1998 ANNUAL REPORT 1998 Annual Report Brought to you by Global Reports 1998 Annual Report Registered Office Financial Calendar Notice of Meeting Qantas Airways Limited 1998 The Annual General Meeting of ACN 009 661 901 30 June Year end Qantas Airways Limited will be held Qantas Centre 20 August Preliminary final result at 2:00 pm on Wednesday Level 9 Building A announcement 18 November 1998 in the 203 Coward Street 4 November Record date for final Grand Ballroom at the Mascot NSW 2020 dividend Sheraton Brisbane Hotel & Towers, Australia 18 November Annual General Meeting 249 Turbot Street, Brisbane. Telephone 61 2 9691 3636 Brisbane Facsimile 61 2 9691 3339 2 December Final dividend payable 31 December Half year end Qantas Share Registry 60 Carrington Street 1999 Sydney NSW 1115 18 February Half year result Australia announcement Telephone 61 2 8234 5470 3 March Record date for interim Facsimile 61 2 8234 5050 dividend 31 March Interim dividend payable Depositary for American 30 June Year end Depositary Receipts 19 August Preliminary final result The Bank of New York announcement ADR Division 3 November Record date for final 101 Barclay Street dividend New York NY USA 17 November Annual General Meeting Telephone 1 212 815 2218 Adelaide Facsimile 1 212 571 3050 1 December Final dividend payable General Counsel & Company Secretary Brett Johnson Internet Address http://www.qantas.com.au All amounts are expressed in Australian dollars unless otherwise stated. Brought to you by Global Reports Operating profit before abnormals and tax of $478 million, up 13.6 percent on the prior year Profit after tax of $305 million, up 20.7 percent Total dividend 13.5 cents per share fully franked, 0.5 cents higher than the previous year, including a final dividend of 7 cents per share Revenue increased by 3.8 percent to $8.13 billion $475 million in new cost reduction, cost avoidance, productivity and revenue enhancement initiatives achieved Cash flow from operations up 9.7 percent to $1.22 billion Debt to equity ratio improved by 9 percentage points to 40:60 Qantas Airways Limited 1998 Annual Report 1 Brought to you by Global Reports Our Commitment Qantas, one of the world’s leading airlines, operates a domestic and international fleet of 144 aircraft linking 108 destinations in 32 countries. Qantas is committed to maintaining the Airline’s strong brand and focus on customer service while preserving its international reputation for technical expertise and reliability. Qantas is committed to managing the Airline’s operations, costs and productivity to ensure profitability for shareholders. Qantas is investing more than $350 million on new product worldwide, including lounges, terminals and a refit of its international jet aircraft with new seats in First, Business and Economy Classes, new interiors and new standards in service and cuisine. 2 Qantas Airways Limited 1998 Annual Report Brought to you by Global Reports Contents Chairman’s Report PAGE 4 Chief Executive’s Report PAGE 6 Record Profit PAGE 8 Gary Pemberton - “The 1997/98 James Strong - “For the 1997/98 Qantas earned an operating profit result was an excellent achievement in financial year, Qantas produced its before abnormals and tax of $478 difficult trading conditions.” fourth successive increased profit, a million for the year ended 30 June record $305 million after tax.” 1998, an increase of 13.6 percent over the prior year. Profit after tax of $305 million was 20.7 percent higher than 1996/97. New Horizons PAGE 10 Alliances PAGE 12 Style and Service PAGE 14 Attention to individual route In line with the worldwide Qantas began a $250 million-plus performance, timely suspension of commercial airline trend towards program of reinvestment in its inflight services on non-profitable routes, forming alliances, Qantas moved to product and service, redesigning its redirection of capacity strengthen its association with its inflight cuisine, dedicating 350 merit- to markets with better existing alliance partners during the selected Flight Attendants commercial prospects and year, as well as forming a number of to the First Class cabins entry into new markets new associations, culminating in and progressively unveiling have characterised the September 1998 with the creation of a new international three- year’s route and scheduling the oneworld alliance. class configuration. developments at Qantas. Technology PAGE 16 Building the Fleet PAGE 18 Information on Directors PAGE 22 Qantas is harnessing the best available With fleet expansion plans announced Board of Directors, Corporate technology to serve its customers and in 1997/98 and continuing terminal Governance and Directors’ Meetings. ensure it is in a position to maintain development, Qantas signalled its the highest intention to develop its assets and Financial Statements PAGE 27 possible level of facilities to provide for anticipated Directors’ Report, Profit and Loss operations growth over the next three years. Accounts, Balance Sheets, Statements through the Year of Cash Flows, Notes to and forming 2000 and beyond. part of the Financial Statements, Statement by Directors, Independent Auditors’ Report, Shareholder Information, Five Year Summary and Glossary. Qantas Airways Limited 1998 Annual Report 3 Brought to you by Global Reports CHAIRMAN’S REPORT The bottom The 1997/98 result was an all indications are that it will be excellent achievement in difficult difficult to match this year’s record trading conditions. Operating profit in 1998/99. profit before abnormals and tax The Directors declared a fully of $478 million was an increase franked final dividend of 7 cents per of 13.6 percent over 1996/97. share, bringing fully franked Profit after tax of $305 million dividends for the year to 13.5 cents was 20.7 percent higher than per share – 0.5 cents per share higher 1996/97. than last year. The timely rationalisation of Asian On behalf of the Qantas Board, services, together with the I would like to thank and reallocation of capacity to stronger congratulate management and staff routes, reduced the potential impact on the 1997/98 trading result. ■ of the Asian financial crisis. Gary Pemberton Chairman The reactions by other carriers, in Operating profit before terms of reduced prices and increased abnormals and tax capacity, as a result of conditions in ($million) Asia have been well documented and will lead to more volatility and uncertainty in market conditions in 1998/99. The response by Qantas will 478.0 include the continuation of planned 420.9 investment in new product, services 401.4 and aircraft, and entry into new markets in Latin America 320.4 and Europe. 301.8 These strategies will reinforce the Airline’s position as a leading international carrier and ensure Qantas remains competitive. Qantas will continue to do what it has done in the last five years – manage capacity, control costs and selectively develop the network. Because of the uncertain market conditions, the Board is not making 94 95 96 97 98 specific profit predictions. However, 4 Qantas Airways Limited 1998 Annual Report Brought to you by Global Reports “Qantas will continue to do what it has done for the last five years - manage capacity, control costs and selectively develop the network.” m line Poll Honours for Qantas Qantas was identified as the “most admired company” in Australia in an independent study of consumer attitudes towards major corporations. The Airline scored highly in categories relating to efficiency, customer satisfaction, respect for customers, product quality and service. Qantas was also voted as the company with the best corporate image for the ninth consecutive year in a poll conducted by Australia’s National Business Bulletin.The magazine canvassed the views of Australia’s corporate leaders on more than 300 business organisations and their products. Qantas Airways Limited 1998 Annual Report 5 Brought to you by Global Reports CHIEF EXECUTIVE’S REPORT Planningbased in the Asia-Pacific region.This productivity, reducing has been due to two major factors, debt, controlling capital the first being a quick operating expenditure, limiting response to the Asian situation, and commitments to future aircraft the second being steps taken over the orders, carefully monitoring last four years to make the business individual route profitability and more resilient to cyclical factors. seeking to meet hurdle rates of return for each aircraft. Rapid Responses More airlines today appear to be Qantas acted quickly to move aircraft moving in these directions, which from markets where traffic and should improve industry financial pricing falls occurred, to other routes performance. It merely reflects within Australia and overseas. emphasis on a more commercial Conclusions had been formed approach, which unfortunately has James Strong previously within Qantas that its not always been the first priority of Chief Executive and Managing Director expansion in the Asia region over the some airlines. previous 10 years or so had not Fourth Year of Improvement achieved acceptable profitability.This Investment for the Future For the 1997/98 financial year, was caused by excessive growth in Qantas has continued to invest in Qantas produced its fourth successive capacity throughout Asia depressing its product, services and people for increased profit, a record $305 pricing in a rapidly growing market. the future. million after tax. The Asian region has seen too much A huge program of aircraft This was an excellent result in a emphasis on chasing expansion and refurbishment is well under way, with climate of severe economic enlarging aircraft fleets as part of installation of First Class sleeper downturn in Asian markets. The attempts to build larger route seating, and new Business and rapid deterioration in a number of structures and market share, Economy seating throughout the economies affected passenger traffic characteristics of an “immature international fleet by the end growth levels and prices of air fares, market”.