Qantas Recommends Revised Offer From Airline Partners Australia

Sydney, 14 December 2006

The Chairman of Qantas Airways Limited, Margaret Jackson, today announced that, following detailed negotiations, the Qantas Board had received a revised proposal from Airline Partners Australia (APA) to acquire 100 percent of the Company for $5.60 cash per share.

Margaret Jackson said the revised proposal provided an attractive premium for Qantas shareholders, being:
* 33 percent higher than the closing share price of $4.20 on 6 November 2006, the day before the first speculation about the offer; and
* 61 percent above Qantas' volume weighted average share price of $3.48 over the six months to that date.

Ms Jackson said that, subject to receiving an opinion by independent expert Grant Samuel that the offer is fair and reasonable, the Non-Executive Directors unanimously intend to recommend that shareholders accept the offer in the absence of a superior proposal, and all Directors intend to accept in respect of their own shareholdings.

"The Directors believe this offer allows Qantas shareholders to realise significant value for their shares that has not been fully recognised in the public market," Ms Jackson said.

The proposal will be implemented by way of an off-market takeover bid, which will be subject to certain conditions including a 90 percent minimum acceptance condition.

Ms Jackson said the revised proposal followed negotiations with APA since the Board's rejection
yesterday of its initial proposal. These negotiations resulted in the removal of unacceptable conditions and a substantial break fee as well as an increase in the price from $5.50 to $5.60 per share.

Under the terms of the offer, the interim dividend that would otherwise be payable in April 2007 will not be available. However, the Board is evaluating whether a fully franked special dividend could be paid during the bid period, in which case the offer consideration would be reduced by the dividend amount.

"Following the Directors' decision, Qantas this morning executed an Implementation Deed with APA and its members to progress the offer," Ms Jackson said.

A summary of the key terms of the Implementation Deed is attached.

APA consists of the following investors:
* Allco Equity Partners
* Allco Finance Group
* Macquarie Bank
* Onex
* other foreign investment funds

The proposal involves:
* Qantas transitioning to a privately owned company and de-listing from the Australian Securities Exchange;
* Qantas remaining majority owned and controlled by Australians; and
* retention of the current management team, who will invest in the privately owned company.

Mr Geoff Dixon would continue as Chief Executive Officer and Mr Peter Gregg would remain Chief
Financial Officer under the new ownership structure.

As Executive Directors, Mr Dixon and Mr Gregg did not participate in the Board's decision-making
processes. However, they agreed with the decision and the rest of the senior executive team also
support the proposal.

Ms Jackson said the consortium had expressed its support for core Qantas strategies, including:
* maintaining an extensive domestic and international airline network, using Qantas' two-brand
(Qantas and Jetstar) strategy;
* continuing Qantas' commitment to high quality product and service; and
* improving the company's cost base to be globally competitive.

If this acquisition is successful, Qantas will remain a majority Australian-owned, Australia-based airline, Ms Jackson said.

"The foreign-based Consortium members are experienced airline investors with a long-standing association with the industry. The Consortium members have made it clear to us that they recognise the immense value of the Qantas brand and intend to improve it and grow the business. "

"Qantas makes an enormous contribution to the Australian economy and community. It employs around 37,000 staff - 93 percent of them in Australia. It spends billions of dollars on goods and services from local suppliers every year, carries a third of all international tourists to Australia and provides a broad network linking metropolitan, regional and rural Australia to the world.

"If this bid succeeds, Qantas will continue to play a vital role as Australia's national carrier."

Ms Jackson said the Board's formal response will be provided in a Target statement that is expected to be mailed to all shareholders by early February 2007.

UBS, Carnegie, Wylie & Company and Allens Arthur Robinson are advising the Non-Executive Directors
of Qantas.

Issued by Qantas Corporate Communication (Q3512)