is one of the world’s leading airlines, operating a domestic and international fleet of 149 aircraft, linking 104 ports in 29 countries. Our strengths are our strong brand, our focus on customer service, and our international reputation for technical expertise and safety. Our aim is to manage our operations, costs and productivity to ensure profitability for our shareholders, while maintaining the quality and reputation of our product. Highlights for the year ended 30 June 1997

Revenue ■ Operating profit before tax and abnormals of year ended 30 June 1997 $420.9 million, up 4.9 percent on the prior year

■ Profit after tax before abnormals of $260.5 million, up 5.6 percent on the prior year

■ Abnormal net loss before tax of $17.2 million

77% Net passenger revenue ■ Total dividend of 13¢ per share 11% Other sources 6% Net freight revenue ■ Revenue increased by 3.1 percent to $7.8 billion 6% Tour and travel sales

■ Cash flows from operations increased by 18.6 percent to $1.1 billion Expenditure year ended 30 June 1997

■ Debt to equity ratio improved by twelve percentage points to 49:51

Qantas Share Price Appreciation 28% Manpower and staff related

21% Aircraft operating variable 150 12% Selling and marketing

12% Fuel and oil

6% Depreciation and amortisation 125 5% Tour and travel cost of sales

3% Non-cancellable operating lease rentals 3% Computer and communication 100 3% Property

6% Capacity hire, insurance and other

1% Net interest expense 75 JUNE 96 JUNE 97

Qantas All Ordinaries ASX 20 Leaders

2 Qantas Airways Limited and Controlled Entities Annual Report 1997 Gary Pemberton James Strong Gary Toomey Robert Ayling Mike Codd, AC John Ducker, AO Chairman Managing Director CFO and EGM Operations Director Director Director

Gary Pemberton, of The Phosphate Co-operative Company Services. From 1986 to 1991, he held the Chairman, Age 57 of Australia Limited for four years and positions of Head of Department of the Mr Pemberton was appointed to the Company Secretary for Rocke Tompsitt Prime Minister and Cabinet, and Secretary Board in February 1993 and as Chairman & Co Limited from 1981 to 1982 and was to Cabinet. in March 1993. appointed Group Company Secretary of He is a Director of Rio Tinto Limited Rocke’s holding company F.H. Faulding John Ducker, AO and Rio Tinto Plc and is Chairman of the & Co Limited in 1983. Mr Toomey has a Non-Executive Director,Age 65 NSW Totalizator Agency Board (TAB). He is chartered accounting background having Mr Ducker was appointed to the Board also a Member of the Philips Australia worked for Peat Marwick Mitchell & Co in August 1983. He is Chairman of Qantas Advisory Council. from 1976 to 1978 and Parkhill, Lithgow Superannuation Limited and of the Safety, Mr Pemberton was Chief Executive of and Gibson from 1979 to 1980. Environment & Security Committee and is Brambles Industries Limited from 1983 to a member of the Audit Committee. 1993, and also held the offices of Chairman Robert Ayling Mr Ducker is a founding Fellow of the from March 1993 to August 1994 and Non-Executive Director,Age 51 Australian Institute of Company Directors, Deputy Chairman from August 1994 to Mr Ayling was appointed to the Board Managing Director of Indrel Consulting November 1996. He was formerly President by British Airways Plc in January 1997. Pty Limited, Director of Edelman World of the Sydney Organising Committee for He is currently Chief Executive Officer Wide and Chairman of the New South Wales the Olympic Games, and a Director of and a Director of British Airways Plc and a Ambulance Service Board and The Duke of Commonwealth Bank of Australia, CSR Director of Concorde International Pty Edinburgh’s Award Scheme Australia (New Limited, John Fairfax Holdings Limited and Limited and World Aviation Services South Wales Division). Australian Airlines Limited. (Australia) Pty Limited. He held a number of management Mr Ayling joined British Airways Plc in positions with the Labor Council of NSW James Strong 1985 as Legal Director and in July 1988 was before becoming Vice President of the Managing Director,Age 53 appointed Director of Human Resources. Australian Council of Trade Unions in 1977. Mr Strong was appointed to the Board In September 1991, he became Marketing Mr Ducker was also General Manager of in January 1991 and as Managing Director in and Operations Director and was later radio station 2KY and Chairman of radio October 1993. He is a member of the Safety, appointed Chief Executive Officer in station 2HD. Mr Ducker was formerly a Environment & Security Committee and January 1996 having been Group Managing member of the Board of Governors of the Chairman of a number of controlled entities Director since February 1993. A solicitor by National Institute of Labour Studies and was of Qantas. profession, he has been involved in air the Foundation Chairman of Work Skill He is a Director of RGC Limited and transport and international commerce Australia. He previously held the position of is admitted as a barrister and solicitor in throughout his career. Chairman of the NSW Public Service Board various Australian jurisdictions. and also served as a Member of the Mr Strong was Chief Executive of Mike Codd, AC Legislative Council of New South Wales. Australian Airlines Limited from December Non-Executive Director,Age 57 1985 to September 1989, National Managing Mr Codd was appointed to the Board Trevor Eastwood, AM Partner, later Chairman of Partners,of in January 1992. He is a member of the Non-Executive Director,Age 55 Corrs Chambers Westgarth, Solicitors, from Audit Committee. Mr Eastwood was appointed to the Board September 1989 to June 1992 and Group Mr Codd is Chancellor, University in October 1995. Chief Executive of DB Group Limited in New of Wollongong, a Director of Telstra He is Chairman of West Australian Zealand from July 1992 until October 1993. Corporation Limited, MLC Limited, MLC Newspapers Holdings Limited,Avatar Lifetime Limited,Australian Eagle Life Industries Limited, KLZ Limited, Gresham Gary Toomey Limited, MLC Investments Limited, MLC Partners Holdings Limited, FlexiPlan Chief Financial Officer & Executive General Insurance Limited, Lend Lease Corporate Australia Limited and Gresham Agribusiness Manager Operations, Age 42 Services Limited,Australian Nuclear Science Management Limited. He is a Director of Mr Toomey was appointed to the Board and Technology Organisation (ANSTO), Wesfarmers Limited, and a Fellow of Curtin in December 1993. He is a Director of a Toogoolawa Consulting Pty Limited and The University,Australian Institute of number of controlled entities of Qantas. Menzies Foundation. He is a member of the Management,Australian Academy of He is a Fellow of The Institute of Chartered Advisory Board of Spencer-Stuart and of IBM Technological Sciences and Engineering, Accountants in Australia, the Australian Society Australia Limited. and the Australian Institute of of Certified Practising Accountants and From 1981 to 1986, Mr Codd held Company Directors. several other professional bodies. senior positions in the Commonwealth Mr Eastwood was formerly Managing Mr Toomey was previously Chief Financial Government as, consecutively, Secretary Director of Wesfarmers Limited, Chief Officer of Arnotts Limited. Before this, he of the Department of Employment and Executive of Western Australian Farmers was Chief Financial Officer of Australian Industrial Relations, Chairman of the Co-operative Limited and Chairman of Orion Airlines Limited from 1987 to 1992, Industries Assistance Commission and Resources NL. He has held various seats on Company Secretary and Finance Manager Secretary of the Department of Community State and Federal Government councils.

24 Qantas Airways Limited and Controlled Entities Annual Report 1997 Trevor Eastwood, AM Margaret Jackson Jim Kennedy, AO, CBE Trevor Kennedy, AM Roger Maynard Nick Tait Director Director Director Director Director Director

Margaret Jackson He is a Director of several other public and Senior Management Group Non-Executive Director,Age 44 private companies including OzEmail James Strong * Ms Jackson was appointed to the Board Limited and Downer Holdings Limited and Managing Director and Chief Executive in July 1992. She is Chairman of the Audit is a Member of the Federal Government Gary Toomey * Committee. Remuneration Tribunal. Chief Financial Officer & Executive General Manager Ms Jackson is Chairman of Victoria’s Mr Kennedy was formerly Managing Operations Transport Accident Commission and a Director of Consolidated Press Holdings David Burden * Director of ANZ Grindlays Bank Limited, Limited, and has previously served on a Executive General Manager Corporate Services Australia and New Zealand Banking Group number of other boards and State and Geoff Dixon * Limited, Pacific Dunlop Limited and The Federal Government authorities. Executive General Manager Commercial Broken Hill Proprietary Company Limited. Doug Gillies * Ms Jackson is a Fellow of The Institute of Roger Maynard Executive General Manager Aircraft Operations Chartered Accountants in Australia. Non-Executive Director,Age 54 Denis Adams Group General Manager Commercial Policy Ms Jackson was a Partner of KPMG Peat Mr Maynard was appointed to the Board Marwick’s Management Consulting Division by British Airways Plc in March 1993. He is John Anderson Group General Manager Airports and National Chairman of the KPMG Micro a member of the Audit Committee. Geoff Askew Economic Reform Group until 30 June He is currently Director of Investments Group General Manager Security & Investigation Services and Joint Ventures for British Airways Plc, 1992, when she resigned to pursue a full- Greg Bee time career as a company director. She was having been Director of Corporate Strategy Group General Manager Cabin Services formerly a Director of Telecom Australia from 1991 to 1996. John Borghetti and the Australian Wool Corporation and Mr Maynard joined British Airways Plc Group General Manager Australia Sales Chairman of the Victorian State Council in 1987 and was Executive Vice President Trevor Crabtree of The Institute of Chartered Accountants North America. Prior to joining British Group General Manager Engineering & Maintenance in Australia. Airways Plc, he served as Counsellor,Aviation George Dalidakis and Shipping, at the British Embassy in Deputy Chief Financial Officer & Group General Manager Jim Kennedy, AO, CBE Washington DC and was Assistant Secretary Finance Non-Executive Director,Age 63 for Aerospace at the Department of Trade Bob Dandie Group General Manager Purchasing Mr Kennedy was appointed to the Board and Industry in London. in October 1995. Paul Edwards Group General Manager Commercial Network He is a Director of Australian Stock Nick Tait George Elsey Exchange Limited, Industrial Property Non-Executive Director,Age 58 Group General Manager Human Resources Mr Tait was appointed to the Board by Management Limited and Suncorp-Metway Peter Frampton Limited. He is Chairman of the Queensland British Airways Plc in March 1993. He is a Group General Manager Freight Investment Corporation and is Deputy member of the Safety, Environment & Peter Gregg Chairman of GWA International Limited. Security Committee. Group Treasurer Mr Kennedy is a former Chairman of the He is General Manager Australia and David Hawes Australian Government Inquiry into Tourism, New Zealand for British Airways Plc and is Group General Manager Government & International former Deputy Chairman of the Australian also Chairman of Concorde International Relations Tourist Commission and former Chairman Travel Pty Limited and World Aviation Ray Heiniger of the Queensland Tourist and Travel Systems (Australia) Pty Limited. Group General Manager Flight Operations Corporation. He was also previously a Mr Tait joined British Airways Plc in Col Hughes Group General Manager Pacific & Japan Sales Director of Commonwealth Bank of Australia in 1964 and has held a variety Brett Johnson Australia, MIM Holdings Limited, Pacific of management positions in that company, General Counsel & Company Secretary Dunlop Limited, Santos Limited and QCT including positions in Australia and overseas. Ken Lewis Resources Limited. Mr Kennedy,a chartered Group General Manager Safety & Environment accountant and public company director, is Alan Loke well-known for his contribution to the Group General Manager North Asia Sales tourism industry as well as to business. Sandra McPhee Group General Manager Europe / South East Asia Sales Trevor Kennedy, AM Andrew Pondekas Non-Executive Director,Age 55 Group General Manager QFCL Mr Kennedy was appointed to the Board Barry Robinson in April 1994. Group General Manager Taiwan Mr Kennedy is Chairman of Oil Search Ken Ryan Limited,AWA Limited, Kilkenny Gold NL and Group General Manager Marketing Cypress Lakes Group Limited and Deputy Chairman of Darowa Corporation Limited. * Executive Committee Members

Qantas Airways Limited and Controlled Entities Annual Report 1997 25 The Board’s obligation Committees The Qantas Board considers that its key There are two formal Committees, the Audit corporate governance responsibilities include: Committee and the Safety, Environment & Security setting corporate strategies; identifying areas of Committee. Members of these Committees are significant business risk; ensuring appropriately responsible for the review of certain detailed skilled management are employed to implement technical aspects of the Airline’s operations and for the Board’s instructions; supervising and making recommendations on these issues for monitoring the operation of the business; decision by the full Board. All Directors have an monitoring the performance of management; open invitation to attend Committee Meetings. and reporting to shareholders. Outside the above technical committees, the The Directors regularly discuss their corporate Board’s policy is to consider all other matters governance responsibilities to ensure that they (including corporate governance, remuneration, are meeting their stewardship obligations. succession planning and Board nominations) as a full Board. Board structure If considered appropriate, the Board forms ad The Qantas Board comprises twelve Directors. hoc working groups to consider specific issues and There are two Executive Directors Ð the Chief report back to the Board. Executive and the Chief Financial Officer & Executive General Manager Operations. Audit Committee There are ten Non-Executive Directors. The Audit Committee reviews and approves draft Three Non-Executive Directors are appointed financial statements prior to submission to the full by British Airways (a right acquired when British Board. This provides additional assurance on the Airways purchased its 25 percent shareholding in quality of financial information prior to approval by Qantas). The other seven are independent, Non- the Board and release to shareholders. Executive Directors elected by shareholders other The Audit Committee is also responsible for: than British Airways. ¥ recommending the appointment and In accordance with the Articles and the replacement of external auditors; Listing Rules, the independent, Non-Executive ¥ overviewing the performance of the external Directors are elected for a three-year term. Any auditors; Board vacancy is filled with a candidate who has ¥ monitoring the work undertaken by the internal an appropriate mix of skills and experience. auditors; Shareholders are then asked to re-elect this ¥ acting as an independent body to whom the Director at the next General Meeting. internal or external auditors can report any The Board formally reviews its performance concerns; and annually. At that review, the Non-Executive ¥ developing, implementing and monitoring Directors meet to discuss the performance of the appropriate internal controls. Board and the contribution of individual Directors. The four Committee members are Non- The Non-Executive Directors then meet with the Executive Directors. The Committee usually meets Chief Executive to review governance issues and four times a year. the working relationship between the Board and management. Safety, Environment & Security Committee Given the particular focus placed on safety,the Board meetings environment and security, Qantas has a separate The Board normally meets eleven times a year. Committee to review these critical aspects of In recognition of the significant domestic and the Airline. The Committee reports to the Board. international nature of the business, the Board The Committee receives detailed reports travels to Qantas operations outside Sydney.During on all safety, environment and security aspects the year, the Board held Meetings in Melbourne, of the Airline and ensures that the appropriate Canberra and the UK. procedures are in place to protect the Airline, its passengers and the community.

26 Qantas Airways Limited and Controlled Entities Annual Report 1997 Particular matters for the attention of the The Code deals with a number of matters, Committee include: including: ¥ compliance with all safety, environment, security ¥ Compliance with Laws and Regulations; and associated legal and regulatory requirements; ¥ Unacceptable Payments; ¥ review of preventative steps and procedures; ¥ Protection of Qantas Assets; ¥ review of contingency and emergency planning ¥ Proper Accounting and Dealing with Auditors; strategies; ¥ Conflict of Interest and Use of Inside ¥ adequacy of reporting systems for actual or Information; and potential accidents, breaches and incidents; and ¥ Insider Trading. ¥ subsequent investigation and remedial action. The Committee members are the Chief Executive and two Non-Executive Directors. 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 & Executive General Manager Operations and other members of Qantas senior management. 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 and individual fees are set by the Board.

External advice Should an individual Director consider it necessary to obtain independent professional advice in carrying out his or her duties, the Director discusses the matter with the Chairman and any advice considered necessary is obtained at the expense of Qantas.

Code of Commercial Conduct The Board has introduced a Code of Commercial 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.

Qantas Airways Limited and Controlled Entities Annual Report 1997 27 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 Qantas Airways Limited during the financial year:

QANTAS BOARD AUDIT COMMITTEE SAFETY, ENVIRONMENT & SECURITY COMMITTEE

DIRECTORS ATTENDED HELD * ATTENDED HELD * ATTENDED HELD *

Gary Pemberton 11 11 4# 4# James Strong 11 11 4# 4# 4 4 Gary Toomey 11 11 4# 4# Robert Ayling ^ 1+ 5 Mike Codd,AC 11 11 3 4 John Ducker,AO 11 11 4 4 4 4 Trevor Eastwood,AM 9 11 1# 1# Margaret Jackson 11 11 4 4 Jim Kennedy,AO, CBE 10 11 Trevor Kennedy,AM 10 11 Sir Colin Marshall ** 1+ 6 Roger Maynard 11 11 4 4 Nick Tait 11 11 4 4 Derek Stevens (alternate for Robert Ayling) 2 2

* 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 ex-officio capacity ^ appointed 1 January 1997 ** resigned 31 December 1996 853.8 936.4 729.0 1,110.8 175.7 301.8 401.4 420.9 32.9 6.5 320.4 5.7 5.5 6.1 6.7 7. 6 7. 2 7. 1 7. 8 7. 3

93 94 95 96 97 93 94 95 96 97 93 94 95 96 97

Profit from A comparison of Cash Flows provided Operations Revenue to by Operating Activities Year ended 30 June ($ m) Expenditure Year ended 30 June ($ m) Year ended 30 June ($ b)

28 Qantas Airways Limited and Controlled Entities Annual Report 1997 Financial Calendar

1997 30 June Year end 21 August Preliminary final result announcement 5 November Books close for final dividend 20 November Annual General Meeting Notice of Meeting 3 December Final dividend payable The Annual General Meeting of Qantas 31 December Half year end Airways Limited will be held at 2:00pm on Thursday 20 November 1997 in the 1998 Grand Ballroom at the Hyatt Regency 19 February Half year result announcement Perth, 99 Adelaide Terrace, Perth. 4 March Books close for interim dividend 1 April Interim dividend payable 30 June Year end 20 August Preliminary final result announcement 4 November Books close for final dividend 18 November Annual General Meeting 2 December Final dividend payable

Registered Office All amounts are expressed in Australian Qantas Airways Limited dollars unless otherwise stated. ACN 009 661 901 Qantas Centre Level 9, Building A 203 Coward Street Mascot NSW 2020 Australia Telephone 61 2 9691 3636 Facsimile 61 2 9691 3339 Financial Statements for the year ended 30 June 1997

Index Directors’ Report 30 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 39 NOTE 3 Abnormal Items 40 NOTE 4 Income Tax 40 NOTE 5 Directors’ Remuneration 41 NOTE 6 Executives’ Remuneration 42 NOTE 7 Auditors’ Remuneration 44 NOTE 8 Cash 44 NOTE 9 Receivables 44 NOTE 10 Inventories 45 NOTE 11 Investments 45 NOTE 12 Other Assets 45 NOTE 13 Property, Plant and Equipment 46 NOTE 14 Intangibles 48 NOTE 15 Accounts Payable 49 NOTE 16 Borrowings 49 NOTE 17 Provisions 50 NOTE 18 Other Liabilities 50 NOTE 19 Share Capital 50 NOTE 20 Reserves 51 NOTE 21 Outside Equity Interests 52 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 Derivative Financial Instruments 58 NOTE 31 Employee Entitlements 59 NOTE 32 Dividends 59 NOTE 33 Segment Information 60 NOTE 34 Earnings per Share 61 NOTE 35 Events Subsequent to Balance Date 61 NOTE 36 Notes to the Statements of Cash Flows 61 NOTE 37 Related Party Transactions 63 Statement by Directors 66 Independent Auditors’ Report 67 Five Year Summary 68 Shareholder Information 70

Qantas Airways Limited and Controlled Entities Annual Report 1997 29 The Directors present their report together with the year ended 30 June 1997 (1996: 6.5 cents). the financial statements of Qantas Airways Limited The final dividend will be fully franked. This followed (the ‘Chief Entity’) and the consolidated accounts an unfranked interim dividend of 6.5 cents per fully of the Economic Entity being the Chief Entity paid share, which was paid during the financial and its controlled entities, for the year ended year. Further details are set out in note 32 to the 30 June 1997. financial statements.

Directors Review of operations The Directors of Qantas Airways Limited at the A review of the Economic Entity’s operations date of this report are: during the financial year and of the results of those operations is contained on pages 9 to 28 inclusive Gary Pemberton of this Annual Report.

James Strong State of affairs Changes in the state of affairs of the Economic Gary Toomey Entity are set out in the Review of Operations on pages 9 to 28 inclusive of this Annual Report. Robert Ayling Significant changes outlined are as follows:

Mike Codd, AC ¥ Operating profit before tax and abnormals of $420.9 million, up 4.9 percent on prior year; John Ducker, AO ¥ Operating profit after tax of $252.7 million, up 2.4 percent on prior year; Trevor Eastwood, AM ¥ Abnormal net loss of $17.2 million, including an Margaret Jackson abnormal profit of $99.4 million on sale of shareholding in Air New Zealand Limited; Jim Kennedy, AO, CBE ¥ Total assets increased from $9,221.6 million to Trevor Kennedy, AM $9,912.0 million;

Roger Maynard ¥ Shareholders’ equity grew by 9.6 percent to $2,671.0 million; Nick Tait ¥ Cash flows from operations increased by 18.6 percent to $1.1 billion; and Derek Stevens (alternate for Robert Ayling). ¥ Debt to equity ratio improved by twelve percentage points to 49:51.

Principal activities In the opinion of the Directors, there were no The principal activities of the Economic other significant changes in the state of affairs Entity during the course of the financial year of the Economic Entity that occurred during the were the operation of international and domestic financial year under review not otherwise disclosed air transportation services, the sale of worldwide in this Annual Report. and domestic holiday tours, catering activities, information technology and resort operations. Events subsequent to balance date There were no significant changes in the nature There has not arisen in the interval between the of the activities of the Economic Entity during the end of the financial year and the date of this report financial year. any item, transaction or event of a material and unusual nature, in the opinion of the Directors, that Consolidated result has significantly affected, or may significantly affect, The consolidated profit for the year after income the operations of the Economic Entity, the results of tax and abnormals attributable to the members of those operations, or the state of affairs of the Qantas Airways Limited was $252.7 million Economic Entity, in subsequent financial years. (1996: $246.2 million). Likely developments and expected results Earnings per share of operations Basic and diluted earnings per share were Developments likely to significantly affect the 23.6 cents (1996: 24.2 cents). operations of the Economic Entity that were not finalised at the date of this report are set out in Dividends the Review of Operations on pages 9 to 28. The Directors declared a final dividend of Further information as to likely developments in the $72.3 million (6.5 cents per fully paid share) for operations of the Economic Entity and the expected

30 Qantas Airways Limited and Controlled Entities Annual Report 1997 results of those operations in subsequent financial The Directors listed on pages 24 and 25 of this years have not been included in this report because, Annual Report and the secretaries of the Chief Entity, the Directors believe, on reasonable grounds, that to being Mr B.S. Johnson, Mr S.F. Heesh and Ms G.E. include further information on those matters would Hillier, have the benefit of the indemnity in Article be likely to result in unreasonable prejudice to the 12.1, which also applies to all officers of the Chief interests of the Economic Entity. Entity. The Chief Entity has insured against amounts which it is liable to pay to officers pursuant to Article Information on directors 12.1 or which it otherwise agrees to pay by way of Details of Directors, their experience and any indemnity. special responsibilities are set out on pages During the financial year, the Chief Entity paid a 24 and 25 of this Annual Report. premium to arrange Directors’ and Officers’ liability Details of Meetings of Directors are set out on insurance policies, which cover all the Directors and page 28 of this Annual Report. officers of the Chief Entity and its controlled entities.

Particulars of Directors’ interests in shares and Details of the nature of the liabilities covered, and options of the Chief Entity: the amount of the premium paid in respect of the Directors’ and Officers’ insurance policies are not disclosed, as such disclosure is prohibited under the Directors’ ordinary shares 1997 1996 terms of the contracts. Gary Pemberton (Chairman) 167,707 64,800 James Strong 88,905 83,067 Gary Toomey 23,767 22,010 Rounding John Ducker, AO 5,795 5,433 The Economic Entity is of a kind referred to in Margaret Jackson 23,007 21,566 Class Order No. 94/1252 dated 17 August 1994 Jim Kennedy, AO, CBE 1,000 1,000 issued by the Australian Securities Commission, Trevor Kennedy, AM 20,800 20,800 relating to the ‘rounding off’ of amounts in the Directors’ report and financial statements. Amounts The particulars of Directors’ interests in shares are in this report and the accompanying financial as at the date of this report. statements have been rounded off to the nearest one hundred thousand dollars in accordance with Directors’ interests and benefits that Class Order unless otherwise indicated. Directors’ relevant interests in the share capital of the Chief Entity are set out above. Since the end Dated at Sydney this seventeenth day of of the previous financial year, no Director of the September 1997. Chief Entity has received or become entitled to Signed in accordance with a resolution of the receive any benefit (other than a benefit included Directors: 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 Articles of Association, the Chief Entity is required to indemnify, Gary Pemberton James Strong to the extent permitted by law, each officer of the Chairman Managing Director 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.

Qantas Airways Limited and Controlled Entities Annual Report 1997 31 NOTES C O NSO LIDATED C H IEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

Operating profit before interest and tax 517.2 504.4 441.9 284.7 Net interest expense 2 (96.3) (103.0) (67.9) (92.1)

PROFIT FROM OPERATIONS 420.9 401.4 374.0 192.6 Abnormal items before tax 3 (17.2) Ð (102.0) Ð

OPERATING PROFIT 2 403.7 401.4 272.0 192.6 Income tax expense attributable to operating profit 4 (151.0) (154.7) (59.1) (59.3)

OPERATING PROFIT AFTER INCOME TAX 252.7 246.7 212.9 133.3 Outside equity interests in operating profit Ð (0.5) Ð Ð OPERATING PROFIT AFTER INCOME TAX ATTRIBUTABLE TO MEMBERS OF THE CHIEF ENTITY 252.7 246.2 212.9 133.3 Retained profits at the beginning of the financial year 824.9 712.4 486.6 486.8 Adoption of Accounting Standard AASB 1021: “Depreciation of Non-Current Assets” 1k (2.2) Ð (1.3) Ð

TOTAL AVAILABLE FOR APPROPRIATION 1,075.4 958.6 698.2 620.1 Dividends provided for or paid 32 (128.0) (133.7) (128.0) (133.5)

RETAINED PROFITS AT THE END OF THE FINANCIAL YEAR 947.4 824.9 570.2 486.6

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 65.

32 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTES CO NSO LIDATED CH IEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

CURRENT ASSETS Cash 8 53.5 79.4 39.5 74.9 Receivables 9 1,648.2 1,327.2 1,950.3 1,634.9 Net receivables under hedge/swap contracts 182.9 52.9 181.9 52.9 Inventories 10 149.5 136.4 102.7 90.3 Other 12 34.1 57.7 21.5 41.1

TOTAL CURRENT ASSETS 2,068.2 1,653.6 2,295.9 1,894.1 NON-CURRENT ASSETS Receivables 9 665.8 663.2 1,018.1 1,000.1 Net receivables under hedge/swap contracts 1,240.2 1,026.7 1,203.4 997.8 Investments 11 16.6 235.1 342.9 342.4 Property, plant and equipment 13 5,807.2 5,586.8 4,256.5 4,021.9 Intangibles 14 30.3 8.3 Ð Ð Other 12 83.7 47.9 11.7 13.9

TOTAL NON-CURRENT ASSETS 7,843.8 7,56 8.0 6,832.6 6,376.1

TOTAL ASSETS 9,912.0 9,221.6 9,128.5 8,270.2

CURRENT LIABILITIES Accounts payable 15 1,154.4 1,032.7 1,058.3 911.1 Borrowings 16 541.9 147.7 798.7 373.5 Net payables under hedge/swap contracts 177.1 175.5 168.5 167.8 Provisions 17 550.3 364.5 437.4 293.6 Revenue received in advance 647.7 600.2 610.0 572.1 Deferred lease benefits/income 46.4 47.5 43.8 45.6

TOTAL CURRENT LIABILITIES 3,117.8 2,368.1 3,116.7 2,363.7

NON-CURRENT LIABILITIES Accounts payable 15 Ð 0.4 Ð Ð Borrowings 16 2,649.4 2,966.0 2,490.1 2,579.4 Net payables under hedge/swap contracts 246.2 323.7 246.2 323.7 Provisions 17 760.4 702.5 513.3 489.1 Deferred lease benefits/income 440.7 400.2 415.8 376.2 Other 18 26.5 24.1 26.5 24.1

TOTAL NON-CURRENT LIABILITIES 4,123.2 4,416.9 3,691.9 3,792.5

TOTAL LIABILITIES 7,241.0 6,785.0 6,808.6 6,156.2

NET ASSETS 2,671.0 2,436.6 2,319.9 2,114.0

SHAREHOLDERS’ EQUITY Share capital 19 1,111.7 1,035.5 1,111.7 1,035.5 Reserves 20 609.9 574.4 638.0 591.9 Retained profits 947.4 824.9 570.2 486.6 Shareholders’ equity attributable to members of the Chief Entity 2,669.0 2,434.8 2,319.9 2,114.0 Outside equity interests in controlled entities 21 2.0 1.8 Ð Ð

TOTAL SHAREHOLDERS’ EQUITY 2,671.0 2,436.6 2,319.9 2,114.0

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 65.

Qantas Airways Limited and Controlled Entities Annual Report 1997 33 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 7,851.4 7,54 9.2 6,795.0 6,691.6 Payments to suppliers and employees (6,668.5) (6,511.4) (5,943.9) (5,973.1) Interest received 99.4 93.2 102.6 98.4 Interest paid (202.8) (211.3) (179.1) (203.9) Dividends received 32.3 22.0 111.4 17.4 Income taxes paid (1.0) (5.3) (0.5) (1.3) Net cash provided by operating activities (refer note 36) 1,110.8 936.4 885.5 629.1

CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment (610.6) (503.5) (569.4) (421.9) Payments for aircraft security deposits (14.2) (87.1) (13.4) (78.6) Total payments for purchases of property, plant, equipment and aircraft security deposits (624.8) (590.6) (582.8) (500.5) Proceeds from sale of equity investments 371.5 ÐÐÐ Proceeds from sale of property, plant and equipment 2.2 52.3 5.7 41.9 Proceeds from sale and leaseback of non-current assets 215.3 396.0 215.3 396.0 Payments for investments net of cash acquired (44.3) (10.1) Ð Ð Loans repaid by other entities 9.0 Ð 4.6 Ð Net funding to related parties Ð Ð 421.1 130.3

Net cash provided by/(used in) investing activities (71.1) (152.4) 63.9 67.7

CASH FLOWS FROM FINANCING ACTIVITIES Repayments of borrowings (151.6) (148.2) (105.7) (104.6) Net repayments of swaps (418.2) (141.5) (410.5) (134.0) Debt prepayments (251.7) (396.0) (251.7) (396.0)

Total debt repayments (821.5) (685.7) (767.9) (634.6) Proceeds from borrowings/swaps 77.2 11.4 74.5 6.1 Proceeds from issue of shares 40.1 Ð 40.1 Ð Dividends paid (40.1) (46.7) (40.1) (46.3)

Net cash used in financing activities (744.3) (721.0) (693.4) (674.8)

RECONCILIATION OF CASH PROVIDED BY/ (USED IN): Operating activities 1,110.8 936.4 885.5 629.1 Investing activities (71.1) (152.4) 63.9 67.7 Financing activities (744.3) (721.0) (693.4) (674.8)

Net increase in cash held 295.4 63.0 256.0 22.0 Cash at the beginning of the financial year 457.2 394.2 187.2 165.2 Cash at the end of the financial year (refer note 36) 752.6 457.2 443.2 187.2

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 65.

34 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 1: STATEMENT OF SIGNIFICANT are included in the balance sheet as receivables. ACCOUNTING POLICIES As at 30 June 1997, the net amount deferred was In order to assist in an understanding of the figures $219.4 million (1996: $122.4 million). These losses presented, the following summarises the significant will be included in the measurement of the relevant policies which have been adopted in the preparation future foreign currency revenues at the time the of these financial statements. transportation services are provided. a. Basis of Preparation Revenues and expenses from currency swap The financial statements are a general purpose transactions and amounts owing to/from swap financial report which have been drawn up in counterparties are set-off and disclosed on a net accordance with Accounting Standards, Urgent Issues basis where the requirements of Accounting Standard Group Consensus Views and the Corporations Law. AASB 1014: “Set-off and Extinguishment of Debt” They have been prepared on the basis of historical are satisfied. costs and do not take into account changing money values or, except where stated, current valuations of d. Derivative Financial Instruments non-current assets. Unless otherwise noted, the The Economic Entity is subject to foreign currency, accounting policies have been consistently applied interest rate and aviation fuel price risks. Derivative with those of the previous year. financial instruments are used to hedge these risks. Economic Entity policy is not to enter, issue or hold b. Principles of Consolidation derivative financial instruments for trading purposes. The consolidated accounts of the Economic Entity comprise the accounts of Qantas Airways Limited, Gains and losses on derivatives used as hedges are being the Chief Entity, and its controlled entities as at accounted for on the same basis as the underlying 30 June 1997, and the results for the year then ended. exposures to which they relate. Accordingly, hedge Results of controlled entities which were acquired or gains and losses are included in the profit and loss disposed of during the year are included from the date account when the gains and losses arising on the control commenced or to the date control ceased. The related hedged positions are recognised in the profit consolidation process eliminates inter-entity balances and loss account. Further details are outlined in and transactions. Outside equity interests in the note 30. results and equity of controlled entities are shown separately in the consolidated profit and loss account e. Passenger and Freight Sales Revenues and balance sheet respectively. Passenger and freight sales revenues are included in the profit and loss account net of sales discounts. c. Foreign Currency Transactions Passenger and freight sales commissions are treated Foreign currency transactions as a cost of sales. Foreign currency transactions, except those subject to specific hedging arrangements, are translated to f. Revenue Received in Advance Australian currency at the rate of exchange ruling at Passenger and freight sales are credited to revenue the date of each transaction. At balance date, amounts received in advance and subsequently transferred to receivable and payable in foreign currencies are revenue when tickets are utilised or freight uplifted. translated at rates of exchange ruling at that date. The liability relating to sales of other airlines’ tickets Resulting exchange differences are brought to account is included in trade creditors. as exchange gains or losses in the profit and loss account in the financial year in which the exchange g. Taxation rate changes. The Economic Entity adopts the liability method of tax effect accounting. Translation of controlled foreign entities All controlled entities incorporated overseas are Income tax expense is calculated on operating self-sustaining foreign operations and as such, their profit adjusted for permanent differences between assets and liabilities are translated at the rates of taxable and accounting income. The tax effect of exchange ruling at the balance date. The profit and timing differences which arise from items being loss accounts are translated at the average rate for brought to account in different years for income tax the year. Exchange differences arising on translation and accounting purposes is carried forward in the are taken directly to the foreign currency balance sheet as a future income tax benefit or a translation reserve. deferred tax liability.

Hedging of foreign currency commitments Future income tax benefits relating to timing Gains and losses on derivatives used to hedge the differences are not brought to account as an asset purchase or sale of capital equipment and goods and unless realisation is assured beyond reasonable doubt. services are deferred in the balance sheet and Future income tax benefits relating to tax losses are included in the related purchase or sale. Net deferred only brought to account as an asset when their losses associated with hedges of foreign currency realisation is considered to be virtually certain. revenues relating to future transportation services

Qantas Airways Limited and Controlled Entities Annual Report 1997 35 NOTE 1: STATEMENT OF SIGNIFICANT k. Property, Plant and Equipment ACCOUNTING POLICIES cont. Cost and valuation g. Taxation cont. Freehold land and buildings and leasehold Capital gains tax is provided in the financial improvements are independently valued at least every statements in the years in which an asset is sold. three years. Major modifications to aircraft and the Capital gains tax is not provided for when an asset costs associated with placing the aircraft into service is revalued. are capitalised as part of the cost of the asset to which they relate. All aircraft maintenance costs are The Economic Entity is taxed as a public company expensed as incurred. and provides for income tax in overseas countries where a liability exists. Generally, these taxes are Depreciation and amortisation assessed on a formula or percentage of sales basis. Depreciation and amortisation are provided on a straight line basis on all property, plant and h. Inventories and Work in Progress equipment, other than freehold and leasehold land, Engineering expendables, consumable stores and at rates calculated to allocate the cost or valuation work in progress which are held for consumption are less estimated residual value at the end of the useful valued at weighted average cost, less any applicable lives of the assets, over their estimated useful lives. allowance for obsolescence. Assets held for disposal The cost of improvements to or on leasehold are valued at the lower of cost and net realisable value. properties is amortised over the unexpired period of the lease or the estimated useful life of the i. Non-Current Assets improvement, whichever is the shorter. The principal The carrying amounts of non-current assets are asset depreciation periods are: reviewed at least annually to determine whether or not they are stated in excess of their recoverable Years Residuals % amounts. Assets which primarily generate cash flows, Buildings and leasehold such as aircraft, are assessed on an individual basis improvements 10-50 0 whereas infrastructure assets are examined on a class Plant and equipment 3-10 0 by class basis, and compared to net surplus cash Jet aircraft and inflows. Expected net cash flows used in determining spare engines 20 0-25 recoverable amounts have been discounted to their Non-jet aircraft and net present value, using a rate reflecting the cost spare engines 10-30 0-20 of funds. Aircraft spare parts 15-20 0-25

Appropriate provisions are made where the carrying Depreciation rates are reviewed annually and reassessed amount exceeds recoverable amount. To the extent having regard to commercial and technological that a revaluation decrement reverses a revaluation developments. increment previously credited to, and still included in the balance of, the asset revaluation reserve for AASB 1021: Depreciation of Non-Current Assets the same class of assets, the decrement is debited Depreciation of non-current assets has been directly to the reserve. Otherwise, the decrement calculated in accordance with Accounting Standard is recognised as an expense in the profit and AASB 1021: “Depreciation of Non-Current Assets”. loss account. The financial effect of the adoption of this Accounting Standard has been to decrease retained profits at the j. Investments beginning of the financial year by $2.2 million All investments are recorded at the lower of cost and (Chief Entity: $1.3 million). recoverable amount. Leased and hire purchased assets Controlled entities Leased assets under which the Economic Dividend income from controlled entities is included Entity assumes substantially all the risks and benefits in revenue of the Chief Entity when proposed. of ownership are classified as finance leases and capitalised. Associated companies An associated company is one in which the Economic At the inception of the lease, a lease asset and Entity exercises significant influence, but not control. liability equal to the present value of the minimum Dividend income from associated companies is lease payments are created. Any gains and losses included in revenue when received. under sale and leaseback arrangements are included as part of the cost of the leased asset. Capitalised Other entities leased assets are amortised on a straight line basis Dividends from investments in corporations which over the period in which benefits are expected to are not controlled entities or associated companies arise from the use of those assets. Lease payments are included in revenue when received. are allocated between the reduction in the principal component of the lease liability and interest expense.

36 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 1: STATEMENT OF SIGNIFICANT n. Employee Entitlements ACCOUNTING POLICIES cont. Wages and salaries, annual leave, k. Property, Plant and Equipment cont. sick leave and statutory entitlements In respect of a number of finance leases, debt funding Liabilities for wages and salaries, annual leave has been provided to the lessor. This debt funding has (including leave loading), sick leave vesting to been offset against the lease liability and the balance employees and statutory overseas termination sheet reflects the net position (refer note 22). Interest entitlements are recognised and measured as the received on the debt funding is also offset against amount unpaid at balance date at current wage and interest paid (refer note 2). salary rates, including all related on-costs in respect of the employees’ services provided up to that date. Hire purchased assets are accounted for in the same way as finance leases. Long service leave The liability for long service leave represents the Operating lease payments are charged to the present value of the estimated future cash outflows profit and loss account in the years in which they to be made by the employer resulting from employees’ are incurred. services provided up to the balance date. Liabilities for employee entitlements which are not expected to be In respect of any premises rented under long-term settled within 12 months are discounted using rates operating leases which are subject to sub-tenancy attached to national government securities at balance agreements, provision is made for any shortfall date which most closely match the timing of maturity between primary payments to the head lessor less of the related liability. In determining the liability for any recoveries from sub-tenants. These provisions are employee entitlements, consideration has been given determined on a discounted cash flow basis, using a to future increases in wage and salary rates and rate reflecting the cost of funds. experience with staff turnover. The liability includes all related on-costs. Non-cancellable operating leases Non-cancellable operating leases are generally for a Superannuation term of 12 years extendable at the option of the Chief The Economic Entity contributes to employee Entity to 15 years. The leases are non-cancellable on superannuation funds. Contributions to these funds the basis that there are likely to be financial penalties are recognised in the profit and loss account as they associated with a termination prior to year twelve. are made. Further details are disclosed in note 26. l. Intangible Assets Qantas Staff Share Plan II Goodwill Eligible Employees of the Chief Entity and its Goodwill, representing the excess of the purchase wholly-owned controlled entities are participants in consideration over the fair values of identifiable net the Qantas Staff Share Plan II. Further details are assets acquired, is amortised on a straight line basis disclosed in note 31. Other than the costs incurred over the period in which future benefits are expected in administering the plan, which are expensed as to arise, or 20 years, whichever is the shorter. incurred, the plan does not result in any expense to the Economic Entity. Other intangible assets Trademarks, tradenames and licences are amortised o. Workers’ Compensation on a straight line basis over the period in which future The Chief Entity is a licensed self-insurer under benefits are expected to arise, or 20 years, whichever the New South Wales Workers Compensation Act is the shorter. and the Accident Compensation Act 1985 (Victoria), and has made provision for all assessed workers’ m. Frequent Flyer liability compensation liabilities based on an independent The obligation to provide travel rewards to members actuarial assessment. Workers’ compensation liabilities of the Frequent Flyer program is progressively accrued for non-New South Wales and Victorian employees are as a current liability as points are accumulated. This insured commercially. accrual is based on the incremental cost of ultimately providing the travel rewards. Australian Airlines Limited, a controlled entity, has made provision for outstanding self-insured pre As members redeem awards or their entitlements 1 July 1989 workers’ compensation claims including expire, the accrual is reduced accordingly to reflect an estimate for incurred but non-reported claims, the acquittal of the outstanding obligation. both based on an independent actuarial assessment. Post 1 July 1989, all workers’ compensation liabilities have been insured commercially.

Qantas Airways Limited and Controlled Entities Annual Report 1997 37 NOTE 1: STATEMENT OF SIGNIFICANT s. Statements of Cash Flows ACCOUNTING POLICIES cont. For the purposes of the statements of cash flows p. Deferred Lease Benefits/Income (refer note 36), cash includes cash on hand, at bank Gains/losses on instantaneous sale and operating and money market investments readily convertible to leaseback of aircraft, benefits derived from cross- cash, net of outstanding bank overdrafts and short- border leasing arrangements and variations between term cash borrowings. Bank loans obtained through actual lease payments and minimum lease payments the use of commercial paper funding facilities and are treated as deferred lease benefits/income. These funding provided to related parties have been are brought to account as income/expenses over the disclosed on a net basis due to the rapid turnover period of the respective lease or on a basis which is and the high volume of transactions. representative of the pattern of benefits derived from the leasing transactions. t. Comparative Figures Where applicable, comparatives have been adjusted q. Segment Information to reflect disclosure on a comparable basis with Segment information is provided in note 33. current year figures.

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 1997, 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 before interest and tax contributions from international and domestic operations and controlled entity operations (refer note 33).

r. 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 financial year (refer note 34).

38 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 2: OPERATING PROFIT Operating profit before income tax has been determined after including: Revenue Sales revenue Related parties Ð controlled entities Ð Ð 102.5 101.1 Ð associated companies 26.0 40.3 22.0 33.6 Ð other related parties 35.1 18.5 25.4 10.1 Other persons/bodies corporate 7,741.0 7,519.6 6,710.0 6,566.5 Other revenue Interest received/receivable from Related parties Ð controlled entities Ð Ð 15.3 17.6 Ð associated companies Ð 1.4 Ð 0.7 Other persons/bodies corporate 100.7 92.3 87.8 80.4 Dividends received/receivable from Related parties Ð controlled entities Ð Ð 108.9 15.8 Ð associated companies 12.1 2.4 1.2 Ð Other persons/bodies corporate 20.2 19.8 1.3 1.6 Operating revenue (refer note 33) 7,935.1 7,69 4.3 7,074.4 6,827.4 Proceeds from sale of non-current assets Other persons/bodies corporate 373.7 52.3 5.7 41.9 Proceeds from sale and leaseback of non-current assets Other persons/bodies corporate 215.3 396.0 215.3 396.0

Total revenue including proceeds from sale and leaseback of non-current assets 8,524.1 8,142.6 7,295.4 7,265.3

Expenditure Interest paid/payable to Related parties Ð controlled entities Ð Ð 17.3 17.2 Other persons/bodies corporate Ð finance charges on capitalised leases 102.7 105.5 76.1 73.8 Ð interest received on portion of debt funded to the lessor (8.6) (10.5) Ð Ð 94.1 95.0 93.4 91.0 Ð other interest paid/payable 102.9 101.7 77.6 99.8 Total interest paid/payable 197.0 196.7 171.0 190.8 Depreciation Buildings 7.9 5.0 3.4 3.2 Leasehold improvements 44.3 35.7 28.2 18.3 Plant and equipment 92.6 85.3 48.8 43.6 Aircraft and engines 94.4 88.8 74.9 71.6 Aircraft spare parts 23.6 17.1 20.6 12.0 Total depreciation 262.8 231.9 175.9 148.7 Amortisation Leasehold land and buildings 1.6 1.6 0.9 0.8 Leased plant and equipment 6.0 5.3 Ð Ð Leased aircraft and engines 183.5 173.0 126.0 119.3 Leased aircraft spare parts 1.5 1.5 Ð Ð Goodwill 2.9 0.5 Ð Ð Expenditure carried forward 6.3 5.5 5.3 4.4 Trademarks, tradenames and licences 1.3 1.2 Ð Ð Total amortisation 203.1 188.6 132.2 124.5

Qantas Airways Limited and Controlled Entities Annual Report 1997 39 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 2: OPERATING PROFIT cont. Net operating foreign currency gain (4.6) (5.6) (5.8) (7.1) Net (profit)/loss on sale of non-current assets 0.8 6.2 4.5 (4.2) Amounts set aside to doubtful debts provision 3.3 3.0 3.0 2.9 Amounts set aside to other provisions (excluding abnormal items) Allowance for inventory obsolescence 5.4 1.3 3.5 1.3 Employee entitlements 57.8 70.8 45.4 61.8 Staff redundancy and restructuring costs Ð 16.2 Ð 15.5 Insurance 26.2 15.8 20.0 12.8 Operating lease charges Non-cancellable 242.3 293.2 272.5 293.2 Cancellable 133.7 151.2 106.5 100.8 Capacity hire Ð aircraft 116.2 102.4 114.6 102.1

NOTE 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 Ð Ð Ð Income tax effect (32.6) Ð Ð Ð 66.8 Ð Ð Ð Staff redundancy costs (60.0) Ð (45.4) Ð Income tax effect 21.6 Ð 16.3 Ð (38.4) Ð (29.1) Ð Write-off of international aircraft in-cabin assets (56.6) Ð (56.6) Ð Income tax effect 20.4 Ð 20.4 Ð (36.2) Ð (36.2) Ð Total abnormal items (17.2) Ð (102.0) Ð Total income tax effect 9.4 Ð 36.7 Ð

Total abnormal items after income tax (7.8) Ð (65.3) Ð

NOTE 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 403.7 401.4 272.0 192.6 Prima facie income tax expense at 36% 145.3 144.5 97.9 69.3 Add/(less): Non-assessable income Deferred lease benefits Ð (5.0) Ð (5.0) Other non-assessable items (11.4) (9.7) (43.7) (20.0) Non-deductible expenditure Deferred lease benefits 0.7 Ð 0.7 Ð Depreciation on buildings 1.8 1.1 1.6 1.1 Amortisation of lease residual values 8.5 7.6 8.5 7.6 Other non-deductible items 19.7 23.2 5.5 8.8 Over provision prior years (13.6) (7.0) (11.4) (2.5)

Total income tax expense 151.0 154.7 59.1 59.3

Comprising Australian income tax expense 132.8 145.6 57.8 58.3 Overseas income tax expense 18.2 9.1 1.3 1.0

151.0 154.7 59.1 59.3

40 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 4: INCOME TAX cont. The income tax expense represents Provision for income tax Ð Australia 112.0 0.8 56.6 Ð Ð overseas 2.5 11.3 1.3 1.2 Group tax loss transfers 31.9 81.3 23.1 16.3 Provision for deferred income tax (6.8) 81.3 (4.7) 77.5 Future income tax benefit 25.0 (13.0) (5.8) (33.2) Over provision prior years (13.6) (7.0) (11.4) (2.5)

151.0 154.7 59.1 59.3

The provision for deferred income tax is reduced by future income tax benefits attributable to tax losses to the amount of 23.4 88.6 1.5 54.6

Of the $23.4 million relating to carried forward tax losses of the Economic Entity at 30 June 1997, no amount (1996: $21.2 million) relates to pre-acquisition carried forward tax losses quarantined in Australian Airlines Limited group which were only available for offset against future taxable income generated by Australian Airlines Limited group.

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; (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.

NOTE 5: DIRECTORS’ REM UNERATION 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 other 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 bands: $ 0Ð 9,999 1* 1* 20,000 Ð 29,999 2 Ð 30,000 Ð 39,999 Ð 2 40,000 Ð 49,999 Ð 2 50,000 Ð 59,999 3 Ð 60,000 Ð 69,999 3 3 70,000 Ð 79,999 1 1 80,000 Ð 89,999 1 1 140,000 Ð 149,999 1 1 620,000 Ð 629,999 Ð 1 840,000 Ð 849,999 1 Ð 1,370,000 Ð 1,379,999 Ð 1 1,690,000 Ð 1,699,999 1 Ð

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

Qantas Airways Limited and Controlled Entities Annual Report 1997 41 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 5: DIRECTORS’ REMUNERATION cont. 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 (1996: $0.6 million)) 3.2 2.7

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 (1996: $0.7 million)) 5.1 4.3

NOTE 6: EX ECUTIVES’ REM UNERATION 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 other 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 current 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.

The annual level of incentive payment that vests at the end of each financial year up to and including 30 June 2002 is determined based on 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 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 Executives A significant number of employees of the Economic Entity received more than $100,000 in total remuneration during the year ended 30 June 1997. A significant proportion of these employees were pilots (including executives and training pilots), flight officers 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 distorted due to appointment of some executives part way through each year and changes to organisational structure.

42 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 6: EX ECUTIVES’ REMUNERATION cont. 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: $ 100,000 Ð 109,999 7 3 5 1 120,000 Ð 129,999 2 Ð 1 Ð 130,000 Ð 139,999 1 4 1 4 140,000 Ð 149,999 8 8 7 6 150,000 Ð 159,999 9 7 7 7 160,000 Ð 169,999 4 11 4 8 170,000 Ð 179,999 8 8 7 6 180,000 Ð 189,999 8 5 6 5 190,000 Ð 199,999 5 5 3 3 200,000 Ð 209,999 6 8 6 8 210,000 Ð 219,999 7 6 7 6 220,000 Ð 229,999 3 Ð 2 Ð 230,000 Ð 239,999 2 1 2 1 240,000 Ð 249,999 2 Ð 2 Ð 250,000 Ð 259,999 1 4 1 4 260,000 Ð 269,999 1 1 1 1 270,000 Ð 279,999 1 2 1 2 280,000 Ð 289,999 4 3 4 3 290,000 Ð 299,999 3 1 3 1 300,000 Ð 309,999 1 1 1 1 310,000 Ð 319,999 3 2 3 2 320,000 Ð 329,999 1 6 1 6 330,000 Ð 339,999 4 1 4 1 340,000 Ð 349,999 2 Ð 2 Ð 350,000 Ð 359,999 Ð 1 Ð 1 360,000 Ð 369,999 1 Ð 1 Ð 370,000 Ð 379,999 1 Ð 1 Ð 380,000 Ð 389,999 1 1 1 1 390,000 Ð 399,999 Ð 1 Ð 1 410,000 Ð 419,999 1 Ð 1 Ð 460,000 Ð 469,999 Ð 1 Ð 1 470,000 Ð 479,999 1 Ð 1 Ð 490,000 Ð 499,999 Ð 2 Ð 2 510,000 Ð 519,999 2 Ð 1 Ð 520,000 Ð 529,999 Ð 1 Ð 1 620,000 Ð 629,999 Ð 1 Ð 1 650,000 Ð 659,999 1 Ð 1 Ð 670,000 Ð 679,999 1 Ð 1 Ð 840,000 Ð 849,999 1 Ð 1 Ð 1,370,000 Ð 1,379,999 Ð 1 Ð 1 1,690,000 Ð 1,699,999 1 Ð 1 Ð

Total executive officers 104 96 91 85

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 26.0 22.7 23.5 21.0

Executives who work wholly or mainly outside Australia are excluded from the above disclosures.

Qantas Airways Limited and Controlled Entities Annual Report 1997 43 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 7: AUDITORS’ REM UNERATION Amounts received or due and receivable for audit services by Ð Auditors of the Chief Entity 0.9 0.7 0.7 0.5

Amounts received or due and receivable for other services by Ð Auditors of the Chief Entity 1.6 1.7 1.6 1.7

NOTE 8: CASH Current Cash on hand 2.7 2.4 2.4 2.3 Cash at bank 33.8 7.0 20.5 2.9 Cash on call 17.0 70.0 16.6 69.7

53.5 79.4 39.5 74.9

NOTE 9: RECEIVABLES Current Trade debtors 808.2 846.7 773.6 801.0 Less: provision for doubtful debts 7.5 8.8 5.9 8.2 800.7 837.9 767.7 792.8 Trade debtors Related parties Ð controlled entities Ð Ð 49.1 44.8 Ð associated companies 12.2 11.9 11.4 11.9 Ð other related parties 56.0 20.4 55.3 19.8 Loans owing from Related parties Ð controlled entities Ð Ð 299.9 316.8 Bills of exchange and promissory notes 234.7 178.4 234.7 178.4 Aircraft security and term deposits 22.6 18.3 21.4 17.7 Negotiable securities 451.0 187.9 451.0 187.9 Sundry debtors Related parties Ð controlled entities Ð Ð 0.3 0.5 Other persons/bodies corporate 71.0 72.4 59.5 64.3

1,648.2 1,327.2 1,950.3 1,634.9

Non-current Loans owing from Related parties Ð controlled entities Ð Ð 428.6 421.5 Ð associated companies Ð 4.5 Ð 4.5 Other persons/bodies corporate 81.5 88.2 60.0 60.1 Bills of exchange 63.1 66.5 63.1 66.5 Aircraft security and term deposits 477.0 459.5 445.3 428.0 Sundry debtors Other persons/bodies corporate 44.2 44.5 21.1 19.5

665.8 663.2 1,018.1 1,000.1

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.

44 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 10: INVENTORIES Current At cost Net engineering expendables 90.3 86.4 51.0 48.3 Consumable stores 43.8 36.9 39.8 33.1 Work in progress 11.7 8.8 10.4 7.0 145.8 132.1 101.2 88.4 At realisable value Aircraft spare parts held for disposal 3.7 4.3 1.5 1.9

149.5 136.4 102.7 90.3

NOTE 11: INVESTMENTS Non-current Investments listed on prescribed stock exchange at cost Other corporations Ð 220.6 Ð Ð Unlisted investments at cost Controlled entities (refer note 27) Ð Ð 331.7 331.7 Associated companies (refer note 28) 3.5 3.5 1.0 1.0 Other corporations 10.2 9.7 10.2 9.7 Partnership interest at cost 2.9 1.3 Ð Ð

16.6 235.1 342.9 342.4

Market value of listed shares Other corporations Ð 411.1 Ð Ð

The Economic Entity’s investment in listed shares in other corporations comprised a holding of 19.9% ‘B’ class shares in Air New Zealand Limited, an airline. This investment was disposed of during the current year, and the resultant profit has been treated as an abnormal item (refer note 3). Dividends received/receivable for the year ended 30 June 1997 were $18.9 million (1996: $17.9 million).

NOTE 12: OTHER ASSETS Current Advances, prepayments and other deposits 26.9 45.8 15.6 30.6 Other 7.2 11.9 5.9 10.5

34.1 57.7 21.5 41.1

Non-current Future income tax benefit 65.1 25.9 Ð Ð Expenditure carried forward 9.0 10.8 3.8 4.4 Other 9.6 11.2 7.9 9.5

83.7 47.9 11.7 13.9

Qantas Airways Limited and Controlled Entities Annual Report 1997 45 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 13: PROPERTY, PLANT AND EQUIPMENT Non-current Freehold land At cost 11.1 11.5 Ð Ð Directors’ valuation 1992 57.4 57.4 57.4 57.4 Directors’ valuation 1993 1.7 1.8 1.7 1.8 Directors’ valuation 1995 4.8 4.8 Ð Ð

75.0 75.5 59.1 59.2

Leasehold land Leasehold land at cost 1.6 1.6 Ð Ð

Buildings At cost 143.3 42.6 19.4 16.5 Directors’ valuation 1992 44.9 44.9 44.9 44.9 Directors’ valuation 1996 9.7 9.7 Ð Ð 197.9 97.2 64.3 61.4 Less: accumulated depreciation At cost 19.6 15.1 11.1 10.4 Directors’ valuation 1992 13.0 10.3 13.0 10.3 Directors’ valuation 1996 0.4 Ð Ð Ð 33.0 25.4 24.1 20.7 164.9 71.8 40.2 40.7 Leased at cost 52.9 52.6 29.0 29.0 Less: accumulated amortisation 26.1 24.5 11.7 10.8 26.8 28.1 17.3 18.2 Total buildings at cost and valuation 250.8 149.8 93.3 90.4 Less: accumulated depreciation/amortisation 59.1 49.9 35.8 31.5

191.7 99.9 57.5 58.9

Leasehold improvements At cost 902.5 779.5 573.0 448.5 Less: accumulated depreciation 375.2 323.9 187.5 151.2

527.3 455.6 385.5 297.3

Plant and equipment At cost 862.4 841.9 544.2 540.7 Less: accumulated depreciation 523.9 478.8 318.4 308.3 338.5 363.1 225.8 232.4 Leased at cost 25.3 33.5 Ð Ð Less: accumulated amortisation 15.2 17.5 Ð Ð 10.1 16.0 Ð Ð Total plant and equipment at cost 887.7 875.4 544.2 540.7 Less: accumulated depreciation/amortisation 539.1 496.3 318.4 308.3

348.6 379.1 225.8 232.4

46 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 13: PROPERTY, PLANT AND EQUIPMENT cont. Aircraft and engines At cost 1,665.0 1,338.0 1,137.8 994.3 Less: accumulated depreciation 641.0 431.5 526.1 372.8 1,024.0 906.5 611.7 621.5 Hire purchased at cost 2,721.5 2,593.6 2,526.8 2,398.9 Less: accumulated amortisation 561.5 579.2 523.0 549.3 2,160.0 2,014.4 2,003.8 1,849.6 Leased at cost 1,539.3 1,620.8 842.1 750.2 Directors’ valuation 1994 24.2 29.3 24.3 29.3 1,563.5 1,650.1 866.4 779.5 Less: accumulated amortisation At cost 302.8 244.0 123.1 76.2 Directors’ valuation 1994 11.3 12.8 11.4 12.8 314.1 256.8 134.5 89.0 1,249.4 1,393.3 731.9 690.5 Total aircraft and engines at cost and valuation 5,950.0 5,581.7 4,531.0 4,172.7 Less: accumulated depreciation/amortisation 1,516.6 1,267.5 1,183.6 1,011.1

4,433.4 4,314.2 3,347.4 3,161.6

Aircraft spare parts At cost 314.9 297.8 258.4 245.9 Less: accumulated depreciation 153.7 131.5 128.3 108.4 161.2 166.3 130.1 137.5 Leased at cost 33.3 33.3 Ð Ð Less: accumulated amortisation 16.0 14.2 Ð Ð 17.3 19.1 Ð Ð Total aircraft spare parts at cost 348.2 331.1 258.4 245.9 Less: accumulated depreciation/amortisation 169.7 145.7 128.3 108.4

178.5 185.4 130.1 137.5

Manufacturers’ deposits Progress payments at cost 51.1 75.5 51.1 75.0

Total property, plant and equipment at cost and valuation 8,466.9 7,870.1 6,110.1 5,632.4 Less: accumulated depreciation/amortisation 2,659.7 2,283.3 1,853.6 1,610.5

5,807.2 5,586.8 4,256.5 4,021.9

Properties Recent valuations Freehold land and buildings based on independent valuations undertaken within three years of balance date 267.3 187.7 134.6 132.8

Interests in leasehold improvements where lease period exceeds 20 years based on independent valuations undertaken within three years of balance date 442.9 411.0 255.7 242.4

Qantas Airways Limited and Controlled Entities Annual Report 1997 47 NOTE 13: PROPERTY, PLANT AND EQUIPMENT cont. Secured assets Certain aircraft act as security against related financings. Under the terms of certain financing facilities entered into by the Economic Entity, the underwriters 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 1997.

The 1997 independent valuation of land, leasehold improvements and buildings was carried out by Mr R.G. Cowell, FVLE, AREI, of Knight Frank (NSW) Pty Limited. The 1997 independent valuation of aircraft and spare engines was carried out by Mr J.W. Vitale, ISTAT Certified Appraiser, of AVITAS Inc.

The valuations for each 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:

1997 1996 Valuation Carrying Valuation Carrying amount amount Excess amount amount Excess $ m $ m $ m $ m $ m $ m Asset class Freehold land and buildings 267.3 239.9 27.4 187.7 147.3 40.4 Leasehold land, buildings and improvements 674.7 555.7 119.0 615.2 485.3 129.9 Aircraft and engines 4,976.2 4,433.4 542.8 4,466.8 4,314.2 152.6

5,918.2 5,229.0 689.2 5,269.7 4,946.8 322.9

All valuations were performed primarily on an independent ‘desktop’ 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 0.75063 at 30 June 1997 (1996: 0.78926). 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.

The Economic Entity has previously advised its intention to market for sale its interests in the assets of the Australian Resorts group of companies. Any potential capital gains tax liability arising from the sale of these assets is not material to the accounts of the Economic Entity, and accordingly has not been provided for.

With the exception of the above, there is no present intention to sell, or market for sale, the above assets, and for this reason no potential capital gains tax has been provided.

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 14: INTANGIBLES Non-current Goodwill at cost 36.8 10.5 Ð Ð Less: accumulated depreciation 6.5 3.5 Ð Ð 30.3 7.0 Ð Ð Trademarks, tradenames and licences at cost 8.2 8.2 Ð Ð Less: accumulated depreciation 8.2 6.9 Ð Ð Ð 1.3 Ð Ð

30.3 8.3 Ð Ð

48 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 15: ACCOUNTS PAYABLE Current Trade creditors Related parties Ð controlled entities Ð Ð 27.6 21.5 Ð associated companies 2.5 3.7 2.4 3.7 Ð other related parties 65.2 63.7 63.8 63.7 Other persons/bodies corporate 945.4 787.0 855.8 727.8 Sundry creditors and accruals Related parties Ð controlled entities Ð Ð 2.6 3.6 Other persons/bodies corporate 84.3 135.9 49.1 48.4 Unredeemed Frequent Flyer liability 57.0 42.4 57.0 42.4

1,154.4 1,032.7 1,058.3 911.1

Redeemed Frequent Flyer Revenue Passenger Kilometres as a percentage of Available Seat Kilometres was 2.2% for the year ended 30 June 1997 (1996: 1.9%).

Non-current Sundry creditors Other persons/bodies corporate Ð 0.4 Ð Ð

NOTE 16: BORROWINGS Current Bank overdrafts Ð unsecured 0.4 0.8 Ð Ð Bank loans Ð secured 9.5 Ð Ð Ð Ð unsecured 69.5 61.0 69.5 61.0 Other loans Related parties Ð controlled entities Ð unsecured Ð Ð 309.5 266.3 Other persons/bodies corporate Ð secured 6.0 5.4 Ð Ð Ð unsecured 367.9 Ð 367.9 Ð Finance lease and hire purchase liabilities (refer note 22) 88.6 80.5 51.8 46.2

541.9 147.7 798.7 373.5

Non-current Bank loans Ð secured 137.9 Ð Ð Ð Ð unsecured 286.3 352.9 286.3 352.9 Other loans Related parties Ð controlled entities Ð unsecured Ð Ð 339.4 16.3 Other persons/bodies corporate Ð secured 14.7 20.7 Ð Ð Ð unsecured 339.7 687.9 339.7 687.9 Lease residual values 265.6 237.0 265.6 237.0 Finance lease and hire purchase liabilities (refer note 22) 1,605.2 1,667.5 1,259.1 1,285.3

2,649.4 2,966.0 2,490.1 2,579.4

Certain current and non-current loans relate to specific financings of aircraft and are secured by the aircraft to which they relate.

Qantas Airways Limited and Controlled Entities Annual Report 1997 49 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 17: PROVISIONS Current Dividends 72.3 67.3 72.3 67.3 Income tax Ð Australia 113.7 0.4 55.0 Ð Ð overseas 2.7 2.7 1.9 1.4 Employee entitlements (refer note 31) Ð annual leave 243.0 220.8 213.7 176.8 Ð long service leave 22.9 28.7 20.4 17.7 Staff redundancy and restructuring costs (refer note 31) 67.9 27.1 52.3 17.0 Loss on swap agreements Ð 0.9 Ð Ð Under recovery of rentals on sub-let premises 8.9 5.5 8.9 5.5 Insurance and other 18.9 11.1 12.9 7.9

550.3 364.5 437.4 293.6

Non-current Deferred income tax 479.1 444.4 259.9 270.4 Employee entitlements (refer note 31) Ð long service leave 199.6 176.1 183.7 151.0 Under recovery of rentals on sub-let premises 41.4 44.3 41.4 44.3 Insurance and other 40.3 37.7 28.3 23.4

760.4 702.5 513.3 489.1

NOTE 18: OTHER LIABILITIES Non-current Systems development put contracts liability 26.5 24.1 26.5 24.1

NOTE 19: SHARE CAPITAL Issued and paid up capital 1,111,709,081 ordinary shares of $1 each fully paid 1,111.7 1,035.5 1,111.7 1,035.5

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

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

1 July 1995 Opening balance 1,000.0 n/a 1,000.0 30 July 1995 Qantas Staff Share Plan 20 10.0 Ð 10.0 8 December 1995 Dividend Reinvestment Plan issues 20, 32 8.3 2.14 8.3 4 April 1996 Dividend Reinvestment Plan issues 20, 32 17.2 2.17 17.2 30 June 1996 Closing balance 1,035.5 1,035.5

4 November 1996 Qantas Staff Share Plan 20 7.9 Ð 7.9 6 December 1996 Dividend Reinvestment Plan and Bonus Share Plan issues, plus shares issued pursuant to a 1.74 / dividend underwriting agreement 20, 32 38.0 1.88 38.0 3 April 1997 Dividend Reinvestment Plan and Bonus Share Plan issues, plus shares issued pursuant to a 2.29 / dividend underwriting agreement 20, 32 30.3 2.41 30.3

30 June 1997 Closing balance 1,111.7 1,111.7

50 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 19: SHARE CAPITAL cont. Qantas Staff Share Plan The Qantas Staff Share Plan (Plan) was open to all eligible employees of the Chief Entity and its wholly-owned controlled entities. On 4 November 1996, $500 worth (subject to rounding) of ordinary, fully paid bonus shares were issued to 29,433 employees, resulting in 268 shares being granted to each participating employee. At the 1996 Annual General Meeting, shareholders approved the implementation of the Qantas Staff Share Plan II (QSSP II). QSSP II replaced the original Plan.

On 20 August 1997, the Chief Entity announced that all Eligible Employees would be offered an additional $500 worth (subject to rounding) of ordinary, fully paid bonus shares under QSSP II. It is intended that these shares will be issued on 6 February 1998 to Eligible Employees employed on the date of the announcement and still employed by Qantas on the date of issue.

Dividend Reinvestment Plan (DRP) and Bonus Share Plan (BSP) Qantas has established a DRP and a BSP. The BSP only operates when a dividend is unfranked. Accordingly, only the DRP will be operational in respect of the final dividend for the year ended 30 June 1997, which is payable on 3 December 1997.

Under the DRP and BSP, ordinary shares are issued at a discount of five percent to the weighted average market price of the shares over a period set by the Directors of between five and ten trading days following the days on which the shares are quoted ex dividend.

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 20: RESERVES Share premium reserve 555.1 509.0 555.1 509.0 Asset revaluation reserve 54.0 54.0 82.9 82.9 Foreign currency translation reserve 0.8 11.4 Ð Ð

609.9 574.4 638.0 591.9

Movements in reserves: Share premium reserve Balance at the beginning of the financial year 509.0 490.3 509.0 490.3 Add/(less): Ð issue of Dividend Reinvestment Plan shares and shares issued pursuant to a dividend underwriting agreement 62.2 29.8 62.2 29.8 Ð issue of Bonus Share Plan shares (7.7) Ð (7.7) Ð Ð issue of Qantas Staff Share Plan shares (7.9) (10.0) (7.9) (10.0) Ð privatisation costs (0.5) (1.1) (0.5) (1.1)

Balance at the end of the financial year 555.1 509.0 555.1 509.0

Asset revaluation reserve Balance at the beginning of the financial year 54.0 58.6 82.9 85.0 Less: Ð revaluation decrements Ð 4.6 Ð 2.1

Balance at the end of the financial year 54.0 54.0 82.9 82.9

Foreign currency translation reserve Balance at the beginning of the financial year 11.4 15.3 Ð Ð Less: Ð net translation adjustments on consolidation of controlled foreign entities 10.6 3.9 Ð Ð

Balance at the end of the financial year 0.8 11.4 Ð Ð

Qantas Airways Limited and Controlled Entities Annual Report 1997 51 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 21: OUTSIDE EQUITY INTERESTS Ordinary share capital of controlled entities issued to outside equity interests 0.3 0.1 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 1.8

NOTE 22: FINANCE LEASE COMM ITMENTS Included in the financial statements as finance lease and hire purchase liabilities are the present values of future rentals of the following: Aircraft 1,668.8 1,713.9 1,296.8 1,315.6 Buildings 14.5 16.4 14.1 15.9 Computer and communications equipment 10.5 17.7 Ð Ð

1,693.8 1,748.0 1,310.9 1,331.5

Payable: Not later than one year 255.7 254.9 161.5 159.4 Later than one year but not later than two years 261.2 253.2 159.0 158.9 Later than two years but not later than five years 798.0 736.0 620.4 491.7 Later than five years 1,302.4 1,545.6 1,072.2 1,280.6 2,617.3 2,789.7 2,013.1 2,090.6 Less: future finance charges 832.6 924.9 702.2 759.1 Total lease liability 1,784.7 1,864.8 1,310.9 1,331.5 Less: debt funded portion 90.9 116.8 Ð Ð

1,693.8 1,748.0 1,310.9 1,331.5

Balance represents: Current liability (refer note 16) 88.6 80.5 51.8 46.2 Non-current liability (refer note 16) 1,605.2 1,667.5 1,259.1 1,285.3

1,693.8 1,748.0 1,310.9 1,331.5

NOTE 23: OPERATING LEASE AND HIRE COMMITMENTS

Future net operating lease and hire commitments not provided for in the financial statements: 2,864.8 2,966.1 2,809.1 2,850.8

Payable: Not later than one year 394.1 493.4 396.9 469.0 Later than one year but not later than two years 373.0 426.5 380.2 405.4 Later than two years but not later than five years 941.3 1,027.8 916.8 994.6 Later than five years 1,156.4 1,018.4 1,115.2 981.8 2,864.8 2,966.1 2,809.1 2,850.8 Less: provision for potential under recovery of rentals on unused premises available for sub-lease (refer note 17) 50.3 49.8 50.3 49.8

2,814.5 2,916.3 2,758.8 2,801.0

52 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 23: OPERATING LEASE AND HIRE COMM ITMENTS cont. Operating lease commitments represent: Cancellable operating leases 1,130.0 1,062.9 988.3 947.6 Non-cancellable operating leases Aircraft leases 1,684.5 1,772.2 1,684.5 1,772.2 Property leases Ð 131.0 86.0 131.0

2,814.5 2,966.1 2,758.8 2,850.8

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

Payable: Not later than one year 227.8 351.5 260.9 351.5 Later than one year but not later than two years 224.0 302.0 259.1 302.0 Later than two years but not later than five years 554.3 724.2 572.1 724.2 Later than five years 678.4 525.5 678.4 525.5

1,684.5 1,903.2 1,770.5 1,903.2

In respect of the Chief Entity’s non-cancellable operating leases, the market value of jet aircraft at 30 June 1997 based on an independent ‘desktop’ valuation was $1,519.3 million (1996: $1,604.2 million), compared to an implied carrying value of $1,302.5 million (1996: $1,420.1 million) had the leased assets been capitalised on inception.

NOTE 24: CAPITAL EXPENDITURE COMMITMENTS Capital expenditure commitments contracted but not provided for in the financial statements: Aircraft 345.2 472.0 336.9 465.1 Building works 270.0 280.0 203.9 280.0 Other 34.5 62.1 22.6 28.8

649.7 814.1 563.4 773.9

Payable: Not later than one year 490.9 576.7 429.3 537.3 Later than one year but not later than two years 127.6 237.4 108.2 236.6 Later than two years but not later than five years 31.2 Ð 25.9 Ð

649.7 814.1 563.4 773.9

NOTE 25: CONTINGENT LIABILITIES Related parties Guarantees to support borrowings and finance lease commitments to other persons/bodies corporate on behalf of controlled entities 36.6 42.2 17.8 19.6 Guarantees and letters of comfort to support operating lease commitments and other arrangements entered into with other persons/ bodies corporate by controlled entities 89.9 94.6 89.9 94.6 Guarantees and letters of comfort to support leveraged and operating lease commitments to other persons/ bodies corporate on behalf of associated companies 4.1 25.6 4.1 23.3 130.6 162.4 111.8 137.5

Qantas Airways Limited and Controlled Entities Annual Report 1997 53 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 25: CONTINGENT LIABILITIES cont. Other persons/bodies corporate General guarantees in the normal course of business 30.2 40.6 30.2 40.6 Contingent liabilities relating to current and threatened litigation 36.6 17.0 36.5 9.5 66.8 57.6 66.7 50.1

197.4 220.0 178.5 187.6

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 $223.8 million (1996: $332.4 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.

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.

Unrealised losses Ð 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 1997, total unrealised exchange losses on hedges of net revenue designated to service long-term debt were $219.4 million (1996: $122.4 million).

Aussie Airlines Pty Limited Aussie Airlines Pty Limited has commenced litigation against Qantas seeking, inter alia, unspecified damages as a result of Qantas’ alleged refusal to provide it with access to Qantas’ domestic terminals at Adelaide, Coolangatta, Melbourne, Perth and Sydney. Qantas had a contractual obligation to the Federal Airports Corporation (FAC) under its Domestic Terminal Leases (DTLs) to provide access to those terminals to Third Party Carriers (as defined in the DTLs).

On 12 September 1997 Qantas, at the FAC’s insistence, entered into Sub-Leases of Third Party Carrier Facilities with Aussie Airlines Pty Limited in respect of its Coolangatta, Melbourne, Perth and Sydney domestic terminals. Included in those facilities are two boarding gates at Melbourne and Sydney and one boarding gate at Coolangatta and Perth. The FAC has agreed to provide Aussie Airlines with terminal facilities at Adelaide.

The sub-leases are for a two year term from a commencement date which should be around 1 April 1998. The sub-leases include an option to renew the sub-leases until 30 October 2000.

The sub-leases contain a condition precedent requiring Aussie Airlines to provide Qantas with capital and rental security deposits or bank guarantees totalling $10.5 million by 5pm on Friday 10 October 1997. If these security deposits or bank guarantees are not received by that time, all obligations of both parties under the sub-leases are terminated.

Regardless of the above, Aussie Airlines Pty Limited has indicated that it intends to pursue the damages action. Qantas has reviewed the claim and is of the opinion that Aussie Airlines Pty Limited’s action is unlikely to succeed.

54 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 26: SUPERANNUATION COMM ITMENTS The Economic Entity maintains five superannuation plans covering Australian based staff. 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.

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 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 Eastern Australia Airlines Pty Limited, Southern Australia Airlines Pty Limited or Sunstate Airlines (Qld) Pty Limited.

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 1994 Australian Airlines Pilots’ Accumulation Fund (1989) Accumulation Not applicable Australian Airlines Flight Engineers’ Superannuation Plan Defined Benefit C.B. Twomey FIA, FIAA 30 June 1994 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:

Present Net Excess/ Employer Vested Present Net Excess/ Employer Vested value of market (deficit) contributions benefits^ value of market (deficit) contributions benefits^ accrued value of to fund^ accrued value of to fund^ benefits* fund benefits* fund FUND assets^ assets^

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 Ð Ð Ð Ð Ð Australian Airlines Flight Engineers’ Superannuation Plan 11.9 19.2 7.3 0.1 13.3 Ð Ð Ð Ð Ð

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

1996 CONSOLIDATED $ m 1996 CHIEF ENTITY $ m

Qantas Airways Limited Staff Superannuation Plan 1,499.4 2,007.1 507.7 94.0 1,920.9 1,346.4 1,803.7 457.3 84.5 1,726.2 TAA Pilots’ Superannuation Scheme (1977) 9.4 16.2 6.8 0.2 9.7 Ð Ð Ð Ð Ð Australian Airlines Flight Engineers’ Superannuation Plan 11.9 18.4 6.5 Ð 12.6 Ð Ð Ð Ð Ð

Total 1,520.7 2,041.7 521.0 94.2 1,943.2 1,346.4 1,803.7 457.3 84.5 1,726.2 * As at date of last actuarial review. ^ As at the last set of audited financial statements prepared by the plans. Qantas Airways Limited and Controlled Entities Annual Report 1997 55 NOTE 26: SUPERANNUATION COMM ITMENTS cont. 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.

COUNTRY OF ECONOMIC AMOUNT OF INCORPORATION ENTITY INVESTMENT INTEREST 1997 1996 1997 1996 % % $ m $ m

NOTE 27: PARTICULARS IN RELATION TO CONTROLLED ENTITIES Qantair Limited Australia 100 100 197.7 197.7 Qantas Investments (NZ) Limited ^ New Zealand Ð 100 Ð Ð Q.H. Tours Limited Australia 100 100 9.2 9.2 Holiday Tours and Travel Pte Limited Singapore 75 75 Ð Ð Jetabout Holidays Pte Limited Singapore 75 75 Ð Ð Tour East Singapore (1996) Pte Limited + Singapore 75 Ð Ð Ð Tour East (Hong Kong) Limited + Hong Kong 75 Ð Ð Ð P.T. Tour East Indonesia + Indonesia 60 Ð Ð Ð P.T. Pacto Holiday Tours Indonesia 53 53 Ð Ð Jetabout North America Inc USA Ð 100 Ð Ð QH International Co, Limited Japan 100 100 Ð Ð Jetabout Japan Inc Japan 100 100 Ð Ð Jetabout Holidays Limited ^ New Zealand Ð 100 Ð Ð Holiday Tours and Travel Limited Hong Kong 85 85 Ð Ð QH Tours (UK) Limited UK 100 100 Ð Ð Qantas Holidays Limited Australia 100 100 Ð Ð Qantas Viva Holidays Limited Australia 100 100 Ð Ð Q.H. Cruises Pty Limited Australia 100 100 Ð Ð Qantas Information Technology Limited Australia 100 100 1.4 1.4 Qantas Airline Systems and Research Limited Australia 100 100 Ð Ð Qantas Flight Catering Holdings Limited Australia 100 100 Ð Ð Qantas Flight Catering Limited Australia 100 100 Ð Ð Asia Pacific Distribution Limited Australia 100 100 Ð Ð 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 Ð Ð Qanlease Limited Australia 100 100 Ð Ð QHF Insurance Brokers Limited # Australia 49 49 Ð Ð Qanfad Pty Limited Australia 100 100 Ð Ð BD No1 Limited Cayman Is. 100 100 Ð Ð Kurrajong Limited Cayman Is. 100 100 Ð Ð Mitokal Pty Limited @ Australia 33 Ð Ð Ð Australian Airlines Limited Australia 100 100 121.3 121.3 Australian Resorts Pty Limited Australia 100 100 Ð Ð Brampton Island Resort Pty Limited Australia 100 100 Ð Ð Dunk Island Resort Pty Limited Australia 100 100 Ð Ð Bedarra Bay Resort Pty Limited Australia 100 100 Ð Ð Bedarra Hideaway Resort Pty Limited Australia 100 100 Ð Ð Great! Keppel Island Resort Pty Limited Australia 100 100 Ð Ð Great Keppel Holdings Pty Limited Australia 100 100 Ð Ð Keppel Leasing Pty Limited Australia 100 100 Ð Ð Keppel Investments Pty Limited Australia 100 100 Ð Ð Australian Airlines Reservations Systems Pty Limited Australia 100 100 Ð Ð Tysentle Pty Limited Australia 100 100 Ð Ð Australian Airlines Express Courier Pty Limited Australia 100 100 Ð Ð

56 Qantas Airways Limited and Controlled Entities Annual Report 1997 COUNTRY OF ECONOMIC AMOUNT OF INCORPORATION ENTITY INVESTMENT INTEREST 1997 1996 1997 1996 % % $ m $ m

NOTE 27: PARTICULARS IN RELATION TO CONTROLLED ENTITIES cont. ARANS Superannuation Pty Limited Australia 100 100 Ð Ð AAPA Superannuation Pty Limited Australia 100 100 Ð Ð AAFE Superannuation Pty Limited Australia 100 100 Ð Ð AAG Superannuation Pty Limited Australia 100 100 Ð Ð AAFA Superannuation Pty Limited Australia 100 100 Ð Ð TAA Superannuation Pty Limited Australia 100 100 Ð Ð Australian Regional Airlines Pty Limited Australia 100 100 Ð Ð Sunstate Airlines (Qld) Pty Limited Australia 100 100 Ð Ð Southern Australia Airlines Pty Limited Australia 100 100 Ð Ð Airlink Pty Limited Australia 100 100 Ð Ð Australian Regional Airlines (Qld) Pty Limited Australia 100 100 Ð Ð Air Queensland Pty Limited Australia 100 100 Ð Ð Lizard Island Resort Pty Limited Australia 100 100 Ð Ð Eastern Australia Airlines Pty Limited Australia 100 100 Ð Ð ACN 000 199 468 Pty Limited Australia 100 100 Ð Ð First Brisbane Airport Pty Limited Australia 100 100 Ð Ð First Brisbane Airport Unit Trust n/a 100 100 Ð Ð Second Brisbane Airport Pty Limited Australia 100 100 Ð Ð Second Brisbane Airport Unit Trust n/a 100 100 Ð Ð TAA Aviation Pty Limited Australia 100 100 Ð Ð Nostam Pty Limited Australia 100 100 Ð Ð In Tours Airline Unit Trust No.1 n/a 100 100 Ð Ð Priestdale Pty Limited Australia 100 100 Ð Ð Denmell Pty Limited Australia 100 100 Ð Ð Denmint Pty Limited Australia 100 100 Ð Ð Denmost Pty Limited Australia 100 100 Ð Ð Denold Pty Limited Australia 100 100 Ð Ð Denpen Pty Limited Australia 100 100 Ð Ð Denpet Pty Limited Australia 100 100 Ð Ð Denpost Pty Limited Australia 100 100 Ð Ð Denrac Pty Limited Australia 100 100 Ð Ð Densale Pty Limited Australia 100 100 Ð Ð Denseed Pty Limited Australia 100 100 Ð Ð Denshore Pty Limited Australia 100 100 Ð Ð Densip Pty Limited Australia 100 100 Ð Ð Densound Pty Limited Australia 100 100 Ð Ð Engine No.6 Pty Limited Australia 100 100 Ð Ð Engine No.9 Pty Limited Australia 100 100 Ð Ð

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 exceptions of QHF Insurance Brokers Limited and 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 ^ Deregistered during the financial year # Balance date 31 December. Definition of controlled entity satisfied by AASB 1024: “Consolidated Accounts” @ Definition of controlled entity satisfied by AASB 1024: “Consolidated Accounts”.

Qantas Airways Limited and Controlled Entities Annual Report 1997 57 NOTE 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 1997 1996 1997 1996 1997 1996 1997 1996 % % % % $ 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 Pty Catering Limited services Australia Ord. 49.0 49.0 Ð Ð 1.2 1.2 Ð Ð

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

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

TET Limited Tours and travel Thailand Ord. 36.8 Ð Ð Ð Ð Ð Ð Ð

Holiday Tours and Tours and Travel Sdn Bhd travel Malaysia Ord. 22.5 22.5 Ð Ð 0.1 0.1 Ð Ð

Qadrant International Information Pty Limited technology Australia Ord. Ð 49.0 Ð Ð Ð Ð Ð Ð

3.5 3.5 1.0 1.0

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 at 30 June 1997, 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.

NOTE 29: UNHEDGED FOREIGN CURRENCY BALANCES The Australian currency equivalents of unhedged foreign currency balances included in the financial statements are:

1997 1996 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 Ð 33.2 (2.9) (57.7) (27.4) Ð 33.2 (9.3) (56.3) (32.4) United States dollars 5.9 108.5 (8.7) (113.4) (7.7) 8.3 111.0 (7.9) (117.1) (5.7) United Kingdom pounds 1.6 Ð (2.3) (1.7) (2.4) Ð Ð (13.0) Ð (13.0) New Zealand dollars ÐÐ ÐÐÐÐ Ð (1.0) Ð (1.0) Other currencies ÐÐ ÐÐÐÐ Ð (0.5) Ð (0.5) 7.5 141.7 (13.9) (172.8) (37.5) 8.3 144.2 (31.7) (173.4) (52.6) Controlled Entities United States dollars 32.0 Ð (5.9) Ð 26.1 22.9 0.1 (14.5) Ð 8.5 Other currencies 15.5 2.8 (22.2) (0.2) (4.1) 12.3 227.1 (15.1) (4.7) 219.6

55.0 144.5 (42.0) (173.0) (15.5) 43.5 371.4 (61.3) (178.1) 175.5

NOTE 30: DERIVATIVE FINANCIAL INSTRUMENTS Foreign exchange risk Forward foreign exchange contracts and currency options are used to hedge up to eighty percent of net foreign currency revenues or expenditures 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. Cross currency swaps are used to convert long-term offshore borrowings to currencies in which the Economic Entity has forecast sufficient surplus revenues to meet the principal and interest obligations under the swaps. Details of unhedged foreign currency balances are included in note 29.

58 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 30: DERIVATIVE FINANCIAL INSTRUM ENTS cont. 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.

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. Up to fifty percent of estimated fuel costs out to eighteen months may be hedged.

Credit risk Credit risk is the risk that the counterparty will default on or before the date of settlement of the derivative contract. The Economic Entity restricts its dealings to counterparties which have credit ratings equal to or better than AÐ (Standard & Poor’s) or A3 (Moody’s).

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 31: EM PLOYEE ENTITLEM ENTS Employee entitlement liabilities Provision for employee entitlements Current (refer note 17) 265.9 249.5 234.1 194.5 Non-current (refer note 17) 199.6 176.1 183.7 151.0 Staff redundancy and restructuring costs (refer note 17) 67.9 27.1 52.3 17.0

Aggregate Employee Entitlement Liability 533.4 452.7 470.1 362.5

Qantas Staff Share Plan II The Qantas Staff Share Plan II (QSSP 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.

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 32: DIVIDENDS Dividends paid Unfranked dividends to outside equity interests Ð 0.2 Ð Ð Unfranked dividends to shareholders of the Chief Entity Ð 6.5 cents per ordinary share 70.8 Ð 70.8 Ð Partially franked (to 68%) dividends to shareholders of the Chief Entity Ð 6.5 cents per ordinary share Ð 66.2 Ð 66.2 Dividends provided Unfranked dividends to shareholders of the Chief Entity Ð 6.5 cents per ordinary share Ð 67.3 Ð 67.3 Fully franked dividends to shareholders of the Chief Entity Ð 6.5 cents per ordinary share 72.3 Ð 72.3 Ð 143.1 133.7 143.1 133.5 Less: dividends paid from reserves Unfranked dividends paid under BSP from share premium reserve (15.1) Ð (15.1) Ð

128.0 133.7 128.0 133.5

Qantas Airways Limited and Controlled Entities Annual Report 1997 59 NOTE 32: DIVIDENDS cont. Although issues of bonus shares under the BSP are made from the share premium reserve, a conservative approach was adopted, and full provision for the dividend made in the financial statements for the year ended 30 June 1996. Accordingly, there was an adjustment made to the current year to reflect the proportion paid in dividends under the BSP.

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

Amount of profits and reserves which could be distributed as franked dividends out of existing franking credits or out of franking credits arising from tax payments to be made in respect of the year ended 30 June 1997:

Ð Franked at 36% 141.4 0.5 96.4 Ð

The above amounts represent the balances of the franking accounts as at 30 June 1997, taking into account adjustments for:

(i) franking credits that will arise from the payment of income tax payable for the current year; (ii) franking debits that will arise from the payment of the final dividend for the current year; and (iii) franking credits that may be prevented from being distributed in the subsequent year.

CONSOLIDATED 1997 1996 $ m $ m

NOTE 33: SEGM ENT INFORMATION Geographical analysis of sales revenue by geographic area Passenger, freight and contract services revenue Australia 3,941.6 3,695.1 United Kingdom and Europe 723.1 706.2 Japan 583.9 742.1 South East Asia and North East Asia 725.0 693.6 America and the Pacific 458.0 482.3 Other (including charters) 332.2 309.9 6,763.8 6,629.2 Other sales revenue Tours and travel 482.0 459.7 Other service and miscellaneous 588.6 511.5 7,834.4 7,600.4 Other revenue 100.7 93.9

Operating revenue 7,935.1 7,69 4.3

Earnings before interest and tax International airline operations 274.7 267.8 Domestic airline operations 168.3 163.6 Subsidiary operations 74.2 73.0

517.2 504.4

60 Qantas Airways Limited and Controlled Entities Annual Report 1997 1997 1996 cents cents

NOTE 34: EARNINGS PER SHARE Earnings per share based on operating profit after income tax attributable to members of the Chief Entity 23.6 24.2

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.

1997 1996 m m

Weighted average number of ordinary shares outstanding during the year, as used in the calculation of earnings per share 1,069.6 1,017.9

NOTE 35: EVENTS SUBSEQUENT TO BALANCE DATE 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 years.

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 36: NOTES TO THE STATEM ENTS OF CASH FLOWS Acquisition of controlled entities On 1 July 1996, control of Mitokal Pty Limited, as defined by Accounting Standard AASB 1024: “Consolidated Accounts” passed to Qantas Airways Limited. Effective from this date, the operating results of this entity have been included in the consolidated operating profit of the Economic Entity.

Details of the assets consolidated are: Fair value of net assets of entity: Property, plant and equipment 98.1 Ð Future income tax benefit 22.7 Ð Bank loans Ð secured (153.2) Ð Cash 3.4 Ð Prepayments 2.8 Ð (26.2) Ð Goodwill on acquisition 26.2 Ð

Cash consideration Ð Ð

Non-cash financing and investing activities During the year ended 30 June 1997, the Economic Entity entered into various finance lease arrangements for property, plant and equipment with an aggregate fair value of $251.2 million (1996: $867.2 million). These transactions are not reflected in the statements of cash flows.

Qantas Airways Limited and Controlled Entities Annual Report 1997 61 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 36: NOTES TO THE STATEM ENTS OF CASH FLOWS cont. 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 on hand 2.7 2.4 2.4 2.3 Cash at bank 33.8 7.0 20.5 2.9 Cash on call 17.0 70.0 16.6 69.7 Current bills of exchange and promissory notes 234.7 178.4 234.7 178.4 Current term deposits 13.8 12.3 13.8 12.3 Current negotiable securities 451.0 187.9 451.0 187.9 Bank overdrafts (0.4) (0.8) Ð Ð Other current advances Ð Ð (295.8) (266.3)

752.6 457.2 443.2 187.2

Reconciliation of operating profit after income tax to net cash provided by operating activities Operating profit after income tax 252.7 246.7 212.9 133.3 Add/(less) non-cash items Amortisation and depreciation 465.9 420.5 308.1 273.2 Net (profit)/loss on sale of non-current assets 0.8 6.2 4.5 (4.2) Net other items 24.7 9.2 136.3 13.6 Net cash provided by operating activities before changes in assets and liabilities 744.1 682.6 661.8 415.9 Changes in assets and liabilities (Increase)/decrease in trade and sundry receivables 0.2 (50.9) (102.9) (38.8) Increase in inventories (8.1) (16.1) (10.6) (9.8) (Increase)/decrease in other assets 10.7 (2.1) 6.8 (3.9) (Increase)/decrease in prepayments 19.1 (6.2) 15.0 (2.2) (Increase)/decrease in bills of exchange and aircraft security deposits 0.1 (37.6) (0.5) (40.5) Increase in net receivables/payables under hedge/swap contracts (35.7) (37.9) (35.5) (38.0) Increase in trade and sundry payables 121.2 151.3 147.1 117.9 Increase in revenue received in advance 47.6 58.6 37.9 60.0 Increase/(decrease) in deferred lease benefits and other liabilities (10.5) 31.6 (12.1) 32.7 Increase in provisions 90.6 23.1 117.9 76.8 Increase in deferred tax provisions 131.5 140.0 60.6 59.0

Net cash provided by operating activities 1,110.8 936.4 885.5 629.1

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. The terms of the facility range from one to five years.

A bank overdraft facility covers the combined balances of all Chief Entity and wholly-controlled entities held with Commonwealth Bank of Australia. 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 $707.0 million (1996: $707.0 million). As at balance date, none of these facilities were in use.

62 Qantas Airways Limited and Controlled Entities Annual Report 1997 CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

NOTE 36: NOTES TO THE STATEM ENTS OF CASH FLOWS cont. Committed financing facilities: Bank overdraft facility Facility available 7.0 7.0 7.0 7.0 Facility used Ð Ð Ð Ð Expiry date n/a n/a n/a n/a Committed standby facility Facility available 700.0 700.0 700.0 700.0 Facility used Ð Ð Ð Ð Expiry date Ð 16 December 1997 Ð 550.0 Ð 550.0 Ð 31 October 1999 550.0 Ð 550.0 Ð Ð 16 December 1999 Ð 150.0 Ð 150.0 Ð 31 October 2001 150.0 Ð 150.0 Ð

Total committed financing facilities available 707.0 707.0 707.0 707.0

Total facilities in use Ð Ð Ð Ð

NOTE 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 Managing Director James Strong Chief Financial Officer Gary Toomey & Executive General Manager Operations Non-Executive Directors Robert Ayling (appointed 1 January 1997) Mike Codd, AC John Ducker, AO Trevor Eastwood, AM Margaret Jackson Jim Kennedy, AO, CBE Trevor Kennedy, AM Sir Colin Marshall (resigned 31 December 1996) Roger Maynard Nick Tait Alternate Director Derek Stevens (alternate for Robert 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 year end are set out below:

NUMBER HELD 1997 1996

Qantas Airways Limited: $1 Ordinary shares, fully paid 356,544 216,673

Ordinary shares were issued to Executive Directors as participants in the Qantas Staff Share Plan (QSSP) on the same basis as other eligible employees. During the year, each Executive Director received 268 ordinary shares (1996: 263 ordinary shares).

Qantas Airways Limited and Controlled Entities Annual Report 1997 63 NOTE 37: RELATED PARTY TRANSACTIONS cont. 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 bodies 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:

Ð 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;

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

Ð are trivial or domestic in nature,

and include travel and accommodation discounts and other benefits, obtained from time to time by Executive Directors and other 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.

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:

Ð The Chief Entity provided a range of administrative and investment services to controlled entities Ð Qantas Information Technology Limited provided computer and communication services to the Chief Entity Ð Qantas Flight Catering Limited provided airline catering services to the Chief Entity Ð Q.H. Tours Limited and controlled entities and the Chief Entity acted as agent for each other’s products Ð QHF Insurance Brokers Limited and Southern Cross Insurances Pte Limited provided insurance services to the Chief Entity Ð Australian Airlines Limited and the controlled entities and the Chief Entity assisted in the hiring of aircraft capacity.

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

CHIEF ENTITY 1997 1996 $ m $ m

Sales revenue (refer note 2) 102.5 101.1 Interest received/receivable (refer note 2) 15.3 17.6 Dividend received/receivable (refer note 2) 108.9 15.8 Interest paid/payable (refer note 2) 17.3 17.2 Current receivables (refer note 9) 349.3 362.1 Non-current receivables (refer note 9) 428.6 421.5 Current payables (refer note 15) 30.2 25.1 Current borrowings (refer note 16) 309.5 266.3 Non-current borrowings (refer note 16) 339.4 16.3

64 Qantas Airways Limited and Controlled Entities Annual Report 1997 NOTE 37: RELATED PARTY TRANSACTIONS cont. 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 financial statements as follows:

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

Sales revenue (refer note 2) 26.0 40.3 22.0 33.6 Interest received/receivable (refer note 2) Ð 1.4 Ð 0.7 Dividend received/receivable (refer note 2) 12.1 2.4 1.2 Ð Current receivables (refer note 9) 12.2 11.9 11.4 11.9 Non-current receivables (refer note 9) Ð 4.5 Ð 4.5 Current payables (refer note 15) 2.5 3.7 2.4 3.7

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. Under this agreement, joint lounges have been opened at a number of airports, including Singapore, Manila, Los Angeles, Hong Kong and Bangkok. Offices have also been co-located in many places, including Paris, Los Angeles, Manila, Tokyo, Singapore, Bangkok, Malaysia, Australia and New Zealand. At Singapore and Bangkok, the hubs for the Economic Entity’s and British Airways’ direct flights, the organisations are being combined, and commercial organisations in Thailand and Singapore are being integrated to create a single sales and airport team. Other initiatives include the launch of a series of joint fares such as the Aussie and Euro Explorer from Asia and the Global Explorer from Europe, UK and Australia. In addition, outside these commercial operations, the Economic Entity and British Airways increasingly co-operate to identify synergies and cost savings in a variety of areas including engineering, information technology, catering and purchasing.

On 12 May 1995, the Trade Practices Commission (now known as the Australian Competition & Consumer Commission) authorised a Joint Services Agreement (JSA) with British Airways, allowing the two parties to develop a co-operative structure on the directly competitive routes between Australia and Europe. The first coordinated schedules under the JSA commenced in November 1995. Besides enabling both airlines to reduce costs on a route which it has traditionally been difficult for any airline to make a profit, it has also enabled improvements in schedules and connections. Under the JSA, the Economic Entity and British Airways now offer more direct, better-timed flights a week between Australia and the United Kingdom and a choice of seventeen stopover destinations where services meet, at places like Johannesburg, Tokyo and Beijing.

In July 1997, a further step in the development of the Economic Entity and British Airways relationship was undertaken with the commencement of codeshare. The Economic Entity now codeshares with British Airways to a number of key ports in the UK and Europe, and reciprocates with British Airways codesharing to key domestic ports in Australia.

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. Other transactions, such as ground handling, contract work, property rentals and interline commissions, none of which were material, were conducted on normal terms and conditions.

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

CONSOLIDATED CHIEF ENTITY 1997 1996 1997 1996 $ m $ m $ m $ m

Sales revenue (refer note 2) 35.1 18.5 25.4 10.1 Current receivables (refer note 9) 56.0 20.4 55.3 19.8 Current payables (refer note 15) 65.2 63.7 63.8 63.7

Qantas Airways Limited and Controlled Entities Annual Report 1997 65 1. In the opinion of the Directors of Qantas Airways Limited:

(a) the financial statements set out on pages 32 to 65 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 1997, and the state of affairs at 30 June 1997, of the Company and the Economic Entity;

(b) the consolidated accounts have been made out in accordance with Divisions 4, 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 seventeenth day of September 1997.

Signed in accordance with a resolution of the Directors:

Gary Pemberton James Strong Chairman Managing Director

66 Qantas Airways Limited and Controlled Entities Annual Report 1997 Scope We have audited the financial statements of Qantas Airways Limited for the financial year ended 30 June 1997, 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 66. 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 financial statements. 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 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 whether, in all material respects, the financial statements are presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) 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 names of the controlled entities of which we have not acted as auditors are set out in note 27. We have received sufficient information and explanations concerning these controlled entities 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 1997, 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, 17 September 1997

Qantas Airways Limited and Controlled Entities Annual Report 1997 67 1997 1996 1995 1994 1993* $ m $ m $ m $ m $ m

GROUP PROFIT AND LOSS ACCOUNT OPERATING REVENUE @ 7,834.4 7,600.4 7,162.9 6,531.4 5,745.1 Operating expenditure (7,317.2) (7,096.0) (6,691.5) (6,051.4) (5,514.8) EARNINGS BEFORE INTEREST AND TAX 517.2 504.4 471.4 480.0 230.3 Net interest expense (96.3) (103.0) (151.0) (178.2) (197.4) OPERATING PROFIT 420.9 401.4 320.4 301.8 32.9 Abnormal items (17.2) Ð Ð (64.9) (446.4) PROFIT/(LOSS) BEFORE TAX 403.7 401.4 320.4 236.9 (413.5) Income tax (expense)/benefit (151.0) (154.7) (140.1) (80.8) 36.7 PROFIT/(LOSS) AFTER TAX 252.7 246.7 180.3 156.1 (376.8) Outside equity interests in profit/(loss) Ð (0.5) (0.2) (0.2) (0.4) PROFIT/(LOSS) FOR THE YEAR 252.7 246.2 180.1 155.9 (377.2)

GROUP EARNINGS BEFORE INTEREST AND TAX International airline operations 274.7 267.8 267.2 300.2 135.9 Domestic airline operations 168.3 163.6 132.7 105.8 64.5 Subsidiary operations 74.2 73.0 71.5 74.0 29.9 GROUP EARNINGS BEFORE INTEREST AND TAX 517.2 504.4 471.4 480.0 230.3

GROUP CASH FLOW Cash flows provided by operating activities 1,110.8 936.4 853.8 729.0 175.7 Cash flows used in investing activities (71.1) (152.4) (221.3) (147.8) (381.9) Cash flows provided by/(used in) financing activities (744.3) (721.0) (516.2) (642.4) 176.4 NET INCREASE/(DECREASE) IN CASH HELD 295.4 63.0 116.3 (61.2) (29.8)

GROUP BALANCE SHEET Property, plant and equipment 5,807.2 5,586.8 5,045.3 5,000.1 5,081.0 Non-current receivables 1,906.0 1,689.9 1,990.8 1,500.3 1,553.5 Current receivables 1,831.1 1,380.1 1,389.5 1,199.7 1,186.4 Investments, inventories and other assets 367.7 564.8 502.9 511.7 648.0 Total assets 9,912.0 9,221.6 8,928.5 8,211.8 8,468.9 Non-current creditors and borrowings 2,895.6 3,290.1 3,546.2 3,259.4 3,709.8 Current creditors and borrowings 1,873.4 1,355.9 1,254.0 1,172.7 1,239.7 Provisions and other liabilities 2,472.0 2,139.0 1,850.4 1,613.4 1,488.7 Total liabilities 7,241.0 6,785.0 6,650.6 6,045.5 6,438.2 NET ASSETS 2,671.0 2,436.6 2,277.9 2,166.3 2,030.7

Capital 1,111.7 1,035.5 1,000.0 1,000.0 1,000.0 Reserves 609.9 574.4 564.2 572.2 591.7 Retained profits 947.4 824.9 712.4 593.0 437.9 Outside equity interests in controlled entities 2.0 1.8 1.3 1.1 1.1 TOTAL SHAREHOLDERS’ EQUITY 2,671.0 2,436.6 2,277.9 2,166.3 2,030.7

@ excludes proceeds on sale and on sale and leaseback of non-current assets and interest revenue which is included in net interest expense * First year of merged Qantas and Australian Airlines (ten months to 30 June 1993).

68 Qantas Airways Limited and Controlled Entities Annual Report 1997 Unit 1997 1996 1995 1994 1993*

OPERATIONAL STATISTICS INTERNATIONAL Ð SCHEDULED SERVICES TRAFFIC AND CAPACITY Passengers carried 000 6,698 6,165 5,980 5,905 5,442 Revenue passenger kilometres (RPKs) m 45,266 41,432 39,563 37,296 33,863 Available seat kilometres (ASKs) m 63,169 58,862 56,289 52,864 49,888 Revenue seat factor % 71.7 70.4 70.3 70.6 67.9 DOMESTIC Ð SCHEDULED SERVICES TRAFFIC AND CAPACITY Passengers carried 000 9,622 9,386 8,442 7,076 5,825 Revenue passenger kilometres m 12,385 11,926 10,652 8,901 6,087 Available seat kilometres m 15,882 15,143 13,459 11,111 7,713 Revenue seat factor % 78.0 78.8 79.1 80.1 78.9 CORE AIRLINE PERFORMANCE STATISTICS TRAFFIC AND CAPACITY Passengers carried 000 16,320 15,551 14,422 12,981 11,267 Revenue passenger kilometres m 57,651 53,358 50,215 46,196 39,950 Available seat kilometres m 79,051 74,005 69,748 63,975 57,601 Revenue seat factor % 72.9 72.1 72.0 72.2 69.4 Average passenger journey length km 3,533 3,431 3,482 3,559 3,546 Revenue tonne kilometres (RTKs) m 7,052 6,603 6,350 5,849 5,306 Available tonne kilometres (ATKs) m 10,887 10,246 9,620 9,217 8,836 FINANCIAL Passenger yield (per RPK) cents 9.82 10.53 10.65 10.42 10.15 PRODUCTIVITY Average full-time employee strength # 24,620 24,429 23,238 21,903 20,676 RPKs per employee 000 2,342 2,184 2,161 2,109 1,932 ASKs per employee 000 3,211 3,029 3,001 2,921 2,786 Aircraft utilisation (average per day) hrs 12.1 11.8 11.1 10.9 9.9 GROUP PERFORMANCE STATISTICS TRAFFIC AND CAPACITY Passengers carried 000 18,606 17,486 16,054 14,252 12,223 Revenue passenger kilometres m 59,199 54,627 51,204 46,854 40,433 Available seat kilometres m 81,440 75,930 71,225 65,019 58,363 Revenue seat factor % 72.7 71.9 71.9 72.1 69.3 Aircraft in service at year end # 148 141 135 126 121 FINANCIAL Passenger yield (per RPK) cents 10.15 10.80 10.86 10.62 10.28 PRODUCTIVITY Average full-time equivalent employees # 30,080 29,627 28,565 26,791 25,093 RPKs per employee 000 1,968 1,844 1,793 1,749 1,611 ASKs per employee 000 2,707 2,563 2,493 2,427 2,326

Qantas Airways Limited and Controlled Entities Annual Report 1997 69 Boeing 747Ð438 Boeing 747Ð338 Boeing 747Ð238B

Boeing 747SPÐ38 Airbus A300ÐB4 Boeing 767Ð338ER

Boeing 767Ð238ER Boeing 737Ð476 Boeing 737Ð376

Owned Extendable Other HP & finance operating operating Total Aircraft type leases leases leases in service

Boeing 747Ð438 12 6 Ð 18 Boeing 747Ð338 1 5 Ð 6 Boeing 747Ð238B 4* Ð Ð 4 Boeing 747SPÐ38 2 Ð Ð 2 Airbus A300ÐB4 4 Ð Ð 4 Boeing 767Ð338ER 14 4 Ð 18 Boeing 767Ð238ER 7 Ð Ð 7 Boeing 737Ð476 21 Ð 1 22 Boeing 737Ð376 16 Ð Ð 16 Total core fleet 81 15 1 97

British Aerospace BAe 146 Ð Ð 14 14 de Havilland Canada Dash 8 13 Ð 1 14 de Havilland Canada Twin Otter 5 Ð Ð 5 British Aerospace Jetstream 31 4 Ð Ð 4 Shorts SD360 7 Ð Ð 7 Cessna C404 Titan 7 Ð Ð 7 Total regional fleet 36 Ð 15 51 Total Qantas fleet 117 15 16 148

* excludes one 747-238B on a two year lease to Air Pacific Details as at 30 June 1997. Excludes one B767-338 aircraft delivered in June 1997, which did not commence operations until July 1997.

Qantas Airways Limited and Controlled Entities Annual Report 1997 23

Achieving results

Qantas earned an operating profit before tax and abnormal items of $420.9 million for the year ended 30 June 1997, an increase of 4.9 percent over the prior year.

Profit of $260.5 million after tax revenues grew by 4.3 percent over the before abnormal items was 5.6 prior year, and Revenue Passenger percent higher than the prior year. Kilometres (RPKs) increased by 9.3 After net abnormal losses of percent.Yield, excluding $17.2 million ($7.8 million after tax), foreign exchange movements, fell by profit before tax of $403.7 million and 4.6 percent reflecting greater price profit after tax of $252.7 million were competition. International load factors both higher than last year. increased by 1.3 percentage points. Domestic passenger revenue Increased revenue increased by 3.5 percent over the Revenue of $7.8 billion exceeded prior year, reflecting increased RPKs last year by 3.1 percent.The growth in of 3.8 percent and increased domestic revenue included a 1.8 percent increase passenger numbers of 2.5 percent. in net passenger revenue, impacted by Marginal reductions were experienced a passenger yield decline of 6.0 percent. in both yield and load factors. Excluding the impact of foreign currency movements, passenger Expenditure and cost savings revenues increased by 4.9 percent, Total expenditure before interest after a yield reduction of 3.2 percent. for the 1996/97 financial year was The revenue growth achieved $7.3 billion, an increase of 3.1 percent during the year came through aggressive over the prior year. marketing campaigns, which resulted in The increase in expenditure an 8.6 percent increase in the number matched revenue growth despite the of international passengers. Excluding impact of increases in fuel prices, net the impact of movements in foreign of price hedging gains, of more than exchange rates, international passenger $100 million over the previous year.

Qantas Airways Limited and Controlled Entities Annual Report 1997 9 Additional costs were also incurred during 2.9 percent over the previous year. Subsidiary the year in relation to the QUBE project, which operations contributed $74.2 million, an increase involved an investment of more than $100 million of $1.2 million or 1.6 percent over the contribution over three years to introduce improved systems for from the prior year. reservations and yield management. This project The increased returns from subsidiary was completed during the 1996/97 financial year. operations were primarily due to improved Cost savings were achieved during the performances from Qantas Holidays and year from improved aircraft utilisation and labour Qantas Flight Catering, offset by a reduction productivity, reductions in aircraft operating costs in contribution to EBIT from the Group’s and savings in property, sales, marketing and regional airlines. overhead costs. Total cost savings from new initiatives in the 1996/97 year totalled over Cash flows applied to reduce debt $560 million. Cash flows from operations totalled $1.1 billion, Overall, excluding the impact of exchange up 18.6 percent on the prior year. movements, cost per Available Seat Kilometre (ASK) Excess cash was applied to debt reduction, fell by 2.3 percent from the prior year. continuing the significant improvement in the Despite the unfavourable effect on revenue balance sheet. A further $569.8 million of debt, of movements in foreign exchange rates, the excluding prepayments, was repaid during the year. overall impact on the profit result was negligible, This brought the debt to equity ratio (including due to savings in foreign currency denominated non-cancellable operating leases and on a hedged expenditure and hedging strategies. basis) to 49:51, down from 61:39 at 30 June 1996. Capital expenditure for the year was $610.6 Abnormal items million, an increase of 21.3 percent over the prior A net abnormal loss of $17.2 million was reported year. This reflected additional expenditure on for the 1996/97 year, consisting of three airport terminal developments and aircraft components: acquisitions. Three Boeing 767-300 aircraft and ¥ a gain of $99.4 million on the sale of the one Boeing 737-400 aircraft were added to the core Air New Zealand shareholding; airline fleet during the year,with two additional ¥ staff redundancy costs of $60 million; and Boeing 767-300 aircraft planned during the ¥ an accelerated write-down of $56.6 million 1997/98 year. relating to international aircraft seats and The planned capital expenditure for the in-cabin assets pending their replacement 1997/98 year, including aircraft acquisitions, in- as part of the ‘Flying Towards 2000’ fleet cabin product improvements and terminal reconfiguration program. developments, is expected to be financed primarily Redundancy costs are the result of a range of by cash holdings and internal cash flow, and initiatives to improve productivity and efficiency. partially through external financings. This is being carefully managed with staff involvement. Qantas has increased staffing levels Commitment to shareholder returns where needed to service growth, whilst at the Qantas is committed to the consistent delivery same time progressively examining specific of attractive returns to shareholders. Shareholder areas of activity to measure cost, effectiveness return is defined as a return delivered via capital and productivity. growth and dividends. The configuration changes and product The Directors have declared a fully franked initiatives are an investment for the future aimed final dividend of 6.5 cents per share Ð following an at maintaining and strengthening Qantas’ unfranked interim dividend of the same amount Ð competitive position. bringing the total dividend for the year to 13 cents per share. Increased contribution The fully franked final dividend of 6.5 cents International operations contributed $274.7 million per share is payable on 3 December 1997, with a in Earnings Before Interest and Tax (EBIT), an record date (books close) of 5 November 1997. increase of 2.6 percent. Domestic airline operations In addition to dividend returns, significant contributed $168.3 million in EBIT,an increase of capital growth was also delivered to shareholders,

10 Qantas Airways Limited and Controlled Entities Annual Report 1997 Route developments include a new Qantas/British Airways codeshare service to Paris, where the airlines share a sales office.

with the Qantas share price outperforming both the All Ordinaries Index and the Top 20 Leaders Index during the year to 30 June 1997. Movements are graphically reflected on page 2 of this Annual Report. Qantas continues to place a strong emphasis upon the generation of shareholder returns, ensuring that future projects offer returns above the cost of capital.

Route profitability The New Zealand and Japan route groups The Qantas Group began operating BAe 146 recorded losses, impacted by price cutting, aircraft between Alice Springs and Ayers Rock in competitive pressures and market conditions. late 1996, enabling Qantas to redirect the B737 All other route groups generally provided improved aircraft used on that route to major business trunk returns, driven by higher passenger volumes. routes. Operations on a number of loss making routes Qantas regional airline, Southern Australia were reduced during the year,including some trans- Airlines, began offering all-jet services linking Pacific services. New routes to Mumbai (Bombay) Melbourne and Sydney with Launceston from and Shanghai provided encouraging results. December 1996, and Sydney with Hobart from January 1997. Qantas moved the B737 capacity More destinations than ever previously dedicated to those routes to its east Route developments announced in 1996/97 coast business routes, primarily to operate between have taken the number of destinations Qantas Melbourne and Brisbane. offers to 104 in 29 countries. During the year, The Airline’s move to two classes of travel Qantas increased capacity on key business on domestic routes in April 1997 added to routes within Australia, as well as services to the number of Business Class seats available. Europe, China, Indonesia and India. Qantas also streamlined operations through new European expansion codeshare arrangements with British Airways, July 1996 marked some important changes to the Japan Airlines, Asiana and Aircalin. Airline’s Europe services. Qantas introduced two additional services a week to Frankfurt, taking Capacity boost for Australian business those services to daily Ð three of which are one- market stop flights. A third weekly one-stop service to Qantas significantly increased business capacity Rome was also added. between Perth and both Sydney and Melbourne, as In June 1997, Qantas announced an expansion well as introducing two non-stop PerthÐBrisbane of its United Kingdom and Europe network services. through codesharing on selected British Airways

Qantas Airways Limited and Controlled Entities Annual Report 1997 11 Qantas increased services from July 1997. Qantas twice-daily flights capacity on a number to London now connect with British Airways services to five cities in the UK Ð Manchester, of key domestic and Belfast, Edinburgh, Glasgow and Aberdeen Ð as well international routes as with twice-daily services to Paris, daily flights to Vienna and three services a week to Amsterdam. during the year. In addition, British Airways has expanded its reach in Australia. British Airways now codeshares on Qantas flights between Sydney and Adelaide, tourism organisations, the Inbound Tourism Sydney and Canberra, Melbourne and Hobart, Organisation of Australia, duty free store operators, Melbourne and Adelaide, Brisbane and Cairns, and airlines and tourist industry lobby groups. Perth and Adelaide. Senior Qantas executives later visited From November 1997, Qantas and British Japan for discussions with key tourist operators. Airways will also codeshare on some of each Qantas has since entered into a series of marketing other’s Kangaroo Route services (subject to initiatives and co-operative promotional campaigns regulatory approval). with the Australian Tourist Commission. Qantas also substantially increased its support Focus on Japan of media visits between the two countries to raise Qantas was at the forefront of moves designed the profile of Australia in Japan, and of Japan to arrest the decline in tourism growth from Japan in Australia. to Australia.The Airline hosted a conference in In April 1997, Qantas and Japan Airlines November 1996 attended by representatives from began a new codeshare arrangement, streamlining the Australian Tourist Commission, state and regional services on 14 flights a week between Queensland

12 Qantas Airways Limited and Controlled Entities Annual Report 1997 and Japan. The new codeshare services provide was introduced in September 1996, followed by customers of both airlines with better options for a sixth frequency in June 1997. The service is business and leisure travel on two key routes Ð scheduled to go daily from November 1997. TokyoÐCairns and TokyoÐBrisbane. From August 1996, the twice-weekly Qantas rescheduled its daily flight from SydneyÐAucklandÐPapeeteÐLos Angeles services Tokyo to Sydney in April 1997 as an overnight were rescheduled to terminate in Tahiti. The new service, and in July 1997 introduced a fifth schedule provides direct connections with Lan CairnsÐFukuoka service. Chile between Tahiti and Santiago. Qantas will introduce a third Tahiti service from More flights to India, China and Indonesia November 1997. After an absence of more than five years, Qantas resumed services to India in July 1996, flying twice Qantas and Asiana streamline a week to Mumbai via Singapore. The Airline added South Korean services a third frequency from November 1996.The new Qantas and South Korean carrier Asiana introduced schedule provides, for the first time, daylight codeshare services in November 1996 on four Singapore to Sydney services. A fourth Mumbai return flights each week. The codeshare services service begins in November 1997. cover the SeoulÐCairns and SeoulÐSydney routes. In August 1996,Qantas added Shanghai to Qantas increased its codeshare arrangements its network and took its China services to two on Asiana services to five per week in April 1997. per week. Both operate from Sydney to Beijing via Shanghai. In August 1997, the frequency Wider choice of Noumea services was doubled. In August 1996, Qantas and Aircalin (formerly Air In November 1996, Qantas introduced Calédonie) expanded their codeshare arrangement twice-weekly BrisbaneÐJakartaÐKuala Lumpur and on flights between Australia and Noumea. The MelbourneÐJakarta services. expansion gives passengers a choice of five return A fourth DarwinÐDenpasar service flights a week from Sydney,two return flights a commenced in December 1996, with a fifth week from Brisbane and one a week from frequency to commence from November 1997. Melbourne. From March 1997, B747SP aircraft took over the Airline’s daily SydneyÐJakartaÐSingapore Boosted frequencies across the Tasman services, providing increased capacity, including a Qantas significantly increased capacity on non-stop 30 percent increase in Business Class seats. CairnsÐAuckland services in July 1996. The Airline also improved Brisbane to Auckland and Capacity boosted to Thailand, Vietnam, Christchurch schedules, and increased its early Hong Kong, Singapore and the Philippines morning flights from Sydney to Auckland. In July 1996, Qantas introduced three new Brisbane Qantas introduced four additional frequencies to Bangkok services. between Sydney and Wellington in November 1996. The Airline also introduced a second Vietnam In April 1997, Qantas introduced a weekly service from Sydney and Melbourne to Ho Chi BrisbaneÐWellington service and increased its Minh City, adding a third-weekly SydneyÐHo Chi frequencies between Melbourne and Christchurch. Minh City flight in November 1996. Two new SydneyÐChristchurch overnight In April 1997, Qantas increased Business Class services are scheduled to commence from seats on its five weekly MelbourneÐHong Kong November 1997. The early morning arrival in services, upgrading to B747SP aircraft on the route. Sydney will provide a range of additional Qantas will operate an additional CairnsÐ connection opportunities. DarwinÐSingapore service from November 1997, creating a daily service on the route. More seats to Africa Qantas introduced a fifth service from Sydney Qantas increased its Africa services in August to Manila in August 1997. 1996, introducing a fourth weekly service. This service operates non-stop from Melbourne Melbourne to Los Angeles more often to Johannesburg and provides a one-stop service A fifth MelbourneÐAucklandÐLos Angeles service from Brisbane and Auckland to South Africa.

Qantas Airways Limited and Controlled Entities Annual Report 1997 13 New and improved facilities the previous arrivals hall, a dedicated departure Qantas made a substantial investment in its lounge, improved baggage handling facilities, terminal facilities in Australia and around the additional check-in counters and separate counters world during 1996/97, with the focus on for ticket collection and baggage service. In March providing benefits to passengers and freight 1997, the Airline opened its new Canberra Airport customers. Chairman’s Lounge and a Qantas Club offering 40 percent more space and seating for 250 members. Qantas and British Airways alliance Plans proceeded for the redevelopment forges ahead of Melbourne domestic terminal, with the major During the year, Qantas prepared to relocate its construction contract awarded in September 1997. airport operations at London Heathrow, moving Construction is anticipated to be completed by from Terminal 3 to British Airways’ Terminal 4 on early 1999. 26 October 1997. The move allows Qantas First Qantas also opened new Qantas Club lounges and Business Class passengers and Gold Frequent in Perth, Cairns and Townsville, and a Chairman’s Flyers to take advantage of the British Airways Lounge in Brisbane. arrivals lounge. It also means that passengers flying The Airline’s worldwide lounge project, which Qantas to London to connect with Qantas/British involves 40 lounges, will continue throughout Airways codeshare flights to Paris and Amsterdam 1997/98. Redevelopment plans include lounges in need no longer change terminals to board their Christchurch, Auckland, Brisbane and Adelaide flights, reducing the minimum connecting times terminals. between flights by up to one hour. Following the successful integration of The first Qantas overseas freight terminal Qantas and British Airways operations in Singapore In January 1997, Qantas Freight began operating and Bangkok, the two airlines began the integration from its new Los Angeles terminal Ð the Airline’s process in Malaysia in August 1997. first overseas freight handling facility. The terminal Qantas and British Airways continued their is located at a major gateway to the USA, which joint lounge program. The airlines opened joint is also a hub for Europe, the UK, South America lounges in Bangkok and Los Angeles during and Canada. 1996/97, in addition to those already opened in The new terminal features improved handling Singapore, Hong Kong and Manila. A new joint of import and export cargo, dedicated facilities for lounge is planned for Chek Lap Kok airport in time-sensitive products and storage for perishable Hong Kong. cargo, as well as fully automated warehouse control facilities, with on-line connections to the rest of the Bigger and better airport facilities Qantas Freight network. Qantas is committed to providing the highest Freight also expanded its Internet tracking quality terminal facilities for its customers. service, giving customers the ability to check the During the year,the Airline’s property progress of their goods by providing real-time enhancement program included major projects at information on shipments. domestic terminals in Sydney,Melbourne, Cairns, Canberra and Townsville. World class engineering The latest stage of the $212 million and maintenance Sydney domestic terminal development opened on Qantas remains committed to the highest 31 August 1997. The terminal features 20 check-in standard of safety and operational reliability. counters, three baggage reclaim carousels and an It employs more than 5,500 qualified staff automatic baggage sorting system Ð the first to in engineering and maintenance, and each be installed in an Australian domestic terminal. year increases engineering and maintenance The new Qantas Club lounge offers facilities for up expenditure. to 800 people, and the Qantas valet parking service offers express parking, check-in and seat allocation. An enviable safety record The $8.9 million Canberra Airport Qantas is committed to the highest safety redevelopment also opened in August 1997. It standards. includes a new arrivals hall three times larger than The Airline has installed the Traffic Collision

14 Qantas Airways Limited and Controlled Entities Annual Report 1997 The new Qantas freight terminal in Los Angeles commenced operations in January 1997, and handles

Avoidance System (TCAS) on every aircraft in its a wide variety of freight, international fleet, and is in the process of fitting TCAS on its domestic jet aircraft. including textiles, Fitting the Quick Access Recorder (QAR) manufactured goods, system to the Qantas core fleet is continuing. QAR allows for 100 percent monitoring of an aircraft’s time-sensitive products performance. Overseas airlines have shown interest in adopting the Qantas program. and primary produce.

Improving engineering and maintenance processes The total gross value of engineering During the year, Qantas continued to look expendables and aircraft spare parts has been at ways of improving its engineering and increased to support these and other maintenance efficiency while maintaining the improvement programs. high levels of safety and quality for which the Qantas continues to grow its contract Airline is renowned. engineering and maintenance work with the In Sydney,an overhaul of B747 ‘D’check Royal Australian Air Force and a number of procedures Ð the most comprehensive customer airlines at its Sydney and Melbourne maintenance check Ð reduced the average time the maintenance facilities. aircraft spend on the ground from 41 to The Airline has supported its business 31 days. In Melbourne, B737 major inspection improvement initiatives in engineering and processes were streamlined, reducing the number maintenance by investing in the development of elapsed days required for the inspections from of a key business system, the Combined Aircraft 42.4 to 33.5. Maintenance System (CAMSYS). The system is

Qantas Airways Limited and Controlled Entities Annual Report 1997 15 f Qantas has introduced an extensive training program to ensure senior flight attendants are able to use the Airline’s on-board defibrillators in cases of emergency.

During the year, Qantas worked with a number of Chinese Airlines, providing pilot training and making available the QAR system. Qantas employs more than 1,700 technical aircrew, including 58 pilots hired during 1996/97.

Worldwide recognition for inflight medical care The findings of the Qantas Cardiac Arrest Program were presented to the world’s cardiovascular leaders at the American College of Cardiology 46th Annual Scientific Session in March 1997. aimed at improving production control, inventory Qantas was then invited to present its findings to traceability and cost management. CAMSYS is the Aerospace Medical Association (May 1997) and scheduled for implementation in December 1997. the International Congress of Aviation and Space A complementary workshop tracking management Medicine (August 1997). system,‘PartSmart’ was introduced in May 1997. In June 1997, Qantas gave a briefing to the US House of Representatives Aviation Subcommittee A leading role in flight operations on the Airline’s on-board medical equipment, cabin Qantas has played a pivotal role in the development crew training and defibrillator research. of Communication Navigation Surveillance/Air Defibrillators were installed on all Qantas Traffic Management (CNS/ATM) technology,used to international B747s and B767s in 1991 as well as in provide high accuracy navigation and reliable the Qantas Melbourne and Sydney terminals. communications over remote areas. Discussions with China over the opening of new air routes over Investing in technology China to Europe, using CNS/ATM, are under way. The Airline’s investment in technology The new routes would significantly reduce flying resulted in some major advances in 1996/97, time between South East Asia and Europe. bringing faster and more efficient service. Qantas has also been involved in discussions to develop CNS/ATM routes across the Bay of One of Australia’s biggest information Bengal. technology projects The Airline continues to develop strategies to During the year, Qantas successfully implemented minimise fuel consumption Ð for example, by a new reservations and departure control system assessing the impact on consumption of (QUBE) and a new yield management system meteorological forecasting, and continually (RATIO), which together formed one of the largest negotiating for the earliest implementation of new information technology projects ever carried out CNS/ATM air routes. in Australia.

16 Qantas Airways Limited and Controlled Entities Annual Report 1997 The $100 million project involved moving In late 1996, a major corporate program was from two separate domestic and international launched to correct these problems and ensure reservations systems to a single, integrated system. that the Airline’s operations will not be adversely affected. Substantial resources will be allocated Easier and faster on the World Wide Web to this program over the next three years. Qantas launched its new-look Internet site Ð http://www.qantas.com.au Ð in July 1997. Planning for tomorrow Qantas Frequent Flyers can now check In May 1997, Qantas unveiled its ‘Flying the balance of their accumulated points using Towards 2000’ project, announcing that individual membership and security numbers, and it would spend $560 million on product plan their own itineraries. It also features expanded and service enhancements over the next information about the Airline’s flight schedules three years. which allows users to check real-time flight arrival and departure details. Product and service Freight clients can also use the Qantas Internet – ‘Flying Towards 2000’ site to track the progress of their consignments by The Airline’s ‘Flying Towards 2000’ project heralds keying in the relevant waybill number. far-reaching changes to Qantas product and Students Ð including children seeking service. The project includes the redesign and project material Ð can access information on refurbishment of the Qantas international fleet Qantas history,Fact Files covering key aspects with new, technologically-advanced seating, of the Airline’s operations and news releases. remodelled galleys and the latest inflight entertainment systems. Fast and convenient E-Ticket The changes include full recline sleeper Qantas made it easier for customers to book tickets seats in international First Class, electrically and check-in at airports with an Australia-wide controlled seats in international Business Class, electronic ticket service, launched in July 1997. and the latest slimline seats with in-built lumbar Passengers book their E-Tickets through support and adjustable headrests for international Qantas telephone sales or Qantas retail outlets. Economy Class. A confirmed itinerary and receipt can be issued if Qantas is also planning to install requested, but at the airport, passengers only need personal interactive seatback videos throughout a current photo ID to receive their boarding pass. international Economy Class and personal More than 3,000 Qantas staff around Australia interactive videos in international First Class and have been trained to provide the E-Ticket service. Business Class. Changes to the Airline’s service include On-line tracking for corporate customers staffing international First Class with 350 specially Qantas launched an on-line personal computer selected and trained flight attendants to provide management information reporting system for more personalised service. corporate customers in February 1997. Called Customer service expert,Ted Wright, has FocusDirect, it is designed to give corporate been contracted to head a major new upgrade customers access to travel data held by the Airline of service standards throughout the Airline. so they can analyse their expenditure. One of Australia’s most outstanding chefs, Neil Perry,is consulting on the redesign of Qantas Qantas Year 2000 program under way inflight cuisine. Qantas has a large suite of computer applications, some developed internally and some acquired from Two classes of excellence other companies. Qantas also makes use of a wide In April 1997, Qantas introduced a new two class range of equipment which contains micro- configuration for domestic flights, retaining for its computers. In late 1995, Qantas carried out a Business Class customers many of the privileges project to evaluate the impact of the Year 2000 offered in the former First Class. The Airline’s new problems (the fact that certain computer programs Business Class meal service features enhanced meal use only two digits to represent the year, and thus presentation and a selection of premium wines. may not operate properly around the year 2000). On the ground, First Class check-in counters

Qantas Airways Limited and Controlled Entities Annual Report 1997 17 The ‘Spirit of Australia’ — a new and As part of the Qantas sporting image ‘Flying Towards 2000’ In May 1997, Qantas launched a new domestic image advertising and promotion campaign. project, top Australian The new ‘Spirit of Australia’ campaign features 40 of Australia’s highest profile sporting achievers chef, Neil Perry, is including golfer Greg Norman, freestyle aerial ski champion Kirstie Marshall, basketballer Luc working with the Longley of the Chicago Bulls, cyclist Gary Neiwand, Airline on its inflight sprinter Cathy Freeman, triathlete Greg Welch, wheelchair track and marathon champion Louise cuisine. Sauvage,Australian Rugby Union Captain John Eales and swimmers Susie O’Neill, Samantha Riley and Kieren Perkins. have become Business Class counters, effectively The campaign was designed to extend the increasing the number of check-in points for use of the very successful ‘I Still Call Australia Business Class travellers. Home’ theme, which focused initially on leading Qantas has also enhanced its Economy Class Australian entertainers. meal service. Continuing its long association with The Airline now offers new in-flight Australian sport, the Airline sponsored the Qantas entertainment programs for both Business Class Skins international swim meet in November 1996 and Economy Class, with four changes of video and again in August 1997, bringing international programming every day. swimmers to Sydney to race Australia’s best.The

18 Qantas Airways Limited and Controlled Entities Annual Report 1997 sponsorship followed the Airline’s carriage of teams Qantas Frequent Flyers earn points from to Europe, the USA, Canada and Asia for selected airline, hotel, car rental and other card international meets in recent years. program partners. In March 1997, Qantas was named the official airline of Australia’s team to the 1998 The most successful card of 1996 Commonwealth Games in Kuala Lumpur, Malaysia. Qantas and Telstra launched a co-branded Visa card As the official airline, Qantas will fly athletes, issued through ANZ Bank in September 1996. More officials and support staff to the Games, as well as than 300,000 cards have been issued. The Qantas thousands of spectators. Telstra Visa card was the most successful card of Qantas won a five-year naming rights the 40 cards launched in Australia in 1996 Ð 17 of sponsorship of the Australian Formula One Grand which were co-branded. Prix in Melbourne dating from March 1997. Qantas has been associated with the Formula One Grand Prix since the race was first held in Australia (in Adelaide) in 1985, and was also the official airline for the inaugural Melbourne event in March 1996.

A commitment to the Arts Qantas is one of the major sponsors of the Arts in Australia. During 1996/97, the Airline continued its sponsorship of ‘Phantom of the Opera’during its sell-out seasons in Brisbane and Adelaide, successfully selling packages through its wholly- owned subsidiary, Qantas Holidays. Qantas continues to be the major sponsor Qantas launched a new of The Australian Youth Orchestra and the world renowned Sydney Dance Company. The Airline domestic sports oriented will also sponsor the Sydney Festival until the year 2000. image advertising The Qantas-sponsored Yiribana Gallery at the Art Gallery of New South Wales continues to draw campaign focusing on tourists from all over the world and remains one of some of the country’s the country’s major exhibitions of Aboriginal art. During the year, Qantas undertook the finest sporting achievers. sponsorship of the first complete cycle of Wagner’s ‘Ring’ to be performed in Australia. Plans are well under way to bring people from all over The card allows members to earn reward the world to Adelaide in late 1998 to experience points at Visa locations worldwide for dollars this musical event. charged to the card account. The points can be Qantas also announced that it would support redeemed for Qantas,Telstra and ANZ rewards, the world premiere in March 1998 of ‘The Boy including Qantas Frequent Flyer points and from Oz’, a musical celebration of the life of Peter Qantas flights. Allen who composed the Airline’s signature tune, ‘I Still Call Australia Home’. The first co-branded corporate American Express Card More Frequent Flyers In November 1996, the Qantas American Express With more than 1.4 million members worldwide, Corporate Card Ð the first co-branded corporate the Qantas Frequent Flyer program is Australia’s card to be issued by American Express Ð was largest airline loyalty program. introduced in response to strong customer During 1996/97, membership continued demand. It functions as a corporate charge card, to grow, with Qantas enrolling around 300,000 providing members with an all-in-one travel and new members. expense management tool.

Qantas Airways Limited and Controlled Entities Annual Report 1997 19 Qantas is Selling the world Qantas reorganised its approach to sales in represented at more 1996/97 to enable greater concentration on regional sales responsibilities, including a than 100 locations stronger focus on the Australian region. worldwide.

A streamlined service for groups and travel agents began in September 1997, covers four Queensland In the first half of 1997, Qantas centralised its Government Departments as well as Work Cover Australian sales resources in Sydney to provide a Queensland, the Queensland Audit Office and the better,more consistent service backed up by a Clerk of the Parliament. This followed an earlier greater number of staff skilled in both domestic decision by Queensland Rail to award Qantas its and international travel. $6 million account effective from July 1997.

Winning more government accounts A boost to industry partnerships In June 1997, Qantas won a 12 month extension of Qantas and Harvey World Travel announced a its contract Ð worth $75 million a year Ð to provide new travel partnership agreement in October 1996, domestic and international travel to the Australian substantially increasing business ties between the Department of Defence. The extension takes two organisations and paving the way for a major the contract to May 1999. Qantas won the contract increase in domestic and international sales of in 1995. Qantas product. The five-year agreement covers Qantas also won a $16.5 million contract Harvey World Travel’s 365 Australian outlets, with for the Queensland Government travel and an option to extend the arrangement for a further ancillary business. The two year contract, which five years.

20 Qantas Airways Limited and Controlled Entities Annual Report 1997 Holiday Wholesaler of the Year Sunstate Qantas Holidays, the Airline’s leisure wholesaler, Sunstate increased revenue by 5.4 percent was voted the travel industry’s number one in 1996/97, and showed strong growth on the wholesaler for 1997 in New South Wales, Maroochydore, Gladstone and Rockhampton Queensland,Victoria, South Australia and Western routes. Major developments for the year Australia. These wins culminated in Qantas included being granted exclusive rights on the Holidays winning the national award Ð 1997 CairnsÐThursday Island route from November Australian Wholesaler of the Year. 1996, and the introduction in May 1997 of daily The awards followed a year of integration for BrisbaneÐNewcastle services. Qantas Holidays. During 1996/97, Qantas Holidays amalgamated the best of its Qantas Jetabout 20 million meals a year Holidays and VIVA! Holidays products under the Qantas Flight Catering (QFCL) Ð the Airline’s ‘Qantas Holidays’brand identity. catering subsidiary Ð achieved an operating profit Work also began on the integration of of $15 million for 1996/97, 49 percent higher than the Qantas Holidays domestic and international 1995/96. reservations operations. Around 70 percent of QFCL’s revenue comes New products included holiday packages from catering for Qantas domestic and for India, China and Mexico. international passengers. QFCL’s other customers include international airlines and non-airline clients Cross-country flying to regional Australia such as hospitals and rail. Aircraft purchases and route developments QFCL, which supplies around 20 million meals helped boost passenger numbers and revenue a year, employs 2,600 staff who operate from its growth for the four Qantas regional airlines. five catering centres in Sydney,Melbourne, Brisbane, Perth and Adelaide. Airlink Airlink expanded significantly in 1996/97, carrying Increased efficiency through competitive 25 percent more passengers than the previous year. tendering Two new BAe 146 jet aircraft were delivered Qantas is progressively reviewing its cost in October 1996, increasing Airlink’s BAe 146 fleet competitiveness and efficiency in all aspects of to twelve. the business. This is part of the Airline’s continuing Airlink commenced daily return drive to achieve substantial gains through increased DarwinÐAlice Springs and PerthÐAyers Rock efficiency, improved productivity and services in October 1996, as well as a new reduced costs. weekly BroomeÐAlice Springs service. The largest element of the exercise is the Airlink also increased its Ayers RockÐCairns competitive tendering of the Airline’s ramp and and CairnsÐAlice Springs frequencies. passenger handling requirements at Australia’s international and domestic airports. The initial Eastern Australia stage of this process is already under way,with Eastern Australia increased passenger numbers by external and internal teams participating in four percent and revenue by two percent over the the bidding. 1995/96 figures. In some functions already reviewed, notably An additional Dash 8 aircraft, delivered in late Melbourne warehouse and Launceston ground 1995/96, resulted in passenger growth in Canberra, handling, existing staff have succeeded with their Tamworth, Moree, Narrabri and Dubbo. own proposals to achieve cost reductions. In other cases, such as printing and some security services, Southern Australia outside operators have won the contracts. Southern Australia introduced two BAe 146 aircraft into its fleet in December 1996, which contributed Caring for the environment to a 70 per cent increase in passenger numbers for Qantas is committed to a range of environment 1996/97. These aircraft operate four daily return protection activities such as recycling, water services between Melbourne and Launceston, treatment and pollution control. Launceston and Sydney,and Sydney and Hobart. The Airline plays an active part in the

Qantas Airways Limited and Controlled Entities Annual Report 1997 21 Qantas plays an active part in Clean Up Australia Day.

International Air Transport Association’s efforts to reduce aircraft noise and emissions, and is involved in Clean Up Australia Day and other environmental sponsorships.

A safe, cost effective workplace One of the Airline’s priorities is the maintenance of safe and cost effective working environments for staff. Qantas continued its project to examine all of its administrative facilities, giving special attention to services such as electrical energy,of which Qantas is a big user. The Airline has put in place an aggressive program to reduce the consumption of electricity, ranging from general conservation techniques to the application of sophisticated power management technology.

22 Qantas Airways Limited and Controlled Entities Annual Report 1997 Boeing 747Ð438 Boeing 747Ð338 Boeing 747Ð238B

Boeing 747SPÐ38 Airbus A300ÐB4 Boeing 767Ð338ER

Boeing 767Ð238ER Boeing 737Ð476 Boeing 737Ð376

Owned Extendable Other HP & finance operating operating Total Aircraft type leases leases leases in service

Boeing 747Ð438 12 6 Ð 18 Boeing 747Ð338 1 5 Ð 6 Boeing 747Ð238B 4* Ð Ð 4 Boeing 747SPÐ38 2 Ð Ð 2 Airbus A300ÐB4 4 Ð Ð 4 Boeing 767Ð338ER 14 4 Ð 18 Boeing 767Ð238ER 7 Ð Ð 7 Boeing 737Ð476 21 Ð 1 22 Boeing 737Ð376 16 Ð Ð 16 Total core fleet 81 15 1 97

British Aerospace BAe 146 Ð Ð 14 14 de Havilland Canada Dash 8 13 Ð 1 14 de Havilland Canada Twin Otter 5 Ð Ð 5 British Aerospace Jetstream 31 4 Ð Ð 4 Shorts SD360 7 Ð Ð 7 Cessna C404 Titan 7 Ð Ð 7 Total regional fleet 36 Ð 15 51 Total Qantas fleet 117 15 16 148

* excludes one 747-238B on a two year lease to Air Pacific Details as at 30 June 1997. Excludes one B767-338 aircraft delivered in June 1997, which did not commence operations until July 1997.

Qantas Airways Limited and Controlled Entities Annual Report 1997 23 Performance Summary 1997 1996 Increase/ (Decrease) $m $m %

GROUP FINANCIAL RESULTS OPERATING REVENUE Net passenger revenue 6,008.4 5,902.4 1.8 Net freight revenue 505.4 508.5 (0.6) Tour and travel sales 482.0 459.7 4.9 Other sources* 838.6 729.8 14.9 TOTAL OPERATING REVENUE 7,834.4 7,600.4 3.1 OPERATING EXPENDITURE Manpower and staff related 2,089.6 2,026.8 3.1 Aircraft operating variable 1,540.1 1,511.7 1.9 Selling and marketing 883.8 924.0 (4.4) Fuel and oil 895.8 787.9 13.7 Depreciation and amortisation 465.9 420.5 10.8 Tour and travel cost of sales 386.1 361.8 6.7 Non-cancellable operating lease rentals 242.3 293.2 (17.4) Computer and communication 218.1 210.4 3.7 Property 189.4 187.1 1.2 Capacity hire, insurance and other 406.1 372.6 (9.0) TOTAL OPERATING EX PENDITURE 7,317.2 7,096.0 3.1 EARNINGS BEFORE INTEREST AND TAX 517.2 504.4 2.5 Net interest expense 96.3 103.0 (6.5) PROFIT FROM OPERATIONS 420.9 401.4 4.9 Abnormal items (17.2) Ð n/a PROFIT BEFORE TAX 403.7 401.4 0.6 Income tax expense 151.0 154.7 (2.4) PROFIT AFTER TAX 252.7 246.7 2.4 BALANCE SHEETS Total assets 9,912.0 9,221.6 7.5 Total liabilities 7,241.0 6,785.0 6.7 TOTAL SHAREHOLDERS' EQUITY 2,671.0 2,436.6 9.6 GROUP CASH FLOWS Cash flows provided by operating activities 1,110.8 936.4 18.6 Cash flows used in investing activities (71.1) (152.4) (53.3) Cash flows used in financing activities (744.3) (721.0) 3.2 NET INCREASE IN CASH HELD 295.4 63.0 368.9 DEBT, GEARING AND CAPITALISATION OF NON-CANCELLABLE OPERATING LEASES ON BALANCE SHEET DEBT Current debt 541.5 146.9 268.6 Non-current debt 2,589.5 2,906.1 (10.9) Swap offset (780.4) (458.1) 70.4 Cash and cash equivalents (1,301.5) (989.2) 31.6 NET DEBT 1,049.1 1,605.7 (34.7) OFF BALANCE SHEET DEBT Present value of aircraft operating leases 1,631.6 1,952.4 (16.4) Net debt including off balance sheet debt 2,680.7 3,558.1 (24.7) Revenue hedge receivables (219.4) (122.4) 79.2 Net debt including off balance sheet debt and revenue hedge receivables 2,461.3 3,435.7 (28.4) BALANCE SHEET INCLUDING OFF BALANCE SHEET DEBT Total assets 11,214.5 10,721.0 4.6 Total liabilities 8,688.5 8,518.3 2.0 TOTAL SHAREHOLDERS' EQUITY INCLUDING OFF BALANCE SHEET DEBT 2,526.0 2,202.7 14.7 Net debt to net debt and equity 28:72 40:60 n/a Net debt to net debt and equity including off balance sheet debt 51:49 62:38 n/a Net debt to net debt and equity including off balance sheet debt and revenue hedge receivables 49:51 61:39 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.

Qantas Airways Limited and Controlled Entities Annual Report 1997 3 Increased operating profit

Qantas achieved a good financial result in its second year as a listed company, in a difficult “trading environment.

After tax profit, before abnormals, of Revenue growth is likely to be modest $260.5 million was up 5.6 percent on the and fuel prices are anticipated to remain previous year and in line with relatively high. expectations. The Board is cautious about the prospects The combined impact of relatively low for the 1997/98 financial year, while” targeting a revenue growth, higher fuel prices and small improvement in operating profit. increases in the unit cost of labour was offset The Board has continued to focus on by gains in operational efficiency and improving the balance sheet. The repayment of productivity. another $569.8 million of debt, excluding The last three years have been the prepayments, during the year brought the debt Airline’s strongest ever period of business to equity ratio to 49:51, down from 61:39 at 30 growth based on strategies of selective route June 1996. development, priority investment in product The Directors declared a fully franked and service, and cost offsets from improved final dividend of 6.5 cents per share Ð productivity and operating efficiency. following an unfranked interim dividend of the A net abnormal loss of $17.2 million was same amount Ð bringing total dividends for the reported for the year consisting of three year to 13.0 cents per share. components: On behalf of the Qantas Board, I would ¥ a gain of $99.4 million on the sale of the Air like to acknowledge the efforts of management New Zealand shareholding; and staff in achieving this financial result in a ¥ staff redundancy costs of $60 million; and difficult year. ¥ an accelerated write-down of $56.6 million In recognition of their contribution, the relating to international aircraft seats and in- Board has approved a further bonus share cabin assets pending their replacement as allocation worth approximately $500 to each part of the ‘Flying Towards 2000’ fleet eligible employee under the Qantas Staff reconfiguration program. Share Plan. These abnormal losses reflect the fundamental commitment to investing in the Qantas product and to rationalising operations to improve effectiveness and efficiency. This process will need to continue during the 1997/98 year with tough trading conditions Gary Pemberton again expected. Chairman The Board expects demand in the Australian economy will remain soft, putting pressure on yields and volumes, although there has been a slight strengthening of yield in the domestic travel market.

4 Qantas Airways Limited and Controlled Entities Annual Report 1997

Three years of growth

Qantas has achieved the highest profitability and fastest growth in its history during the “past three years.

Significant expansion has been based have been increased where necessary to on better asset utilisation and greater service growth. At the same time reviews have efficiency. In this period, passenger been conducted across a wide range of numbers have increased by over activities and functions to measure cost 30 percent, capacity by over 25 percent effectiveness and productivity.” Qantas can only and staff employment levels by over counter increasing competition by improving 12 percent. performance. This process, by its nature, has Despite these achievements, there is resulted in some restructuring. continuing pressure on operating margins Continuing increases in expenditure on caused by declining yields due to competitive maintenance and materials indicate the clear pressures. This is a long term trend throughout commitment of Qantas to its record of safety the whole aviation industry,caused by faster and reliability. The major investment program growth in capacity than in passenger numbers. in product and service demonstrates a Qantas competes with 47 other continuing focus on quality. international airlines flying into and out of Development of commercial alliances is a Australia. During the 1996/97 financial year, the vital part of creating a sustainable competitive Airline generated an increase of 8.6 percent in position. The value of the British Airways the number of international passengers. alliance has been clearly demonstrated. As However, total revenue growth was 3.1 globalisation progresses, the future of Qantas percent, including net passenger revenue will be as part of a high quality world alliance growth of 1.8 percent. Overall, passenger yield including other leading airlines. declined by six percent. Excluding the impact I would like to acknowledge the of foreign currency movements, passenger contribution of Qantas staff in achieving the revenues increased by 4.9 percent after a yield financial results for the year. It is a great reduction of 3.2 percent. challenge to maintain consistent high standards Qantas is directing a great deal of of customer services whilst major changes are attention and effort towards the important being implemented to improve cost issues of revenue and yield. Steps taken include competitiveness and efficiency. significant investment in product and service Our challenge is to maintain a balanced standards amounting to $560 million over the approach which involves investment of next three years, as announced in May 1997. resources across all areas of operation, This will be supported by expenditure on customer services, product standards, staff maintaining a strong market image and development and training, whilst continuing presence. to improve our financial performance. During the year, Qantas also completed the QUBE information technology project, involving an investment of more than $100 million over three years to introduce improved systems for reservations and yield management. An overhaul of cost competitiveness James Strong throughout the Airline is being carefully Managing Director and Chief Executive managed with staff involvement. Staffing levels

6 Qantas Airways Limited and Controlled Entities Annual Report 1997

The shareholder information set out below was applicable as at 23 September 1997 being a date within eight weeks of issue of this Annual Report.

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 16,869,781 34,391 1.52 1,001-5,000 103,858,561 63,497 9.34 5,001-10,000 27,083,928 4,504 2.44 10,001-100,000 38,906,669 2,210 3.50 100,001+ 924,990,410 199 83.20

1,111,709,349 104,846 100.00

*1,465 shareholders hold less than a marketable parcel of shares in Qantas Airways Limited.

Twenty Largest Shareholders

Shareholder Ordinary shares held % of issued shares British Airways Investments (Australia) Pty Limited 277,927,336 25.00 Westpac Custodian Nominees Limited 71,632,176 6.44 Chase Manhattan Nominees Limited 71,250,312 6.32 Pendal Nominees Pty Limited 69,534,356 6.25 National Nominees Limited 60,598,494 5.45 Permanent Trustee Company Limited 53,744,499 4.83 Commonwealth Custodial Services Limited 50,651,396 4.56 ANZ Nominees Limited 36,333,548 3.27 Australian Mutual Provident Society 22,514,759 2.03 MLC Limited 19,350,615 1.74 Perpetual Trustees Nominees Limited 15,568,199 1.40 Perpetual Trustees Victoria Limited 14,556,080 1.31 Citicorp Nominees Pty Limited 11,410,794 1.03 BT Custodians Limited 10,555,240 0.95 Queensland Investment Corporation 10,139,727 0.91 The National Mutual Life Association of Australasia Limited 7,491,224 0.67 Victorian Superannuation Board 6,702,052 0.60 National Australia Financial Management Limited 6,058,981 0.55 CSS Board 4,685,214 0.42 Bankers Trust Life Limited 4,671,721 0.42

70 Qantas Airways Limited and Controlled Entities Annual Report 1997 Substantial Shareholders The following shareholders have notified that they are substantial shareholders of Qantas Airways Limited:

Shareholder Ordinary shares held % of issued shares British Airways Investments (Australia) Pty Limited 277,927,336 25.00 Bankers Trust Australia Limited 130,514,646 11.74 Permanent Trustee Company Limited 54,513,940 5.04

GLOSSARY

Revenue Passenger Kilometres (RPKs) Number of paying passengers carried, multiplied by the number of kilometres flown.

Available Seat Kilometres (ASKs) Total number of seats available for passengers, multi- plied by the number of kilometres flown.

Revenue Seat Factor Percentage of total passenger capacity actually utilised by paying passengers.

Revenue Tonne Kilometres (RTKs) Total tonnage of paid traffic carried, multiplied by the number of kilometres flown.

Available Tonne Kilometres (ATKs) Number of tonnes of capacity available for carriage of passengers, freight and mail, multiplied by the number of kilometres flown.

Qantas Airways Limited and Controlled Entities Annual Report 1997 71 Share Registrar Qantas Share Registry 321 Kent Street Sydney NSW 1115 Australia Telephone 61 2 9299 5747 Facsimile 61 2 9262 2574

Stock Exchange Listing Australian Stock Exchange 20 Bond Street Sydney NSW 2000 Australia

Depositary for American Depositary Receipts The Bank of New York ADR Division 101 Barclay Street New York NY USA Telephone 1 212 815 2218 Facsimile 1 212 571 3050

General Counsel & Company Secretary Brett Johnson

Assistant Company Secretaries Stephen Heesh Garie Hillier

Auditors KPMG The KPMG Centre 45 Clarence Street Sydney NSW 2000 Australia

Lawyers Minter Ellison 44 Martin Place Sydney NSW 2000 Australia

Blake Dawson Waldron 225 George Street Sydney NSW 2000 Australia

Principal Banker Commonwealth Bank of Australia 48 Martin Place Sydney NSW 2000 Australia

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