Qantas Airways Limited Business Information, Profile, and History

Company Perspectives:

Qantas is one of the world's leading airlines, operating a domestic and international fleet of 149 aircraft, linking 104 ports in 29 countries. Our strengths are our strong brand, our focus on customer service, and our international reputation for technical expertise and safety. Our aim is to manage our operations, costs, and productivity to ensure profitability for our shareholders, while maintaining the quality and reputation of our product.

History of Qantas Airways Limited

Qantas Airways Limited, Australia's number one domestic airline, is one of the major international airlines based in the Asia-Pacific region. It is the second oldest airline in the world, after KLM of the Netherlands. Qantas serves 105 cities in 29 countries worldwide: 52 in Australia, 28 in the Asia-Pacific region (excluding Australia), 11 in Europe, 11 in North America, two in southern Africa, and one in the Middle East. In addition to its flagship Qantas line, the company also operates several regional airlines in Australia: Eastern Australia Airlines, Southern Australia Airlines, Sunstate, and Airlink. Qantas and its regional subsidiaries carry more than 18.5 million passengers a year. Qantas has a fleet of 99 Boeing jet aircraft, while the regional subsidiary lines use a mix of 49 de Havilland, Shorts, British Aerospace, and Cessna aircraft. Qantas maintains a number of alliances with British Airways PLC, which holds a 25 percent interest in Qantas; the company itself owns 17.5 percent of Air Pacific.

Early History

Qantas was founded by two World War I veterans, William Hudson Fysh and Paul McGuiness, who had served with the Australian Flying Corps. In March 1919 they gained the support of a millionaire industrialist to enter a competition for a prize of A$20,000 offered by the Australian government for the first Australians to fly from Britain to Australia within 20 days. Unfortunately, their patron died before the arrangements for their flight had been made. They accepted a related task from the Australian Chief of General Staff to survey the air race route from Longreach in Queensland to Katherine in the Northern Territory and to lay down supplies along the route for the competitors.

After the completion of their overland survey in August 1919, Fysh and McGuiness were convinced that aircraft could play an important role in transporting passengers and freight over the sparsely populated areas of western and northern Queensland and northern Australia, and they decided to form an airline. The pair had insufficient capital to launch their new venture, but a chance meeting between McGuiness and Fergus McMaster, a prominent Queensland grazier, led to the latter's involvement in the project. McMaster, together with his fellow grazier Ainslie Templeton, agreed to provide financial backing for Fysh and McGuiness's proposed air service for western Queensland.

On November 16, 1920, Queensland and Northern Territory Aerial Services Limited (Qantas) was registered in Brisbane with an initial paid-up capital of A$12,074. McMaster became the first chairman of the airline; he was to prove anything but a silent partner. Without his constant efforts on behalf of Qantas, it is doubtful whether the airline would have survived.

In 1921 the airline's head office was moved from Winton to Longreach, another small Queensland outback town. During its early years, the airline encountered serious problems in obtaining suitable aircraft, as most of the British-manufactured aircraft were inappropriate for the Australian outback and the country's hot climate. Eventually, in 1924, the company found an aircraft up to the challenge: the de Havilland DH50. In the early days, passengers were few in number and most of the airline's revenue came from joyriders and air taxi work.

It soon became clear that Qantas would need a government subsidy to survive. In late 1921 Qantas won the contract for a weekly subsidized mail service between Charleville and Cloncurry in Queensland, and the airline's first scheduled service was inaugurated on November 2, 1922. Later in that year, McGuiness left the company, leaving Fysh as the sole employee from what John Gunn described in The Defeat of Distance: Qantas 1919-1939 as the airline's "dreamtime days." In February 1923, Marcus Griffin, the airline's first professional manager, resigned. With McMaster's support, he was replaced by Fysh.

In 1924 the subsidized mail service was extended from Cloncurry to Camooweal, and three years later another subsidized mail service was started from Cloncurry to Normanton. The following year the Australian Medical Service--renamed the Flying Doctor Service in 1942--was formed, and Qantas was contracted to operate medical flights on demand. On April 17, 1929, Qantas inaugurated the 710-kilometer Charleville-Brisbane service on the first direct link to the coast, bringing its total route network to nearly 2,380 kilometers. In 1930 the airline's headquarters were moved to Brisbane, the capital of Queensland.

QEA Formed in 1934

The original link with Britain's Imperial Airways took place in 1931, when Qantas assisted in carrying the first official airmail as part of an experimental Australia-Britain route. Qantas carried the airmail between Darwin, the capital of the Northern Territory, and Brisbane. On January 18, 1934, Qantas Empire Airways Limited (QEA) was formed as a 50-50 joint venture between Imperial Airways and Qantas to enable the Australian airline to participate in the new airmail service. QEA secured subsidized airmail contracts for the Brisbane-Singapore via Darwin and also Cloncurry-Normanton services. The new weekly transcontinental service began on December 10, 1934. In 1936 a second weekly service was begun between Brisbane and Singapore.

On June 10, 1938, the route between Australia and Britain was upgraded to a thrice-weekly subsidized service with the introduction of Short Brothers Empire Flying Boats, extending the route to Sydney. Imperial Airways and QEA's flying boats were flown directly across the whole route, with the British crews taking over the aircraft in Singapore. During the same year, QEA's headquarters were moved to Sydney.

During the 1930s KLM emerged as a major competitor with its Amsterdam-Batavia (Jakarta) service. In July 1938 its partner airline, KNILM, started a service between Batavia and Sydney. QEA regarded KLM's service as superior to that of Imperial Airways, partly because of KLM's use of American aircraft. In the earliest days of air travel, British aircraft had been superior to those built in the United States, but with the development of a major commercial airline industry in the 1930s American planes gained dominance. Pan American Airways (Pan-Am) also emerged as a strong competitor to the Imperial Airways-QEA Sydney-London service with the inauguration of a United States West Coast-Honolulu-Auckland service in 1940 after an abortive start in 1938.

World War II Efforts

After the outbreak of World War II, the Sydney-London route over which the flying boats operated became a vital line of communication. QEA continued to fly to Singapore. After the occupation of Singapore by Japan, however, all QEA aircraft eventually were recalled to Broome in Western Australia as Japanese forces advanced ever closer to Australia. QEA continued a token domestic service, but it ceased to be an overseas commercial passenger airline until the end of the war. More than half of the QEA fleet was commissioned for war service by the Australian government. Later in the war, QEA crews served alongside the Royal Australian Air Force in the battle zones of New Guinea.

In 1943 an agreement was signed between QEA, the British Air Ministry, and British Overseas Airways Corporation (BOAC--formerly Imperial Airways) to reestablish an air link between Britain and Australia. Using Catalina flying boats&mdash[tained from the United States and leased from the Australian government--regular flights were carried out between Perth, the capital of Western Australia, and Ceylon. The single ocean route of 5,600 kilometers was the longest ever undertaken. Between July 10, 1943, and July 18, 1945, 271 flights were completed.

Postwar Rebuilding and Expansion

Having survived World War II, QEA was left with virtually no aircraft. Hence it immediately began the task of rebuilding and modernizing its fleet. Against bitter opposition from the British government, BOAC, and their friends in Australia, QEA refused to consider seriously the purchase of what it regarded, correctly as it later transpired, as inferior and unairworthy British aircraft not even off the drawing board. Instead, in October 1946 an order worth A$5.5 million was placed with Lockheed for four Constellation aircraft. The DC3 aircraft also was introduced by QEA for use on the Australia-New Guinea and on internal New Guinea and Queensland routes.

QEA had been the national overseas airline of Australia since 1934. The nationalization of Imperial Airways in 1940 by the British government, however, had led to pressure in Australia for the nationalization of QEA. In 1947 the Australian ALP government purchased BOAC's 50 percent share of QEA and later in the year also purchased Qantas's 50 percent share as well. In October McMaster retired as the result of persistent ill health, and Fysh became chairman of the newly nationalized QEA in addition to his role as managing director.

The first L749 Constellation arrived in October 1947, and on December 1 QEA began its first regular weekly service right through to London via Singapore on the famous "Kangaroo Route." The Douglas DC4 Skymaster was introduced to the fleet in June 1949 on the new Hong Kong service. In 1949 Qantas handed over its services in Queensland and the Northern Territory and the Flying Doctor Service to Trans-Australia Airlines (TAA). TAA had been formed in December 1945 as a state-owned domestic airline. It was government policy that TAA should operate only domestic routes and that Qantas should confine itself to overseas routes. In 1950 a commercial service to Japan was inaugurated, followed in 1952 by a fortnightly service to Johannesburg, South Africa. In October 1953 QEA received permission to operate its first scheduled service to North America with the transfer of this service from the previous operator, British Commonwealth Pacific Airways (BCPA). QEA eventually took over BCPA.

In 1954 QEA began taking delivery of Lockheed Super Constellation aircraft and was able to inaugurate its new twice weekly transpacific service to North America on May 15. One service flew on to San Francisco, and the other to Vancouver. During 1957 Qantas moved to new headquarters in Sydney. The following year QEA inaugurated its first round-the-world service with the establishment of the "Southern Cross Route" via San Francisco and New York. An agreement had been signed in 1957 for QEA to operate between Britain and Australia via the United States. In mid-1958, despite Qantas's weak financial position, the government decided that both its internal operations in New Guinea and Sydney were domestic in nature. Hence it decided that Qantas's New Guinea services would be taken over by TAA, which was done in 1960.

Entered Jet Age in 1959

In 1959, ahead of all of its non-U.S. competitors, QEA took delivery of seven Boeing 707-138 jet aircraft. These were introduced in turn on both the Southern Cross and Kangaroo Routes during the same year. The Boeing 707 fleet was expanded rapidly and frequencies increased. By 1964, 13 707 jetliners were operating on most of the Qantas routes, and the airline had begun selling off its aging propeller-driven aircraft. By March 1966 Qantas's Boeing fleet had reached 19 jets, six of which were the larger 707-338C series, with five more on order.

In June 1966 Sir Hudson Fysh retired as chairman of Qantas because of his ill health. His retirement was soon followed by that of the man most responsible for the postwar Qantas expansion, Sir Cedric Turner, who had been general manager since 1951 and chief executive since 1955. Captain R. J. Richie, who had taken a leading role in building up the company's fleet and airline network after World War II, was appointed general manager; Sir Roland Wilson, a Qantas Board member, was appointed as the new chairman.

The same year Qantas made the decision to standardize its fleet with the larger Boeing 338C series and to dispose of its 138B aircraft. It also considered purchasing an even larger, innovative aircraft: the Boeing 747. As a result of the high costs involved, it was decided that Qantas would hold on to its 21-strong 707 fleet to protect its immediate position and would wait for the more advanced "B" series of the 747. An initial order for four Boeing 747Bs was placed in August 1967. Although this meant that Qantas's competitors would have been operating the wide-bodied jet for nearly two years before it took delivery, the B series had features and refinements particularly suited to long-haul operations. The airline also changed its name on August 1, 1967, to Qantas Airways Limited. At the end of the 1960s Qantas came under government pressure to cut its airfares because the Australian Tourist Commission and some government ministers felt that lower fares were essential for the development of the Australian tourist industry. Qantas, which was facing rising costs and falling revenue yields, did not want to cut its fares.

In 1970 Qantas again decided to standardize its fleet with Boeing aircraft when it rejected the option of purchasing cheaper DC10s in favor of 747s. In the early 1970s, the airline was facing strong competition, particularly on the Pacific, where it had excess capacity and one of its principal rivals, Pan-Am, was already using 747s. Qantas was forced to eliminate some of its air crew. Qantas also experienced problems with the United States Civil Aeronautics Board (CAB), which banned its 747 operations even though Pan-Am used 747s on its flights to Australia. As a result Qantas introduced its 747s on routes to Singapore and London instead of on transpacific services to the United States West Coast. The Australian government was forced to allow more American airline services between the United States and Australia. In return the CAB allowed Qantas to begin 747 services to the United States in January 1972.

Low Fare Policy Debuted in Early 1970s

In the early 1970s, Qantas formed a charter subsidiary, Qantair Limited, with the strong support of the Australian government and with the intention of recovering the traffic it had lost to charter services on the Europe-Far East part of the journey to Australia. At the same time, Qantas decided to embark upon a low fares initiative in late 1971. On April 1, 1972, subject to British government approval, it cut the one-way fare between London and Sydney from £276 to £169. Single fares between Australia and four other European cities were cut similarly. The British government deferred approval for the new fare, but Qantas sold unapproved tickets in the face of bitter opposition to the new low fare from its rivals. In late May Britain approved the new fare. Britain's liberal line earned it a good deal of anger from other countries and non-British airlines. Qantas offered travelers charter-level fares while still retaining the benefits of scheduled services. As a result, the airline's passenger traffic and revenue grew dramatically, despite the huge increase in the price of aviation fuel.

In August 1972 the Australian government authorized Qantas to go ahead with the construction of the International Centre, the new headquarters located in downtown Sydney. In December the ALP replaced the Liberals as Australia's governing party. The new government confirmed its predecessor's decision that Qantas would replace the two domestic airlines Ansett and TAA on the highly profitable route between Port Morseby and Australia after Papua New Guinea (PNG) became independent on December 1, 1973. Qantas had been forced to surrender this route to TAA in 1960.

After the introduction of its low fare policy in 1972, Qantas embarked upon a major rationalization of its route network. Margins were extremely tight and the airline could not afford to spread its operations over wide areas of the world for reasons of prestige alone. Hence Qantas decided to discontinue its "Southern Cross Route" to London as it had done earlier in the case of operations between Hong Kong and London.

During the late 1970s, Qantas readopted its policy of offering bargain fares between Britain and Australia, beginning with fare cuts of up to £79 in 1977. Further fare cuts of up to one third were made in February 1979 as a means of meeting the potential threat of cheap advance booking charter fares proposed by Laker Airways of Britain. Qantas's policy was opposed by members of the Association of South East Asian Nations (ASEAN). Singapore especially opposed it because the policy excluded stopovers in their countries, cutting tourism and airline profits. At a meeting in Kuala Lumpur in May 1979, however, Australia succeeded in forcing ASEAN to accept its new policy.

With the sale of its last Boeing 707 in 1979, Qantas became the world's first airline to operate a fleet composed entirely of Boeing 747s. The final roundtrip 707 flight operated between Sydney and Auckland at the end of March. Over the next few years, Qantas took delivery of several 747 variations. In 1980 the chairman since 1975, Sir Lenox Hewitt, retired. He was replaced by Jim Leslie, who was initially only a part-time chairman as well as continuing temporarily to be chairman and managing director of Mobil Oil Australia.

Fleet Modernized in Early 1980s

In the early 1980s, Qantas suffered from large operating losses. After the election of the new Labor (ALP) government in 1983, one of its first actions was to increase Qantas's capital base from A$89.4 million to A$149.4 million. The airline had been denied adequate capital by the previous government and had been obliged to borrow heavily to maintain its aircraft fleet in a modern, efficient, and competitive form. The government hoped that the injection of new capital would assure the future of Qantas as a wholly owned government enterprise.

The new government approved Qantas's largest-ever aircraft order, an A$860 million fleet modernization program involving the purchase of three stretched upper-deck Boeing 747s and six of the Extended Range Boeing 767 twin-engined jets. The latter would help service airports such as Adelaide, which joined the Qantas network in November 1982, and Cairns, Darwin, and Townsville. The twin-engined jets also were to be used on the New Zealand routes and expanded to Asian and Pacific destinations. Qantas was to sell its six oldest 747s progressively as the new aircraft were delivered.

Qantas returned to profitability in 1984, making a record pretax profit from airline operations of A$58 million in the year to March 31. This was a particularly strong performance given the depressed state of world aviation at that time. Qantas was able to sustain its strong recovery throughout the mid-1980s. Leslie felt that there was now more optimism because of depressed fuel prices and cost-cutting by airlines; he felt the main opportunity in Australia lay with tourism. Although the introduction of large, long-range aircraft could affect Australia's neighbors, Leslie reasoned, tourist traffic from the Asian region itself could be increased.

In 1987 Qantas embarked upon the next stage of its fleet modernization program with an order for four fuel-efficient Boeing 747-400s, which the company hoped would keep it competitive with British Airways (the successor to BOAC) and Singapore Airlines on its Britain-Australia and transpacific routes. The record profits made in 1986-87 of A$63.4 million showed that the airline had become one of Australia's top export earners.

In 1988 the governments of Australia and New Zealand decided to merge and partially privatize their state-owned airlines, Qantas, Australian Airlines (formerly TAA), and Air New Zealand. This plan was abandoned after it met with strong opposition in New Zealand. The New Zealand government decided to privatize Air New Zealand in its existing form. In December Qantas was part of a consortium led by Brierley Investments of New Zealand (BIL) that purchased Air New Zealand, defeating a consortium led by British Airways. As a result Qantas acquired a 19.9 percent stake in the airline. The following year it was revealed that Qantas had reached a secret financial agreement with its partners in the consortium consisting of BIL, American Airlines, and Japan Air Lines to prevent control of Air New Zealand going to British Airways. The subsequent disclosure of this agreement damaged the reputation of Qantas.

At the same time, it was revealed that A$5.4 billion was to be spent on aircraft by 1992 and that the company would need a capital injection of A$600 million by the Australian government unless shares were sold to private investors. In 1989 the Australian government proposed the complete privatization of Qantas because it needed substantial capital injections to remain competitive, which the government was unable to fund. This new proposal led to a bitter argument in the ALP. During the year Qantas took delivery of the first of its ten long-haul Boeing 747-400s and flew it nonstop from London to Sydney. It was the first airline to do so and, at 17,850 kilometers, it was the longest single distance any commercial aircraft had ever flown.

Transformative 1990s

In 1990 Qantas reported a loss as a result of its fleet expansion program and the five-month-long domestic pilots' dispute. These losses increased during 1990 as a result of the Persian Gulf crisis, and by early 1991 the airline was facing its worst financial situation since its foundation, including the Great Depression. It was decided to lay off 5,000 employees, sell nine Boeing 747s earlier than planned, and cut flying hours by 14 percent in the year to June 30, 1991.

In early 1990 Leslie was succeeded as chairman by Bill Dix, with John Ward continuing as chief executive, a position he attained in the late 1980s. In September 1990 the ALP had been persuaded to support the privatization of 49 percent of Qantas. The Australian government abandoned plans to float the airline in early 1991, however, and decided on a trade sale instead.

Change came swiftly and dramatically for Qantas in the mid-1990s. In June 1992 the Australian government approved Qantas's purchase of 100 percent of Australian Airlines' shares for A$400 million; in October 1993 the operations of Qantas and Australian Airlines were merged under a single brand: "Qantas--The Australian Airline." It was also announced in June 1992 that later that year 49 percent of Qantas would be sold through a trade sale, and the remaining 51 percent would be floated publicly during the first half of 1993. Foreign interests were to be allowed to invest up to 35 percent, with the Australian government retaining a "golden share." These plans were soon altered, however, when British Airways in late 1992 stepped in with an offer that was accepted--and completed in March 1993&mdashø buy a 25 percent stake in Qantas for A$665 million (US$470 million). The move was part of British Airways' push to create a global airline through the creation of a series of alliances, and it followed previous British Airways deals for 49 percent of TAT of France, 49 percent of Deutsche BA, and 31 percent of Air Russia. British Airways soon added a 25 percent stake in American carrier USAir. Meanwhile, in March 1993 the Australian government pumped A$1.35 billion into Qantas to enhance the company's competitive position ahead of privatization.

For Qantas, the deal with British Airways created management turmoil, as it was reported that both Dix and Ward opposed the alliance. By mid-1993 both had departed the company, replaced by Gary Pemberton, former chief executive of Brambles Ltd., a transport and industrial services group, in the chairman's slot and James Strong, who had previously served as chief executive of Australian Airlines, in the chief executive's chair.

The new management team immediately faced the challenge of completing the privatization, as well as improving upon the dismal results of fiscal 1993--an after-tax loss of A$376.8 million (US$250 million) incurred in part as a result of difficulties encountered integrating the operations of Australian Airlines. A plan for a September 1993 public offering of the remaining 75 percent of Qantas still owned by the government was pushed back because a spate of privatizations were hitting the Australian market at about the same time. The long-anticipated initial public offering (IPO) finally took place in July 1995, and the company's shares were listed on the Australian Stock Exchange; the foreign ownership limit was set at 49 percent. Qantas thus celebrated its 75th anniversary in 1995 as a public company.

From 1993 through 1997 the alliance between Qantas and British Airways evolved into a comprehensive collection of code-sharing arrangements, reciprocal frequent flyer programs, reciprocal lounge access agreements, and scheduling and pricing coordination efforts. The core of this alliance--and most airline alliances--was the code-sharing, whereby a passenger's trip involves two legs, one a Qantas flight and one a British Airways flight, but the entire trip is booked as either entirely Qantas or entirely British Airways. During this period, Qantas developed or enhanced several other alliances, including ones with American Airlines, Canadian Airlines International, Air Pacific, Asiana, Japan Airlines, Emirates, and Reno Air.

In March 1997 Qantas sold its 19.9 percent stake in Air New Zealand to ANZ Securities for NZ $425 million (US$295 million), using the after-tax profits of A$66.8 million to reduce debt. This move was made in anticipation of Air New Zealand's purchase of an equity stake in Qantas's Australian rival, Ansett Australia. Later that year Qantas began a A$560 million (US$430 million), three-year fleet modernization program, including the refurbishment of all of its international 747s and 767-300ERs with new seats featuring seat-back personal video screens.

By fiscal 1997 Qantas was solidly in the black, achieving net profits of A$252.7 million (US$190.1 million) on revenues of A$7.83 billion (US$5.89 billion). In early 1998, however, the Asian financial crisis forced the company to cut back on some of its Asian service, including destinations in Indonesia, Malaysia, and Thailand. The crisis threatened to derail, at least temporarily, what had been a fairly successful start to Qantas's public company era.

Principal Subsidiaries: Eastern Australia Airlines; Southern Australia Airlines; Sunstate Airlines; Airlink; Qantas Flight Catering Limited.