice.
The aggregate maximum Non-Executive Directors’ fees
are set by shareholders.The Directors set individual fees by
reference to fees paid by comparable listed companies.
Qantas Code of Conduct
The Board has implemented and enforces a strict Code of
Conduct. Under this Code, all Directors and employees
must comply, at all times, with all laws governing the
Airline’s operations.The Code also requires that Qantas
operations are conducted in keeping with the highest legal,
moral and ethical standards.
The Code deals with a number of matters, including:
■ Compliance with Laws and Regulations;
■ Unacceptable Payments;
■ Protection of Qantas Assets;
■ Proper Accounting and Dealing with Auditors;
■ Conflict of Interest and Use of Inside Information;
and
■ Insider Trading.

DIRECTORS’ MEETINGS

The number of Directors’ Meetings held (including Meetings of Committees of Directors) and number of Meetings attended
by each of the Directors of the Chief Entity during the financial year:

SAFETY,
ENVIRONMENT
AUDIT & SECURITY
QANTAS BOARD COMMITTEE COMMITTEE
DIRECTORS ATTENDED HELD * ATTENDED HELD * ATTENDED HELD *
Gary Pemberton 11 11 3# 4#
James Strong 11 11 3# 4# 4 4
Gary Toomey 11 11 4# 4#
Bob Ayling 3+ 11
Mike Codd 10 11 4 4
John Ducker 8 11 2 4 2 4
Trevor Eastwood 11 11
Margaret Jackson 10 11 4 4
Jim Kennedy 9 11
Trevor Kennedy 10 11
Roger Maynard 11 11 4 4
Nick Tait 11 11 4 4

* reflects the number of Meetings held during the time the Director held office during the year.
+ when not present in person represented by an alternate.
# attended in an ex-officio capacity.

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Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 25
 P E R F O R M A N C E S U M M A RY

Increase/
1998 1997 (Decrease)
Group Financial Results $m $m %

OPERATING REVENUE
Net passenger revenue 6,188.3 6,008.4 3.0
Net freight revenue 547.8 505.4 8.4
Tour and travel sales 510.7 482.0 6.0
Other sources * 884.7 838.6 5.5
TOTAL OPERATING REVENUE 8,131.5 7,834.4 3.8

OPERATING EXPENDITURE
Manpower and staff-related 2,196.8 2,089.6 5.1
Selling and marketing 914.5 883.8 3.5
Aircraft operating variable 1,551.8 1,540.1 0.8
Fuel and oil 888.5 895.8 (0.8)
Property 205.7 189.4 8.6
Computer and communication 272.7 218.1 25.0
Depreciation and amortisation 531.4 465.9 14.1
Non-cancellable operating lease rentals 138.8 242.3 (42.7)
Tour and travel cost of sales 412.7 386.1 6.9
Capacity hire, insurance and other 436.9 406.1 7.6
TOTAL OPERATING EXPENDITURE 7,549.8 7,317.2 3.2

EARNINGS BEFORE INTEREST AND TAX 581.7 517.2 12.5

Net interest expense 103.7 96.3 7.7
PROFIT FROM OPERATIONS 478.0 420.9 13.6
Abnormal items - (17.2) (100.0)
OPERATING PROFIT 478.0 403.7 18.4
Income tax expense 173.0 151.0 14.6
OPERATING PROFIT AFTER INCOME TAX 305.0 252.7 20.7

Balance Sheets
Total assets 10,358.8 9,852.1 5.1
Total liabilities 7,396.4 7,181.1 3.0
TOTAL SHAREHOLDERS’ EQUITY 2,962.4 2,671.0 10.9

Cash Flows
Cash flows provided by operating activities 1,218.4 1,110.8 9.7
Cash flows used in investing activities (668.0) (71.1) 839.5
Cash flows used in financing activities (592.3) (744.3) (20.4)
NET INCREASE/(DECREASE) IN CASH HELD (41.9) 295.4 (114.2)

Debt, Gearing and Capitalisation of

Non-Cancellable Operating Leases
ON BALANCE SHEET DEBT
Current debt 193.1 541.5 (64.3)
Non-current debt 2,591.6 2,589.5 0.1
Swap offset (740.0) (780.4) (5.2)
Cash and cash equivalents (1,307.4) (1,301.5) 0.5
NET DEBT 737.3 1,049.1 (29.7)
OFF BALANCE SHEET DEBT
Present value of aircraft operating leases 1,489.4 1,631.6 (8.7)
Net debt including off balance sheet debt 2,226.7 2,680.7 (16.9)
REVENUE HEDGE RECEIVABLES (370.0) (219.4) 68.6
NET DEBT INCLUDING OFF BALANCE SHEET DEBT AND REVENUE
HEDGE RECEIVABLES 1,856.7 2,461.3 (24.6)

BALANCE SHEET INCLUDING OFF BALANCE SHEET DEBT

Total assets 11,511.4 11,154.6 3.2
Total liabilities 8,703.4 8,628.6 0.9
TOTAL SHAREHOLDERS’ EQUITY INCLUDING OFF BALANCE SHEET DEBT 2,808.0 2,526.0 11.2

Net debt to net debt plus equity 20:80 28:72 n/a

Net debt to net debt plus equity including off balance sheet debt 44:56 51:49 n/a
Net debt to net debt plus equity including off balance sheet debt
and revenue hedge receivables 40:60 49:51 n/a
* excludes proceeds on sale and on sale and leaseback of non-current assets and interest revenue which is included in net interest expense.

26 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Financial
Statements
for the year ended 30 June 1998
Directors’ Report 28
Profit and Loss Accounts 32
Balance Sheets 33
Statements of Cash Flows 34
Notes to and forming part of the Financial Statements 35
NOTE 1 Statement of Significant Accounting Policies 35
NOTE 2 Operating Profit 38
NOTE 3 Abnormal Items 39
NOTE 4 Income Tax 40
NOTE 5 Directors’ Remuneration 41
NOTE 6 Executives’ Remuneration 41
NOTE 7 Auditors’ Remuneration 43
NOTE 8 Cash 43
NOTE 9 Receivables 43
NOTE 10 Inventories 44
NOTE 11 Investments 44
NOTE 12 Other Assets 45
NOTE 13 Property, Plant and Equipment 45
NOTE 14 Intangibles 48
NOTE 15 Accounts Payable 48
NOTE 16 Borrowings 49
NOTE 17 Provisions 49
NOTE 18 Other Liabilities 50
NOTE 19 Share Capital 50
NOTE 20 Reserves 51
NOTE 21 Outside Equity Interests 51
NOTE 22 Finance Lease Commitments 52
NOTE 23 Operating Lease and Hire Commitments 52
NOTE 24 Capital Expenditure Commitments 53
NOTE 25 Contingent Liabilities 53
NOTE 26 Superannuation Commitments 54
NOTE 27 Particulars in Relation to Controlled Entities 56
NOTE 28 Particulars in Relation to Associated Companies 58
NOTE 29 Unhedged Foreign Currency Balances 58
NOTE 30 Financial Instruments 59
NOTE 31 Employee Entitlements 62
NOTE 32 Dividends 62
NOTE 33 Segment Information 63
NOTE 34 Earnings per Share 64
NOTE 35 Events Subsequent to Balance Date 64
NOTE 36 Notes to the Statements of Cash Flows 64
NOTE 37 Related Party Transactions 66
Statement by Directors 69
Independent Auditors’ Report 70
Shareholder Information 71
Five Year Summary 72

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 27

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 Directors’ Report
FOR THE YEAR ENDED 30 JUNE 1998
The Directors present their report together with the
financial statements of Qantas Airways Limited (Chief
Entity) and the consolidated accounts of the Economic
Entity being the Chief Entity and its controlled entities,
for the year ended 30 June 1998.
Directors
The Directors of Qantas Airways Limited at the date of
this report are:
Gary Pemberton
James Strong
Gary Toomey
Bob Ayling
Mike Codd, AC
John Ducker, AO
Trevor Eastwood, AM
Margaret Jackson
Jim Kennedy, AO,CBE
Trevor Kennedy, AM
Roger Maynard
Nick Tait
Derek Stevens (alternate for Bob Ayling).
Principal activities
The principal activities of the Economic Entity during the
course of the financial year were the operation of
international and domestic air transportation services,
the sale of worldwide and domestic holiday tours,
catering activities, information technology and resort
operations. There were no significant changes in the
nature of the activities of the Economic Entity during the
financial year.
Consolidated result
The consolidated profit for the year after abnormals
and income tax attributable to the members of
Qantas Airways Limited was $304.8 million
(1997: $252.7 million).
Earnings per share
Basic and diluted earnings per share were 26.8 cents
(1997: 23.6 cents).
Dividends
The Directors declared a final dividend of $83.2 million
(7 cents per fully paid share) for the year ended 30 June
1998 (1997: 6.5 cents). The final dividend will be fully
franked and follows a fully franked interim dividend of
6.5 cents per fully paid share, which was paid during the
financial year. Further details are set out in note 32 to
the financial statements.
Review of operations
A review of the Economic Entity’s operations during the
financial year and of the results of those operations is
contained on pages 8 to 21 inclusive of this Annual
Report.
State of affairs
Changes in the state of affairs of the Economic Entity
are set out in the Review of Operations on pages 8 to
21 inclusive of this Annual Report. Significant changes
28 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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outlined are as follows:
■ operating profit before abnormals and income tax
of $478 million, up 13.6 percent on the prior year;
■ operating profit after income tax before outside
equity interests of $305 million, up 20.7 percent
on the prior year;
■ total assets increased from $9,852.1 million to
$10,358.8 million;
■ shareholders’ equity grew by 10.9 percent to
$2,962.4 million;
■ cash flows from operating activities increased by
9.7 percent to $1.22 billion; and
■ debt to equity ratio improved by nine percentage
points to 40:60.
In the opinion of the Directors, there were no other
significant changes in the state of affairs of the
Economic Entity that occurred during the financial year
under review not otherwise disclosed in this Annual
Report.
Events subsequent to balance date
Amendments to the Corporations Law which came into
effect on 1 July 1998 abolished the par value of shares.
As a result, the amounts standing in the share premium
reserve became part of the Chief Entity’s share capital
on 1 July 1998. The balance of the share premium
reserve amounting to $636.3 million was transferred to
the share capital account on 1 July 1998, increasing the
share capital to $1,813.6 million. The impact of this
change has not been reflected in the financial
statements.
The changes to the Corporations Law mean that the
share premium reserve will no longer be available for
writing off expenses in respect of any future share
issues.
Other than the matter referred to above, there has not
arisen in the interval between the end of the financial
year and the date of this report any item, transaction
or event of a material and unusual nature, in the opinion
of the Directors, that has significantly affected, or may
significantly affect, the operations of the Economic
Entity, the results of those operations, or the state of
affairs of the Economic Entity, in subsequent financial
years.
Likely developments and expected results of
operations
Developments likely to significantly affect the operations
of the Economic Entity that were not finalised at the date
of this report are set out in the Review of Operations on
pages 8 to 21 inclusive of this Annual Report. Further
information as to likely developments in the operations
of the Economic Entity and the expected results of those
operations in subsequent financial years has not been
included in this report because the Directors believe,
on reasonable grounds, that to include further
information on those matters would be likely to result
in unreasonable prejudice to the interests of the
Economic Entity.
 Directors’ Report
FOR THE YEAR ENDED 30 JUNE 1998
Information on Directors
Details of Directors, their experience and any special
responsibilities are set out below:
Gary Pemberton
Chairman, Age 58
Mr Pemberton was appointed to the Board in February
1993 and as Chairman in March 1993.
He is Chairman of TAB Limited and a Director of Rio
Tinto Limited and Rio Tinto plc.
Mr Pemberton was Chief Executive of Brambles
Industries Limited from 1983 to 1993, and also held the
offices of Chairman from March 1993 to August 1994
and Deputy Chairman from August 1994 to November
1996. He was formerly President of the Sydney
Organising Committee for the Olympic Games, and a
Director of Commonwealth Bank of Australia, CSR
Limited, John Fairfax Holdings Limited and Australian
Airlines Limited.
James Strong
Chief Executive and Managing Director, Age 54
Mr Strong was appointed to the Board in January 1991
and as Managing Director in October 1993. He is a
member of the Safety, Environment & Security
Committee and Chairman of a number of controlled
entities of Qantas.
He is a Director of RGC Limited and is admitted as a
barrister and solicitor in various Australian jurisdictions.
Mr Strong was Chief Executive of Australian Airlines
Limited from December 1985 to September 1989,
National Managing Partner, later Chairman of Partners,
of Corrs Chambers Westgarth, Solicitors, from
September 1989 to June 1992 and Group Chief
Executive of DB Group Limited in New Zealand from July
1992 until October 1993.
Gary Toomey
Chief Financial Officer & Executive General Manager
Operations, Age 43
Mr Toomey was appointed to the Board in December
1993. He is a Director of a number of controlled entities
of Qantas.
He is a Director of the Australia and New Zealand
Banking Group Limited and a Fellow of The Institute of
Chartered Accountants in Australia, the Australian
Society of Certified Practising Accountants and several
other professional bodies.
Mr Toomey was previously Chief Financial Officer
of Arnott’s Limited. Before this he was Chief Financial
Officer of Australian Airlines Limited from 1987 to 1992,
Company Secretary and Finance Manager of The
Phosphate Co-operative Company of Australia Limited for
four years, Company Secretary for Rocke Tompsitt & Co
Limited from 1981 to 1982 and was appointed Group
Company Secretary of Rocke's holding company F. H.
Faulding & Co. Limited in 1983. Mr Toomey has a
chartered accounting background having worked for Peat
Marwick Mitchell & Co from 1976 to 1978 and Parkhill,
Lithgow and Gibson from 1979 to 1980.
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Bob Ayling
Non-Executive Director, Age 52
Mr Ayling was appointed to the Board by British Airways
Plc in January 1997.
He is currently Chief Executive Officer and Director of
British Airways Plc and Director of Concorde International
Pty Limited and World Aviation Services (Australia) Pty
Limited.
Mr Ayling joined British Airways Plc in 1985 as Legal
Director and in July 1988 was appointed Director of
Human Resources. In September 1991 he became
Marketing and Operations Director and was later
appointed Chief Executive Officer in January 1996 having
been Group Managing Director since February 1993. A
solicitor by profession, he has been involved in air
transport and international commerce throughout his
career.
Mike Codd, AC
Non-Executive Director, Age 58
Mr Codd was appointed to the Board in January 1992.
He is a member of the Audit Committee.
Mr Codd is Chancellor, University of Wollongong, and a
Director of Telstra Corporation Limited, MLC Limited,
MLC Lifetime Limited, Australian Nuclear Science and
Technology Organisation (ANSTO), Toogoolawa Consulting
Pty Limited and The Menzies Foundation. He is a
member of the Advisory Boards of Spencer-Stuart, IBM
Australia Limited and Blake Dawson Waldron.
From 1981 to 1986, Mr Codd held senior positions in
the Commonwealth Government as, consecutively,
Secretary of the Department of Employment and
Industrial Relations, Chairman of the Industries
Assistance Commission and Secretary of the
Department of Community Services. From 1986 to
1991, he held the positions of Head of Department of
the Prime Minister and Cabinet, and Secretary to
Cabinet.
John Ducker, AO
Non-Executive Director, Age 66
Mr Ducker was appointed to the Board in August 1983.
He is Chairman of Qantas Superannuation Limited and
of the Safety, Environment & Security Committee and is
a member of the Audit Committee.
Mr Ducker is a founding Fellow of the Australian
Institute of Company Directors, Managing Director of
Indrel Consulting Pty Limited, Director of Edelman World
Wide and NRMA Building Society Limited, Chairman of
the New South Wales Ambulance Service Board and
Chairman of The Duke of Edinburgh's Award Scheme
Australia (New South Wales Division).
He held a number of management positions with the
Labor Council of NSW before becoming Vice President of
the Australian Council of Trade Unions in 1977. Mr
Ducker was also General Manager of radio station 2KY
and Chairman of radio station 2HD. Mr Ducker was
formerly a Member of the Board of Governors of the
National Institute of Labour Studies and was the
Foundation Chairman of Work Skill Australia. He
previously held the position of Chairman of the NSW
Public Service Board and also served as a Member of
the Legislative Council of New South Wales.
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 29
 Directors’ Report
FOR THE YEAR ENDED 30 JUNE 1998
Trevor Eastwood, AM
Non-Executive Director, Age 56
Mr Eastwood was appointed to the Board in October
1995.
He is Chairman of West Australian Newspapers
Holdings Limited, Avatar Industries Limited, KLZ Limited,
Gresham Partners Holdings Limited, Gresham
Agribusiness Management Limited and Gresham Rabo
Management Limited. He is a Director of Wesfarmers
Limited and a Fellow of Curtin University, Australian
Institute of Management, Australian Academy of
Technological Sciences and Engineering, and the
Australian Institute of Company Directors.
Mr Eastwood was formerly Managing Director of
Wesfarmers Limited, Chief Executive of Westralian
Farmers Co-operative Limited and Chairman of Orion
Resources NL. He has held various seats on State and
Federal Government councils.
Margaret Jackson
Non-Executive Director, Age 45
Ms Jackson was appointed to the Board in July 1992.
She is Chairman of the Audit Committee.
Ms Jackson is Chairman of Victoria's Transport
Accident Commission, Playbox Theatre Company Pty
Limited, Malthouse Pty Limited and a Director of ANZ
Grindlays Bank Limited, Australia and New Zealand
Banking Group Limited, Pacific Dunlop Limited and The
Broken Hill Proprietary Company Limited. Ms Jackson is
a Fellow of The Institute of Chartered Accountants in
Australia.
Ms Jackson was a Partner of KPMG Peat Marwick's
Management Consulting Division and National Chairman
of the KPMG Micro Economic Reform Group until 30
June 1992, when she resigned to pursue a full-time
career as a company director. She was formerly a
Director of Telecom Australia and the Australian Wool
Corporation and Chairman of the Victorian State Council
of The Institute of Chartered Accountants in Australia.
Jim Kennedy, AO, CBE
Non-Executive Director, Age 64
Mr Kennedy was appointed to the Board in
October 1995.
He is a Director of Australian Stock Exchange Limited,
Industrial Property Management Limited and Suncorp-
Metway Limited. He is Chairman of the Queensland
Investment Corporation and is Deputy Chairman of GWA
International Limited.
Mr Kennedy is a former Chairman of the Australian
Government Inquiry into Tourism, former Deputy
Chairman of the Australian Tourist Commission and
former Chairman of the Queensland Tourist and Travel
Corporation. He was also previously a Director of
Commonwealth Bank of Australia, MIM Holdings Limited,
Pacific Dunlop Limited, Santos Limited and QCT
Resources Limited. Mr Kennedy, a chartered accountant
and public company director, is well known for his
contribution to the tourism industry as well as
to business.
30 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Trevor Kennedy, AM
Non-Executive Director, Age 56
Mr Kennedy was appointed to the Board in April 1994.
Mr Kennedy is Chairman of Oil Search Limited, AWA
Limited, Kilkenny Gold NL and Cypress Lakes Group
Limited and Deputy Chairman of Darowa Corporation
Limited. He is a Director of several other public and
private companies including OzEmail Limited and Downer
Holdings Limited and is a Member of the Federal
Government Remuneration Tribunal.
Mr Kennedy was formerly Managing Director of
Consolidated Press Holdings Limited, and has previously
served on a number of other boards and State and
Federal Government authorities.
Roger Maynard
Non-Executive Director, Age 55
Mr Maynard was appointed to the Board by British
Airways Plc in March 1993. He is a member of the Audit
Committee.
He is currently Director of Investments and Joint
Ventures for British Airways Plc, having been Director of
Corporate Strategy from 1991 to 1996.
Mr Maynard joined British Airways Plc in 1987 and
was Executive Vice President North America. Prior to
joining British Airways Plc he served as Counsellor,
Aviation and Shipping, at the British Embassy in
Washington DC and was Assistant Secretary for
Aerospace at the Department of Trade and Industry
in London.
Nick Tait
Non-Executive Director, Age 59
Mr Tait was appointed to the Board by British Airways Plc
in March 1993. He is a member of the Safety,
Environment & Security Committee.
He is General Manager Australia and New Zealand for
British Airways Plc and is also a Director of Concorde
International Travel Pty Limited and World Aviation
Systems (Australia) Pty Limited.
Mr Tait joined British Airways Plc in Australia in 1964
and has held a variety of management positions in that
company, including positions in Australia and overseas.
Particulars of Directors’ interests in shares and options
of the Chief Entity:
Directors’ ordinary shares 1998 1997
Gary Pemberton (Chairman) 167,707 167,707
James Strong 104,210 88,905
Gary Toomey 25,276 23,767
Mike Codd, AC 8,000 Nil
John Ducker, AO 6,109 5,795
Margaret Jackson 24,253 23,007
Jim Kennedy, AO, CBE 10,000 1,000
Trevor Kennedy, AM 20,800 20,800
The particulars of Directors’ interests in shares are as
at the date of this report.
Details of Meetings of Directors are set out on page
25 of this Annual Report.
 Directors’ Report
FOR THE YEAR ENDED 30 JUNE 1998
Directors’ interests and benefits
Directors’ relevant interests in the share capital of the
Chief Entity are set out above. Since the end of the
previous financial year, no Director of the Chief Entity
has received or become entitled to receive any benefit
(other than a benefit included in the aggregate amount
of remuneration received or due and receivable by
Directors shown in the consolidated accounts) because
of a contract made by the Chief Entity, its controlled
entities or a related body corporate with the Director, or
with a firm of which the Director is a member, or with an
entity in which the Director has a substantial interest,
other than as disclosed in note 37 to the financial
statements.
Indemnities and insurance
Under Article 12.1 of the Qantas Constitution, the Chief
Entity is required to indemnify, to the extent permitted by
law, each officer of the Chief Entity (subject to certain
qualifications) against:
■ liability to third parties (other than related Qantas
companies) arising out of conduct undertaken in
his or her capacity as a Qantas officer, unless the
liability arises out of conduct involving a lack of
good faith, wilful misconduct or reckless behaviour;
and
■ the costs and expenses of successfully defending
legal proceedings arising out of conduct
undertaken in his or her capacity as a Qantas
officer.
The Directors listed on page 28 of this Annual Report
and the secretaries of the Chief Entity, being Brett
Johnson, Steve Heesh and Garie Hillier, have the benefit
of the indemnity in Article 12.1, which also applies to all
officers of the Chief Entity. The Chief Entity has insured
against amounts which it is liable to pay to officers
pursuant to Article 12.1 or which it otherwise agrees to
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pay by way of indemnity.
During the financial year, the Chief Entity paid a premium
to arrange Directors’ and Officers’ liability insurance
policies, which cover all Directors and officers of the
Chief Entity and its controlled entities.
Details of the nature of the liabilities covered, and the
amount of the premium paid in respect of the Directors’
and Officers’ liability insurance policies are not
disclosed, as such disclosure is prohibited under the
terms of the contracts.
Rounding
The Economic Entity is of a kind referred to in Class
Order No. 97/1005 dated 9 July 1997 issued by the
Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the Directors’
Report and financial statements. Amounts in this report
and accompanying financial statements have been
rounded off to the nearest one hundred thousand dollars
in accordance with that Class Order unless otherwise
indicated.
Dated at Sydney this sixteenth day of September 1998.
Signed in accordance with a resolution of the Directors:
Gary Pemberton James Strong
Chairman Chief Executive and
Managing Director
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 31
 Profit and Loss Accounts FOR THE YEAR ENDED 30 JUNE 1998

NOTES CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Operating profit before interest and tax 581.7 517.2 448.0 441.9
Net interest expense 2 (103.7) (96.3) (84.6) (67.9)

PROFIT FROM OPERATIONS 478.0 420.9 363.4 374.0

Abnormal items before tax 3 – (17.2) – (102.0)

OPERATING PROFIT BEFORE INCOME TAX 2 478.0 403.7 363.4 272.0

Income tax expense attributable to operating profit 4 (173.0) (151.0) (103.6) (59.1)

OPERATING PROFIT AFTER INCOME TAX 305.0 252.7 259.8 212.9

Outside equity interests in operating profit (0.2) – – –

OPERATING PROFIT AFTER INCOME TAX

ATTRIBUTABLE TO MEMBERS OF THE
CHIEF ENTITY 304.8 252.7 259.8 212.9
Retained profits at the beginning of the financial year 947.4 824.9 570.2 486.6
Adoption of Accounting Standard AASB 1021:
‘Depreciation of Non-Current Assets’ 1l. – (2.2) – (1.3)

TOTAL AVAILABLE FOR APPROPRIATION 1,252.2 1,075.4 830.0 698.2

Dividends provided for or paid 32 (158.1) (128.0) (157.8) (128.0)

RETAINED PROFITS AT THE END OF THE

FINANCIAL YEAR 1,094.1 947.4 672.2 570.2

The profit and loss accounts above are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 35 to 68.

32 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Balance Sheets AS AT 30 JUNE 1998

NOTES CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

CURRENT ASSETS
Cash 8 121.4 53.5 112.5 39.5
Receivables 9 1,579.8 1,648.2 1,906.6 1,950.3
Net receivables under hedge/swap contracts 143.2 182.9 138.2 181.9
Inventories 10 207.5 149.5 198.9 102.7
Other 12 56.8 34.1 39.1 21.5

TOTAL CURRENT ASSETS 2,108.7 2,068.2 2,395.3 2,295.9

NON-CURRENT ASSETS
Receivables 9 652.5 605.9 860.5 958.2
Net receivables under hedge/swap contracts 1,565.6 1,240.2 1,520.3 1,203.4
Investments 11 38.6 16.6 364.6 342.9
Property, plant and equipment 13 5,913.4 5,807.2 4,353.4 4,256.5
Intangibles 14 28.6 30.3 – –
Other 12 51.4 83.7 8.3 11.7

TOTAL NON-CURRENT ASSETS 8,250.1 7,783.9 7,107.1 6,772.7

TOTAL ASSETS 10,358.8 9,852.1 9,502.4 9,068.6

CURRENT LIABILITIES
Accounts payable 15 1,384.2 1,154.4 1,272.3 1,058.3
Borrowings 16 193.9 541.9 475.7 798.7
Net payables under hedge/swap contracts 214.8 177.1 202.3 168.5
Provisions 17 559.1 550.3 441.4 437.4
Revenue received in advance 804.8 647.7 761.5 610.0
Deferred lease benefits/income 51.1 46.4 48.8 43.8

TOTAL CURRENT LIABILITIES 3,207.9 3,117.8 3,202.0 3,116.7

NON-CURRENT LIABILITIES
Borrowings 16 2,591.6 2,589.5 2,405.2 2,430.2
Net payables under hedge/swap contracts 384.0 246.2 384.0 246.2
Provisions 17 805.4 760.4 561.8 513.3
Deferred lease benefits/income 377.6 440.7 350.8 415.8
Other 18 29.9 26.5 29.9 26.5

TOTAL NON-CURRENT LIABILITIES 4,188.5 4,063.3 3,731.7 3,632.0

TOTAL LIABILITIES 7,396.4 7,181.1 6,933.7 6,748.7

NET ASSETS 2,962.4 2,671.0 2,568.7 2,319.9

SHAREHOLDERS’ EQUITY
Share capital 19 1,177.3 1,111.7 1,177.3 1,111.7
Reserves 20 689.0 609.9 719.2 638.0
Retained profits 1,094.1 947.4 672.2 570.2
Shareholders’ equity attributable to
members of the Chief Entity 2,960.4 2,669.0 2,568.7 2,319.9
Outside equity interests in controlled entities 21 2.0 2.0 – –

TOTAL SHAREHOLDERS’ EQUITY 2,962.4 2,671.0 2,568.7 2,319.9

The balance sheets above are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 35 to 68.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 33

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 Statements of Cash Flows FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 8,194.3 7,851.4 7,263.6 6,795.0
Payments to suppliers and employees (6,773.6) (6,668.5) (6,147.7) (5,943.9)
Interest received 96.5 99.4 95.4 102.6
Interest paid (187.6) (202.8) (168.8) (179.1)
Dividends received 17.8 32.3 67.1 111.4
Income taxes paid (129.0) (1.0) (83.7) (0.5)

Net cash provided by operating activities (refer note 36) 1,218.4 1,110.8 1,025.9 885.5

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for property, plant and equipment (673.0) (610.6) (451.7) (569.4)
Payments for aircraft security deposits (13.6) (14.2) (14.3) (13.4)
Total payments for purchases of property, plant,
equipment and aircraft security deposits (686.6) (624.8) (466.0) (582.8)
Proceeds from sale of equity investments – 371.5 – –
Proceeds from sale of property, plant and equipment 40.6 2.2 12.9 5.7
Proceeds from sale and leaseback of non-current assets – 215.3 – 215.3
Payments for investments, net of cash acquired (22.0) (44.3) (21.6) –
Loans repaid by other entities – 9.0 – 4.6
Net funding from/(to) related parties – – (107.9) 421.1

Net cash provided by/(used in) investing activities (668.0) (71.1) (582.6) 63.9

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of borrowings/swaps (571.5) (569.8) (510.1) (516.2)
Debt prepayments on sale and leaseback transactions (76.5) (251.7) (76.5) (251.7)

Total debt repayments (648.0) (821.5) (586.6) (767.9)

Proceeds from borrowings/swaps 55.7 77.2 53.0 74.5
Proceeds from issue of shares 36.7 40.1 36.7 40.1
Dividends paid (36.7) (40.1) (36.7) (40.1)

Net cash used in financing activities (592.3) (744.3) (533.6) (693.4)

RECONCILIATION OF CASH PROVIDED BY/(USED IN):

Operating activities 1,218.4 1,110.8 1,025.9 885.5
Investing activities (668.0) (71.1) (582.6) 63.9
Financing activities (592.3) (744.3) (533.6) (693.4)

Net increase/(decrease) in cash held (41.9) 295.4 (90.3) 256.0

Cash at the beginning of the financial year 752.6 457.2 443.2 187.2

Cash at the end of the financial year (refer note 36) 710.7 752.6 352.9 443.2

The statements of cash flows above are to be read in conjunction with the notes to and forming part of the financial statements set out on pages
35 to 68.

34 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
In order to assist in an understanding of the figures
presented, the following summarises the significant
policies which have been adopted in the preparation
of these financial statements.
a. Basis of Preparation
The financial statements are a general purpose financial
report which has been drawn up in accordance with
Accounting Standards, Urgent Issues Group Consensus
Views and the Corporations Law. They have been
prepared on the basis of historical costs and do not take
into account changing money values or, except where
stated, current valuations of non-current assets. Unless
otherwise noted, the accounting policies have been
consistently applied with those of the previous year.
b. Principles of Consolidation
The consolidated accounts of the Economic Entity
comprise the accounts of Qantas Air ways Limited, being
the Chief Entity, and its controlled entities as at 30 June
1998 and the results of all controlled entities for the
year then ended. Results of controlled entities which
were acquired or disposed of during the year are
included from the date control commenced or to the date
control ceased. The consolidation process eliminates
inter-entity balances and transactions. Outside equity
interests in the results and equity of controlled entities
are shown separately in the consolidated profit and loss
account and balance sheet respectively.
c. Foreign Currency Transactions
Foreign currency transactions
Foreign currency transactions, except those subject
to specific hedging arrangements, are translated to
Australian currency at the rate of exchange ruling at the
date of each transaction. At balance date, amounts
receivable and payable in foreign currencies are
translated at rates of exchange ruling at that date.
Resulting exchange differences are brought to account as
exchange gains or losses in the profit and loss account
in the financial year in which the exchange rate changes.
Translation of controlled foreign entities
All controlled entities incorporated overseas are
self-sustaining foreign operations and as such, their
assets and liabilities are translated at the rates of
exchange ruling at balance date. The profit and loss
accounts are translated at the average rate for the year.
Exchange differences arising on translation are taken
directly to the foreign currency translation reserve.
Hedging of foreign currency commitments
Gains and losses on derivatives used to hedge the
purchase or sale of capital equipment, goods and
services are deferred in the balance sheet and included
in the related purchase or sale. Net deferred losses
associated with hedges of foreign currency revenues
relating to future transportation services are included in
the balance sheet as receivables. These losses will be
included in the measurement of the relevant future foreign
currency revenues at the time the transportation services
are provided. As at 30 June 1998, the net amount
deferred was $370 million (1997: $219.4 million).
Revenues and expenses from currency swap transactions
and amounts owing from/to swap counterparties are set-
off and disclosed on a net basis where the requirements
of Accounting Standard AASB 1014: ‘Set-off and
Extinguishment of Debt’ are satisfied.
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d. Financial Instruments
The Economic Entity is subject to foreign currency,
interest rate and fuel price risks. Derivative financial
instruments are used to hedge these risks. Economic
Entity policy is not to enter, issue or hold derivative
financial instruments for trading purposes.
Principal amounts outstanding under individual cross
currency swaps are recognised as a net asset or liability
in accordance with the requirements of Accounting
Standard AASB 1033: ‘Presentation and Disclosure of
Financial Instruments’. Interest payments and receipts
under cross currency swaps are recognised on an
accruals basis in the profit and loss account. Premiums
paid on interest rate options are amortised over the
period of the hedge.
Gains and losses on derivatives used as hedges are
accounted for on the same basis as the underlying
exposures to which they relate. Accordingly, hedge gains
and losses are included in the profit and loss account
when the gains and losses arising on the related
hedged position are recognised in the profit and loss
account. Further details are outlined in note 30.
e. Passenger and Freight Sales Revenue
Passenger and freight sales revenues are included in
the profit and loss account net of sales discounts.
Passenger and freight sales commissions are treated
as a cost of sales.
f. Revenue Received in Advance
Passenger and freight sales are credited to revenue
received in advance and subsequently transferred to
revenue when tickets are utilised or freight uplifted.
The liability relating to sales of other airlines’ tickets
is included in trade creditors.
g. Taxation
The Economic Entity adopts the liability method of tax
effect accounting.
Income tax expense is calculated on operating profit
adjusted for permanent differences between taxable
and accounting income. The tax effect of timing
differences which arise from items being brought to
account in different years for income tax and accounting
purposes is carried forward in the balance sheet as a
future income tax benefit or a deferred tax liability.
Future income tax benefits relating to timing differences
are not brought to account as an asset unless
realisation is assured beyond reasonable doubt. Future
income tax benefits relating to tax losses are only
brought to account as an asset when their realisation
is considered to be virtually certain.
Capital gains tax is provided in the financial statements
in the years in which an asset is sold. Capital gains tax
is not provided for when an asset is revalued.
The Economic Entity is taxed as a public company and
provides for income tax in overseas countries where a
liability exists. Generally, these taxes are assessed on a
formula or percentage of sales basis.
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 35
 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
cont.
h. Year 2000
Expenditure associated with the costs of modifying
computer software for the Year 2000 are accounted for
in accordance with Urgent Issues Group Abstract 12.
Costs relating to the modification of internal-use software
are recognised as an expense in the period they are
incurred. In circumstances where non-cancellable
contracts have been entered into, and a present
obligation exists, appropriate accruals are recognised.
The total Year 2000 expenditure in the 1997/98
financial year was $44 million.
i. Inventories and Work in Progress
Engineering expendables, consumable stores and work
in progress which are held for consumption are valued
at weighted average cost, less any applicable allowance
for obsolescence. Assets held for disposal are valued at
the lower of cost and net realisable value.
j. Non-Current Assets
The carrying amounts of non-current assets are
reviewed at least annually to determine whether or not
they are stated in excess of their recoverable amounts.
Assets which primarily generate cash flows, such as
aircraft, are assessed on an individual basis whereas
infrastructure assets are examined on a class by class
basis, and compared to net surplus cash inflows.
Expected net cash flows used in determining
recoverable amounts have been discounted to their net
present value, using a rate reflecting the cost of funds.
Appropriate provisions are made where the carrying
amount exceeds recoverable amount. To the extent that
a revaluation decrement reverses a revaluation
increment previously credited to, and still included in
the balance of, the asset revaluation reserve for the
same class of assets, the decrement is debited directly
to the reserve. Otherwise, the decrement is recognised
as an expense in the profit and loss account.
k. Investments
All investments are recorded at the lower of cost and
recoverable amount.
Controlled entities
Dividend income from controlled entities is included in
revenue of the Chief Entity when proposed.
Associated companies
An associated company is one in which the Economic
Entity exercises significant influence, but not control.
Dividend income from associated companies is included
in revenue when received.
Other entities
Dividends from investments in corporations which are
not controlled entities or associated companies are
included in revenue when received.
l. Property, Plant and Equipment
Cost and valuation
Freehold land and buildings and leasehold improvements
are independently valued at least every three years.
Major modifications to aircraft and the costs associated
with placing the aircraft into service are capitalised as
part of the cost of the asset to which they relate. All
aircraft maintenance costs are expensed as incurred.
36 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t
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Depreciation and amortisation
Depreciation and amortisation are provided on a
straight line basis on all property, plant and equipment,
other than freehold and leasehold land, at rates
calculated to allocate the cost or valuation less
estimated residual value at the end of the useful lives
of the assets, over their estimated useful lives to the
Economic Entity. The cost of improvements to or on
leasehold properties is amortised over the unexpired
period of the lease or the estimated useful life of the
improvement to the Economic Entity, whichever is the
shorter. The principal asset depreciation and
amortisation periods are:
Years Residuals %
Buildings and
leasehold improvements 10-50 0
Jet aircraft and
spare engines 20 0-25
Non-jet aircraft and
spare engines 10-30 0-20
Aircraft spare parts 15-20 0-25
Plant and equipment 3-10 0
Depreciation and amortisation rates are reviewed
annually and reassessed having regard to commercial
and technological developments. Depreciation and
amortisation of non-current assets has been
recalculated in accordance with the revised Accounting
Standard AASB 1021: ‘Depreciation of Non-Current
Assets’. The financial effect of the adoption of this
Accounting Standard in the prior year was to decrease
retained profits by $2.2 million (Chief Entity: $1.3
million).
Leased and hire purchased assets
Leased assets under which the Economic Entity assumes
substantially all the risks and benefits of ownership are
classified as finance leases and capitalised.
At the inception of the lease, a lease asset and liability
equal to the present value of the minimum lease
payments are created. Any gains and losses under sale
and leaseback arrangements are included as part of the
cost of the leased asset. Capitalised leased assets are
amortised on a straight line basis over the period in
which benefits are expected to arise from the use of
those assets. Lease payments are allocated between
the reduction in the principal component of the lease
liability and interest expense.
In respect of a number of finance leases, debt funding
has been provided to the lessor. This debt funding has
been offset against the lease liability and the balance
sheet reflects the net position (refer note 22). Interest
received on the debt funding is also offset against
interest paid (refer note 2). Hire purchased assets are
accounted for in the same way as finance leases.
Operating lease payments are charged to the profit and
loss account in the years in which they are incurred.
In respect of any premises rented under long-term
operating leases which are subject to sub-tenancy
agreements, provision is made for any shortfall between
primary payments to the head lessor less any
recoveries from sub-tenants. These provisions are
determined on a discounted cash flow basis, using a
rate reflecting the cost of funds.
 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998
1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
cont.
l. Property, Plant and Equipment cont.
Non-cancellable operating leases
Non-cancellable operating leases are generally for a term
of twelve years extendable at the option of the Chief
Entity to 15 years. The leases are non-cancellable on the
basis that there are likely to be financial penalties
associated with a termination prior to year twelve.
m. Intangible Assets
Goodwill
Goodwill, representing the excess of the purchase
consideration over the fair values of identifiable net
assets acquired, is amortised on a straight line basis
over the period in which future benefits are expected
to arise, or 20 years, whichever is the shorter.
Other intangible assets
Trademarks, tradenames and licences are amortised
on a straight line basis over the period in which future
benefits are expected to arise, or 20 years, whichever
is the shorter.
n. Frequent Flyer Liability
The obligation to provide travel rewards to members of
the Frequent Flyer program is progressively accrued as
a current liability as points are accumulated. This
accrual is based on the incremental cost of ultimately
providing the travel rewards.
As members redeem awards or their entitlements
expire, the accrual is reduced accordingly to reflect the
acquittal of the outstanding obligation.
o. Employee Entitlements
Wages and salaries, annual leave, sick leave and
statutory entitlements
Liabilities for wages and salaries, annual leave
(including leave loading), sick leave vesting to
employees and statutory overseas termination
entitlements are recognised and measured as the
amount unpaid at balance date at current wage and
salary rates, including all related on-costs in respect of
the employees’ services provided up to that date.
Long service leave
The liability for long service leave represents the present
value of the estimated future cash outflows to be made
by the employer resulting from employees’ services
provided up to balance date. Liabilities for employee
entitlements which are not expected to be settled within
twelve months are discounted using rates attached to
national government securities at balance date which
most closely match the timing of maturity of the related
liability. In determining the liability for employee
entitlements, consideration has been given to future
increases in wage and salary rates and experience with
staff turnover. The liability includes all related on-costs.
Superannuation
The Economic Entity contributes to employee
superannuation funds. Contributions to these funds are
recognised in the profit and loss account as they are
made. Further details are disclosed in note 26.
Qantas Staff Share Plan II
Eligible Employees of the Chief Entity and its wholly
owned controlled entities are participants in the Qantas
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Staff Share Plan II. Further details are disclosed in note
31. Other than the costs incurred in administering the
plan, which are expensed as incurred, the plan does not
result in any expense to the Economic Entity.
p. Workers’ Compensation
The Chief Entity is a licensed self insurer under the New
South Wales Workers Compensation Act and the
Accident Compensation Act 1985 (Victoria), and has
made provision for all assessed workers’ compensation
liabilities based on an independent actuarial
assessment. Workers’ compensation liabilities for
non-New South Wales and Victorian employees are
insured commercially.
Australian Airlines Limited, a controlled entity, has made
provision for outstanding self-insured pre 1 July 1989
workers’ compensation claims including an estimate for
incurred but non-reported claims, both based on an
independent actuarial assessment. Post 1 July 1989,
all workers’ compensation liabilities have been insured
commercially.
q. Deferred Lease Benefits/Income
Gains/losses on instantaneous sale and operating
leaseback of aircraft, benefits derived from cross border
leasing arrangements and variations between actual
lease payments and minimum lease payments are
treated as deferred lease benefits/income. These are
brought to account as income/expense over the
period of the respective lease or on a basis which is
representative of the pattern of benefits derived from
the leasing transactions.
r. Segment Information
Segment information is provided in note 33.
Industry segments
The Economic Entity operates predominantly in one
industry segment, being the transportation of
passengers and freight on services within and to or
from Australia.
Geographical segments
Passenger, freight and contract services revenue from
domestic services within Australia is attributed to the
Australian area. Passenger, freight and contract services
revenue from inbound and outbound services between
Australia and overseas is allocated to the area where
the sale was made. Other revenue is not allocated to a
geographic area as it is impractical to do so.
Segmental analysis of net assets and profit
contribution
For the year ended 30 June 1998, the principal assets
of the Economic Entity comprised the aircraft fleet, all
except one of which, were registered and domiciled in
Australia. These assets are used flexibly across the
Economic Entity’s worldwide route network. Accordingly,
there is no suitable basis of allocating such assets and
the related liabilities between geographic areas.
Operating profit resulting from turnover generated in
each geographic area according to origin of sale is not
disclosed as it is neither practical nor meaningful to
allocate operating expenditure on that basis.
Disclosure is made of a more appropriate measure of
profit contributions in accordance with the Economic
Entity’s internal reporting system, between the earnings
Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 37
 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
cont.
r. Segment Information cont.
before interest and tax contributions from international
airline, domestic airline and subsidiary operations (refer
note 33).
s. Earnings per Share
Earnings per share is determined by dividing the
Economic Entity’s operating profit after income tax
attributable to members of the Chief Entity by the
weighted average number of ordinary shares on issue
during the current financial year (refer note 34).
borrowings. Bank loans obtained through the use of
commercial paper funding facilities and funding provided
to related parties have been disclosed on a net basis
due to the rapid turnover and the high volume of
transactions.
u. Comparative Figures
Where applicable, comparatives have been adjusted to
reflect disclosure on a comparable basis with current
year figures.

t. Statements of Cash Flows

For the purposes of the statements of cash flows (refer
note 36), cash includes cash on hand, at bank and
money market investments readily convertible to cash,
net of outstanding bank overdrafts and short-term cash

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

2 OPERATING PROFIT
Operating profit before income tax
has been determined after including:
Revenue
Sales revenue
Related parties
– controlled entities – – 103.2 102.5
– associated companies 80.7 26.0 75.0 22.0
– other related parties 111.1 35.1 76.9 25.4
Other persons/bodies corporate 7,921.9 7,741.0 6,832.8 6,710.0
Other revenue:
Interest received/receivable from
Related parties
– controlled entities – – 11.6 15.3
Other persons/bodies corporate 100.0 100.7 86.6 87.8
Dividends received/receivable from
Related parties
– controlled entities – – 61.1 108.9
– associated companies 16.0 12.1 4.2 1.2
Other persons/bodies corporate 1.8 20.2 1.8 1.3
Operating revenue (refer note 33) 8,231.5 7,935.1 7,253.2 7,074.4
Proceeds from sale of non-current assets
Other persons/bodies corporate 40.5 373.7 12.9 5.7
Proceeds from sale and leaseback of non-current assets
Other persons/bodies corporate – 215.3 – 215.3
Total revenue including proceeds from sale and
leaseback of non-current assets 8,272.0 8,524.1 7,266.1 7,295.4

38 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

2 OPERATING PROFIT cont.

Expenditure
Interest paid/payable to
Related parties
– controlled entities – – 14.9 17.3
Other persons/bodies corporate
– finance charges on capitalised leases 108.4 102.7 89.1 76.1
– interest received on portion of debt funded to the lessor (6.5) (8.6) – –
101.9 94.1 104.0 93.4
– other interest paid/payable 101.8 102.9 78.8 77.6
Total interest paid/payable 203.7 197.0 182.8 171.0
Depreciation
Buildings 9.1 7.9 3.5 3.4
Leasehold improvements 53.4 44.3 42.1 28.2
Plant and equipment 87.2 92.6 47.2 48.8
Aircraft and engines 117.8 94.4 99.1 74.9
Aircraft spare parts 53.4 23.6 51.2 20.6
Total depreciation 320.9 262.8 243.1 175.9
Amortisation
Leasehold land and buildings 1.6 1.6 0.9 0.9
Leased plant and equipment 2.5 6.0 – –
Leased aircraft and engines 198.9 183.5 140.8 126.0
Leased aircraft spare parts 2.8 1.5 – –
Goodwill 1.7 2.9 – –
Expenditure carried forward 3.0 6.3 2.1 5.3
Trademarks, tradenames and licences – 1.3 – –
Total amortisation 210.5 203.1 143.8 132.2
Net operating foreign currency (gain)/loss 0.8 (4.6) – (5.8)
Net (profit)/loss on sale of non-current assets 3.8 0.8 (1.8) 4.5
Amounts set aside to doubtful debts provision 15.7 3.3 15.7 3.0
Amounts set aside to other provisions
(excluding abnormal items)
Allowance for inventory obsolescence 4.7 5.4 3.5 3.5
Employee entitlements 72.2 57.8 65.0 45.4
Staff redundancy and restructuring costs 45.0 – 38.5 –
Insurance 23.1 26.2 23.0 20.0
Operating lease charges
Non-cancellable 138.8 242.3 171.6 272.5
Cancellable 142.5 133.7 111.8 106.5
Capacity hire – aircraft 189.3 116.2 142.5 114.6

3 ABNORMAL ITEMS
Included in operating profit are the following
abnormal items credited/(charged):
Profit on sale of shareholding in Air New Zealand Limited – 99.4 – –
Income tax effect – (32.6) – –
– 66.8 – –
Staff redundancy costs – (60.0) – (45.4)
Income tax effect – 21.6 – 16.3
– (38.4) – (29.1)
Write-off of international aircraft in-cabin assets – (56.6) – (56.6)
Income tax effect – 20.4 – 20.4
– (36.2) – (36.2)
Total abnormal items – (17.2) – (102.0)
Total income tax effect – 9.4 – 36.7
Total abnormal items after income tax – (7.8) – (65.3)

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 39

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

4 INCOME TAX
The prima facie income tax on operating profit differs from
the income tax charged in the accounts and is calculated
as follows:
Operating profit before income tax 478.0 403.7 363.4 272.0
Prima facie income tax expense at 36% 172.1 145.3 130.8 97.9
Add/(less) adjustments for permanent differences:
Non-assessable items (10.8) (11.4) (25.9) (43.7)
Depreciation on buildings 0.8 1.8 1.0 1.6
Amortisation of lease residual values 10.3 8.5 10.3 8.5
Deferred lease benefits – 0.7 – 0.7
Other non-deductible items 11.3 19.7 6.3 5.5
Over provision prior years (10.7) (13.6) (18.9) (11.4)
Total income tax expense 173.0 151.0 103.6 59.1

Comprising:
Australian income tax expense 170.2 132.8 102.1 57.8
Overseas income tax expense 2.8 18.2 1.5 1.3
173.0 151.0 103.6 59.1

The income tax expense represents:

Provision for income tax
– Australia 164.3 112.0 95.8 56.6
– overseas 2.6 2.5 1.6 1.3
Group tax loss transfers (23.0) 31.9 17.5 23.1
Provision for deferred income tax 42.4 (6.8) 46.1 (4.7)
Future income tax benefit (2.6) 25.0 (38.5) (5.8)
Over provision prior years (10.7) (13.6) (18.9) (11.4)
173.0 151.0 103.6 59.1

The provision for deferred income tax is reduced by future

income tax benefits attributable to tax losses to the amount of: 14.9 23.4 0.1 1.5

The future income tax benefit will only be obtained if:

(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefits to be
realised or the benefit can be utilised by another entity in the Economic Entity in accordance with Division 170
of the Income Tax Assessment Act 1997;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the ability of the Economic Entity to realise the benefit.

40 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

5 DIRECTORS’ REMUNERATION
Directors’ remuneration includes fees, salaries, superannuation contributions, performance bonuses (refer note 6),
other non-cash benefits, retirement and resignation payments as applicable to Executive and Non-Executive Directors.

Other non-cash benefits include travel and accommodation discounts obtained from time to time by Directors, some
of which are through agreements entered into by the Chief Entity. Certain travel benefits are available on similar
terms and conditions as those offered to employees of the Chief Entity.

All remuneration levels are determined with reference to external professional advice taking into account market
levels of remuneration.

The number of Directors of the Chief Entity whose remuneration from the Chief Entity and related parties falls within
the following specified bands:

CHIEF ENTITY
1998 1997
$ Number Number

0 – 9,999 1* 1*
20,000 – 29,999 – 2
50,000 – 59,999 7 3
60,000 – 69,999 1 3
70,000 – 79,999 1 1
80,000 – 89,999 – 1
140,000 – 149,999 – 1
150,000 – 159,999 1 –
840,000 – 849,999 – 1
940,000 – 949,999 1 –
1,690,000 – 1,699,999 – 1
1,730,000 – 1,739,999 1 –

* Alternate Non-Executive Director did not receive any remuneration.

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Total remuneration paid, payable or otherwise made

available to Directors of the Chief Entity from the
Chief Entity or related parties (includes Directors’
fees of $0.6 million (1997: $0.6 million)) 3.3 3.2

Total remuneration paid, payable or otherwise made

available to Directors of each entity in the Economic
Entity from the Chief Entity or related parties or
controlled entities (includes Directors’ fees of
$0.7 million (1997: $0.7 million)) 5.8 5.1

6 EXECUTIVES’ REMUNERATION
Remuneration
Executives’ remuneration includes salaries, superannuation contributions, performance bonuses, other non-cash
benefits, retirement and resignation payments as applicable.

Other non-cash benefits include travel and accommodation discounts obtained from time to time by executives, some
of which are through agreements entered into by the Chief Entity. Certain travel benefits are available on similar
terms and conditions as those offered to employees of the Chief Entity.

All remuneration levels are determined with reference to external professional advice taking into account market
levels of remuneration.

Performance-based Incentive Schemes

Executive Directors and certain senior executives participate in an executive incentive plan, introduced in the 1996/97
financial year, which provides for a bonus payable at the earlier of the expiry of the relevant executives’ service contract, or
on 30 June 2002, based on the financial performance of Qantas.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 41

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

6 EXECUTIVES’ REMUNERATION cont.

The annual level of incentive payment that vests at the end of each financial year up to and including 30 June 2002 is
determined on a range of criteria including Qantas’ Total Shareholder Return (TSR) ranking amongst the top 100 listed
Australian companies, and also against the TSRs of a predetermined basket of international airlines listed on overseas
stock exchanges.

Executive Directors and other executives participate in a performance-based reward scheme introduced for all executives in
the 1995/96 financial year. This scheme provides for cash performance bonuses to be paid where predetermined
objectives are met. Performance objectives include the achievement of predetermined profit and cost reduction/revenue
improvement targets.

Definition of Executive
Approximately 2,300 employees of the Economic Entity received more than $100,000 in total remuneration during the year
ended 30 June 1998. A significant proportion of these employees were pilots (including executive and training pilots) and
flight engineers, however also included were a number of licensed aircraft maintenance engineers, and other award
employees from areas such as Information Systems, Customer Services, Airport and Commercial Operations.

Only those employees who received more than $100,000 in remuneration and met the definition of an executive officer
under the Corporations Law are included in the following disclosures. Although these disclosures are in accordance with the
Corporations Law, the comparability of the disclosures between years is impacted due to appointment of some executives
part way through each year, changes to organisational structure and inclusion of retirement and resignation payments
where applicable.

The number of executive officers of the Chief Entity whose remuneration from the Chief Entity or related parties within the
Economic Entity falls within the following bands:

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$ Number Number Number Number

100,000 – 109,999 1 7 1 5
120,000 – 129,999 – 2 – 1
130,000 – 139,999 2 1 2 1
140,000 – 149,999 2 8 2 7
150,000 – 159,999 6 9 3 7
160,000 – 169,999 7 4 6 4
170,000 – 179,999 3 8 3 7
180,000 – 189,999 16 8 16 6
190,000 – 199,999 8 5 6 3
200,000 – 209,999 4 6 4 6
210,000 – 219,999 5 7 4 7
220,000 – 229,999 10 3 9 2
230,000 – 239,999 6 2 6 2
240,000 – 249,999 3 2 1 2
250,000 – 259,999 2 1 2 1
260,000 – 269,999 1 1 1 1
270,000 – 279,999 1 1 1 1
280,000 – 289,999 1 4 – 4
290,000 – 299,999 1 3 1 3
300,000 – 309,999 1 1 1 1
310,000 – 319,999 1 3 1 3
320,000 – 329,999 3 1 3 1
330,000 – 339,999 2 4 2 4
340,000 – 349,999 3 2 3 2
360,000 – 369,999 1 1 1 1
370,000 – 379,999 2 1 2 1
380,000 – 389,999 1 1 1 1
400,000 – 409,999 2 – 2 –

42 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$ Number Number Number Number

6 EXECUTIVES’ REMUNERATION cont.

410,000 – 419,999 – 1 – 1
470,000 – 479,999 – 1 – 1
510,000 – 519,999 – 2 – 2
630,000 – 639,999 1 – 1 –
650,000 – 659,999 – 1 – 1
670,000 – 679,999 – 1 – 1
810,000 – 819,999 1 – 1 –
840,000 – 849,999 1 1 1 1
940,000 – 949,999 1 – 1 –
1,690,000 – 1,699,999 – 1 – 1
1,730,000 – 1,739,999 1 – 1 –

Total executive officers 100 104 89 92

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Total remuneration received, or due and receivable

from the Chief Entity, entities in the Economic Entity,
and related parties by executive officers whose
income exceeds $100,000 26.3 26.0 24.0 24.0

Executives who work wholly or mainly outside Australia are

excluded from the above disclosures.

7 AUDITORS’ REMUNERATION
Amounts received or due and receivable for audit
services by:
– Auditors of the Chief Entity 0.9 0.9 0.7 0.7

Amounts received or due and receivable for other

services by:
– Auditors of the Chief Entity 1.6 1.6 1.6 1.6

8 CASH
Current
Cash on hand 2.9 2.7 2.7 2.4
Cash at bank 56.0 33.8 47.5 20.5
Cash on call 62.5 17.0 62.3 16.6
121.4 53.5 112.5 39.5

9 RECEIVABLES
Current
Trade debtors 813.8 808.2 777.3 773.6
Less: provision for doubtful debts 22.3 7.5 20.9 5.9
791.5 800.7 756.4 767.7
Trade debtors
Related parties
– controlled entities – – 43.6 49.1
– associated companies 7.3 12.2 6.0 11.4
– other related parties 112.4 56.0 110.4 55.3
119.7 68.2 160.0 115.8

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 43

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

9 RECEIVABLES cont.
Loans owing from
Related parties
– controlled entities – – 333.5 299.9
Bills of exchange and promissory notes 339.0 234.7 339.0 234.7
Aircraft security and term deposits 28.7 22.6 27.6 21.4
Negotiable securities 235.5 451.0 235.5 451.0
Sundry debtors
Related parties
– controlled entities – – 0.2 0.3
Other persons/bodies corporate 65.4 71.0 54.4 59.5
65.4 71.0 54.6 59.8

1,579.8 1,648.2 1,906.6 1,950.3

Non-current
Loans owing from
Related parties
– controlled entities – – 284.0 428.6
Other persons/bodies corporate 22.6 21.6 – 0.1
Bills of exchange 67.1 63.1 67.1 63.1
Aircraft security and term deposits 516.3 477.0 485.1 445.3
Sundry debtors
Other persons/bodies corporate 46.5 44.2 24.3 21.1
652.5 605.9 860.5 958.2

Non-current bills of exchange and current and non-current

aircraft security and term deposits have been pledged
as security to providers of aircraft finance.

10 INVENTORIES
Current
At cost
Net engineering expendables 147.6 90.3 141.4 51.0
Consumable stores 36.2 43.8 33.9 39.8
Work in progress 20.7 11.7 20.6 10.4
204.5 145.8 195.9 101.2
At net realisable value
Aircraft spare parts held for disposal 3.0 3.7 3.0 1.5
207.5 149.5 198.9 102.7

11 INVESTMENTS
Non-current
Unlisted investments at cost
Controlled entities (refer note 27) – – 331.7 331.7
Associated companies (refer note 28) 32.9 3.5 30.4 1.0
Other corporations 2.3 10.2 2.5 10.2
Partnership interest at cost 3.4 2.9 – –
38.6 16.6 364.6 342.9

44 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

12 OTHER ASSETS
Current
Advances, prepayments and other deposits 40.3 26.9 23.4 15.6
Other 16.5 7.2 15.7 5.9
56.8 34.1 39.1 21.5

Non-current
Future income tax benefit 37.1 65.1 – –
Expenditure carried forward 6.9 9.0 2.7 3.8
Other 7.4 9.6 5.6 7.9
51.4 83.7 8.3 11.7

13 PROPERTY, PLANT AND EQUIPMENT

Non-current
Freehold land
Owned at cost 5.3 11.1 – –
Directors’ valuation 1992 57.3 57.4 57.3 57.4
Directors’ valuation 1993 1.7 1.7 1.7 1.7
Directors’ valuation 1995 4.8 4.8 – –
69.1 75.0 59.0 59.1

Leasehold land
Leasehold land at cost – 1.6 – –

Buildings
Owned at cost 126.5 143.3 21.3 19.4
Directors’ valuation 1992 44.9 44.9 44.9 44.9
Directors’ valuation 1996 9.7 9.7 – –
181.1 197.9 66.2 64.3
Less: accumulated depreciation
At cost 20.7 19.6 11.9 11.1
Directors’ valuation 1992 15.6 13.0 15.6 13.0
Directors’ valuation 1996 0.8 0.4 – –
37.1 33.0 27.5 24.1
144.0 164.9 38.7 40.2
Leased at cost 52.6 52.9 29.0 29.0
Less: accumulated amortisation 27.6 26.1 12.6 11.7
25.0 26.8 16.4 17.3
Total buildings at cost and valuation 233.7 250.8 95.2 93.3
Less: accumulated depreciation/amortisation 64.7 59.1 40.1 35.8
169.0 191.7 55.1 57.5

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 45

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

13 PROPERTY, PLANT AND EQUIPMENT cont.

Leasehold improvements
At cost 969.0 902.5 660.4 573.0
Less: accumulated depreciation 419.5 375.2 230.8 187.5
549.5 527.3 429.6 385.5

Aircraft and engines

Owned at cost 1,666.9 1,665.0 1,155.3 1,137.8
Less: accumulated depreciation 719.3 641.0 615.0 526.1
947.6 1,024.0 540.3 611.7
Hire purchased at cost 2,867.3 2,721.5 2,662.3 2,526.8
Less: accumulated amortisation 686.6 561.5 639.3 523.0
2,180.7 2,160.0 2,023.0 2,003.8
Leased at cost 1,681.8 1,539.3 810.8 842.2
Directors’ valuation 1994 – 24.2 – 24.2
Directors’ valuation 1998 11.6 – 11.6 –
1,693.4 1,563.5 822.4 866.4
Less: accumulated amortisation
At cost 427.1 302.8 170.5 123.1
Directors’ valuation 1994 – 11.3 – 11.4
427.1 314.1 170.5 134.5
1,266.3 1,249.4 651.9 731.9
Total aircraft and engines at cost and valuation 6,227.6 5,950.0 4,640.0 4,531.0
Less: accumulated depreciation/amortisation 1,833.0 1,516.6 1,424.8 1,183.6
4,394.6 4,433.4 3,215.2 3,347.4

Aircraft spare parts

Owned at cost 395.6 314.9 383.3 258.4
Less: accumulated depreciation 197.4 153.7 189.9 128.3
198.2 161.2 193.4 130.1
Leased at cost 33.3 33.3 – –
Less: accumulated amortisation 17.7 16.0 – –
15.6 17.3 – –
Total aircraft spare parts at cost 428.9 348.2 383.3 258.4
Less: accumulated depreciation/amortisation 215.1 169.7 189.9 128.3
213.8 178.5 193.4 130.1
Manufacturers’ deposits
Progress payments at cost 195.6 51.1 195.6 51.1

46 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

13 PROPERTY, PLANT AND EQUIPMENT cont.

Plant and equipment
Owned at cost 883.5 862.4 556.4 544.2
Less: accumulated depreciation 568.3 523.9 350.9 318.4
315.2 338.5 205.5 225.8
Leased at cost 21.3 25.3 – –
Less: accumulated amortisation 14.7 15.2 – –
6.6 10.1 – –
Total plant and equipment at cost 904.8 887.7 556.4 544.2
Less: accumulated depreciation/amortisation 583.0 539.1 350.9 318.4

321.8 348.6 205.5 225.8

Total property, plant and equipment at cost and valuation 9,028.7 8,466.9 6,589.9 6,110.1
Less: accumulated depreciation/amortisation 3,115.3 2,659.7 2,236.5 1,853.6

5,913.4 5,807.2 4,353.4 4,256.5

Properties
Recent valuations:
Freehold land and buildings based on independent
valuations undertaken within three years of balance date 245.1 267.3 135.7 134.6

Interests in leasehold improvements where lease

period exceeds 20 years based on independent
valuations undertaken within three years of balance date 495.9 442.9 296.8 255.7

Secured assets
Certain aircraft act as security against related financings. Under the terms of certain financing facilities entered into
by the Economic Entity, the participants to these agreements have a fixed charge over certain aircraft and engines
to the extent that debt has been issued directly to those underwriters (refer note 16).

Recent valuations
Independent valuations of property and aircraft assets (excluding aircraft spare parts) were obtained as at
30 June 1998.

The 1998 independent valuation of land, buildings and leasehold improvements was carried out by Mr R.G. Cowell,
FVLE, AREI, of Knight Frank Valuations Services (NSW) Pty. Limited. The 1998 independent valuation of aircraft and
spare engines was carried out by Mr J.W. Vitale, ISTAT Certified Appraiser, of AVITAS Inc.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 47

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

13 PROPERTY, PLANT AND EQUIPMENT cont.

The valuations for each asset class were in excess of their carrying amounts, however no additional increments have
been brought to account. Details of the valuations obtained were as follows:

1998 1997
Valuation Carrying Valuation Carrying
Amount Amount Excess Amount Amount Excess
$m $m $m $m $m $m

Asset class
Freehold land and buildings 245.1 213.1 32.0 267.3 239.9 27.4
Leasehold land, buildings
and improvements 698.4 574.5 123.9 674.7 555.7 119.0
Aircraft and engines 6,390.1 4,394.6 1,995.5 4,976.2 4,433.4 542.8
7,333.6 5,182.2 2,151.4 5,918.2 5,229.0 689.2
All valuations were performed primarily on a desktop ‘sight unseen’ basis. The valuations of aircraft and spare
engines were expressed in United States dollars and converted to their Australian dollar equivalents based on an
exchange rate of 0.59741 at 30 June 1998 (1997: 0.75063). The valuations were based on open market value or
special use value to the Economic Entity taking into account the age and condition of the assets.

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

14 INTANGIBLES
Non-current
Goodwill at cost 36.8 36.8 – –
Less: accumulated amortisation 8.2 6.5 – –
28.6 30.3 – –
Trademarks, tradenames and licences at cost 8.2 8.2 – –
Less: accumulated amortisation 8.2 8.2 – –
– – – –
28.6 30.3 – –

15 ACCOUNTS PAYABLE
Current
Trade creditors
Related parties
– controlled entities – – 39.3 27.6
– associated companies 13.4 2.5 13.4 2.4
– other related parties 104.5 65.2 101.8 63.8
Other persons/bodies corporate 1,053.8 945.4 940.9 855.8
1,171.7 1,013.1 1,095.4 949.6

Sundry creditors and accruals

Related parties
– controlled entities – – 1.5 2.6
Other persons/bodies corporate 128.7 84.3 91.6 49.1
128.7 84.3 93.1 51.7
Unredeemed frequent flyer liability 83.8 57.0 83.8 57.0
1,384.2 1,154.4 1,272.3 1,058.3

Redeemed Frequent Flyer Revenue Passenger

Kilometres as a percentage of Available Seat
Kilometres was 2.1% for the year ended
30 June 1998.

48 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

16 BORROWINGS
Current
Bank overdrafts – unsecured 0.8 0.4 – –
Bank loans
– secured 13.7 9.5 – –
– unsecured 63.5 69.5 63.5 69.5
Other loans
Related parties – unsecured
– controlled entities – – 349.6 309.5
Other persons/bodies corporate
– secured 4.7 6.0 – –
– unsecured – 367.9 – 367.9
Finance lease and hire purchase liabilities (refer note 22) 111.2 88.6 62.6 51.8
193.9 541.9 475.7 798.7

Non-current
Bank loans
– secured 124.2 137.9 – –
– unsecured 197.1 286.3 197.1 286.3
Other loans
Related parties – unsecured
– controlled entities – – 245.3 339.4
Other persons/bodies corporate
– secured 10.1 14.7 – –
– unsecured 426.8 339.7 426.8 339.7
Lease residual values 323.0 265.6 323.0 265.6
Finance lease and hire purchase liabilities (refer note 22) 1,510.4 1,545.3 1,213.0 1,199.2
2,591.6 2,589.5 2,405.2 2,430.2
Certain current and non-current loans relate to specific
financings of aircraft and are secured by the aircraft to
which they relate.

17 PROVISIONS
Current
Dividends (refer note 32) 83.2 72.3 83.2 72.3
Income tax
– Australia 125.3 113.7 64.2 55.0
– overseas 3.5 2.7 2.6 1.9
Employee entitlements (refer note 31)
– annual leave 245.1 243.0 216.1 213.7
– long service leave 28.7 22.9 24.2 20.4
Staff redundancy and restructuring costs (refer note 31) 44.8 67.9 32.6 52.3
Under recovery of rentals on sub-let premises 4.5 8.9 4.5 8.9
Insurance and other 24.0 18.9 14.0 12.9
559.1 550.3 441.4 437.4

Non-current
Deferred income tax 482.2 479.1 267.5 259.9
Employee entitlements (refer note 31)
– long service leave 238.7 199.6 219.9 183.7
Under recovery of rentals on sub-let premises 41.8 41.4 41.8 41.4
Insurance and other 42.7 40.3 32.6 28.3
805.4 760.4 561.8 513.3

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 49

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

18 OTHER LIABILITIES
Non-current
Systems development put contracts liability 29.9 26.5 29.9 26.5

19 SHARE CAPITAL
Issued and paid up capital
1,177,332,232 ordinary shares of $1 each fully paid 1,177.3 1,111.7 1,177.3 1,111.7
(1997: 1,111,709,081)

Movements in issued and paid up ordinary share capital of the Chief Entity during the past two years were as follows:

NUMBER ISSUE
OF SHARES PRICES
DATE DETAILS NOTES m $ $m

1 July 1996 Opening balance 1,035.5 n/a 1,035.5

4 November 1996 Qantas Staff Share Plan 20 7.9 – 7.9
6 December 1996 Dividend Reinvestment Plan and Bonus
Share Plan issues, plus shares issued
pursuant to a dividend underwriting
agreement 20, 32 38.0 1.74/1.88 38.0
3 April 1997 Dividend Reinvestment Plan and Bonus
Share Plan issues, plus shares issued
pursuant to a dividend underwriting
agreement 20, 32 30.3 2.29/2.41 30.3
30 June 1997 Closing balance 1,111.7 1,111.7
3 December 1997 Dividend Reinvestment Plan issue
and shares issued pursuant to a
dividend underwriting agreement 20, 32 29.6 2.40/2.53 29.6
6 February 1998 Qantas Staff Share Plan II 20 6.0 – 6.0
1 April 1998 Dividend Reinvestment Plan issue
and shares issued pursuant to a
dividend underwriting agreement 20, 32 30.0 2.46/2.59 30.0
30 June 1998 Closing balance 1,177.3 1,177.3

Qantas Staff Share Plan II

The Qantas Staff Share Plan II (QSSP II) was open to all Eligible Employees of the Chief Entity and its wholly owned
controlled entities. On 6 February 1998, $500 worth (subject to rounding) of ordinary, fully paid bonus shares were
issued to 27,686 employees, resulting in 216 shares being granted to each participating employee.

Dividend Reinvestment Plan and Bonus Share Plan

The Chief Entity previously operated a Dividend Reinvestment Plan (DRP) and a Bonus Share Plan (BSP). The terms
and conditions of the DRP have been modified so that future issues of shares under the DRP will be at the prevailing
market price (rather than at a five percent discount to the prevailing market price). The modified issue price under the
DRP will apply to all future dividends including the final dividend for the year ended 30 June 1998. The BSP has been
terminated as there are no tax advantages to participating shareholders.

50 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

20 RESERVES
Share premium reserve 636.3 555.1 636.3 555.1
Asset revaluation reserve 52.6 54.0 82.9 82.9
Foreign currency translation reserve 0.1 0.8 – –
689.0 609.9 719.2 638.0

Movements in reserves:

Share premium reserve

Balance at the beginning of the financial year 555.1 509.0 555.1 509.0
Add/(less):
– issue of Dividend Reinvestment Plan shares
and shares issued pursuant to a dividend
underwriting agreement 87.2 62.2 87.2 62.2
– issue of Bonus Share Plan shares – (7.7) – (7.7)
– issue under Qantas Staff Share Plan II shares (6.0) (7.9) (6.0) (7.9)
– privatisation costs – (0.5) – (0.5)
Balance at the end of the financial year 636.3 555.1 636.3 555.1

Asset revaluation reserve

Balance at the beginning of the financial year 54.0 54.0 82.9 82.9
Less:
– revaluation decrements 1.4 – – –
Balance at the end of the financial year 52.6 54.0 82.9 82.9

Foreign currency translation reserve

Balance at the beginning of the financial year 0.8 11.4 – –
Less:
– net translation adjustments on consolidation
of controlled foreign entities 0.7 10.6 – –
Balance at the end of the financial year 0.1 0.8 – –

21 OUTSIDE EQUITY INTERESTS

Ordinary share capital of controlled entities
issued to outside equity interests 0.3 0.3
Outside equity interests in reserves
of controlled entities 0.1 0.1
Outside equity interests in retained profits
of controlled entities 1.6 1.6
2.0 2.0

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 51

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

22 FINANCE LEASE COMMITMENTS

Included in the financial statements as finance lease
and hire purchase liabilities are the present values
of future rentals of the following:
Aircraft 1,601.5 1,608.9 1,263.1 1,236.9
Buildings 12.5 14.5 12.5 14.1
Computer and communications equipment 7.6 10.5 – –
1,621.6 1,633.9 1,275.6 1,251.0

Payable:
Not later than one year 274.6 255.7 171.9 161.5
Later than one year but not later than two years 287.3 261.2 178.2 159.0
Later than two years but not later than five years 1,045.3 798.0 896.1 620.4
Later than five years 788.8 1,242.5 634.3 1,012.3
2,396.0 2,557.4 1,880.5 1,953.2
Less: future finance charges 710.3 832.6 604.9 702.2
Total lease liability 1,685.7 1,724.8 1,275.6 1,251.0
Less: debt funded portion 64.1 90.9 – –
1,621.6 1,633.9 1,275.6 1,251.0

Balance represents:
Current liability (refer note 16) 111.2 88.6 62.6 51.8
Non-current liability (refer note 16) 1,510.4 1,545.3 1,213.0 1,199.2
1,621.6 1,633.9 1,275.6 1,251.0

23 OPERATING LEASE AND HIRE COMMITMENTS

Future net operating lease and hire commitments
not provided for in the financial statements: 2,406.6 2,864.8 2,344.3 2,809.1

Payable:
Not later than one year 399.5 394.1 398.4 396.9
Later than one year but not later than two years 309.2 373.0 320.5 380.2
Later than two years but not later than five years 762.0 941.3 722.0 916.8
Later than five years 935.9 1,156.4 903.4 1,115.2
2,406.6 2,864.8 2,344.3 2,809.1
Less: provision for potential under recovery
of rentals on unused premises available for
sub-lease (refer note 17) 46.3 50.3 46.3 50.3
2,360.3 2,814.5 2,298.0 2,758.8

Operating lease commitments represent:

Cancellable operating leases 884.3 1,130.0 751.9 988.3
Non-cancellable operating leases
Aircraft leases 1,476.0 1,684.5 1,476.0 1,684.5
Property leases – – 70.1 86.0
2,360.3 2,814.5 2,298.0 2,758.8

52 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

23 OPERATING LEASE AND HIRE COMMITMENTS cont.

Non-cancellable operating lease commitments, excluding
unguaranteed residual payments, not provided for in the
financial statements:

Payable:
Not later than one year 216.5 227.8 250.9 260.9
Later than one year but not later than two years 194.8 224.0 230.5 259.1
Later than two years but not later than five years 526.1 554.3 526.1 572.1
Later than five years 538.6 678.4 538.6 678.4
1,476.0 1,684.5 1,546.1 1,770.5

In respect of the Chief Entity’s non-cancellable operating

leases, the market value of jet aircraft at 30 June 1998
based on an independent desktop valuation was
$1,657.3 million (1997: $1,519.3 million), compared to an
implied carrying value of $1,152.7 million (1997: $1,302.5
million) had the leased assets been capitalised on inception.

24 CAPITAL EXPENDITURE COMMITMENTS

Capital expenditure commitments contracted
but not provided for in the financial statements:
Aircraft 1,422.7 345.2 1,422.7 336.9
Building works 155.9 270.0 130.3 203.9
Other 49.9 34.5 29.1 22.6
1,628.5 649.7 1,582.1 563.4

Payable:
Not later than one year 974.6 490.9 928.2 429.3
Later than one year but not later than two years 651.2 127.6 651.2 108.2
Later than two years but not later than five years 2.7 31.2 2.7 25.9
1,628.5 649.7 1,582.1 563.4

25 CONTINGENT LIABILITIES
Related parties
Guarantees to support borrowings and finance lease
commitments to other persons/bodies corporate on
behalf of controlled entities 32.3 36.6 17.8 17.8
Guarantees and letters of comfort to support operating
lease commitments and other arrangements entered into
with other persons/bodies corporate by controlled entities 97.2 89.9 97.2 89.9
Guarantees and letters of comfort to support leveraged
and operating lease commitments to other persons/bodies
corporate on behalf of associated companies 3.9 4.1 3.9 4.1
133.4 130.6 118.9 111.8
Other persons/bodies corporate
General guarantees in the normal course of business 40.3 30.2 40.3 30.2
Contingent liabilities relating to current and threatened litigation 15.9 36.6 15.9 36.5
56.2 66.8 56.2 66.7
189.6 197.4 175.1 178.5

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 53

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

25 CONTINGENT LIABILITIES cont.

Terminal fuel facilities
The Economic Entity, together with other airlines, has entered into various agreements in order to facilitate the
funding and installation of jet turbine fuel hydrant systems and terminal equipment facilities at Los Angeles and San
Francisco airports. The airlines have jointly and severally agreed to repay any unpaid balance (including interest) of
the loans totalling $286.7 million (1997: $223.8 million) in the event the agreements are terminated prior to expiry
of the loans.

Aircraft financing
As part of the financing arrangements for the acquisition of aircraft, the Economic Entity has provided certain
guarantees and indemnities to various lenders and equity participants in leveraged lease transactions. The Economic
Entity has guaranteed that the lessors will receive all of the funds due to them under the lease arrangements. Only in
exceptional circumstances, including the insolvency of major international banks, will the Economic Entity be required
to make any payments under these guarantees.

The Chief Entity and certain controlled entities have entered into asset value underwriting arrangements with lenders
under certain aircraft secured financings. These arrangements protect the value of the aircraft security to the lenders
to a predetermined level. This is reflected by the balance of aircraft security deposits held with certain financial
institutions and included in current and non-current receivables totalling $529.6 million (1997: $485.7 million).

The Economic Entity has provided standard tax indemnities to the equity investors in certain leveraged leases. The
indemnities effectively guarantee the after tax rate of return of the investors, and the Chief Entity may be subject to
additional financing costs on future lease payments if certain assumptions made at the time of entering the
transactions, including assumptions as to the rate of income tax, subsequently become invalid.

Workers’ Compensation Self Insurance

An amount of $26.7 million, included in receivables, is held on deposit as security for Workers’ Compensation Self
Insurance Licences.

Unrealised losses – back to back hedges

Where long-term foreign currency borrowings have been denominated in surplus revenue currencies, offsetting
forward foreign exchange contracts have been used to hedge the cash flows arising under the borrowings with the
expected revenue surpluses used to hedge the borrowings. To the extent a gain or loss is incurred, this is deferred
until the net revenue is realised. As at 30 June 1998, total unrealised exchange losses on hedges of net revenue
designated to service long-term debt were $370 million compared to $219.4 million at 30 June 1997.

26 SUPERANNUATION COMMITMENTS
The Economic Entity maintains five superannuation plans covering Australian based employees. The Economic Entity
also maintains a number of superannuation and retirement plans for local staff in overseas countries. Plan trustees
are indemnified by the Economic Entity against actions, claims and demands arising from their lawful administration
of the superannuation plans.

The superannuation plan for the Chief Entity’s Australian based employees (including employees of certain controlled
entities) provides either accumulation benefits (with a guaranteed minimum benefit for members of Division 1 of the
Qantas Airways Limited Staff Superannuation Plan (QALSSP)) or a combination of accumulation and defined benefits
payable as a lump sum. The Chief Entity is committed to making contributions to the plan, the commitment being
legally enforceable on the basis of actuarial advice of amounts required to fully fund the superannuation benefits
provided for in the rules of the plan, after allowing for employee contributions. In addition, the Economic Entity is
required to provide a minimum level of contributions under the Australian Superannuation Guarantee legislation.

The various plans were last actuarially assessed as detailed in the following table. The actuarial valuations confirmed
that the value of the assets of the plans were sufficient to meet all anticipated liabilities, including vested benefits of
the plans in the event of termination of the plans and voluntary or compulsory termination of employment of each
employee at balance date.

The actuarial valuation of the QALSSP determined that the Chief Entity’s contribution to fund the defined benefit
portion of the plan was in surplus.

The Regional Airlines Superannuation Plan comprises several categories of membership according to the
employers, being Airlink Pty Limited, Eastern Australia Airlines Pty Limited, Southern Australia Airlines Pty Limited
and Sunstate Airlines (Qld) Pty Limited.

54 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

26 SUPERANNUATION COMMITMENTS cont.

The last actuarial reviews of the funds were as follows:

NAME AND
QUALIFICATION
FUND TYPE OF FUND OF ACTUARY* DATE

Qantas Airways Limited Staff Defined benefit K.N. Lockery FIA FIAA 30 June 1996
Superannuation Plan Accumulation Not applicable

TAA Pilots’ Superannuation Scheme (1977) Defined benefit C.B. Twomey FIA FIAA 30 June 1997

Australian Airlines Pilots’ Accumulation Accumulation Not applicable

Fund (1989)

Australian Airlines Flight Engineers’ Defined benefit C.B. Twomey FIA FIAA 30 June 1997
Superannuation Plan

Regional Airlines Superannuation Plan Accumulation Not applicable

* Actuarial valuations performed by actuaries employed by Towers, Perrin, Forster & Crosby, Inc.

Certain controlled entities have a legally enforceable obligation under various awards to contribute to industry plans
on behalf of some employees. These plans operate on an accumulation basis and provide lump sum benefits for
members on resignation, retirement or death.

The following defined benefit superannuation plans are sponsored by the Economic Entity:

Net Net
Present market Present market
value of value of Employer value of value of Employer
accrued fund contributions Vested accrued fund contributions Vested
Fund benefits* assets^ Excess to fund^ benefits^ benefits* assets^ Excess to fund^ benefits^
1998 CONSOLIDATED $ m 1998 CHIEF ENTITY $ m

Qantas Airways Limited

Staff Superannuation Plan 2,078.6 2,840.5 761.9 147.0 2,363.9 1,866.4 2,562.9 696.5 132.6 2,132.9

TAA Pilots’ Superannuation

Scheme (1977) 10.6 19.9 9.3 0.2 10.6 – – – – –

Australian Airlines Flight

Engineers’ Superannuation Plan 13.2 21.5 8.3 – 13.1 – – – – –
Total 2,102.4 2,881.9 779.5 147.2 2,387.6 1,866.4 2,562.9 696.5 132.6 2,132.9
1997 CONSOLIDATED $ m 1997 CHIEF ENTITY $ m

Qantas Airways Limited

Staff Superannuation Plan 2,078.6 2,332.9 254.3 156.8 1,986.0 1,866.4 2,094.7 228.3 140.8 1,783.2

TAA Pilots’ Superannuation

Scheme (1977) 9.4 17.5 8.1 0.2 10.5 – – – – –

Australian Airlines Flight

Engineers’ Superannuation Plan 11.9 19.2 7.3 0.1 13.3 – – – – –
Total 2,099.9 2,369.6 269.7 157.1 2,009.8 1,866.4 2,094.7 228.3 140.8 1,783.2
* As at date of last actuarial review.
^ As at the last set of audited financial statements prepared by the plans.

Vested benefits are benefits which are not conditional upon continued membership of the plan, and include benefits
which members were entitled to receive had they terminated their membership of the plan as at balance date.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 55

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

ECONOMIC
COUNTRY OF ENTITY AMOUNT OF
INCORPORATION INTEREST INVESTMENT
1998 1997 1998 1997
% % $m $m

27 PARTICULARS IN RELATION TO CONTROLLED

ENTITIES
Qantair Limited Australia 100 100 197.7 197.7
QH Tours Limited Australia 100 100 9.2 9.2
Holiday Tours and Travel Pte Limited Singapore 75 75 – –
Jetabout Holidays Pte Limited Singapore 75 75 – –
Tour East Singapore (1996) Pte Limited Singapore 75 75 – –
Tour East (Hong Kong) Limited Hong Kong 75 75 – –
PT Tour East Indonesia Indonesia 60 60 – –
PT Pacto Holiday Tours Indonesia 53 53 – –
QH International Co, Limited Japan 100 100 – –
Jetabout Japan Inc Japan 100 100 – –
Holiday Tours and Travel Limited Hong Kong 85 85 – –
QH Tours (UK) Limited UK 100 100 – –
Qantas Holidays Limited Australia 100 100 – –
Qantas Viva Holidays Limited Australia 100 100 – –
QH Cruises Pty Limited Australia 100 100 – –
Qantas Information Technology Limited Australia 100 100 1.4 1.4
Qantas Airline Systems and Research Limited Australia 100 100 – –
Qantas Flight Catering Holdings Limited Australia 100 100 – –
Qantas Flight Catering Limited Australia 100 100 – –
Asia Pacific Distribution Limited Australia 100 100 – –
Qantas Limited Australia 100 100 1.5 1.5
Southern Cross Insurances Pte Limited Singapore 100 100 0.6 0.6
Qantas Superannuation Limited Australia 100 100 – –
Qanlease Limited Australia 100 100 – –
QHF Insurance Brokers Limited # Australia – 49 – –
Qanfad Pty Limited Australia 100 100 – –
BD No 1 Limited Cayman Is. 100 100 – –
Kurrajong Limited Cayman Is. 100 100 – –
Mitokal Pty Limited @ Australia 33 33 – –
VH-OEB Pty Limited + Australia 100 – – –
Australian Airlines Limited Australia 100 100 121.3 121.3
Australian Resorts Pty Limited Australia 100 100 – –
ACN 009 716 769 Pty Limited Australia 100 100 – –
Dunk Island Resort Pty Limited ^ Australia – 100 – –
Bedarra Bay Resort Pty Limited ^ Australia – 100 – –
Bedarra Hideaway Resort Pty Limited ^ Australia – 100 – –
ACN 009 864 546 Pty Limited Australia 100 100 – –
Great Keppel Holdings Pty Limited Australia 100 100 – –
ACN 009 874 864 Pty Limited Australia 100 100 – –
ACN 009 842 719 Pty Limited Australia 100 100 – –
Australian Airlines Reservations Systems
Pty Limited Australia 100 100 – –
Australian Airlines Express Courier Pty Limited Australia 100 100 – –
Tysentle Pty Limited Australia 100 100 – –
ARANS Superannuation Pty Limited Australia 100 100 – –
AAPA Superannuation Pty Limited Australia 100 100 – –
AAFE Superannuation Pty Limited Australia 100 100 – –
AAG Superannuation Pty Limited Australia 100 100 – –
AAFA Superannuation Pty Limited Australia 100 100 – –
TAA Superannuation Pty Limited Australia 100 100 – –
Australian Regional Airlines Pty Limited Australia 100 100 – –
Sunstate Airlines (Qld) Pty Limited Australia 100 100 – –
Southern Australia Airlines Pty Limited Australia 100 100 – –
Airlink Pty Limited Australia 100 100 – –
Australian Regional Airlines (Qld) Pty Limited Australia 100 100 – –
Air Queensland Pty Limited Australia 100 100 – –

56 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

ECONOMIC
COUNTRY OF ENTITY AMOUNT OF
INCORPORATION INTEREST INVESTMENT
1998 1997 1998 1997
% % $m $m

27 PARTICULARS IN RELATION TO CONTROLLED

ENTITIES cont.
Lizard Island Resort Pty Limited Australia 100 100 – –
Eastern Australia Airlines Pty Limited Australia 100 100 – –
ACN 000 199 468 Pty Limited Australia 100 100 – –
First Brisbane Airport Pty Limited Australia 100 100 – –
First Brisbane Airport Unit Trust n/a 100 100 – –
Second Brisbane Airport Pty Limited Australia 100 100 – –
Second Brisbane Airport Unit Trust n/a 100 100 – –
TAA Aviation Pty Limited Australia 100 100 – –
Nostam Pty Limited Australia 100 100 – –
In Tours Airline Unit Trust No 1 n/a 100 100 – –
Priestdale Pty Limited Australia 100 100 – –
Denmell Pty Limited Australia 100 100 – –
Denmint Pty Limited Australia 100 100 – –
Denmost Pty Limited Australia 100 100 – –
Denold Pty Limited Australia 100 100 – –
Denpen Pty Limited Australia 100 100 – –
Denpet Pty Limited Australia 100 100 – –
Denpost Pty Limited Australia 100 100 – –
Denrac Pty Limited Australia 100 100 – –
Densale Pty Limited Australia 100 100 – –
Denseed Pty Limited Australia 100 100 – –
Denshore Pty Limited Australia 100 100 – –
Densip Pty Limited Australia 100 100 – –
Densound Pty Limited Australia 100 100 – –
Engine No 6 Pty Limited Australia 100 100 – –
Engine No 9 Pty Limited Australia 100 100 – –
Total controlled entities 331.7 331.7
All controlled entities carry on business in their country of incorporation, with the exception of Qantas Limited, which
also carries on business in Taiwan. All controlled entities are audited by member firms of KPMG, with the exception
of Mitokal Pty Limited.

Indentation of controlled entities signifies that the issued capital of the entity is owned by the entity above.

+ Acquired during the financial year.

# Liquidated during the financial year.
@ Definition of controlled entity satisfied by Accounting Standard AASB 1024: ‘Consolidated Accounts’.
^ Disposed of during the financial year.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 57

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

28 PARTICULARS IN RELATION TO ASSOCIATED COMPANIES

Details of significant interests in associated companies are as follows:

PRINCIPAL COUNTRY OF SHARE OWNERSHIP INTEREST AMOUNT OF INVESTMENT

ACTIVITIES INCORPORATION CLASS CONSOLIDATED CHIEF ENTITY CONSOLIDATED CHIEF ENTITY
1998 1997 1998 1997 1998 1997 1998 1997
% % % % $m $m $m $m
Travel Industries
Automated
Systems Reservations
Pty Limited systems Australia Ord. 50.0 50.0 25.0 25.0 2.1 2.1 1.0 1.0

Caterair Airport
Services Catering
Pty Limited services Australia Ord. 49.0 49.0 – – 1.2 1.2 – –

Australian Air
Express
Pty Limited Air cargo Australia Ord. 50.0 50.0 – – – – – –

Holiday Tours
and Travel Tours and
(Thailand) Limited travel Thailand Ord. 36.8 36.8 – – 0.1 0.1 – –

TET Limited Tours and

travel Thailand Ord. 36.8 36.8 – – – – – –
Holiday Tours
and Travel Tours and
Sdn Bhd travel Malaysia Ord. 22.5 22.5 – – 0.1 0.1 – –

Air Pacific Limited* Air

transport Fiji Ord. 46.1 – 46.1 – 29.4 – 29.4 –
32.9 3.5 30.4 1.0

* During the financial year, Qantas Airways Limited increased its equity ownership in Air Pacific Limited to 46.05 percent (1997: 17.5
percent). In accordance with the requirements of Accounting Standard AASB 1016: ‘Disclosure of Information about Investments in Associated
Companies’, this investment now satisfies the definition of an associated company. However, in accordance with the requirements of Accounting
Standard AASB 1031: ‘Materiality’, this investment has not been equity accounted.

Investments in associated companies are accounted for on a cost basis in the accounts of the Economic Entity and
the Chief Entity. No investments in associated companies are material as at 30 June 1998, and in accordance with
Accounting Standard AASB 1016: ‘Disclosure of Information about Investments in Associated Companies’, these
investments are not required to be equity accounted.

29 UNHEDGED FOREIGN CURRENCY BALANCES

The Australian currency equivalents of unhedged foreign currency balances included in the financial statements are:

1998 1997
Non- Non- Non- Non-
Current current Current current Current current Current current
asset asset liability liability Total asset asset liability liability Total
$m $m $m $m $m $m $m $m $m $m

Chief Entity
Japanese yen – 36.0 (4.0) (59.2) (27.2) – 33.2 (2.9) (57.7) (27.4)
United States dollars 56.7 169.0 (58.0) (173.8) (6.1) 5.9 108.5 (8.7) (113.4) (7.7)
United Kingdom pounds – – (17.8) – (17.8) 1.6 – (2.3) (1.7) (2.4)
New Zealand dollars – – (1.0) – (1.0) – – – – –
Other currencies – – – – – – – – – –
56.7 205.0 (80.8) (233.0) (52.1) 7.5 141.7 (13.9) (172.8) (37.5)
Controlled entities
United States dollars 18.8 0.2 (12.7) – 6.3 32.0 – (5.9) – 26.1
Other currencies 17.7 4.7 (20.1) (0.3) 2.0 15.5 2.8 (22.2) (0.2) (4.1)
93.2 209.9 (113.6) (233.3) (43.8) 55.0 144.5 (42.0) (173.0) (15.5)

58 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

30 FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity
instrument of another entity.

The Economic Entity is subject to interest rate, foreign currency, fuel price and credit risks. The Economic Entity manages
these risk exposures using various financial instruments, using a set of policies approved by the Board of Directors.
Economic Entity policy is not to enter, issue or hold derivative financial instruments for trading purposes.

(a) Interest rate risk

The Economic Entity manages interest rate risk by reference to a duration target, being a measure of the sensitivity of the
borrowing portfolio to changes in interest rates. The relative mix of fixed and floating interest rate funding is managed by
using interest rate swaps, forward rate agreements and options. Interest payments and receipts under interest rate
swaps are recognised on an accruals basis in the profit and loss account. Premiums paid on interest rate options are
amortised over the period of the hedge.

Weighted
average Floating Fixed interest rate maturing in: Non-
interest interest 1 year 1 to 5 over interest
Notes rate rate or less years 5 years bearing Total
(%) $m $m $m $m $m $m

Recognised financial assets

Cash 8 4.89 121.4 – – – – 121.4
Trade debtors 9 – – – – 911.2 911.2
Bills of exchange and promissory notes 9 5.10 – 339.0 67.1 – – 406.1
Aircraft security and term deposits 9 6.10 145.4 4.0 182.7 200.6 12.3 545.0
Negotiable securities 9 5.10 – 235.5 – – – 235.5
Sundry debtors 9 – – – – 111.9 111.9
Loans receivable 9 9.20 – – – 22.6 – 22.6
Net receivables under hedge/swap
contracts (i) (1,249.0) 95.9 1,021.3 871.8 – 740.0
Investments 11 – – – – 38.6 38.6
Total (982.2) 674.4 1,271.1 1,095.0 1,074.0 3,132.3

Recognised financial liabilities

Trade creditors 15 – – – – 1,171.7 1,171.7
Sundry creditors 15 – – – – 128.7 128.7
Unredeemed frequent flyer liability 15 – – – – 83.8 83.8
Bank overdrafts – unsecured 16 7.45 0.8 – – – – 0.8
Bank loans – secured 16 15.34 – 13.7 124.2 – – 137.9
Bank loans – unsecured 16 7.99 – 63.5 197.1 – – 260.6
Other loans – secured 16 5.59 14.8 – – – – 14.8
Other loans – unsecured 16 9.78 133.9 – 292.9 – – 426.8
Lease residual values 16 10.15 – – 323.0 – – 323.0
Finance lease and hire purchase liabilities 16 5.84 875.0 56.9 579.2 110.5 – 1,621.6
System development put contract liability 18 – – – – 29.9 29.9
Sub total 1,024.5 134.1 1,516.4 110.5 1,414.1 4,199.6

Unrecognised financial liabilities

Non-cancellable operating leases 6.27 619.6 110.5 261.6 497.7 – 1,489.4
Interest rate swaps (ii) 50.3 (148.6) 98.3 – – –
Total 1,694.4 96.0 1,876.3 608.2 1,414.1 5,689.0

(i) Notional principal amounts. Interest payable/receivable has been included in the calculation of the effective interest rate of the underlying
financial liability or asset. Excludes unrealised loss on revenue back to back hedges.
(ii) Notional principal amounts.

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 59

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

30 FINANCIAL INSTRUMENTS cont.

(b) Foreign exchange risk
Cross currency swaps are used to convert long-term foreign currency borrowings (both recognised and unrecognised) to
currencies in which the Economic Entity has forecast sufficient surplus net revenues to meet the principal and interest
obligations under the swaps. These foreign currency borrowings have a maturity of between one and twelve years. Where
this has occurred, back to back forward foreign exchange contracts have been used to hedge the cash flows arising under
the borrowings with the expected revenue surpluses used to hedge the borrowings. To the extent a gain or loss is
incurred, this is deferred until the net revenue is realised. Forward foreign exchange contracts and currency options are
used to hedge a portion of remaining net foreign currency revenues or expenditures in accordance with Economic Entity
policy, out to twelve months. Purchases and sales of aircraft denominated in a foreign currency are hedged at the date
a firm commitment to buy or sell is entered into using a combination of forward foreign exchange contracts and currency
options.

Any unrealised gains or losses on contracts entered into to hedge anticipated sales and purchases of goods and
services, together with the cost of the contracts, will be recognised in the financial statements at the time the
underlying transaction occurs. As at 30 June 1998, the amount of deferred or unrecognised loss, including hedges of
net revenue designated to service long-term debt, is $350.7 million.

(c) Fuel price risk

The Economic Entity uses options and swaps on aviation fuel and crude oil to hedge the exposure to movements in
the price of aviation fuel. Hedging is conducted in accordance with Economic Entity policy. Up to 50 percent of
estimated fuel costs out to 18 months may be hedged, with any hedging outside these parameters requiring approval
by the Board of Directors.

Any unrealised gains or losses on contracts hedging anticipated fuel transactions, together with the cost of the
contracts, will be recognised in the financial statements at the time the underlying transaction occurs. No material
unrealised gains or losses on fuel contracts exist as at 30 June 1998.

(d) Credit risk

Credit risk is the potential loss from a transaction in the event of default by the counterparty during the term of the
transaction or on settlement of the transaction. Credit exposure is measured as the cost to replace existing
transactions should a counterparty default. The Economic Entity conducts transactions with the following major types
of counterparties:

– trade debtor counterparties – the credit risk is the recognised amount, net of any provision for doubtful debts. As
at 30 June 1998, this amounted to $911.2 million. The Economic Entity has no significant concentration of credit
risk with any single customer or group of customers; and

– other financial asset counterparties – the Economic Entity restricts its dealings to counterparties that have
acceptable credit ratings. Should the rating of a counterparty fall below certain levels, internal policy dictates that
approval by the Board of Directors is required to maintain the level of counterparty exposure.

The Economic Entity minimises the concentration of credit risk by undertaking transactions with a large number of
customers and counterparties in various countries. As at 30 June 1998, the credit risk of the Economic Entity to
other financial asset counterparties amounted to $3,480.3 million and was spread over a number of regions,
including Australia, Asia, Europe and the United States.

60 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

30 FINANCIAL INSTRUMENTS cont.

(e) Net fair value
Recognised financial instruments
The net fair value of cash, cash equivalents and non-interest bearing financial assets and liabilities approximates
their carrying value due to their short maturity. The net fair value of other financial assets and liabilities is
determined by valuing them at the present value of future contractual cash flows. Cash flows are discounted using
standard valuation techniques at the applicable market yield having regard to the timing of the cash flows.

Unrecognised financial instruments

The net fair value of forward foreign exchange and fuel contracts is determined as the unrealised gain or loss at
balance date by reference to market exchange rates and fuel prices. The net fair values of operating lease and
interest rate swaps are determined as the present value of future contractual cash flows. Cash flows are discounted
using standard valuation techniques at the applicable market yield having regard to the timing of the cash flows. The
net fair value of options is determined using standard valuation techniques.

The following table shows the carrying amount and net fair value of financial assets and liabilities as at balance date:

Carrying amount Net fair value

$m $m

On balance sheet
Financial assets
Cash 121.4 121.4
Trade debtors 911.2 911.2
Bills of exchange and promissory notes 406.1 410.0
Aircraft security and term deposits 545.0 591.9
Negotiable securities 235.5 238.9
Sundry debtors 111.9 111.9
Loans receivable 22.6 22.6
Net receivables under hedge/swap contracts 740.0 1,029.1
Investments 38.6 38.6
3,132.3 3,475.6
Financial liabilities
Trade creditors 1,171.7 1,171.7
Sundry creditors 128.7 128.7
Unredeemed frequent flyer liability 83.8 83.8
Bank overdraft – unsecured 0.8 0.8
Bank loans – secured 137.9 177.5
Bank loans – unsecured 260.6 277.5
Other loans – secured 14.8 15.0
Other loans – unsecured 426.8 460.9
Lease residual values 323.0 372.8
Finance lease and hire purchase liabilities 1,621.6 1,840.2
System development put contract liability 29.9 29.9
4,199.6 4,558.8
Net financial liabilities (1,067.3) (1,083.2)

Off balance sheet

Financial assets
Forward contracts (4.9)
Option contracts 13.9
9.0
Financial liabilities
Non-cancellable operating leases 1,846.9
Interest rate swaps (4.6)
1,842.3

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

Carrying amount
$m

30 FINANCIAL INSTRUMENTS cont.

(e) Net fair value cont.
Reconciliation of net financial liabilities to net assets
Net financial liabilities per above (1,067.3)
Non-financial assets
Receivables under hedge contracts 370.0
Inventories 207.5
Property, plant and equipment 5,913.4
Intangibles 28.6
Prepayments 40.3
Future income tax benefit 37.1
Expenditure carried forward 6.9
Other assets 23.9
Non-financial liabilities
Provisions (1,364.5)
Revenue received in advance (804.8)
Deferred lease benefits/income (428.7)
Net assets per balance sheet 2,962.4

(f) Comparative information

This is the first year that the Economic Entity is required to adopt Accounting Standard AASB 1033: ‘Presentation and
Disclosure of Financial Instruments’. Therefore, comparative information has not been disclosed.

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

31 EMPLOYEE ENTITLEMENTS
Employee entitlement liabilities
Provisions for employee entitlements
Current (refer note 17) 273.8 265.9 240.3 234.1
Non-current (refer note 17) 238.7 199.6 219.9 183.7
Staff redundancy and restructuring costs
Current (refer note 17) 44.8 67.9 32.6 52.3
Aggregate employee entitlement liabilities 557.3 533.4 492.8 470.1

Qantas Staff Share Plan II

The Qantas Staff Share Plan II is open to all Eligible Employees
of the Chief Entity and its wholly owned controlled entities.
Further details are included in note 19.

Superannuation
Employees of the Economic Entity are entitled to benefits on
retirement, disability or death from various superannuation plans.
Further details are included in note 26.

32 DIVIDENDS
Dividends paid
Unfranked dividends to outside equity interests 0.3 – – –
Unfranked dividends to shareholders of the Chief Entity
– 6.5 cents per ordinary share – 70.8 – 70.8
Fully franked dividends to shareholders of the Chief Entity
– 6.5 cents per ordinary share 74.6 – 74.6 –
Dividends provided
Fully franked dividends to shareholders of the Chief Entity
– 7.0 cents per ordinary share (1997: 6.5 cents) 83.2 72.3 83.2 72.3
158.1 143.1 157.8 143.1
Less: dividends paid from reserves
Unfranked dividends paid under the Bonus Share Plan from
share premium reserve – (15.1) – (15.1)
158.1 128.0 157.8 128.0

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

32 DIVIDENDS cont.
Amount of retained profits and reserves which could
be distributed as franked dividends out of existing
franking credits or out of franking credits arising from
the payment of income tax in the forthcoming year:
– Franked at 36% 217.3 141.4 118.9 96.4

The above amounts represent the balances of the franking

accounts as at 30 June 1998, taking into account adjustments for:
(a) franking credits that will arise from the payment of income
tax payable for the current year;
(b) franking debits that will arise from the payment of the final
dividend for the current year; and
(c) franking credits that may be prevented from being distributed
in the subsequent year.

33 SEGMENT INFORMATION
Analysis of sales revenue by geographic area
Passenger, freight and contract services revenue
Australia 4,129.8 3,941.6
United Kingdom and Europe 742.0 723.1
Japan 593.5 583.9
South East Asia and North East Asia 701.2 725.0
America and the Pacific 555.2 458.0
Other (including charters) 359.9 332.2
7,081.6 6,763.8
Other operating revenue
Tours and travel 510.7 482.0
Other service and miscellaneous 539.2 588.6
Total sales and other revenue 8,131.5 7,834.4
Interest revenue 100.0 100.7
Operating revenue 8,231.5 7,935.1

Earnings before interest and tax

International airline operations 271.9 274.7
Domestic airline operations 213.4 168.3
Subsidiary operations 96.4 74.2
581.7 517.2

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 63

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

34 EARNINGS PER SHARE

1998 1997
cents cents

Earnings per share based on operating profit after income tax

attributable to members of the Chief Entity 26.8 23.6

In accordance with the definitions included within Accounting Standard AASB 1027: ‘Earnings per Share’, there is no
material difference between basic and diluted earnings per share for the above years. The calculation of earnings per
share is based upon the weighted average number of ordinary shares outstanding during the year.

1998 1997
m m

Weighted average number of ordinary shares outstanding during the year,

as used in the calculation of earnings per share 1,138.6 1,069.6

35 EVENTS SUBSEQUENT TO BALANCE DATE

Amendments to the Corporations Law which came into effect on 1 July 1998 abolished the par value of shares. As a
result, the amounts standing in the share premium reserve became part of the Chief Entity’s share capital on 1 July
1998. The balance of the share premium reserve amounting to $636.3 million was transferred to the share capital
account on 1 July 1998, increasing the share capital to $1,813.6 million. The impact of this change has not been
reflected in the financial statements.

The changes to the Corporations Law mean that the share premium reserve will no longer be available for writing off
expenses in respect of any future share issues.

Other than the matter discussed above, no matters or circumstances have arisen since the end of the financial year that
have significantly affected or may significantly affect the operations of the Economic Entity, the results of those operations,
or the state of affairs of the Economic Entity in subsequent financial years.

36 NOTES TO THE STATEMENTS OF CASH FLOWS

Acquisition of controlled entities
In the prior year, control of Mitokal Pty Limited, as defined by Accounting Standard AASB 1024: ‘Consolidated
Accounts’ passed to Qantas Airways Limited. Details of the assets consolidated are:

CONSOLIDATED
1997
$m

Fair value of net assets of entity:

Property, plant and equipment 98.1
Future income tax benefit 22.7
Bank loans – secured (153.2)
Cash 3.4
Prepayments 2.8
(26.2)
Goodwill on acquisition 26.2
Cash consideration –

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Reconciliation of cash
Cash as at the end of the financial year as shown in the
statements of cash flows, is reconciled to the related
items in the balance sheets as follows:
Cash at hand 2.9 2.7 2.7 2.4
Cash at bank 56.0 33.8 47.5 20.5
Cash on call 62.5 17.0 62.3 16.6
Current bills of exchange and promissory notes 339.0 234.7 339.0 234.7
Current term deposits 15.6 13.8 15.4 13.8
Current negotiable securities 235.5 451.0 235.5 451.0
Bank overdrafts (0.8) (0.4) – –
Other current advances – – (349.5) (295.8)
710.7 752.6 352.9 443.2

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

36 NOTES TO THE STATEMENTS OF CASH FLOWS cont.

Reconciliation of operating profit after income tax
to net cash provided by operating activities
Operating profit after income tax 305.0 252.7 259.8 212.9
Add/(less) non-cash items:
Amortisation and depreciation 531.4 465.9 386.9 308.1
Net (profit)/loss on sale of non-current assets 3.8 0.8 (1.8) 4.5
Net other items 48.2 24.7 18.8 136.3
Net cash provided by operating activities
before changes in assets and liabilities 888.4 744.1 663.7 661.8
Changes in assets and liabilities:
(Increase)/decrease in trade and sundry debtors (43.3) 0.2 54.7 (102.9)
Increase in inventories (2.0) (8.1) (41.5) (10.6)
(Increase)/decrease in other assets (5.0) 10.7 (6.3) 6.8
(Increase)/decrease in prepayments (13.3) 19.1 (7.8) 15.0
(Increase)/decrease in bills of exchange
and aircraft security deposits (29.9) 0.1 (29.6) (0.5)
Increase/(decrease) in net receivables/payables
under hedge/swap contracts 20.7 (35.7) 21.5 (35.5)
Increase/(decrease) in trade and sundry payables (51.4) 121.2 (53.1) 147.1
Increase in revenue received in advance 153.5 47.6 147.8 37.9
Increase/(decrease) in deferred lease
benefits and other liabilities 229.9 (10.5) 214.1 (12.1)
Increase in provisions 27.3 90.6 23.9 117.9
Increase in deferred tax provisions 43.5 131.5 38.5 60.6
Net cash provided by operating activities 1,218.4 1,110.8 1,025.9 885.5

Non-cash financing and investing activities

During the year ended 30 June 1998, the Economic Entity entered into various finance lease arrangements for
property, plant and equipment with an aggregate fair value of $76.5 million (1997: $251.2 million). These
transactions are not reflected in the statements of cash flows.

Financing facilities
A standby facility has been provided through a syndicate of Australian and overseas banks and financial institutions.
The facility is undrawn and provides liquidity support for the Economic Entity.

A bank overdraft facility held with Commonwealth Bank of Australia covers the combined balances of the Chief Entity
and all wholly owned controlled entities. Subject to the continuance of satisfactory credit ratings, the bank overdraft
facility may be utilised at any time and may be terminated by the bank without notice.

The total amount of committed financing facilities available to the Economic Entity as at balance date amounted to
$707 million (1997: $707 million). As at balance date, none of these facilities were in use.

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Committed financing facilities

Bank overdraft
Facility available 7.0 7.0 7.0 7.0
Expiry date n/a n/a n/a n/a
Committed standby facility
Facility available 700.0 700.0 700.0 700.0
Expiry date – 31 October 1999 550.0 550.0 550.0 550.0
– 31 October 2001 150.0 150.0 150.0 150.0
Total committed financing facilities available 707.0 707.0 707.0 707.0
Total facilities in use – – – –

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 65

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

37 RELATED PARTY TRANSACTIONS

Directors
The names of persons who were Directors of the Chief Entity at any time during the financial year are as follows:

Chairman Gary Pemberton

Chief Executive and Managing Director James Strong
Chief Financial Officer & Executive
General Manager Operations Gary Toomey
Non-Executive Directors Bob Ayling
Mike Codd, AC
John Ducker, AO
Trevor Eastwood, AM
Margaret Jackson
Jim Kennedy, AO, CBE
Trevor Kennedy, AM
Roger Maynard
Nick Tait
Alternate Director Derek Stevens (alternate for Bob Ayling).

Information on remuneration of Directors, superannuation and retirement benefits of Directors is disclosed in note 5.

Directors’ holdings of shares

The relevant interests of Directors of the Chief Entity and their Director-related entities in shares of entities within the
Economic Entity at balance date are set out below:

NUMBER HELD
1998 1997

Qantas Airways Limited:

$1 Ordinary shares, fully paid 383,980 356,544

Ordinary shares were issued to Executive Directors as participants in the Qantas Staff Share Plan II (QSSP II) on the
same basis as other eligible employees. During the year, each Executive Director received 216 ordinary shares
(1997: 268 ordinary shares).

Other transactions of Directors and Director-related entities

A number of Directors of the Chief Entity also hold directorships with other corporations which provide goods or
services to the Economic Entity in the ordinary course of business on normal terms and conditions, and are
considered to be trivial in nature. None of these Directors exercise significant influence with those corporations nor
derive any direct personal benefit from the transactions between the Economic Entity and these other corporations.

During the year, the Chief Entity paid a premium on normal commercial terms and conditions to insure all Directors of
the Chief Entity, as listed above, all Directors of related bodies corporate of the Chief Entity, and other officers of the
Chief Entity and its related bodies corporate, against liabilities incurred in their capacity as Director or officer, as the
case may be, of the Chief Entity or related body corporate.

In addition to the transactions referred to above, transactions were entered into during the year with the Directors
of the Chief Entity and its controlled entities or with Director-related entities, which:

– occurred within a normal employee customer or supplier relationship on terms and conditions no more
favourable than those which it is reasonable to expect would have been adopted if dealing with the Director or
Director-related entity at arm’s length in the same circumstances;

– do not have the potential to adversely affect decisions about the allocation of scarce resources or the discharge
of responsibility of the Directors; and

– are trivial or domestic in nature,

and include travel and accommodation discounts and other benefits, obtained from time to time by Executive
Directors and Directors of the Economic Entity, some of which are through agreements entered into by the Economic
Entity. Certain travel and accommodation discounts are available on similar terms and conditions as those offered to
other employees of the Economic Entity. All benefits are included in the aggregate amount of remuneration disclosed
in note 5.

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

37 RELATED PARTY TRANSACTIONS cont.

Partly and wholly owned group
Details of interests in controlled entities are set out in note 27. Transactions between the Chief Entity and controlled
entities are conducted on normal business terms and conditions. In addition, the Economic Entity has pooled funding
arrangements with its major domestic banker (refer note 36) and as such, reciprocal borrowings occur regularly
between the Chief Entity and its controlled entities.

Transactions between the Chief Entity and related parties in the wholly owned group consisted of:

- the Chief Entity provided a range of administrative and investment services to controlled entities;

- Qantas Information Technology Limited provided computer and communication services to the Chief Entity;

- Qantas Flight Catering Limited provided airline catering services to the Chief Entity;

- QH Tours Limited and controlled entities and the Chief Entity acted as an agent for each other’s products;

- Southern Cross Insurances Pte Limited provided insurance services to the Chief Entity; and

- Australian Airlines Limited and controlled entities assisted in the hiring of aircraft capacity.

Transactions and balances with partly and wholly owned controlled entities are included in the accounts as follows:

CHIEF ENTITY
1998 1997
$m $m

Sales revenue (refer note 2) 103.2 102.5

Interest received/receivable (refer note 2) 11.6 15.3
Dividend received/receivable (refer note 2) 61.1 108.9
Interest paid/payable (refer note 2) 14.9 17.3

Current receivables (refer note 9) 377.3 349.3

Non-current receivables (refer note 9) 284.0 428.6
Current payables (refer note 15) 40.8 30.2
Current borrowings (refer note 16) 349.6 309.5
Non-current borrowings (refer note 16) 245.3 339.4

Associated companies
Details of interests in associated companies are provided in note 28. Transactions with associated companies are
conducted on normal terms and conditions, and are not significant in amount to the Economic Entity.

Transactions and balances with associated companies are included in the accounts as follows:

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Sales revenue (refer note 2) 80.7 26.0 75.0 22.0

Dividend received/receivable (refer note 2) 16.0 12.1 4.2 1.2

Current receivables (refer note 9) 7.3 12.2 6.0 11.4

Current payables (refer note 15) 13.4 2.5 13.4 2.4

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 67

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 Notes to and forming part of the Financial Statements
FOR THE YEAR ENDED 30 JUNE 1998

37 RELATED PARTY TRANSACTIONS cont.

Other related parties
British Airways Plc
In March 1993, British Airways Plc (British Airways) acquired 25 percent of the Economic Entity from the Australian
Government. As a condition of the sale, British Airways entered into a ten year Commercial Agreement with the
Economic Entity to identify and develop potential synergies in their operations and to optimise co-operation in such
areas as frequent flyer programs and marketing.

On 12 May 1995, the Trade Practices Commission (the predecessor to the Australian Competition and Consumer
Commission) authorised a Joint Services Agreement (JSA) between the Economic Entity and British Airways. The JSA
was intended to be a partial implementation of the Commercial Agreement. Under the JSA, the Economic Entity and
British Airways co-ordinate various aspects of their services between Australia and South East Asia, South East Asia
and Europe, and Australia and Europe. The JSA has enabled both airlines to reduce costs, while improving schedules,
yields and connections for passengers.

The JSA sets out in detail the financial settlement procedures between the two airlines to ensure that the return each
airline obtains from the designated route services recognises the value of route rights it utilises. In common with
standard industry practice, the Economic Entity and British Airways also carry passengers on an interline basis on
the same terms and conditions as with other carriers.

In July 1997, a further step in the development of the Economic Entity and British Airways relationship was
undertaken with the commencement of codesharing on the Kangaroo Route. The Economic Entity also codeshares on
British Airways flights from London to a number of key ports in the UK, and British Airways codeshares to key
domestic ports in Australia.

Other initiatives with British Airways have included the launch of a series of joint fares such as the Aussie and
Europe Explorer from Asia, and the Global Explorer from Europe, the UK and Australia. In addition, the Economic
Entity and British Airways co-operate in order to identify synergies and cost savings in a variety of areas including
engineering, information technology, catering and purchasing. In addition, certain joint information technology projects
have been undertaken dealing with data warehousing, exchange of data on interline sales, reservations, yield
management and electronic ticketing.

Offices have been co-located in many places, including Paris, Los Angeles, Manila, Tokyo, Singapore, Bangkok,
Malaysia, and New Zealand. In Thailand and Singapore, single sales and airport teams have been created.

Joint lounges have been opened at a number of airports, including Singapore, Manila, Los Angeles, Hong Kong and
Bangkok.

Other transactions, such as ground handling, contract work, property rentals, interchange of maintenence spares and
spare engines and use of communication facilities were all conducted on normal terms and conditions.

During the year, Qantas relocated to British Airways Terminal 4 at London Heathrow Airport and all ground handling
for Qantas in London is now performed by British Airways.

Transactions and balances with other related parties are included in the accounts as follows:

CONSOLIDATED CHIEF ENTITY

1998 1997 1998 1997
$m $m $m $m

Sales revenue (refer note 2) 111.1 35.1 76.9 25.4

Current receivables (refer note 9) 112.4 56.0 110.4 55.3

Current payables (refer note 15) 104.5 65.2 101.8 63.8

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 Statement by Directors
FOR THE YEAR ENDED 30 JUNE 1998

1. In the opinion of the Directors of Qantas Airways Limited:

(a) the financial statements set out on pages 32 to 68 are drawn up so as to give a true and fair view of the
results and cash flows for the financial year ended 30 June 1998, and the state of affairs at 30 June
1998, of the Company and the Economic Entity;

(b) the consolidated accounts have been made out in accordance with Divisions 4A and 4B of Part 3.6
of the Corporations Law; and

(c) at the date of this statement, there are reasonable grounds to believe that the Company will be able to
pay its debts as and when they fall due.

2. The financial statements have been made out in accordance with applicable Accounting Standards and Urgent
Issues Group Consensus Views.

Dated at Sydney this sixteenth day of September 1998.

Signed in accordance with a resolution of the Directors:

Gary Pemberton James Strong

Chairman Chief Executive and Managing Director

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 69

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 Independent Auditors’ Report
FOR THE YEAR ENDED 30 JUNE 1998

SCOPE
We have audited the financial statements of Qantas Airways Limited for the financial year ended 30 June 1998,
consisting of the profit and loss accounts, balance sheets, statements of cash flows, accompanying notes, and the
Statement by Directors set out on pages 32 to 69. The financial statements comprise the accounts of the Company
and the consolidated accounts of the Economic Entity, being the Company and its controlled entities.

The Company’s Directors are responsible for the preparation and presentation of the financial statements and the
information they contain. We have conducted an independent audit of these financial statements in order to express
an opinion on them to the members of the Company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as
to whether the financial statements are free of material misstatement. Our procedures included examination, on a
test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation
of accounting policies and significant accounting estimates. These procedures have been undertaken to form an
opinion as to whether, in all material respects, the financial statements are presented fairly in accordance with
Accounting Standards and other mandatory professional reporting requirements and statutory requirements so as to
present a view which is consistent with our understanding of the Company’s and the Economic Entity’s financial
position and the results of their operations and their cash flows.

The name of the controlled entity of which we have not acted as auditors is set out in note 27. We have received
sufficient information and explanations concerning this controlled entity to enable us to form an opinion on the
consolidated accounts.

The audit opinion expressed in this report has been formed on the above basis.

AUDIT OPINION
In our opinion, the financial statements of Qantas Airways Limited are properly drawn up:

(a) so as to give a true and fair view of:

(i) the state of affairs of the Company and the Economic Entity at 30 June 1998, and the results and cash
flows of the Company and the Economic Entity for the financial year ended on that date; and

(ii) the other matters required by Divisions 4, 4A and 4B of Part 3.6 of the Corporations Law to be dealt with
in the financial statements;

(b) in accordance with the provisions of the Corporations Law; and

(c) in accordance with applicable Accounting Standards and other mandatory professional reporting requirements.

KPMG D.K. Jukes

Chartered Accountants Partner

Sydney, 16 September 1998

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 Shareholder Information

The shareholder information set out below was applicable as at 17 September 1998.

Distribution of Ordinary Shares

Analysis of ordinary shareholders by size of shareholding:
Ordinary Number of % of
Number of shares shares held shareholders issued shares

1– 1,000 24,461,362 38,186 2.08

1,001 – 5,000 106,458,897 61,596 9.04
5,001 – 10,000 28,736,089 4,535 2.44
10,001 – 100,000 38,146,037 2,139 3.24
100,001+ 979,529,847 151 83.20
1,177,332,232 106,607 100.00

2,822 shareholders hold less than a marketable parcel of shares in Qantas Airways Limited.

Twenty Largest Shareholders

Ordinary % of
Shareholder shares held issued shares

British Airways Investments (Australia) Pty Limited 294,333,056 25.00

Chase Manhattan Nominees Limited 104,014,681 8.83
Permanent Trustee Company Limited 84,724,161 7.20
Westpac Custodian Nominees Limited 73,397,193 6.23
National Nominees Limited 73,186,295 6.22
Pendal Nominees Pty Limited 72,186,675 6.13
Commonwealth Custodial Services Limited 29,514,836 2.51
MLC Limited 24,752,822 2.10
Queensland Investment Corporation 23,402,201 1.99
AMP Life Limited 20,230,994 1.72
BT Custodians Limited 12,948,661 1.10
Perpetual Trustees Nominees Limited 12,872,644 1.09
ANZ Nominees Limited 10,762,366 0.91
Prudential Corporation Australia Limited 8,329,856 0.71
SAS Trustee Corporation 7,497,921 0.64
Bankers Trust Life Limited 6,277,052 0.53
PTA Nominees Limited 5,316,367 0.45
HKBA Nominees Limited 5,260,834 0.45
Citicorp Nominees Pty Limited 4,855,236 0.41
Macquarie Life Limited 4,807,426 0.41
74.63

Substantial Shareholders
The following shareholders have notified that they are substantial shareholders of Qantas Airways Limited:

Ordinary % of
Shareholder shares held issued shares

British Airways Investments (Australia) Pty Limited 294,333,056 25.00

Bankers Trust Australia Limited 176,821,831 15.49
Permanent Trustee Company Limited 93,545,620 7.95

Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t 71

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 Five Year Summary
FOR THE YEAR ENDED 30 JUNE

Unit 1998 1997 1996 1995 1994

GROUP PROFIT AND LOSS ACCOUNT

OPERATING REVENUE $ m 8,131.5 7,834.4 7,600.4 7,162.9 6,531.4

Operating expenditure $ m (7,549.8) (7,317.2) (7,096.0) (6,691.5) (6,051.4)
EARNINGS BEFORE INTEREST AND TAX $ m 581.7 517.2 504.4 471.4 480.0
Net interest expense $ m (103.7) (96.3) (103.0) (151.0) (178.2)
PROFIT FROM OPERATIONS $ m 478.0 420.9 401.4 320.4 301.8
Abnormal items $ m – (17.2) – – (64.9)
OPERATING PROFIT BEFORE INCOME TAX $ m 478.0 403.7 401.4 320.4 236.9
Income tax expense $ m (173.0) (151.0) (154.7) (140.1) (80.8)
OPERATING PROFIT AFTER INCOME TAX $ m 305.0 252.7 246.7 180.3 156.1
Outside equity interests in operating profit $ m (0.2) – (0.5) (0.2) (0.2)
PROFIT FOR THE YEAR $ m 304.8 252.7 246.2 180.1 155.9
Profit for the six months to 31 December $ m 165.8 151.6 148.1 128.5 71.6
Profit for the six months to 30 June $ m 139.0 101.1 98.1 51.6 84.3

SHARE INFORMATION
Earnings per share cents 26.8 23.6 24.2 18.0 15.6
Dividends per share cents 13.5 13.0 13.0 3.5 –
Dividend payout ratio % 50.4 55.1 53.7 19.4 –
Share price - high $ 3.21 3.15 2.47 n/a n/a
Share price - low $ 2.13 1.79 2.03 n/a n/a
Share price - closing $ 2.43 3.10 2.15 n/a n/a
Weighted average number of ordinary shares m 1,138.6 1,069.6 1,017.9 1,000.0 1,000.0
Net tangible asset backing per share $ 2.49 2.38 2.35 2.27 2.15

GROUP EARNINGS BEFORE INTEREST AND TAX

International airline operations $ m 271.9 274.7 267.8 267.2 300.2
Domestic airline operations $ m 213.4 168.3 163.6 132.7 105.8
Subsidiary operations $ m 96.4 74.2 73.0 71.5 74.0
GROUP EARNINGS BEFORE INTEREST AND TAX $ m 581.7 517.2 504.4 471.4 480.0

PROFIT AND LOSS PERFORMANCE INDICATORS

Interest cover times 5.6 5.4 4.9 3.1 2.7
Return on shareholders’ equity (excl. operating leases) % 10.3 9.5 10.1 7.9 7.2
Return on shareholders’ equity (incl. operating leases) % 10.8 10.8 13.5 7.8 7.8

GROUP CASH FLOWS

Cash flows provided by operating activities $ m 1,218.4 1,110.8 936.4 853.8 729.0
Cash flows used in investing activities $ m (668.0) (71.1) (152.4) (221.3) (147.8)
Cash flows used in financing activities $ m (592.3) (744.3) (721.0) (516.2) (642.4)
NET INCREASE/(DECREASE) IN CASH HELD $ m (41.9) 295.4 63.0 116.3 (61.2)
Capital expenditure $ m (673.0) (610.6) (503.5) (451.0) (256.0)

GROUP BALANCE SHEET

Total assets $m 10,358.8 9,852.1 9,221.6 8,928.5 8,211.8
Total liabilities $m 7,396.4 7,181.1 6,785.0 6,650.6 6,045.5
NET ASSETS $m 2,962.4 2,671.0 2,436.6 2,277.9 2,166.3

Capital $ m 1,177.3 1,111.7 1,035.5 1,000.0 1,000.0

Reserves $ m 689.0 609.9 574.4 564.2 572.2
Retained profits $ m 1,094.1 947.4 824.9 712.4 593.0
Outside equity interests in controlled entities $ m 2.0 2.0 1.8 1.3 1.1
TOTAL SHAREHOLDERS’ EQUITY $ m 2,962.4 2,671.0 2,436.6 2,277.9 2,166.3

BALANCE SHEET STATISTICS

Net debt on balance sheet $m 737.3 1,049.1 1,605.7 2,334.3 2,230.9
Net debt including off balance sheet debt $m 2,226.7 2,680.7 3,558.1 5,042.0 5,001.1
Net debt including off balance sheet debt
and revenue hedge receivables $m 1,856.7 2,461.3 3,435.7 4,192.5 4,592.0
Net debt to net debt plus equity ratio 20:80 28:72 40:60 51:49 51:49
Net debt to net debt plus equity including
off balance sheet debt ratio 44:56 51:49 62:38 72:28 73:27
Net debt to net debt plus equity including off balance
sheet debt and revenue hedge receivables ratio 40:60 49:51 61:39 68:32 71:29

72 Qantas Airways Limited 1 9 9 8 A n n u a l R e p o r t

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 Five Year Summary
FOR THE YEAR ENDED 30 JUNE

Unit 1998 1997 1996 1995 1994

OPERATIONAL STATISTICS

INTERNATIONAL – SCHEDULED SERVICES

TRAFFIC AND CAPACITY
Passengers carried 000 6,623 6,698 6,165 5,980 5,905
Revenue passenger kilometres (RPKs) m 44,511 45,266 41,432 39,563 37,296
Available seat kilometres (ASKs) m 63,034 63,169 58,862 56,289 52,864
Revenue seat factor % 70.6 71.7 70.4 70.3 70.6

DOMESTIC – SCHEDULED SERVICES

TRAFFIC AND CAPACITY
Passengers carried 000 9,738 9,622 9,386 8,442 7,076
Revenue passenger kilometres m 12,415 12,385 11,926 10,652 8,901
Available seat kilometres m 15,952 15,882 15,143 13,459 11,111
Revenue seat factor % 77.8 78.0 78.8 79.1 80.1

CORE AIRLINE PERFORMANCE STATISTICS

TRAFFIC AND CAPACITY
Passengers carried 000 16,361 16,320 15,551 14,422 12,981
Revenue passenger kilometres m 56,926 57,651 53,358 50,215 46,196
Available seat kilometres m 78,986 79,051 74,005 69,748 63,975
Revenue seat factor % 72.1 72.9 72.1 72.0 72.2
Average passenger journey length km 3,479 3,533 3,431 3,482 3,559
Revenue tonne kilometres m 7,055 7,052 6,603 6,350 5,849
Available tonne kilometres m 11,151 10,887 10,246 9,620 9,217
FINANCIAL
Passenger yield (per RPK) cents 10.16 9.82 10.53 10.65 10.42
PRODUCTIVITY
Average full-time employee strength # 23,749 24,620 24,429 23,238 21,903
RPKs per employee 000 2,397 2,342 2,184 2,161 2,109
ASKs per employee 000 3,326 3,211 3,029 3,001 2,921
Aircraft utilisation (average per day) hrs 11.7 12.1 11.8 11.1 10.9

GROUP PERFORMANCE STATISTICS

TRAFFIC AND CAPACITY
Passengers carried 000 18,865 18,606 17,486 16,054 14,252
Revenue passenger kilometres m 58,619 59,199 54,627 51,204 46,854
Available seat kilometres m 81,537 81,440 75,930 71,225 65,019
Revenue seat factor % 71.9 72.7 71.9 71.9 72.1
Aircraft in service at period end # 146 148 141 135 126
FINANCIAL
Passenger yield (per RPK) cents 10.56 10.15 10.80 10.86 10.62
PRODUCTIVITY
Average full-time employee strength # 28,934 30,080 29,627 28,565 26,791
RPKs per employee 000 2,026 1,968 1,844 1,793 1,749
ASKs per employee 000 2,818 2,707 2,563 2,493 2,427

Glossary
Revenue Passenger Available Seat Revenue Seat Revenue Tonne Available Tonne
Kilometres (RPKs) Kilometres (ASKs) Factor Kilometres (RTKs) Kilometres (ATKs)
Number of paying Total number of Percentage of total Total tonnage of Number of tonnes of
passengers carried, seats available for passenger capacity paid traffic carried, capacity available
multiplied by the passengers, actually utilised by multiplied by the for carriage of
number of multiplied by the paying passengers. number of passengers, freight
kilometres flown. number of kilometres flown. and mail, multiplied
kilometres flown. by the number of
Designed and produced by FCR

kilometres flown.

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