Qantas affirms its two-airline strategy

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Qantas Airways says global operating conditions have rebounded from historic lows, but the aviation industry remains competitive, challenging and potentially volatile.

And the airline, in its annual report, affirms its two airline strategy, which it says offers flexibility to ride economic cycles, leverage different sectors of the market, and maintain a robust operating cash flow.

Qantas released its annual report on Friday.

"Looking ahead, the Australian commercial aviation sector will remain highly competitive, both domestically and internationally," Chairman Leigh Clifford says in the report.

"To succeed, the Qantas Group's two flying brands will be competing vigorously every day in their different market segments - the full service Qantas and the low fares Jetstar."

Jetstar's goal was to create the best low-fare airline in the world, "which is all about sustainable growth and being true to the positive and energetic values of the brand," chief executive Alan Joyce said.

"For example, this year Jetstar was the first airline in the world to trial the iPad as an inflight entertainment system."

Mr Joyce said Qantas had brought forward its order for 50 Boeing 787s, with the first now due in mid-2012, to effectively renew both brands' fleets.

The first 15 Boeing 787s will go to Jetstar International, allowing the transfer of A330-200s to Qantas and the earlier retirement of eight Qantas B767-300s, he said.

International demand improved across premium and leisure sectors in 2009/10, while domestic business demand also returned strongly.

Mr Clifford said domestic leisure demand continued to be relatively soft late in the financial year.

He said Qantas had decided to pay no dividend for the 2009/10 year, as it needed to maintain a high credit rating to meet coming high capital requirements.

"The economic outlook and competitive situation will continue to be challenging and potentially volatile," Mr Clifford said.

- AAP