A New Era Annual Report 2007 1944 1947 1968 1984 2007 The original kangaroo The winged kangaroo The flying kangaroo The flying kangaroo was A new interpretation symbol, which appeared symbol first appeared was placed in a circle refined to a more slender, of the logo was revealed. on Qantas aircraft in 1947 to coincide and the aircraft livery stylised presentation. The modern kangaroo was adapted from the with Qantas’ introduction was modified on the The wings on the was designed to reflect Australian one penny coin. of Lockheed L749 Boeing 707 V-jets. The kangaroo were removed the changing structure Constellations. words “Overseas Airline” to help strengthen of the A380 and other were removed from the the design and the new generation aircraft, fuselage, leaving the typeface for the airline’s and keeping with the words ”Australia” and name was changed airline’s increasing focus “Qantas.” The Australian from hand-drawn to on contemporary design flag was moved from a standard typeface. for its inflight and on-the- the rear of the aircraft, ground products. to sit in between these two words. Contents 01 About Qantas 49 Performance Summary 02 Our Key Objectives 50 Discussion and Analysis 04 Financial Highlights of Performance Summary 05 Operational Highlights 54 Directors‘ Report 06 Report from the Chairman 72 Financial Statements & the Chief Executive and Notes Officer 134 Shareholder Information 10 Qantas 135 Qantas Group Five Year 18 Jetstar Summary 22 Portfolio Businesses 136 Sustainability Information 30 Sustainability 141 Financial Calendar 40 Board of Directors 44 2007 Corporate Governance Statement About Qantas Tenacity and the ability to survive adverse conditions have characterised the history of Qantas since its first tentative flights across outback Queensland in the early 1920s. The Qantas Group once again faced a series of challenges that included the APA takeover bid, fierce competition, aircraft delivery delays and record fuel prices. During this period Qantas continued to uphold its commitment to safety, reliability, technical innovation, professionalism, customer service, the communities it serves and to being Australian. Qantas and its people remain focused firmly on the future, to getting on with the job and moving into a new era. Qantas | Annual Report 2007 1 Our Key Objectives Service Creating Shareholder Value We are committed to providing the highest quality travel experience, tailored to meet the diverse needs of our customers. To achieve this, we are investing extensively in the most advanced aircraft, complemented People by innovative product and training to enable our people to deliver excellent The dedication and service. The Qantas Group will take professionalism of our people delivery of the world’s finest new is critical to Qantas’ success. aircraft, the A380 and B787 next year. Qantas in turn is committed to In addition, Qantas is setting a new being a responsible employer. benchmark in premium travel with We have created over 7,000 jobs its rollout of the next generation since 1999 and we invest of inflight and on-the-ground product extensively in training. Our over the next 12 months. Sustainability growth plans will create more jobs and exciting careers for A broad sense of responsibility to Australians. stakeholders is ingrained in the Qantas Group’s DNA. That extends from our commitment to safety, which has and always will be our first priority, to our proud track record of providing assistance in national emergencies. We are working hard to minimise the environmental impact of our operations. We also share the spirit through our sponsorship of many community, arts and sporting organisations across Australia. 2 Qantas | Annual Report 2007 EfficiencyEfficiency To competeTo compete effectively, effectively, we must we must becomebecome more more efficient efficient as we as grow. we grow. GrowthGrowth The TheSustainable Sustainable Future Future Program Program ensuresensures central central co-ordination co-ordination of of The Theprofitable profitable growth growth of both of both of of efficiencyefficiency and andcost costimprovements improvements our twoour twomajor major flying flying brands, brands, Qantas Qantas in allin parts all parts of the of businessthe business and andthis this and andJetstar, Jetstar, continues continues to be to our be our workwork remains remains a strategic a strategic priority. priority. corecore strategy. strategy. To continueTo continue the momentum,the momentum, we we will focuswill focus on reducing on reducing complexity, complexity, QantasQantas will focuswill focus on strengthening on strengthening developingdeveloping and andexpanding expanding lower lower its leadingits leading position position in premium in premium cost costproduction production models models and and marketsmarkets domestically, domestically, regionally regionally streamliningstreamlining the waythe wayour businessesour businesses and andinternationally. internationally. workwork together. together. Jetstar,Jetstar, our lowour lowcost costbrand, brand, will expandwill expand rapidlyrapidly in international in international leisure leisure markets, markets, whilewhile adding adding to its to established its established domesticdomestic network. network. Jetstar Jetstar will alsowill also leadlead the developmentthe development of our of valueour value basedbased airline airline interests interests in Asia, in Asia, with with the the aim aimof building of building a pan-Asian a pan-Asian network network OptimisationOptimisation to complementto complement the broaderthe broader Qantas Qantas and andJetstar Jetstar operations. operations. For customers,For customers, FlyingFlying people people is our is primaryour primary business, business, this meansthis means more more destinations, destinations, but webut do we much do much more. more. We haveWe have moremore connections connections and andmore more choice. choice. strongstrong strategic strategic positions, positions, valuable valuable expertiseexpertise and andassets assets in related in related but but distinctdistinct markets markets such such as loyalty, as loyalty, freightfreight and andaircraft. aircraft. These These parts parts of our of our businessbusiness represent represent substantial substantial growth growth opportunitiesopportunities and andtend tend to be to less be less cyclicalcyclical than than passenger passenger air transport. air transport. We areWe developingare developing and andprogressively progressively separatingseparating key partskey parts of our of business,our business, whilstwhilst reviewing reviewing ownership ownership alternatives alternatives to ensureto ensure the valuethe value of our of portfolioour portfolio is is fullyfully optimised optimised for shareholders. for shareholders. Qantas | Annual Report 2007 3 Financial Highlights Revenue +11.0 per cent to $15.2 billion Profit before tax +53.8 per cent to $1.0 billion Net cash held +15.9 per cent to $3.4 billion Earnings per share +11.5 cents to 36.4 cents Full year dividends per share +8.0 cents to 30.0 cents a share Sales and other income ($M) 07 15,165.7 06 13,660.6 05 12,563.9 04* 11,353.7 03* 11,374.9 Profit before related income tax expense ($M) 07 1,032.1 06 671.2 05 914.3 04* 964.6 03* 502.3 * As reported under previous GAAP. 4 Qantas | Annual Report 2007 Operational Highlights 36.4 million passengers carried The Qantas Group operated 6,335 services per week to 140 destinations in 37 countries 3.3 million+ Frequent Flyer reward seat redemptions Achieved emission savings of 130,000 tonnes Dividends (cents per share) 07 30.0 06 22.0 05 20.0 04 17.0 03 17.0 Passengers carried (000) 07 36,449 06 34,075 05 32,658 04 30,076 03 28,746 Qantas | Annual Report 2007 5 Margaret Jackson Chairman Geoff Dixon Chief Executive Officer 6 Qantas | Annual Report 2007 Report from the Chairman & the Chief Executive Officer In2006/07,theQantasGroupbegantoreapthebenefitsofasustainedperiodof investment, innovation and cost-containment in an environment of unprecedented market growth. A private equity bid to take over the company attracted widespread attention,butdidnotdistractQantasanditspeoplefromacorecommitmentto safety, reliability, technical innovation and customer service. As always, Qantas honoured its responsibility to the Australian people through extensive contributions to arts, sport and charitable organisations. Qantas continued toinvest,changeandgrowtoprovideaplatformforfuturesuccess. To our fellow shareholders This strong result was based on the ongoing strengths of the company’s fundamentals and driven by: During the difficult first six years of this century, the aviation industry confronted the challenges of war, terrorism, fuel price rises, the SARS • the robust economic environment, domestically and internationally, virus and a massive industry downturn. with high levels of demand in both business and leisure markets leading to a 6.9 per cent yield improvement and a 2.9 percentage However, Qantas remained focused on long-term growth, developing an innovative two brand strategy and investing billions of dollars in point improvement in seat factor to 79.9 per cent; fleet, product and customer service, while also working hard to attack • a significant improvement in international operations and continuing inefficiencies, change work practices and lower our cost base. improvement in domestic operations, driven by high yields and loads; and Today, we are in a new global operating environment for aviation. Passenger numbers are up, productivity has increased,