Fergus McMaster was a wealthy grazier who took little convincing about the benefits of aviation. He was crossing the sandy bed of Queensland's Cloncurry River when his car broke an axle. Paul McGinness helped repair the vehicle and the two struck up a friendship. Back in Brisbane, McGinness and Fysh outlined to McMaster their plans for an air service, beginning with joy rides and air taxi trips. McMaster, fired with enthusiasm, convinced business acquaintances to invest with them.
With their former flight sergeant Arthur Baird as aircraft mechanic, Fysh and McGinness travelled to Mascot Aerodrome, Sydney, where they ordered two Avro aircraft. (The order for one was later cancelled.) The purchase agreement, dated 19 August 1920, was in the name of The Western Queensland Auto Aero Service Limited. A new company name was later adopted, Queensland and Northern Territory Aerial Services Limited, which was quickly abbreviated to the acronym 'QANTAS'.
Papers formally establishing Qantas were signed in the Gresham Hotel, Brisbane, on 16 November 1920. The company, based in Winton, was registered with Fergus McMaster as Chairman.
In 1921 the Qantas fleet consisted of two biplanes - an Avro 504K with a 100 horsepower (74 kw) water-cooled Sunbeam Dyak engine and a Royal Aircraft Factory BE2E with a 90 horsepower (67 kw) air-cooled engine. The BE2E was purchased for £450 ($900) from Charles Knight, a Longreach stock and station agent who, having experienced a turbulent delivery trip, swore nothing would induce him to fly again.
McGinness and Baird flew joy riding and demonstration flights. It was tough work keeping the two machines in the air. The Avro 504s Dyak engine struggled in the thin hot air and boiled on the shortest trips. But Baird, a superb engineer, modified the aircraft to improve performance. In this period 871 passengers were taken aloft and the biplanes logged 54,000km without serious mishap.
In November 1922 Qantas began to operate a scheduled airmail service between Charleville and Cloncurry. This was the first scheduled air service and provided a measure of financial security although the initial air mail contract was only for 12 months.