Qantas Results for the Half Year Ended 31 December 2004

SYDNEY, 19 February 2004

* Profit before tax of $530.3 million

* Net profit after tax of $357.8 million

* Revenue of $5.8 billion

* Fully franked interim dividend of 8 cents per share

* Earnings per share of 19.9 cents per share


Qantas today announced a profit before tax of $530.3 million for the six months to 31 December 2003. The net profit after tax was $357.8 million.

The Directors declared a fully franked interim dividend of 8 cents per share.

The Chairman of Qantas, Margaret Jackson, described the result as excellent given the circumstances existing in the aviation industry.

Ms Jackson said all the company's businesses had returned to profitability during the period, following the severe impact of the war in Iraq and SARS in the first half of 2003.

"Qantas has responded quickly and effectively to the many challenges that have hit aviation in recent years, while continuing to invest in product, aircraft and technology," she said.

"This has put us in a good position to take advantage of what appears to be a return to more stable market conditions."

The Chief Executive Officer and Managing Director of Qantas, Geoff Dixon, said the main drivers of the half-year result were:

* a strong performance in the domestic market, due largely to a simplified fare structure and an overall improvement in the efficiency of the domestic operation;

* improved efficiency from cost-reduction initiatives and the introduction of new aircraft;

* a recovery in the international market in the second half of the six month period; and

* continued improvement in earnings from subsidiary businesses, particularly Qantas Holidays and Qantas Flight Catering.

Mr Dixon said total revenue for the six months fell by 4.4 per cent, or $267.8 million, compared to the corresponding period in 2002.

"This was entirely due to the continued impact of SARS and the war in Iraq in July, August and September when international capacity was still down by 10.5 per cent.

"Revenue recovered well in October, November and December when the low-yielding SARS 'recovery' fares ended."

Total revenue was down $228.7 million in the first three months but recovered to be down only $39.1 million in the second three months.

Mr Dixon said the total revenue fall of 4.4 per cent was offset by a reduction in expenditure of 6.0 per cent, or $332.5 million.

"Our Sustainable Future Program aims to cut net operating costs by $1 billion over two years, with $350 million designated for 2003/04," he said.

"We are on track to exceed the target of $350 million and will reduce costs by $500 million in 2003/04, of which $221 million has been achieved in the first half.

"This program is now going to be extended over another year and the expenditure reduction target increased by another $500 million."

Mr Dixon said the expenditure reduction had been achieved despite depreciation and amortisation costs increasing by 49.4 per cent to $536.2 million as a result of the purchase of new aircraft and investment in product improvements.

"We are confident of the industry's growth prospects and believe Qantas is well placed to participate profitably in this growth," Mr Dixon said.

"However, as we plan to invest a further $7 billion in aircraft, product and technology between now and mid-2006, it is imperative that we continue to remove inefficiencies and grow revenue in all our business segments."

During the half-year, Qantas:

* took delivery of eight new aircraft - three Boeing 737-800s, one Extended Range Boeing 747-400, two Airbus A330s and two Dash 8-300s;

* launched its new International Business Class, a $385 million investment featuring Skybed, the award-winning sleeper seat, and 1,200 dedicated and specially trained First and Business Class flight attendants;

* introduced a world-first Short Message Service (SMS) system allowing all international customers to use their in-seat telephone handset to send messages and receive replies; and

* continued to expand and refurbish its international network of lounges with improved facilities opening in Los Angeles, Perth, Canberra, Gold Coast and Townsville.

Qantas also entered into agreements to acquire:

* the former Ansett engine maintenance facility in Melbourne through a joint venture with Patrick Corporation, providing additional engine maintenance jobs in Australia; and

* the express road freight operator Star Track Express through a joint venture with Australia Post, adding to the quality portfolio of freight businesses operated by Qantas.

Qantas continued its major investment in technology that will deliver substantial efficiency gains in the years ahead.

Mr Dixon said Qantas' new low cost carrier Jetstar would launch in May with its route network and fare structure to be announced later this month.

"We are confident Jetstar will commence with a cost base of 8.25 cents per ASK compared to Virgin's unit cost of 8.72 cents per ASK, as stated in its prospectus.

"This confidence is based on certified agreements Jetstar has with its staff and Unions and contracts already signed with suppliers.

"When Jetstar has an all A320 aircraft fleet, we expect its cost base to be 7.8 cents per ASK."

Mr Dixon said Jetstar would complement the premium Qantas domestic product.

"Qantas domestic will continue to offer a two-class, full service product with increased frequency on key business routes," he said.

"The latest official figures show that Qantas' domestic market share is 66.2 per cent with Virgin Blue, Rex and other carriers making up the remaining 33.8 per cent.

"From what we know of the capacity plans of Virgin Blue and the other domestic carriers over the next two years, and our own plans for capacity increases, the three-product offering of Qantas, Jetstar and QantasLink will have around 65 per cent of the domestic market.

"This is our line in the sand and we will provide the capacity and infrastructure to defend it against Virgin Blue and the other carriers. This is the most profitable course of action for our business."

Issued by Qantas Corporate Communication (3035)