HELLOWORLD TRAVEL LIMITED - Proxy Solicitation & Information Statement 2008

Jetset Travelworld Limited ABN: 60 091 214 998 Level 28 Australia Square 264 George Street Sydney NSW 2000

Telephone Facsimile 02 8080 3150 02 8080 3199

==> picture [171 x 34] intentionally omitted <==

14 May 2008

Company Announcements Office Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000

EXTRAORDINARY GENERAL MEETING DOCUMENTATION

Pursuant to the requirements of Listing Rule 3.17, attached are the Explanatory Memorandum (including Notice of Extraordinary General Meeting) and Proxy Form in relation to the proposed merger of the Company with Qantas Holidays Limited and Qantas Business Travel Pty Limited, subsidiaries of Qantas Airways Limited.

These documents are being dispatched to Jetset Travelworld Limited shareholders today.

Yours faithfully

==> picture [117 x 61] intentionally omitted <==

Stephen F Heesh Company Secretary

==> picture [591 x 76] intentionally omitted <==

Jetset Travelworld Ltd Explanatory Memorandum

For a proposed Merger of Jetset Travelworld Ltd with Qantas Holidays and Qantas Business Travel

In relation to the proposed merger of Jetset Travelworld Ltd ACN 091 214 998 (JTL) and Qantas Holidays and Qantas Business Travel through the acquisition by JTL of all the issued fully paid ordinary shares in the capital of Qantas Holidays Limited ACN 003 836 459 (Qantas Holidays) in consideration of new fully paid ordinary shares in the capital of JTL to be issued to Q H Tours Ltd ACN 001 262 433 (QH Tours), a wholly-owned subsidiary of Qantas Airways Limited ACN 009 661 901 (Qantas Airways), which will result in QH Tours holding 58% of all of the issued fully paid ordinary shares in the capital of JTL immediately following the implementation of the Merger Proposal.

The Board of Directors of Jetset Travelworld Ltd UNANIMOUSLY RECOMMENDS that you vote IN FAVOUR of the Resolutions required for the Merger to take effect.

This document contains important information regarding the Extraordinary General Meeting of JTL Shareholders to be held on 29 May 2008. This document is important and requires your urgent attention and should be read in its entirety. If you are in doubt as to how to deal with it you should consult your financial, legal or other professional adviser immediately. Advisers to JTL

Kidder Williams Logo Gadens Lawyers Logo

Jetset Travelworld Ltd Explanatory Memorandum

For a proposed Merger of Jetset Travelworld Ltd with Qantas Holidays and Qantas Business Travel In relation to the proposed merger of Jetset Travelworld Ltd ACN 091 214 998 (JTL) and Qantas Holidays and Qantas Business Travel through the acquisition by JTL of all the issued fully paid ordinary shares in the capital of Qantas Holidays Limited ACN 003 836 459 (Qantas Holidays) in consideration of new fully paid ordinary shares in the capital of JTL to be issued to Q H Tours Ltd ACN 001 262 433 (QH Tours), a wholly-owned subsidiary of Qantas Airways Limited ACN 009 661 901 (Qantas Airways), which will result in QH Tours holding 58% of all of the issued fully paid ordinary shares in the capital of JTL immediately following the implementation of the Merger Proposal.

The Board of Directors of Jetset Travelworld Ltd UNANIMOUSLY RECOMMENDS that you vote IN FAVOUR of the Resolutions required for the Merger to take effect. This document contains important information regarding the Extraordinary General Meeting of JTL Shareholders to be held on 29 May 2008. This document is important and requires your urgent attention and should be read in its entirety. If you are in doubt as to how to deal with it you should consult your financial, legal or other professional adviser immediately. Advisers to JTL

Kidder Williams Logo

Gadens Lawyers Logo

==> picture [26 x 25] intentionally omitted <==

==> picture [596 x 324] intentionally omitted <==

IMPORTANT NOTICES

Date

This Explanatory Memorandum is dated 7 May 2008.

Purpose of Explanatory Memorandum

This statement is made to provide JTL Shareholders with information relating to the Merger Resolutions to be put to JTL Shareholders at the EGM, which are required to be approved to implement the merger of JTL with Qantas Holidays and Qantas Business Travel through the acquisition by JTL of all of the issued shares in Qantas Holidays Limited.

Entire document

JTL Shareholders are encouraged to read this Explanatory Memorandum in its entirety before making a decision on how to vote on the Merger Resolutions to be considered at the EGM.

ASIC

A copy of this Explanatory Memorandum has been lodged with ASIC. Neither ASIC nor any of its officers takes any responsibility for the contents of this Explanatory Memorandum.

ASX

A copy of this Explanatory Memorandum has been provided to ASX. Neither ASX nor any of its officers takes any responsibility for the contents of this Explanatory Memorandum.

Glossary

Certain terms and abbreviations used in this Explanatory Memorandum have defined meanings, which are set out in the Glossary (i.e. Section 7 of this Explanatory Memorandum).

Responsibility

Other than as set out below, JTL accepts responsibility for the form and content of this Explanatory Memorandum.

The information contained in the Letter from the Qantas Airways Chairman, Section 2.1.2, Section 3, Section 5, Appendix E and the forecast financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours and provided to JTL to assist it with preparation of the information in Section 4.3 (“Qantas Information”) has been prepared solely by QH Tours and is the sole responsibility of QH Tours. JTL does not assume any responsibility for the accuracy or completeness of the Qantas Information.

Neither QH Tours nor its Representatives assume any responsibility for the accuracy or completeness of the Explanatory Memorandum other than the Qantas Information.

PricewaterhouseCoopers Securities Ltd has prepared the Independent Expert’s Report set out in Appendix B in relation to the Merger Proposal and takes responsibility for that report.

Pitcher Partners Corporate Pty Ltd has prepared the Investigating Accountant’s Report set out in Appendix C in relation to the Merger Proposal and takes responsibility for that report.

Pitcher Partners Corporate Pty Ltd has prepared the Taxation Implications Report set out in Appendix D in relation to the Merger Proposal and takes responsibility for that report.

The remaining information contained in this Explanatory Memorandum has been provided by JTL and is the responsibility of JTL.

==> picture [596 x 338] intentionally omitted <==

Forward looking statements

This document contains statements of historical fact and forward looking statements in relation to JTL, Qantas Holidays and Qantas Business Travel. The forward looking statements included in this document are made only as of the date of this Explanatory Memorandum. Any forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of JTL, QH Tours and their respective directors. Such statements reflect the current expectations of JTL and QH Tours concerning future results and events, and are not guarantees of future performance. The actual results of JTL, Qantas Holidays and Qantas Business Travel may differ materially from the anticipated results, performance or achievements expressed, projected or implied by these forward looking statements. Subject to any obligations under the Corporations Act or the ASX Listing Rules, neither JTL nor QH Tours has any obligation to disseminate after the date of this Explanatory Memorandum any update or revisions to any forward looking statements to reflect any change in expectations in relation to those statements or any change in circumstances, events or conditions on which any of those statements are based.

Neither JTL nor QH Tours nor any of their Representatives gives any representation, assurance or guarantee that the results, performance or achievements expressed in or implied by the forward looking statements in this Explanatory Memorandum will actually occur. JTL Shareholders are cautioned not to place undue reliance on the forward looking statements.

JTL’s Half Yearly Accounts

JTL’s half yearly accounts in respect of the half year ended 31 December 2007 contain important information regarding JTL and its operations for the half year ended 31 December 2007. Together with this Explanatory Memorandum, it also contains information relevant to making a decision on how to vote on the Merger Resolutions. The information contained in JTL’s half yearly accounts in respect of the half year ended 31 December 2007 is deemed to form part of this Explanatory Memorandum.

If you require a copy of the half yearly accounts, please call the JTL information line on 1300 850 505.

Investment decisions

This Explanatory Memorandum contains general advice only and does not take into account the investment objectives, financial situation or particular needs of any individual JTL Shareholder or any other particular person. This Explanatory Memorandum should not be relied upon as the sole basis for any investment decision in relation to the Merger Proposal or JTL Shares generally. Before making any investment decision in relation to the Merger Proposal or JTL Shares generally, it is important that you read this Explanatory Memorandum and seek independent professional financial, legal or taxation advice.

JTL information line

If you have any questions in relation to the Merger Proposal or the EGM please call the JTL information line on 1300 850 505 between 9.00am and 5.00pm (Sydney/Melbourne time), Monday to Friday, or consult with your investment or other professional advisers.

KEY DATES

(all times are Sydney/Melbourne time)

16 June 2008, 11.00am

Deadline for returning proxy forms for the Extraordinary General Meeting of JTL Shareholders

16 June 2008, 7.00pm

Time and Date to determine voting entitlements for the Extraordinary General Meeting of JTL Shareholders

18 June 2008, 11.00am

Extraordinary General Meeting of JTL Shareholders

19 June 2008, 7.00pm

Record Date for payment of Special Dividend

27 June 2008

Payment of Special Dividend

1 July 2008

Merger Implementation Date

1 July 2008

Allotment of new JTL Shares to QH Tours

==> picture [569 x 752] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|TABLE OF CONTENTS|
|Letters from JTL & Qantas Airways Chairmen|7|
|1.|Overview of Merger Proposal and Key Questions Answered|9|
|2.|The Merger Proposal|15|
|3.|Profile of Qantas Holidays and Qantas Business Travel|21|
|4.|Profile of JTL post merger|29|
|5.|Information about QH Tours|39|
|6.|Additional Information|45|
|7.|Glossary|63|
|8.|Corporate directory|66|
|Appendix A – Notice of Extraordinary General Meeting|67|
|Appendix B – Independent Expert’s Report|71|
|Appendix C – Investigating Accountant’s Report|144|
|Appendix D – Taxation Report|150|
|Appendix E – Qantas Controlled Group|160|
|Appendix F – Notice of Nomination of New Auditor|164|

----- End of picture text -----

==> picture [596 x 101] intentionally omitted <==

LETTERS FROM JTL & QANTAS AIRWAYS CHAIRMEN

7th May 2008

==> picture [10 x 10] intentionally omitted <==

==> picture [89 x 89] intentionally omitted <==

Dear Shareholder,

In the last five years, the share price of Jetset Travelworld Ltd (“JTL”) has significantly outperformed the All Ordinaries Index. While the JTL Board has strategies in place for the future growth of the core business, we seek your approval for a transaction that will significantly increase the size and prospects of the business, while at the same time supporting our core business plan.

The purpose of this Explanatory Memorandum is to seek your approval to acquire Qantas Holidays and Qantas Business Travel and to issue new JTL Shares to QH Tours as contemplated by the Merger Implementation Agreement.

Your Directors believe this acquisition will give strength to our existing retail network, diversify earnings streams through a number of complementary businesses (namely corporate business travel and holiday packaging) and add significant depth to our management team. The acquisition will also enhance on-line opportunities and strengthen our relationship with Qantas Airways.

There are also a number of tangential benefits of the Merger Proposal, including capital market advantages as the number of JTL Shares and the Company’s market capitalisation will increase substantially with QH Tours (and therefore, indirectly, Qantas Airways) becoming a 58% cornerstone shareholder in JTL. If the Merger Proposal is approved, there will also be an 11 cent per JTL Share Special Dividend.

This 11 cents per JTL Share Special Dividend is an increase from the 4 cents per JTL Share special dividend previously announced. This increase effectively brings forward what might have been the final dividend for the year ending 30 June 2008. As a consequence, if the Merger Proposal is approved and the 11 cents per JTL Share Special Dividend paid, JTL Shareholders should not expect to receive any further dividend in respect of the year ending 30 June 2008.

The Board commissioned PricewaterhouseCoopers Securities Ltd to provide an Independent Expert’s Report on the merits of the Merger Proposal. The Independent Expert has formed the view that despite the Merger Proposal not being fair, it is reasonable. The Independent Expert concluded that the high end of the value range for a JTL Share post Merger (the value range being between $2.73 and $2.95) only marginally exceeds the low end of the value range for a JTL Share on a stand-alone basis (the value range being betweem $2.88 and $3.12) and therefore is not fair. The view that the Merger Proposal is reasonable to JTL Shareholders not associated with QH Tours is based on the conclusion that the advantages of the Merger Proposal outweigh the disadvantages (see Appendix B for the full report).

Your Directors unanimously recommend that you vote in favour of the Merger Resolutions. Each of your Directors who holds or controls JTL Shares intends to vote those JTL Shares in favour of the Merger Resolutions.

This Explanatory Memorandum, which also includes the Notice of Extraordinary General Meeting (see Appendix A), provides the details of the Merger Proposal for you to consider before voting.

I encourage you to read the information in this Explanatory Memorandum carefully, and, if necessary, to seek independent advice prior to attending and voting at the Extraordinary General Meeting on 18 June 2008. If you are unable to attend the meeting, please complete the proxy form and return it in accordance with the attached instructions.

Yours sincerely

==> picture [157 x 38] intentionally omitted <==

John M C King Chairman Jetset Travelworld Limited

==> picture [596 x 107] intentionally omitted <==

7th May 2008

==> picture [89 x 89] intentionally omitted <==

Dear Jetset Travelworld Shareholder,

On 21 February 2008, Qantas Airways and JTL announced a proposed transaction in which Qantas Holidays and Qantas Business Travel will be combined with JTL to form a vertically integrated Australian retail, corporate and wholesale travel group. The transaction builds on a long standing, strong, relationship between the two companies.

Under the proposed transaction JTL will acquire 100% of Qantas Holidays and Qantas Business Travel from QH Tours in exchange for a 58% shareholding in JTL.

The transaction has the unanimous support of both the Qantas Airways Directors and JTL Directors and is subject to a majority shareholder vote of JTL.

The proposed Merger represents an exciting opportunity to bring together two highly complementary businesses which have a strong strategic fit. Qantas Airways believes the merged group will be an attractive proposition for current and potential JTL franchisees, offering a multi channel distribution platform covering wholesale, retail and corporate segments across consumer, trade and on-line sales channels.

Qantas Airways’ decision to become a major shareholder in the enlarged group through QH Tours reflects its commitment and belief in the merged group’s strategy and growth opportunities. With increased financial strength and scale, the merged group will be better positioned to invest in growth and further innovation.

Qantas Airways looks forward to working with JTL’s board and management to create value for all shareholders.

Yours sincerely

==> picture [86 x 49] intentionally omitted <==

Leigh Clifford, AO Chairman Qantas Airways Limited

==> picture [596 x 101] intentionally omitted <==

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED

This section is a summary only. Shareholders should read this entire Explanatory Memorandum before making a decision on how to vote on the Merger Resolutions.

1.1 A snapshot of the post merger JTL

On implementation of the Merger Proposal, JTL will operate one of Australia’s largest integrated travel businesses, providing wholesale, retail and specialist business travel products and services across the country. The Combined JTL Group will have:

a stockmarket capitalisation of approximately $550m[1] ;
a 58% shareholding by QH Tours, a member of the Qantas Group;
approximately 1,100 staff;
combined annual Total Transaction Value (“TTV”) of approximately $3 billion;
over 600 retail network members throughout Australia as well as call centres in Brisbane, Sydney, Canberra, Melbourne, Adelaide, Perth and Auckland; and
an expanded online presence through the dynamic packaging product and the hotel booking engine on www.qantas.com.au in addition to the JTL websites, www.jetsettravelworld.com.au, www.jetset.com.au and www.travelworld.com.au.

1.2 Overview of the Merger Proposal and the key JTL steps to the Merger Proposal

JTL and QH Tours entered into a Merger Implementation Agreement on 21 February 2008 (which has been varied by an amending agreement drafted 2 May 2008) which documented the terms and conditions under which the parties would implement a merger of JTL with Qantas Holidays and Qantas Business Travel.

The Merger Proposal is conditional upon a number of matters including the passing of the Merger Resolutions. If the Merger Resolutions are passed by the requisite majority of JTL Shareholders and if all other conditions to the Merger Proposal are satisfied, the implementation of the Merger Proposal will require the following steps:

==> picture [548 x 152] intentionally omitted <==

1 Based on the closing price of $2.53 per JTL Share as at 2 May 2008 and assuming the issue of 127,340,726 JTL Shares to QH Tours on implementation of the Merger Proposal.

==> picture [596 x 107] intentionally omitted <==

==> picture [484 x 256] intentionally omitted <==

----- Start of picture text -----

Step Action
JTL will declare a fully franked cash dividend of 11 cents per JTL Share to holders of JTL Shares as at the
1 Record Date (as this Record Date is before the date on which any JTL Shares will be issued to QH Tours as
part of the Merger Proposal, QH Tours will not be entitled to receive this dividend).
JTL will acquire from QH Tours, all of the fully paid issued ordinary shares in the capital of Qantas Holidays.
2 As Qantas Business Travel is a wholly-owned subsidiary of Qantas Holidays, JTL will also acquire Qantas
Business Travel when it acquires Qantas Holidays.
JTL will issue new JTL Shares to QH Tours as consideration for the acquisition of all of the shares in Qantas
3 Holidays, which will provide QH Tours with 58% of the total number of JTL Shares on issue immediately
following the implementation of the Merger Proposal.
The JTL Board will be reconstituted to include four nominees of QH Tours who will comprise a majority of the
4
JTL Board.
The management and staff of JTL and Qantas Holidays and Qantas Business Travel will be integrated, under
5
the leadership of Peter Collins, who is currently Group General Manager of Qantas Holidays.
QH Tours will have the ability to maintain its percentage shareholding in JTL under the terms of an
6
Anti-Dilution Deed.
----- End of picture text -----

1.3 Key benefits for JTL Shareholders

Some important potential benefits of the Merger Proposal include:

the formation of one of Australia’s leading integrated travel companies with increased scale;
an association with Qantas Airways, one of Australia’s best recognised companies and brands;
strengthened business operations including increased product and service diversity;
a Special Dividend of 11 cents per JTL Share to all JTL Shareholders at the Record Date (QH Tours will not be a JTL Shareholder at this date so will not be entitled to receive this dividend);
an increase in the market capitalisation of JTL which should enhance capital market interest in JTL and improve the Company’s access to capital markets; and
a premium of 14% on JTL’s value per Share on a minority basis as determined by the Independent Expert.

JTL Shareholders should read Section 2.4 of this Explanatory Memorandum and also the Independent Expert’s Report regarding the possible advantages of the Merger Proposal.

1.4 Possible disadvantages of the Merger proposal

The Merger Proposal has possible disadvantages. JTL Shareholders should read Section 2.5 of this Explanatory Memorandum and also the Independent Expert’s Report regarding the possible disadvantages of the Merger Proposal.

==> picture [596 x 101] intentionally omitted <==

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED (CONT)

1.5 Independent expert opinion

PricewaterhouseCoopers Securities Ltd has concluded that despite the Merger Proposal not being fair, the advantages of the Merger Proposal outweigh the disadvantages, and that the Merger Proposal is reasonable to JTL Shareholders who are not associated with QH Tours.

The Independent Expert concluded that the Merger Proposal is not fair because the high end of the value range for a JTL Share post Merger (the value being between $2.73 and $2.95) only marginally exceeds the low end of the value range for a JTL Share on a stand-alone basis (the value being between $2.88 and $3.12). However, the Independent Expert’s view that the Merger Proposal is reasonable to JTL Shareholders not associated with QH Tours is based on its conclusion that, the advantages of the Merger Proposal to JTL Shareholders not associated with QH Tours outweigh the disadvantages. A copy of the Independent Expert’s Report is set out in Appendix B.

1.6 JTL Shareholder approvals

As a condition precedent to the Merger Proposal proceeding, JTL Shareholders must approve resolutions, by a majority of votes cast, in relation to the following matters:

The issue of the JTL Shares to QH Tours under the Merger Implementation Agreement for the purposes of item 7 of section 611 of the Corporations Act;
JTL entering into the Anti-Dilution Deed for the purposes of Chapter 2E of the Corporations Act; and
JTL and its subsidiaries performing and observing obligations under or otherwise contemplated by the Merger Implementation Agreement and the Separation Agreements for the purposes of Chapter 2E of the Corporations Act.

JTL Shareholders will also be asked to approve resolutions, in relation to the following matters:

An increase in the total remuneration payable to JTL’s Non-Executive Directors from $250,000 per annum to $800,000 per annum for the purposes of ASX Listing Rule 10.17 and in accordance with clause 10.2 of JTL’s constitution;
That Pitcher Partners be removed as the current Auditor of JTL; and
KPMG, who has consented in writing to act as Auditor of JTL be appointed as Auditor of JTL.

The resolutions relating to the increase in the total remuneration payable to JTL’s Non-Executive Directors and the removal of Pitcher Partners as the current Auditor of JTL require the approval of JTL Shareholders by a majority of votes cast. The resolution relating to the appointment of KPMG as the new Auditor of JTL is a special resolution. In order for this special resolution to be effective, it needs to be approved by at least 75% of those JTL Shareholders present at the meeting either in person or by proxy.

For further details of each of the Resolutions, the reasons they are required and voting see Section 6.10.

The Resolutions will be put to JTL Shareholders at the EGM to be held at The Westin Melbourne, 205 Collins Street, Melbourne, Victoria, on 18 June 2008 at 11.00am (Sydney/Melbourne time). The Notice of EGM convening the EGM, including the proxy form, is set out in Appendix A and has been sent to JTL Shareholders with this Explanatory Memorandum.

==> picture [548 x 132] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

1.7 Your questions answered

==> picture [484 x 639] intentionally omitted <==

----- Start of picture text -----

Question Answer
Why have I received this This Explanatory Memorandum is intended to help you, as a JTL Shareholder, decide how to
Explanatory Memorandum? vote on the Merger Proposal which, if approved and implemented, will result in the merger
of JTL with Qantas Holidays and Qantas Business Travel.
What is the Merger Proposal? The Merger Proposal involves a merger of JTL with Qantas Holidays and Qantas Business
Travel through the acquisition of Qantas Holidays and Qantas Business Travel by JTL.
If JTL Shareholders approve the Merger Proposal, JTL will acquire all of the fully paid
ordinary shares in the capital of Qantas Holidays and, as a result, become the beneficial
owner of Qantas Holidays and Qantas Business Travel. In return, JTL will issue new JTL
Shares to QH Tours, which will represent 58% of the issued capital of JTL immediately
following the implementation of the Merger Proposal.
In effect, Qantas Holidays will become a wholly-owned subsidiary of JTL and JTL will also
acquire the beneficial interest in Qantas Business Travel, and QH Tours (which is a wholly-
owned subsidiary of Qantas Airways) will become the majority shareholder of JTL.
Do the JTL Directors The JTL Directors UNANIMOUSLY RECOMMEND that JTL Shareholders vote in favour of
recommend the Merger each Merger Resolution. They intend to vote any JTL Shares they hold or control in favour of
Proposal? the Merger Resolutions.
What has the Independent The Independent Expert has concluded that despite the Merger Proposal not being fair, it is
Expert said? reasonable to JTL Shareholders who are not associated with QH Tours.
The Independent Expert has concluded that the Merger Proposal is not fair because the
high end of the value range for a JTL Share post Merger (the value range being between
$2.73 and $2.95) only marginally exceeds the low end of the value range for a JTL Share on
a stand-alone basis (the value range being between $2.88 and $3.12).
However, the Independent Expert’s view that the Merger Proposal is reasonable to JTL
Shareholders not associated with QH Tours is based on its conclusion that, the advantages
of the Merger Proposal to JTL Shareholders not associated with QH Tours outweigh the
disadvantages.
When will the Merger Subject to all conditions being satisfied (which includes obtaining JTL Shareholder approval
Proposal be completed and of the Merger Resolutions), JTL and QH Tours are working towards implementing the Merger
the Merger implemented? on or about 1 July 2008.
Will JTL Shareholders No new JTL Shares will be issued to existing JTL Shareholders as a result of
need to be issued with new the Merger.
JTL Shares?
Will JTL remain listed on Yes.
the ASX?
What are the tax implications Pitcher Partners Corporate Pty Ltd has provided a taxation report (set out in Appendix D) on
of the Merger? the general Australian taxation implications of the Merger for JTL Shareholders.
It is recommended that JTL Shareholders seek their own independent legal, financial and
taxation advice based upon their specific circumstances.
----- End of picture text -----

==> picture [596 x 101] intentionally omitted <==

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED (CONT)

==> picture [484 x 673] intentionally omitted <==

----- Start of picture text -----

Question Answer
What are the rationale and The rationale for the Merger Proposal is to create a combined entity which is better
possible benefits for the positioned for future growth through a diversification of earnings, substantial financial
Merger? capacity and platform for growth.
The creation of the Combined JTL Group is expected to provide the following benefits for
JTL Shareholders:
• an association with the Qantas Group, one of the world’s largest airlines;
• strengthened business operations including increased product and service diversity;
• the Independent Expert has estimated that the value of a JTL Share following
implementation of the Merger Proposal will represent a premium of 14% above its
assessed value range of an existing JTL Share (in each case on a minority interest
cumulative dividend basis);
• a Special Dividend of 11 cents per JTL Share to all JTL Shareholders at the Record Date
(which will not include QH Tours);
• continued investment in an entity that will have significant market share and access to
strong travel brands; and
• a larger capital base with improved access to capital markets.
What are the potential Key potential risks and disadvantages to the Merger Proposal include:
disadvantages and risks of
• existing JTL Shareholders no longer having collective control of JTL and the diluting
the Merger Proposal?
effect of the issue of a majority interest in JTL Shares to QH Tours;
• the Independent Expert has formed the view that the Merger Proposal is not fair however,
it has also concluded that the Merger Proposal is reasonable to JTL Shareholders who
are not associated with QH Tours;
• new business risks; and
• implementation risks.
What happens if the Merger is If the Merger is not approved:
not approved?
• JTL Shareholders will not receive the Special Dividend;
• JTL will not acquire the shares in Qantas Holidays or the business of Qantas Holidays or
Qantas Business Travel; and
• QH Tours will not acquire a controlling interest in JTL and the proposed changes to the
JTL Board and management will not occur.
Has an alternative proposal Since the announcement of the Merger Proposal on 21 February 2008 no alternative
been received from a third proposal has emerged from a third party.
party?
If I wish to support the Merger As a JTL Shareholder, if you support the Merger Proposal, you should vote in favour of the
Proposal, what should I do? Merger Resolutions at the EGM.
The Notice of EGM is included as Appendix A to this Explanatory Memorandum.
What if I cannot or do not If you cannot or do not wish to attend the EGM, you may appoint a proxy, attorney, or
wish to attend the EGM? representative to vote at the meeting on your behalf. Full details on how these appointments
may be made are contained in the Notice of EGM included as Appendix A to this
Explanatory Memorandum. A proxy form for the EGM is attached to and forms part of this
Explanatory Memorandum. Proxy forms and powers of attorney can be lodged with the JTL
Share Registry up until 11.00am (Sydney/Melbourne time) on 16 June 2008.
----- End of picture text -----

==> picture [596 x 107] intentionally omitted <==

Question	Answer
Is voting compulsory at the EGM?	Whilst voting is not compulsory, the JTL Board believes that the Merger Proposal is important to all JTL Shareholders and encourages you to exercise your right to vote after having read this Explanatory Memorandum.
When will the results of the EGM be known?	The results of the votes to be cast at the EGM will be made publicly available during or shortly after the conclusion of the EGM.
What are my options?	As a JTL Shareholder, your options are to: • follow the recommendation of your Directors and vote in favour of the Merger Resolutions at the EGM to be held on 18 June 2008; • vote against the Merger Resolutions at the EGM; • sell your JTL Shares prior to the implementation of the Merger (scheduled to be on or about 1 July 2008); or • do nothing.
What should I do now?	• Read this Explanatory Memorandum in full before making any decision on the Merger Proposal. • If necessary, seek professional fnancial, legal and/or taxation advice, as this Explanatory Memorandum does not take into account the fnancial situation, investment objectives and particular needs of any JTL Shareholder. • Determine how you wish to vote on the Merger Resolutions. • Vote at the EGM.
Further questions?	If you have any other questions in relation to the Merger Proposal, please call the JTL information line on 1300 850 505 or consult your professional adviser.

==> picture [596 x 102] intentionally omitted <==

2. THE MERGER PROPOSAL

2.1 Introduction

2.1.1 JTL

Since the formation of JTL in May 2001, the Company has grown to become one of the largest retail travel companies in Australia. JTL is principally a franchisor for over 600 retail network members either operating under the master brands of Jetset or Travelworld or operating as non-branded affiliate retail stores.

JTL provides its network members with a dedicated team of professionals who provide support in marketing, sales, information technology, training and development and small business management. In addition to this, JTL network members benefit from partnership reward programs and increased buying power driven by JTL’s relationships with many of the travel industry’s major airline and wholesale operators.

Network members also receive access to JTL’s National Ticket Centre. The National Ticket Centre is JTLs inhouse fares and ticketing consolidation unit providing airfares and commissions at specially negotiated rates in addition to industry best practice ticketing and support.

2.1.2 Qantas Holidays and Qantas Business Travel

Qantas Holidays is presently a wholly owned subsidiary of QH Tours. Qantas Holidays sells international and domestic travel packages and components of those packages. Those travel packages are sold at the wholesale and retail level under two brands licensed from Qantas Airways, namely:

the Qantas Holidays brand, which is employed for packages utilising the Qantas Airways network incorporating flights operated or marketed by Qantas Airways and Jetstar Airways (as well as those of Qantas Airways marketed as code-share services); and
the Viva! Holidays brand, which is employed for packages utilising the flights of other airlines. Viva! Holidays currently sells the air content of Thai Airways, Hawaiian Airlines, Garuda Indonesia, Malaysia Airlines and Royal Brunei.

Approximately 1.1 million travellers used services provided by Qantas Holidays in the 12 months ended 30 June 2007.

Qantas Business Travel provides travel management services to corporate clients, including arranging flights, accommodation, car hire and an expense reporting service. Qantas Business Travel has six travel centres across Australia and one in Auckland, New Zealand. Qantas Airways has approximately 550 staff employed in Qantas Business Travel. Qantas Business Travel is one of the most significant business travel operators in Australia.

2.2 The Merger Proposal

2.2.1 Key rationale for the Merger Proposal

The rationale for the Merger Proposal is to create an enlarged JTL entity trading in both the retail and wholesale travel industry markets which is better positioned for future growth and potential greater returns to JTL Shareholders through a diversification of earnings, substantial financial capacity and platform for growth.

2.2.2 Overview of the Merger Proposal

JTL and QH Tours entered into a Merger Implementation Agreement on 21 February 2008 which documented the terms and conditions under which the parties would implement a merger of JTL, Qantas Holidays and Qantas Business Travel. The terms and conditions of the Merger Implementation Agreement were varied by an amending agreement dated 2 May 2008.

==> picture [596 x 107] intentionally omitted <==

A summary of the key terms of the Merger Implementation Agreement (as amended) is set out in Section 6.3.

The Merger Proposal is conditional upon a number of matters including the passing of the Merger Resolutions by JTL Shareholders. If the Merger Resolutions are passed by JTL Shareholders and if all other conditions to the Merger Proposal are satisfied, the following steps will need to be undertaken on or before the completion of the implementation of the Merger (which is expected to occur on or around 1 July 2008), in accordance with the Merger Implementation Agreement:

JTL will declare a fully franked cash dividend of 11 cents per JTL Share to holders of JTL Shares as at the Record Date (this will not include QH Tours). This 11 cents per JTL Share Special Dividend is an increase from the 4 cents per JTL Share special dividend previously announced. This increase effectively brings forward what might have been the final dividend for the year ending 30 June 2008. As a consequence, if the Merger Proposal is approved and the 11 cents per JTL Share Special Dividend paid, JTL Shareholders should not expect to receive any further dividend in respect of the year ending 30 June 2008;
JTL will acquire all of the fully paid issued ordinary shares in Qantas Holidays. As Qantas Business Travel is a wholly-owned subsidiary of Qantas Holidays, JTL will also acquire Qantas Business Travel when it acquires Qantas Holidays;
JTL will issue such number of new JTL Shares to QH Tours as will result in QH Tours holding 58% of the issued shares in JTL immediately following implementation of the Merger Proposal, as the consideration for the purchase of the shares in Qantas Holidays. Based on the number of JTL Shares on issue as at the date of this Explanatory Memorandum, this will result in QH Tours, which is a wholly-owned subsidiary of Qantas Airways, being issued with 127,340,726 new JTL Shares;
the JTL Board will be reconstituted to include four nominees of QH Tours, who will comprise a majority of the JTL Board;
JTL will appoint Peter Collins as its new Chief Executive Officer and Andrea Slark as its new Chief Financial Officer;
QH Tours will have the ability to maintain its percentage shareholding in JTL under the Anti-Dilution Deed described in Section 6.4; and
KPMG will be appointed as auditor of the Combined JTL Group.

2.2.3 Key financial information

Section 4.3 of this Explanatory Memorandum sets out forecast financial information in respect of the combined businesses of JTL, Qantas Holidays and Qantas Business Travel for the financial years ending 30 June 2008 and 30 June 2009. These forecasts have been the subject of a review by the Investigating Accountant and the Investigating Accountant’s Report (which forms Appendix C of this Explanatory Memorandum) describes that review.

2.2.4 Board and Management Changes

If the Merger Proposal is implemented, the JTL Board will be reconstituted to comprise the following persons:

John King (Chairman)
Peter Spathis (Director)
Geoff Dixon (Director)
Peter Gregg (Director)
Lesley Grant (Director)
Gareth Evans (Director)

Further information regarding the new Directors (being Geoff Dixon, Peter Gregg, Lesley Grant and Gareth Evans) is included in Sections 5.1.2 and 5.4 of this Explanatory Memorandum.

==> picture [596 x 102] intentionally omitted <==

2. THE MERGER PROPOSAL (CONT)

If the Merger Proposal is implemented, Peter Collins and Andrea Slark will be appointed as JTL’s new Chief Executive Officer and Chief Financial Officer respectively. Further information regarding Mr Collins and Ms Slark is included in Section 5.5.3 of this Explanatory Memorandum.

2.3 Directors’ recommendations

Your Directors consider that, notwithstanding that the Independent Expert has concluded that the Merger Proposal is not fair (but has concluded that the Merger Proposal is reasonable) to JTL Shareholders not associated with QH Tours, the expected benefits and advantages of the Merger Proposal to JTL Shareholders outweigh its potential risks or disadvantages. Accordingly, your Directors unanimously recommend the Merger Proposal and unanimously recommend that JTL Shareholders vote in favour of the Merger Resolutions required to implement the Merger Proposal.

Each of the Directors who holds or controls JTL Shares in JTL intends to vote in favour of the Merger Resolutions required to implement the Merger Proposal.

The detailed reasons for the JTL Directors’ recommendations are outlined in this Section. In summary, the Directors consider the terms of the Merger Proposal should provide you, as a JTL Shareholder, with:

continued investment in a vertically integrated entity, with increased diversity and access to strong brands, operating in the wholesale, retail and corporate travel markets. JTL, post merger, should be better positioned to facilitate future growth and potentially generate greater shareholder returns;
a Special Dividend of 11 cents per JTL Share;
a reduction in earnings volatility, through increased product and service diversity;
improved service and product supply to customers; and
increased market capitalisation leading to improved access to capital markets.

However, it is important for each JTL Shareholder to carefully consider the case for and against the Merger Proposal, as well as the Independent Expert’s assessment of the Merger Proposal, before voting on the Merger Resolutions.

The possible advantages of the Merger Proposal and other relevant considerations are discussed below. Also listed are the possible disadvantages and risks of the Merger Proposal. In reaching its recommendation your Board has assessed and weighed the favourable and unfavourable positions, as well as the Independent Expert’s assessment of the Merger Proposal, and has unanimously decided in favour of the implementation of the Merger Proposal.

2.4 Possible advantages of the Merger Proposal

2.4.1 Strengthened business

The Merger will create a leading travel industry company that is likely to:

provide a stronger position from which to compete more effectively with existing competitors and new entrants including on-line travel businesses, by being a larger, vertically integrated, merged entity providing both retail and wholesale products and services to both leisure and corporate customers;
reduce business volatility through diversity as the business of JTL has a retail focus and Qantas Holidays and Qantas Business Travel have a wholesale/corporate focus; and
strengthen the multi-channel offering of JTL with direct, indirect and online sales channels.

==> picture [596 x 107] intentionally omitted <==

2.4.2 Premium on JTL’s value per share on a minority interest basis

PricewaterhouseCoopers Securities Ltd which was engaged by JTL as an Independent Expert, has estimated the value of a JTL Share post implementation of the Merger Proposal on a minority interest basis, to be between $2.73 and $2.95 per share. This represents a 14% premium above PricewaterhouseCoopers Securities Ltd’s estimated value of an existing JTL Share of between $2.40 and $2.60.

2.4.3 Larger capital base and improved access to capital markets

The Merger Proposal should have a positive impact on the trading of securities in JTL on the ASX including an increase in market capitalisation, increased likelihood of broker coverage and the possibility of future inclusion in indices such as the ASX 300 index which may lead to increased interest from institutional investors and additional broker coverage. JTL is expected to have a combined market capitalisation of circa $550 million[1] upon the implementation of the Merger Proposal, an increase to more than double JTL’s market capitalisation as at 2 May 2008.

2.5 Possible disadvantages of the Merger Proposal

2.5.1 Current JTL Shareholders will no longer collectively control JTL

The Merger will result in JTL being 58% owned by QH Tours, a wholly owned subsidiary of Qantas Airways. Consequently, current JTL Shareholders will represent the minority interests in the post merger JTL and will no longer collectively control it. Such control will be held by Qantas Airways once the Merger has been implemented. In addition, under the Anti-Dilution Deed, QH Tours will be able to protect its percentage shareholding in JTL and may, in certain circumstances, veto any capital raising. The Directors are of the opinion that the benefits of diversification of income streams, the association with Qantas Airways and access to the Qantas Holidays, Viva! Holidays and Qantas Business Travel brands and access to a larger capital base in the enlarged entity far outweigh the loss of collective control of JTL.

2.5.2 Board representation and ability to pass ordinary resolutions

While it is envisaged that there will be an on-going minority representation of current JTL Shareholders on the Board of JTL following implementation of the Merger Proposal, JTL Shareholders should be aware that QH Tours would be in a position to cast the majority of votes at a general meeting of JTL. This will enable it to control the composition of JTL’s board of directors and senior management, determine JTL’s dividend policy and control the strategic direction of the businesses of JTL. Accordingly and in accordance with the Corporations Act, QH Tours may by ordinary resolution (i.e. simple majority) remove a director from office despite anything contained in the company’s constitution, any agreement between the company and a director or any agreement between a shareholder and a director. Accordingly, it is possible that QH Tours may seek to invoke this right in the future to remove a JTL Director who is not a nominee of QH Tours.

Section 5.4 of the Explanatory Memorandum details QH Tours’ nominees to the JTL Board. QH Tours’ four nominees are all members of the Qantas Airways executive team and will therefore be classified as NonIndependent Directors of the new JTL Board. The new JTL Board will therefore not include a majority of Independent Directors. JTL believes the strong travel industry experience and expertise of the QH Tours nominees will be of significant benefit to JTL and the high calibre of these appointments is indicative of Qantas Airways commitment to the success of JTL post merger.

2.5.3 Additional business risks

JTL is predominately a retail-focused travel agency franchisor business. If the Merger Proposal is approved and implemented, JTL Shareholders will have an investment exposure to travel related businesses that are not presently conducted by JTL, primarily through the provision of products and services for the wholesale and corporate markets.

1Based on the closing price of $2.53 per JTL Share as at 2 May 2008 and assuming the issue of 127,340,726 JTL share to QH Tours.

==> picture [596 x 102] intentionally omitted <==

2. THE MERGER PROPOSAL (CONT)

The profitability of this wholesale/corporate client-based business is closely associated with the availability and sourcing of air and land content, foreign exchange rates, operating efficiency and other economic factors. JTL believes Qantas Holidays and Qantas Business Travel are experienced in managing these risks.

The Directors of JTL believe that the widening of the operational focus of JTL will be to the advantage of the Company overall, giving it a wider base of travel operations than if it continued on its current basis.

2.5.4 Merger and Integration Risks

The Merger Proposal brings together separate companies with different management and cultures. New systems and management structures will be required to integrate the businesses. A new CEO and CFO will be appointed. The current JTL CEO and CFO will provide assistance to the merged entity for a transitional period.

There is a risk that the expected synergy benefits of the Merger Proposal may be less than expected or may not materialise at all. While JTL has undertaken analysis in this area, expected synergies cannot be confirmed until the Merger Proposal is approved and fully implemented. There is the risk that unforeseen events may cause the synergies to be delayed, not be obtained or cost more to achieve than originally expected. To address these risks, integration committees of both JTL and Qantas Airways management and advisers have been formed to devise strategies to integrate people, processes, systems and risk management frameworks for the immediate post-merger period.

JTL Shareholders will share a proportional risk of any contingent liabilities associated with the past operations of Qantas Holidays and Qantas Business Travel. This includes exposure to possible taxation and legal claims in respect of, amongst other things, business practices, product and public liability and employee health and safety issues. JTL undertook a due diligence review regarding these potential exposures prior to signing the Merger Implementation Agreement. Certain warranties and indemnities were obtained by JTL from QH Tours, recognising that as a consequence of the Merger, QH Tours is accepting 58% of any similar contingent liabilities relating to JTL’s business. Equally, JTL provided limited warranties and indemnities for the benefit of QH Tours.

2.5.5 The Independent Expert’s assessment that the Merger Proposal is not fair to JTL Shareholders not associated with QH Tours

The Independent Expert has concluded that the Merger Proposal is not fair to JTL Shareholders who are not associated with QH Tours.

The Independent Expert has concluded that the Merger Proposal is not fair because it has assessed the high end of the value range for a JTL Share post Merger (the value range being between $2.73 and $2.95) as only marginally exceeding the low end of the value range for a JTL Share on a stand-alone basis (the value range being between $2.88 and $3.12).

However, the Independent Expert has also concluded that the Merger Proposal is reasonable to JTL Shareholders not associated with QH Tours on the basis that the possible disadvantages of the Merger Proposal are outweighed by the potential advantages of the Merger Proposal being implemented.

2.5.6 Conditions to implementation

The Merger Proposal is subject to a number of conditions. While JTL is not aware of any matter which would, as at the date of this Explanatory Memorandum, cause these conditions to be breached or unfulfilled, there is a risk that due to matters outside JTL’s control, these conditions will not be satisfied. If this is the case, the Merger Proposal may not proceed.

==> picture [596 x 107] intentionally omitted <==

2.6 No immediate negative tax consequences to JTL Shareholders

Pitcher Partners Corporate Pty Ltd have advised that no Australian capital gains tax should be payable by existing JTL Shareholders as a result of the Merger Proposal, as existing JTL Shareholders will not be required to dispose of their JTL Shares for the purposes of the Merger.

JTL Shareholders should refer to Pitcher Partners Corporate Pty Ltd’s taxation report in Appendix D for a report of the taxation implications.

It is recommended that JTL Shareholders seek their own independent legal, financial and taxation advice based upon their specific circumstances.

2.7 Implications if the Merger Proposal does not proceed

If JTL Shareholders do not approve the Merger Resolutions (or if the Merger Proposal does not proceed because of the non-fulfilment of any condition), JTL Shareholders will not be able to hold a stake in the enlarged entity. Instead, they will retain their direct interest in JTL for the same proportion and JTL will continue to operate under its existing capital structure. In these circumstances, the possible advantages of the Merger Proposal outlined in Section 2.4 above will not be available to JTL and JTL Shareholders.

On the other hand, the possible disadvantages of the Merger Proposal discussed in Section 2.5 will not be relevant.

In these circumstances, the Directors and management of JTL would consider alternatives for the long-term strategic future of JTL. The Directors believe the future prospects for JTL in these circumstances would be less attractive than if the Merger proceeds.

2.8 Independent Expert’s conclusion

The Independent Expert, PricewaterhouseCoopers Securities Ltd, has concluded that despite the Merger Proposal not being fair, it is reasonable to JTL Shareholders who are not associated with QH Tours.

The Offer is not fair

The Independent Expert has concluded that in the absence of a superior proposal emerging, the Merger Proposal is not fair (but is reasonable) to JTL Shareholders who are not associated with QH Tours.

In determining its estimate of fair market value of a JTL Share, the Independent Expert has included a 20% premium for control. A “premium for control” is the difference between an entity having a controlling interest (that is what QH Tours would have upon the completion of the Merger) and a minority interest (that is what each JTL Shareholder currently has).

The Offer is reasonable

The Independent Expert has concluded that the Merger Proposal is reasonable following an assessment of a number of advantages and disadvantages that will likely accrue to JTL Shareholders should the Merger proceed.

The Independent Expert’s view is that possible advantages of implementing the Merger Proposal such as integration, diversification, competitive positioning, the benefit of the Qantas brand and synergy benefits, outweigh the possible disadvantages of implementing the Merger Proposal, such as the foregone opportunity to receive a future takeover premium and the risks of integration.

The Independent Expert’s Report is included in Appendix B of this Explanatory Memorandum

==> picture [596 x 101] intentionally omitted <==

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL

3.1 Qantas Holidays

3.1.1 Overview

Qantas Holidays is one of Australia’s leading travel wholesalers, and with its predecessors has been providing travellers with package holidays throughout Australia and around the world for over 30 years. In the 12 months ended 30 June 2007 Qantas Holidays sold package holidays and related travel services to over 1.1 million travellers worldwide. In fiscal year 2007, Qantas Holidays’ product range was covered through 26 brochures, to 42 destinations covering Australia, Asia, Africa, Europe, Canada, the Pacific and North America.

Qantas Holidays operates two brands:

Qantas Holidays – this brand is employed for packages utilising the Qantas Airways network incorporating flights operated or marketed by Qantas Airways and Jetstar Airways (as well as those of Qantas Airways marketed code-share services). For the 12 months to 31 March 2008, Qantas Holidays has prepared for distribution, approximately 2.6 million travel brochures for travel products and services it is offering during the 12 months to 31 March 2009.
Viva! Holidays – packages other airlines with a land component. Viva! Holidays currently sells the air content of Thai Airways, Hawaiian Airlines, Garuda Indonesia, Malaysia Airlines and Royal Brunei.

In Australia, Qantas Holidays has sales representation in each state and territory, contact centres in Brisbane, Melbourne, Perth and Sydney and has international distribution through a number of reselling arrangements. Qantas Holidays employs approximately 550 staff. Qantas Holidays is the only major Australian travel wholesaler which is a Qantas Frequent Flyer partner, offering Frequent Flyer points on the purchase of its holidays.

==> picture [493 x 244] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

3.1.2 Business model

Qantas Holidays sources air and land content from a broad network of travel product suppliers and sells this content through a multi-channel distribution model, which includes direct and intermediary channels. Intermediary channels include retail travel agents and third party distribution channels (resellers). Qantas Holidays sells most of its holidays through retail travel agents. Travellers are also able to directly book holidays by calling a Qantas Holidays’ call centre. In 2007, Qantas Holidays launched a dynamic packaging product which provides travellers with the ability to book flights and hotels online through qantas.com. qantas.com is Australia’s most popular travel site, with around six million visits recorded each month.

Qantas Holidays business model

==> picture [417 x 74] intentionally omitted <==

----- Start of picture text -----

Intermediary Direct
Travel agents Re-sellers Online Call centre
----- End of picture text -----

Qantas Holidays earns a margin on the sale of travel products sourced from suppliers. If Qantas Holidays distributes its product through an intermediary, it pays a proportion of this margin onto the intermediary which sells the holiday.

3.1.3 Competitive advantages

Broad offering

Qantas Holidays has a diverse product offering in the Australian wholesale market. The breadth of offering allows Qantas Holidays to fulfil the majority of customer preferences and allows alternative products to be substituted in the event of major geopolitical events.

Significant buying power

As one of Australia’s leading travel wholesalers, Qantas Holidays is able to achieve competitive content cost and access to significant levels of inventory.

Product knowledge difficult to replicate

With 36 years experience in marketing and selling holidays, Qantas Holidays has extensive experience and product knowledge.

Strong brand recognition

Qantas Holidays is a well recognised brand with both its suppliers and distributors.

Strong customer reach

Qantas Holidays has strong customer reach with the ability to market (through Qantas Airways) to a database of over 500,000 customers and the ability to market through the Qantas Frequent Flyer program (which has approximately 4 million members). This enables targeted marketing specific to customer preferences. In addition, the Qantas Holidays link on qantas.com enables the brand to be visible to over 6 million website visitors per month.

==> picture [596 x 101] intentionally omitted <==

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL (CONT)

3.1.4 Products

Qantas Holidays revenue is generated from the sale of the following products:

outbound holidays
domestic holidays
tickets to special events and attractions
other travel products such as insurance, car hire, transfers and cruises

Outbound holidays

Outbound holidays consist of all international holiday packages originating from Australia.

Qantas Holidays’ major international holiday destinations include UK, Europe, Thailand, Fiji, USA, Bali, Singapore, Hong Kong and Hawaii. Qantas Holidays is also targeting growth in the fast-growing travel destinations of India, Vietnam and China. Qantas Holidays, through the Viva! Holidays brand, provides outbound packages with other airline flights to key leisure destinations including Thailand, Bali, Hawaii and Malaysia. Qantas Holidays, through its flagship brand, currently sells air content that is operated by, or marketed as a codeshare flight by, Qantas Airways and Jetstar Airways.

Domestic holidays

Domestic holidays consist of all travel content within Australia. Qantas Holidays offers content to all major holiday destinations within Australia. The Qantas Group (Qantas, Qantaslink and Jetstar) supply the air content for Qantas Holidays domestic packages.

Special events

In addition to destination holidays, Qantas Holidays offers special holiday packages for popular stage shows, cultural and sporting events. Key annual events include the Formula 1 Grand Prix, the Australian Open Tennis Championships and stage shows such as Billy Elliot.

Related travel services

Qantas Holidays sells car hire, tours and transfers, cruises and travel insurance and is continuously seeking to develop its extensive product portfolio with additional travel related products.

3.1.5 Online capabilities

Qantas Holidays has developed its online distribution channel to enable customers, who prefer to book online, to access Qantas Holidays’ content via the internet. Qantas Holidays has built dynamic packaging capability into qantas.com that enables travellers to book flights and accommodation. Qantas Holidays also has a hotel online capability. To complement Qantas Holidays’ online capability, visitors to qantas.com are able to research their favourite destinations by accessing Lonely Planet content and checking weather forecasts.

Qantas Holidays also uses qantas.com to market special deals. On average around 4,000 Qantas Holidays’ brochures, covering International and Domestic destinations are downloaded from the qantas.com website each month.

==> picture [134 x 139] intentionally omitted <==

==> picture [238 x 77] intentionally omitted <==

----- Start of picture text -----

Dynamic packaging capability
Select
Select Select
other travel
flight hotel room services
----- End of picture text -----

==> picture [238 x 56] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

3.1.6 Suppliers

Over the past 36 years, Qantas Holidays has developed strong relationships with travel product suppliers both in Australia and overseas. As one of Australia’s leading travel wholesalers, Qantas Holidays has significant purchasing power with travel product suppliers enabling it to offer product content to travellers at competitive prices.

Qantas Holidays’ travel product suppliers fall into the following categories:

Airlines – Qantas Holidays contracts with the Qantas Group and under the Viva! brand receives a base commission from a number of other major airlines
Accommodation – Qantas Holidays has relationships with the world’s leading hotel chains, serviced apartment chains and other accommodation providers. Qantas Holidays negotiates to hold inventory with accommodation suppliers where possible enabling fast confirmations even during peak travel periods
Other products – Qantas Holidays offers an excellent range of other product types to complement flights and accommodation. These include car hire, rail, transfers and tours and cruising

3.1.7 Growth strategies and opportunities

Qantas Holidays’ strategy is to maintain its strong position in the traditional leisure wholesale space while maximising opportunities to further increase scale, participate actively in online market growth and take advantage of white-label and reselling opportunities.

Expand online capabilities

Online sales penetration in the Australian market has risen significantly in the last few years. However, it is still yet to reach the same levels of penetration as other developed countries such as the US. To capitalise on the increasing demand for online content, Qantas Holidays has launched dynamic packaging capability which is accessible through the qantas.com website. The launch and continuing development of this online capability, including dynamic packaging, will enhance Qantas Holidays’ ability to capture consumer demand for travel products booked through online channels.

In the future, Qantas Holidays plans to leverage its existing knowledge and technology to develop an additional website for the sale of land and package content which will offer both Qantas and non-Qantas branded products.

New geographic markets

Qantas Holidays intends to leverage its expertise and scale to extend into new markets and further develop existing destination content. Qantas Holidays has identified the opportunity to expand its product range in countries where it has previously had limited presence and where high growth is anticipated. Key destinations for new product development include China, India, South America and other emerging destinations as their popularity continues to grow.

Niche products

Qantas Holidays plans to further develop a range of products targeting niche markets of cruises, special event packages and luxury travel to complement the current offering.

Operational enhancements

The implementation of new technology, improved processes and the ability to deliver content faster to the market will drive greater efficiency.

==> picture [596 x 101] intentionally omitted <==

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL (CONT)

3.2 Qantas Business Travel

3.2.1 Overview

Qantas Business Travel operates a travel management business, arranging business travel for Government departments, large corporate customers and small to medium sized enterprises (SME). In the Australian corporate travel segment, Qantas Business Travel is one of the largest travel providers. Qantas Business Travel’s travel management services include, but are not limited to:

flights, accommodation and car hire bookings
travel insurance
itinerary planning and management
pre- and post-booking customer support, including a 24/7 travel business service for customers
visa and passport assistance
travel expenditure reports
corporate travel policy compliance monitoring

Qantas Business Travel operates from seven call centres, six of which are in Australia and one of which is in Auckland, New Zealand. Qantas Airways has approximately 550 staff employed in Qantas Business Travel, focussed primarily on managing and servicing client accounts.

3.2.2 Business model

Historically, Qantas Business Travel has been a business division within Qantas Airways rather than its own separate entity (refer to Section 6.3.8 of this Explanatory Memorandum). Accordingly, the Qantas Business Travel business model has traditionally involved Qantas Airways as the contracting entity with corporate and government organisations to fulfil their travel needs. Qantas Business Travel provides personalised service and support to over 180 accounts.

Traditionally, clients have contacted a Qantas Business Travel call centre with their booking requests by telephone, fax or email. Qantas Business Travel consultants process these bookings and provide customer reporting. Qantas Business Travel is in the process of installing a new system offering a booking engine with mid-office functionality and enhanced customer reporting. It is expected that this system will be fully operational from October 2008.

For larger customers which require an advanced travel management service, Qantas Business Travel offers its online booking tool QBT.travel. This advanced online booking system allows customers to book all GDS listed airlines. Hotels and cars can also be booked online with Qantas Business Travel preferred rates or client’s direct deals. The tool also manages corporate policy for customers and provides back-end reporting on a monthly basis.

==> picture [238 x 138] intentionally omitted <==

----- Start of picture text -----

Booking requests
Online Call centre
Qantas.com QBT.Travel Phone/email/fax
Car hire Air content Land content
----- End of picture text -----

==> picture [78 x 52] intentionally omitted <==

==> picture [77 x 52] intentionally omitted <==

==> picture [79 x 52] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

Qantas Business Travel’s revenue is derived from two main sources:

Customers – Qantas Business Travel charges either a transaction fee or management fee for providing clients with travel management services. Under a management fee structure, clients are charged a percentage of the airfare value which is built into the price of the travel service obtained. Transaction fees are calculated on a per transaction basis at the rate applicable to each client’s booking. In line with industry trends, Qantas Business Travel is shifting from a management fee structure to a transaction fee model.
Suppliers – Qantas Business Travel also receives base and incentive commissions from some suppliers of travel products for reservations made and also from its GDS provider. Qantas Business Travel earns incentive commissions from some air, land and other travel suppliers for achieving volume targets.

3.2.3 Competitive advantages

High quality clients with long term relationships

As one of the largest corporate travel managers in Australia, Qantas Business Travel has some of the largest and highest profile corporate and government accounts, as well as a broad range of small to medium enterprise customers. The breadth of the services offered by Qantas Business Travel coupled with the reporting capabilities supplied, ensures Qantas Business Travel maintains its long term relationships.

Advanced IT platform

Qantas Airways has invested in technology for Qantas Business Travel to provide its customers with automated quality control, on-line booking and reporting products, company and individual profile maintenance, and travel policy compliance and account expenditure.

World class travel management services

Qantas Business Travel offers global access to a full range of business travel services, allowing customers to create or change their travel arrangements 24 hours a day, 7 days a week. Qantas Business Travel has dedicated sales teams responsible for all aspects of account management including relationship building, customer communication, tendering for new business, supplier procurement and pre-analysed trip expenditure.

3.2.4 Suppliers

Qantas Business Travel has strong relationships with travel product suppliers both in Australia and overseas. Due to its scale, Qantas Business Travel is able to purchase air and land content at discounts which it is able to pass onto its clients in the form of lower travel prices. Qantas Business Travel’s suppliers fall into the following categories:

Airlines – Qantas Business Travel makes bookings for clients on all major airlines including Qantas, Virgin Blue, British Airways, Singapore Airlines, Emirates, Cathay Pacific Airways, and Thai Airways
Accommodation – Qantas Business Travel has long-term relationships with leading domestic and international hotel chains, serviced apartment chains and other accommodation providers. Qantas Business Travel’s largest accommodation suppliers are Accor, Marriott, Toga, Starwood, and Flag Inn
Car hire – Qantas Business Travel has relationships with leading car hire companies including Hertz, Avis, and Budget
Insurance – Qantas Business Travel sells insurance underwritten by a major Australian insurance company

3.2.5 Customers

Qantas Business Travel has over 180 managed accounts and approximately 160 unmanaged accounts. Managed accounts are with large corporate clients and government agencies which have an airline deal and are managed by a dedicated account manager. Unmanaged accounts are generally with SME’s who have no airline deal and are too small to be managed by a dedicated account manager. Corporate clients include some of Australia’s largest companies and Federal and State government departments.

The average life of Qantas Business Travel’s managed accounts is 10 years. In 2007, Qantas Business Travel had 100% retention of its managed accounts.

==> picture [596 x 101] intentionally omitted <==

==> picture [548 x 485] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL (CONT)

3.2.6 Growth strategies and opportunities

Qantas Business Travel’s strategy is to be the leading corporate travel manager in the markets in which it operates. Management has identified a range of opportunities which are expected to drive the future growth of Qantas Business Travel.

Regional expansion

Qantas Business Travel has identified opportunities in New Zealand and Singapore to expand its business. Qantas Business Travel set up a call centre in Auckland in 2007 and plans to open up an office in Singapore in 2008. Qantas Business Travel is committed to expanding its presence in other South-East Asian countries where new operations will enable Qantas Business Travel to grow its client base profitably.

Full service offering

Historically, Qantas Business Travel’s services predominantly focussed on air-sales. Qantas Business Travel has commenced a program to expand its service offering to include additional travel products such as accommodation, car hire, transfers and insurance. By increasing non-air sales Qantas Business Travel aims to increase commission from suppliers and to increase fee income from customers as a result of increased bookings.

Productivity improvements

Qantas Airways has recently invested over $4 million into Qantas Business Travel’s Agency Manager and Selling Platform IT system. This system is a web-based booking engine with the best of both travel agency and airline booking functionality. It will enable much improved itinerary management and improve the customer experience. It also vastly improves both internal and external customer reporting. This system will be fully functional across all customers by October 2008 and will create significant operating efficiencies such as quicker customer and company profile maintenance, improved fee collection, reduced fee leakage, and quicker and more accurate report generation.

Technology improvements

Qantas Business Travel intends to leverage the benefits of its online self-service booking systems. Through the use of qbt.travel to service SME clients, Qantas Business Travel will allow all of its clients to make booking requests online and to make changes, pre-ticketing, online, thereby increasing cost efficiency for both Qantas Business Travel and its clients. Qantas Business Travel promotes online uptake through reduced fees. Customers are able to achieve increased savings by better adherence to the Best Fare of Day policy, something which is increasingly important and can be easily implemented in the online tool.

Improved content

Qantas Business Travel is currently negotiating new hotel programs with a number of hotels and large customers. These programs offer tailored solutions to customers who seek preferred rates with recognised brands.

Qantas Business Travel is in the process of negotiating a wholesale ticketing contract with preferred suppliers in order to earn commissions for booking on non-Qantas Airways airlines.

==> picture [596 x 101] intentionally omitted <==

4. PROFILE OF JTL POST MERGER

4.1 Overview of impact of Merger Proposal

If the Merger Proposal is approved and implemented according to its terms:

JTL Shareholders as at the Record Date will receive a Special Dividend of 11 cents per JTL Share. This 11 cents per JTL Share Special Dividend is an increase from the 4 cents per JTL Share special dividend previously announced. This increase effectively brings forward what might have been the final dividend for the year ending 30 June 2008. As a consequence, if the Merger Proposal is approved and the 11 cents per JTL Share Special Dividend paid, JTL Shareholders should not expect to receive any further dividend in respect of the year ending 30 June 2008.
Qantas Holidays will become a wholly-owned subsidiary of JTL and JTL will therefore own Qantas Holidays and, through it, Qantas Business Travel;
JTL’s current shareholders will hold 42% of the expanded issued ordinary share capital of the post merger JTL. The other 58% of the issued ordinary shares of JTL will be held by QH Tours;
the Board of JTL will be reconstituted to comprise a majority of QH Tours nominees. The newly constituted JTL Board will have the responsibility to drive the future strategy of the merged JTL. It is the understanding of the current JTL Board that JTL’s core retail travel business will continue operating on a similar basis to how it is currently operating. Please refer to Section 5 where the intentions of QH Tours in respect of the future of the JTL business are stated; and
KPMG will be appointed auditor of the Combined JTL Group.

4.2 Capital structure

The following table provides the change to JTL’s issued capital if:

the Merger Resolutions are passed by the requisite majority of JTL Shareholders;
the Merger Proposal is implemented in accordance with the terms set out in the Merger Implementation Agreement; and
no additional JTL Shares are issued between the date of this Explanatory Memorandum and the implementation of the Merger Proposal.

==> picture [484 x 159] intentionally omitted <==

----- Start of picture text -----

Current Post Merger
Number of JTL Shares Number of JTL Shares
JTL Shares held by QH Tours - - 127,340,726 58.0%
JTL Shares held by Sintack Pty Ltd, Chesters Nominees Pty Ltd,
Just Super Co Pty Ltd and S & I Nominees Pty Ltd (ie. Interests
associated with Mr. Spiros Alysandratos) 55,246,943 59.9% 55,246,943 25.2%
JTL Shares held by other Shareholders 36,965,307 40.1% 36,965,307 16.8%
Total JTL Shares 92,212,250 100.0% 219,552,976 100.0%
----- End of picture text -----

4.3 Pro-Forma Forecast Financial Information

The Pro-Forma Forecast Financial Information is based on a number of estimates and assumptions concerning future events including general and specific best estimate assumptions set out in Section 4.3.3. The sensitivity analysis in Section 4.3.5 indicates the sensitivity of the Forecast Financial Information for the years ending 30 June 2008 and 30 June 2009 to changes in key assumptions.

To provide JTL Shareholders with a comparable prior period to the forecast income statement for the year to 30 June 2008, the directors have included a pro-forma actual income statement for the year ended 30 June 2007. JTL figures have been extracted from the audited financial statements of JTL. The Qantas Holidays and

==> picture [596 x 107] intentionally omitted <==

Qantas Business Travel numbers (QHB) are derived from unaudited pro-forma management accounts supplied by QH Tours and, whilst subject to certain due diligence procedures by JTL and its advisors, the Directors of JTL take no responsibility for these numbers. The forecasts have been prepared by JTL (based, in part, on forecast financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours) and the Directors believe that the Pro-Forma Forecast Financial Information has been prepared with due care and attention and considered all best estimate assumptions when taken as a whole to be reasonable on the date of this Explanatory Memorandum.

Actual financial results are likely to vary from the Forecast Financial Information and any variation may be materially positive or negative. The Forecast Financial Information and the best estimate assumptions on which they are based are by their very nature subject to significant uncertainties and contingencies including significant demographic, business, technologic, economic, political, environmental, regulatory and competitive uncertainties, many of which are outside the control of the directors and management of JTL and QH Tours.

Furthermore, anticipated events and circumstances often do not occur as expected. Therefore, actual results may differ from the Forecast Financial Information and the differences may be material. Accordingly, the JTL Directors cannot and do not guarantee that the forecasts included in this Explanatory Memorandum will be achieved.

Further, neither JTL nor QH Tours nor their respective directors can give any assurance or guarantees that the Forecast Financial Information contained in this Explanatory Memorandum will be achieved. Events and outcomes may differ in quantum and timing from the assumptions with a material consequential impact on the Combined JTL Group.

The Summary Income Statement in Section 4.3.2 does not include revenue as each entity has a different basis for revenue recognition and there is no reliable estimate to eliminate inter-entity sales between JTL and Qantas Holidays/Qantas Business Travel.

The Pro-Forma Forecast Financial Information has been reviewed by Pitcher Partners Corporate Pty Ltd and its Investigating Accountants Report is contained in Appendix C. You are encouraged to read that report in its entirety.

The forecasts for the year ending 30 June 2009 do not include any net synergistic gains as it is assumed that any gains in this period will be offset by the costs of integration.

4.3.1 Summary Pro-Forma Aggregated Forecast Income Statements

The table below summarises the pro-forma income statements for the year ended 30 June 2007 as well as the forecast income statements for the financial years ending 30 June 2008 and 30 June 2009.

These numbers are shown for illustrative purposes to demonstrate the position as if the Combined JTL Group was in place for the entire 2007 financial year and as if the Qantas Holidays and Qantas Business Travel businesses had operated as stand-alone entities. Please also see Section 4.4 of this Explanatory Memorandum.

The forecasts for the year ending 30 June 2008 were prepared by the JTL Directors and management (based, in part, on forecast financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours) as if both entities operated on an independent basis for the entire year ended 30 June 2008. It should be noted that the statutory financial statements produced by JTL at 30 June 2008 will differ from this stated information as the Merger Proposal is only anticipated to be implemented on or about 1 June 2008. Additionally, as the Merger gives rise to the application of a reverse acquisition in accordance with the Australian Accounting Standards, the statutory financial results of JTL will vary significantly from what is being presented in this Explanatory Memorandum.

The financial forecasts for the year ending 30 June 2009 have been prepared by the JTL Directors and management (based, in part, on forecast financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours) for the purposes of this Explanatory Memorandum and has been disclosed on a combined basis. It is anticipated that there will be structural changes in the way a number of the business sections within each of JTL, Qantas Holidays and Qantas Business Travel operate and that separate reported performance may not be representative.

==> picture [596 x 101] intentionally omitted <==

4. PROFILE OF JTL POST MERGER (CONT)

4.3.2 Summary Pro-Forma Aggregated Forecast Income Statement

==> picture [484 x 366] intentionally omitted <==

----- Start of picture text -----

Jetset Travelworld Limited Years Actual Pro-Forma 2007 Forecast 2008 Forecast 2009
ending 30 June $ million $ million $ million
EBIT
JTL 17.3 22.4
QHB 21.6 21.5
Aggregated EBIT 38.9 43.9 54.1
Interest
JTL 1.3 2.0
QHB 13.4 13.9
Aggregated Interest 14.7 15.9 16.5
NPBT
JTL 18.6 24.4
QHB 35.0 35.4
Aggregated NPBT 53.6 59.8 70.6
NPAT
JTL 13.0 17.0
QHB 26.0 24.9
Aggregated NPAT 39.0 41.9 49.4
----- End of picture text -----

4.3.3 Best Estimate Assumptions Underlying the Pro-Forma Forecast Financial Information

The Pro-Forma Forecast Financial Information is based on various best estimate assumptions including those set out below which should be read in conjunction with the Risk Factors in Section 4.5 and the Investigating Accountants Report in Appendix C.

General Assumptions

The forecasts for the years ending 30 June 2008 and 30 June 2009 respectively have been prepared on the basis of the best estimate assumptions of the directors of JTL, and based, in part, on financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours. The forecasts are based on the following general assumptions:

There is no substantial change in the competitive or regulatory environment which would have an impact on the entities’ ability to conduct the existing businesses or on their respective operations.
There are no material changes in general demographic, industrial, political, environmental or economic conditions in Australia or internationally and no one off events that affect travellers (such as pandemics and terrorism incidents) occur.
There are no material adverse impacts due to changes in Australian taxation law.
There are no material changes in Australian Accounting Standards or other mandatory professional reporting requirements which would have an impact on the Forecast Financial Information.

==> picture [596 x 107] intentionally omitted <==

All key personnel of the respective businesses are retained.
The Combined JTL Group’s accounting policies will remain materially consistent with those previously adopted.
There are no material acquisitions or disposals by the Combined JTL Group.
There are no material operational or technological disturbances or legal claims which affect the Combined JTL Group.
The only change in JTL’s capital structure is the issue of JTL Shares to QH Tours contemplated in this Explanatory Memorandum.
There is no amendment or termination to any material agreement regarding any of JTL’s, Qantas Holidays’ and Qantas Business Travel’s businesses.
QH and QBT conduct a significant level of transactions in foreign currencies. This has resulted in material foreign currency gains and losses historically. No gain or loss on foreign currency transactions has been included in the Pro-Forma Forecast Financial Information as such gains and losses cannot be reliably forecast.
The Pro-Forma Forecast Financial Information does not reflect the impact of any intercompany transactions that may take place during the forecast period.

Specific Assumptions for JTL

Revenue

Revenues will be earned in accordance with the terms of contractual arrangements with JTL’s preferred suppliers.
Revenues are recognised as they accrue. In the case of volume incentives/commissions and service fees earned by JTL on travel products sold by franchisees, this is determined by the terms of the contractual arrangements with the suppliers of those travel products. Revenues are recognised only when they can be reliably measured and are not recognised if there are significant uncertainties regarding recovery.
Organic growth of the JTL network throughout the forecast period will be augmented by a recruitment and retention strategy, which should see JTL’s total transaction value and network numbers increase.
Interest is assumed to be earned at 6% throughout the forecast period.

Expenses

Wages and salaries costs are based upon the forecast head count and at rates forecast to reflect anticipated market conditions.
Marketing costs have been forecasted throughout the forecast period at levels which are anticipated to both maintain brand awareness and provide support for growth.
Other expenses are based on prior years experience and have been increased to reflect additional costs which are expected to be incurred, based on forecast business expansion and the recruitment of additional staff.
Fixed assets including office furniture and equipment are depreciated on a straight line basis over their useful lives to the economic entity. Intangibles, including software development costs are amortised on a straight line basis over 3 years.
No amortisation/write-off of any intangible assets arising from the Merger.

Taxations and Dividends

A corporate tax rate of 30% is assumed throughout the forecast period.
It is assumed that a consistent dividend policy will be applied throughout the forecast period, which will see a distribution of approximately 70% of net profit after tax in respect of each financial year.

==> picture [596 x 101] intentionally omitted <==

4. PROFILE OF JTL POST MERGER (CONT)

Specific Assumptions for Qantas Holidays

Revenue

Revenues will be earned in accordance with the terms of contractual arrangements and specific management assumptions with respect to distribution channel shifts.
Revenues are recognised as they accrue. Revenues are recognised only when they can be reliably measured and are not recognised if there are significant uncertainties regarding recovery.
Organic growth of QH throughout the forecast period will be augmented by a multi channel distribution strategy, development into new geographic markets and operational enhancements.
Interest is assumed to be earned at 7% throughout the forecast period.

Expenses

Wages and salaries costs are based upon forecast head count and improvements in efficiencies realised as a result of the distribution channel strategy.
Marketing costs have been forecast at levels which will maintain brand awareness and provide support for the growth strategies.
Other expenses are based on prior years experience, contractual arrangements and a realisation of improved efficiencies.
Fixed assets including office furniture and equipment are depreciated on a straight line basis over the useful lives of the asset.

Specific Assumptions for Qantas Business Travel

Revenue

Revenues will be earned in accordance with the terms of contractual arrangements and specific management assumptions with respect to growth.
Revenues are recognised as they accrue. Revenues are recognised only when they can be reliably measured and are not recognised if there are significant uncertainties regarding recovery.
Organic growth of QBT throughout the forecast period will be augmented by growth in underlying volumes, increases in price/yield, a channel shift and the collection of commissions from non-air sales.
Interest is assumed to be earned at 7% throughout the forecast period.

Expenses

Wages and salaries costs are based upon forecast head count and improvements in efficiencies realised as a result of a channel shift and technology enhancements.
Other expenses are based on prior years experience, contractual arrangements and a realisation of improved efficiencies. The expenses have been reduced to reflect manpower savings as a result of improved efficiencies.
Fixed assets including office furniture and equipment are depreciated on a straight line basis over the useful lives of the asset.

4.3.4 Value from Synergies

It is anticipated that the Merger Proposal, if implemented, will ultimately provide annual pre-tax synergies of approximately $13 million by 2012. The estimate of synergy benefits has been prepared by JTL management and is the result of a review of potential synergies conducted by JTL, with input from Qantas Holidays and Qantas Business Travel.

==> picture [596 x 107] intentionally omitted <==

JTL management believes that the amount and timing of the estimated synergy benefits is both reasonable and achievable. However, there is a risk that the expected synergy benefits of the Merger Proposal may be less than expected. While management has performed extensive analysis in this area, achieving planned synergies of approximately $13 million annually by 2012 cannot be confirmed until the Merger Proposal is approved and fully implemented.

There is a risk that unforeseen events may cause the synergies to be delayed, not be obtained or cost more to achieve than originally expected. To address these risks, strategies are being devised by an implementation committee (comprising senior JTL, Qantas Holidays, Qantas Business Travel and Qantas Airways executives) to integrate people, processes and systems for the immediate post-Merger period.

4.3.5 Sensitivity Analysis

The Pro-Forma Forecast Financial Information has been based upon certain economic and business assumptions about future events. The summary of key best estimate assumptions underlying the Pro-Forma Forecast Financial Information is set out in Section 4.3.3.

The forecast EBIT and NPAT for the Combined JTL Group are considered to be sensitive to a number of key assumptions. A summary of the potential impact on EBIT and NPAT for the financial years ending 30 June 2008 and 30 June 2009 is set out below.

==> picture [484 x 109] intentionally omitted <==

----- Start of picture text -----

Impact on Forecast EBIT Impact on Forecast NPAT
FY2008 FY2009 FY2008 FY2009
$million $million $million $million
+/- 1% change in net income 1.8 1.9 1.3 1.3
+/- 1% change in total expenses 1.3 1.3 1.0 1.0
----- End of picture text -----

The changes in these assumptions are not intended to be indicative of a complete range of variations that may occur and are not intended as an indication of potential changes considered likely by the JTL Directors.

Extreme care should be taken in interpreting this information. The analysis treats each movement in an assumption in isolation from possible movements, which may not be the case. Movements in one assumption may have an off-setting or compounding effect on other variables the effect of which are not reflected in the above analysis. In addition, it is possible that more than one assumption may move at any one point in time giving rise to cumulative effects which are not reflected in this analysis.

Typically JTL, Qantas Holidays and Qantas Business Travel will respond to any material adverse change in conditions by taking appropriate actions to minimise/maximise to the extent possible the adverse/beneficial effect on profits and dividends. The effect of any such mitigating action has been excluded from the analysis.

4.4 Impact on financial position

The financial impact of the Merger Proposal on JTL’s accounts will be to increase issued capital and investment in subsidiary in the JTL accounts by the value of the shares issued to QH Tours. The value of the shares will be determined based on the market value of JTL Shares at the time of the issue of the shares. Given recent market volatility this amount cannot be accurately determined at the date of this Explanatory Memorandum.

As QH Tours will hold 58% of the shares in JTL, on consolidation for financial reporting purposes under Australian Accounting Standard AASB3, a reverse acquisition will be undertaken. This means that the head entity in a consolidation process will be Qantas Holidays Limited.

==> picture [596 x 101] intentionally omitted <==

4. PROFILE OF JTL POST MERGER (CONT)

For the following reasons, the Directors of JTL have not prepared a pro-forma consolidation of JTL following the Merger:

the financial statements of Qantas Holidays have not been separately audited (as the accounts have been previously grouped in the consolidated Qantas Airways Group accounts and have been previously prepared having regard to materiality thresholds that have been applied in the preparation of financial statements for the consolidated Qantas Group taken as a whole, which thresholds are materially different to those that will apply in respect of the Combined JTL Group) and the unaudited information provided by QH Tours does not provide a sufficient basis to provide a pro-forma consolidated balance sheet of the Combined JTL Group following the Merger;
QH Tours is unable to provide JTL with audited or audit reviewed financial statements of Qantas Holidays incorporating the recent restructure of Qantas Business Travel as a subsidiary of Qantas Holidays;
the impact of QH Tours’ intention to change some JTL accounting policies to be consistent with Qantas Group accounting policies is unknown (but is not expected to be material); and
the value of JTL Shares to be issued cannot currently be determined with any certainty.

The JTL Directors note that:

Like JTL, the Qantas Holidays and Qantas Business Travel balance sheets mainly comprise working capital balances such as trade receivables and trade payables. There are no significant tangible non-current assets, such as property plant and equipment nor any significant tangible non-current liabilities. As at the implementation of the Merger Proposal, the net asset position of the QH Group is expected to be positive; but regardless, will be of nominal value when compared with the value of the JTL Shares issued as consideration for the purchase of Qantas Holidays and Qantas Business Travel. Consequently, the Merger Proposal, if implemented, is expected to generate a substantial amount of goodwill to be recognised in the financial statements of the Combined JTL Group;
Qantas Holidays has no external interest bearing debt; and
on implementation of the Merger, it is a condition that Qantas Holidays will have a minimum of $190m in cash or cash equivalents to fund the working capital requirements of the business ie. the minimum of $190m in cash should be sufficient to fund the current liabilities of the QH Group as at implementation of the Merger Proposal.

4.5 Risk factors

If the Merger Proposal is implemented, JTL Shareholders will continue to be indirectly exposed to the risks associated with having an interest in the Combined JTL Group’s assets and general economic, share market and industry risks. The financial performance and operations of the Combined JTL Group, the value of JTL Shares and the amount and timing of any dividends that JTL pays will be influenced by a range of factors, many of which will be outside the control of JTL.

JTL Shareholders should be aware of the risks described in this Section 4.5 that may affect the performance of the Combined JTL Group and the value of JTL Shares. In addition, JTL Shareholders should be aware that many of the risks described below already apply to JTL’s existing business and to the Qantas Holidays and Qantas Business Travel business. Some of these risks may be mitigated by the use of safeguards and appropriate systems and controls. However, many will be outside the control of the Combined JTL Group and cannot be mitigated. There are also general risks associated with any investment in securities.

The principal risk factors which JTL Shareholders should consider include those described below. The risks identified in this Section 4.5 are not exhaustive. You should read this Explanatory Memorandum carefully. If you are unclear in relation to any matter, you should consult your legal, financial, taxation or other professional adviser.

==> picture [596 x 107] intentionally omitted <==

4.5.1 General risks associated with JTL and the Combined JTL Group

Changes in economic conditions

The financial performance of the Combined JTL Group could be affected by changes in economic conditions in Australia and any other countries in which the Combined JTL Group may operate. Such changes include:

changes in economic growth, unemployment levels and consumer confidence which may lead to a general fall in the demand for the Combined JTL Group’s travel-related goods and services;
changes in underlying cost structures for labour, technology and service charges;
changes in inflation and interest rates, which may impact on the profitability of the Combined JTL Group;
national or international political and economic instability or the instability of national or international financial markets as a result of terrorist acts or war, which could reduce demand for travel-related goods and services;
changes in exchange rates (whether or not hedged) as such changes will impact on consumer demand for travel; and
any prolonged economic downturn which may result in the Combined JTL Group not being able to achieve operational and financial targets.

Although the Combined JTL Group will have in place a number of strategies to minimise the exposure to economic risk, and engage in prudent management practice to minimise shareholder exposure to such risk in the future, these factors may nonetheless have an adverse impact on the Combined JTL Group’s businesses.

General market risks

Generally, the market price of JTL Shares will be affected by factors that impact on the market price of all ASX listed shares (such as economic policy or international market, economic or political conditions). In addition, the market price of JTL Shares is affected by factors specifically relevant to the wholesale, retail and specialist business travel product and service sector of the travel industry. Accordingly, the market price of JTL Shares may rise or fall over any given period as a result of one or a combination of these factors.

Specific risks associated with JTL and the Combined JTL Group

Demand risk

The operations and profits of the Combined JTL Group may be affected by fluctuating levels of demand for the travel services offered by JTL (post acquisition). Travel demand is always sensitive relative to disposable consumer dollars which in turn is influenced by many variables including interest rates and mortgage repayment impact, the fundamental price of travel in its own right (including any impact that arises from increases in the cost of oil), bowser petrol price shocks, consumer confidence and the buoyancy of the stock market. Travel demand can also be affected by certain one off events that can affect travellers’ preparedness to travel, including pandemics and terrorism incidents.

Commercial and operational risks

The Combined JTL Group will be subject to general commercial and operational risks including the loss of major clients, loss of major suppliers, increased competition and other causes of business interruption, which may have a material adverse impact on JTL in the future. Such events could materially adversely affect the Combined JTL Group’s future financial performance, and could cause that future financial performance to differ materially from the Pro-Forma Forecast Financial Information outlined in Section 4.3 of this Explanatory Memorandum. JTL and QH Tours have considered each of these factors, and assessed previous and recent behaviour of their major clients and major suppliers (which may change once the Merger Proposal has been implemented), in preparing that Pro-Forma Forecast Financial Information and the assumptions on which it is based. For example, the Combined JTL Group’s forecast NPBT for the year ending 30 June 2009 (as outlined in Section 4.3) could be adversely affected by up to $11 million (before the effect of any mitigating actions the Combined JTL Group would take in such an event) if the Combined JTL Group lost income that represented 15% of revenue of Qantas Holidays.

==> picture [596 x 101] intentionally omitted <==

4. PROFILE OF JTL POST MERGER (CONT)

Industry competition

The Combined JTL Group will operate in highly competitive markets and will face ongoing competition from both Australian and international travel agencies, including online travel agencies, and other providers of travelrelated goods and services.

The following events may adversely affect the margins earned by the Combined JTL Group and therefore its future financial performance:

price discounting by existing competitors in the traditional markets in which the Combined JTL Group will operate; and
the entry of any new competitors into any of the markets in which the Combined JTL Group will operate.

Reliance on key personnel

The continued success of the Combined JTL Group will, in part, be reliant on the future performance, abilities and expertise of its key management figures. There is no guarantee that the Combined JTL Group will be able to retain the services of key employees in the future on acceptable terms.

Technology risks

The Combined JTL Group will rely heavily on internet and other technology operating platforms that may be susceptible to viruses and other technical problems. Although the Combined JTL Group will have appropriate systems in place to manage these risks, their occurrence has the potential to interrupt the efficient conduct of the Combined JTL Group’s business.

New technology

The ability of the Combined JTL Group to compete effectively in the future will, in part, be driven by its ability to effectively maintain and update its technology platforms. Failure to maintain appropriate standards of technology may adversely affect the future operating and financial performance of the Combined JTL Group.

Loss of reputation, brand risk

The success of the Combined JTL Group will be affected by its reputation and branding. Unforeseen issues or events that diminish the Combined JTL Group’s reputation or branding may impact on its future growth and profitability.

Litigation and legal risk

In the course of its operations, the Combined JTL Group may be involved in disputes and possible litigation. There is a risk that any material or costly dispute or litigation could adversely affect the value of the assets or the future financial performance of the Combined JTL Group.

Litigation risks to the Combined JTL Group include, but are not limited to, intellectual property claims and claims arising from internet or credit card fraud.

Changes in regulatory and legal environment

JTL is subject to and must comply with the requirements set out in the Corporations Act, ASIC policy and the ASX Listing Rules. Changes to legislation or policy and procedures may affect the Combined JTL Group, its business operations and financial performance, or have other unforeseen implications.

The Combined JTL Group may also be affected by changes in government policy or legislation applying to companies in the travel industry and companies which operate through the internet.

==> picture [596 x 107] intentionally omitted <==

==> picture [531 x 248] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

5. INFORMATION ABOUT QH TOURS

5.1 QH Tours and its associates

5.1.1 QH Tours

If JTL Shareholders approve the Merger Proposal and the Merger is implemented, QH Tours will hold 58% of the JTL Shares immediately following implementation of the Merger.

QH Tours is a wholly-owned subsidiary of Qantas Airways.

QH Tours is the sole shareholder of Qantas Holidays. Qantas Holidays is the sole shareholder of Qantas Business Travel. The businesses conducted by Qantas Holidays and Qantas Business Travel are described in Sections 3.1 and 3.2 of this Explanatory Memorandum.

5.1.2 QH Tours’ directors

The directors of QH Tours are Geoff Dixon, Peter Gregg and Cassandra Hamlin.

Geoff Dixon was appointed Chief Executive Officer and Managing Director of Qantas Airways in March 2001. He was Chief Executive Designate from November 2000, after serving as Deputy Chief Executive Officer since November 1998. He was appointed to the Qantas Airways Board in August 2000. Mr Dixon is a Member of the Qantas Safety, Environment & Security Committee and Chairman of a number of controlled entities of the Qantas Group. Mr Dixon is also a Director of Consolidated Media Holdings Limited and Air Pacific Limited. He was formerly a Director of Leighton Holdings Limited. Mr Dixon joined Qantas Airways in 1994 and has had responsibility in the airline for all commercial activities, including worldwide sales and marketing, network development, revenue management, fleet planning, cabin crew, customer service, product development and airline alliances. Before joining Qantas Airways, Mr Dixon was Director of Marketing and Industry Sales at Ansett Australia and General Manager of Marketing and Corporate Affairs at Australian Airlines. He has also worked in the Mining and Media Industries. Mr Dixon is on the Governing Board of IATA, the Board of the Business Council of Australia and is a Member of the International Marketing Institute of Australia. Mr Dixon has been a Director of QH Tours since March 2001.

Peter Gregg was appointed Chief Financial Officer of Qantas Airways and to the Qantas Airways Board in September 2000. He is Chairman of the Singapore-based company, Orangestar Investment Holdings Pte Limited and is a Director of a number of controlled entities and associated companies of the Qantas Group. Mr Gregg is a Director of Leighton Holdings Limited and Stanwell Corporation Limited. He was formerly a Director of Air Pacific Limited. He was also actively involved in the privatisation of Qantas Airways. Mr Gregg is responsible for Group Finance, Investor Relations, Strategy, Economics, IT Services, Shared Services and Strategic Procurement. Previously, Mr Gregg was Deputy Chief Financial Officer and Group Treasurer at Qantas Airways. He was also Treasurer of Australian Airlines and has worked for the Queensland Government in various risk management roles. He is a Fellow of the Finance and Treasury Association, a Member of the Australian Institute of Company Directors and holds a Bachelor of Economics. Mr Gregg has been a Director of QH Tours since September 2000.

Cassandra Hamlin was appointed Company Secretary of Qantas Airways in May 2007, after joining Qantas Airways’ Company Secretariat in February 2006. Ms Hamlin joined Qantas Airways in January 1996 and was previously Qantas Airways’ Head of Investor Relations. She also worked in Qantas Airways’ Group Finance department for a period of five years, including as Financial Reporting Manager, and in the Qantas Airlines business, as General Manager Business Reporting. Ms Hamlin holds a Bachelor of Commerce in Accounting, and is recognised as a Chartered Accountant with the Institute of Chartered Accountants in Australia and as a Fellow of The Institute of Chartered Secretaries and Administrators (Australian Division). Ms Hamlin has been a Director of QH Tours since June 2007.

5.1.3 QH Tours’ associates

Qantas Airways and each body corporate that is controlled by Qantas Airways (Qantas Controlled Group) is an associate of QH Tours in relation to JTL under section 12(2)(a) of the Corporations Act. A list of the members of the Qantas Controlled Group, as at the date of this Explanatory Memorandum, is set out in Appendix E.

==> picture [596 x 107] intentionally omitted <==

5.2 The Qantas Group

The Qantas Group’s main business is operating as a premium, full-service airline transporting passengers domestically and internationally. The Qantas Group also operates a full-service regional airline, QantasLink, that supports its domestic network and a low cost airline, Jetstar, that supports the Qantas network both domestically and internationally.

In addition to its flying operations, the Qantas Group operates a diverse portfolio of airline-related businesses. These include Qantas Engineering, Qantas Airports, Qantas Loyalty (which manages the Qantas Frequent Flyer Program), Qantas Catering, Qantas Freight and Qantas Holidays (which is the subject of the Merger).

Qantas Airways is a disclosing entity for the purpose of the Corporations Act and, as such, is subject to periodic reporting and continuous disclosure obligations. Publicly disclosed information about all listed entities, including Qantas Airways, is available on the ASX website at www.asx.com.au. Publicly disclosed information about Qantas Airways, including its latest annual report and its half year financial report for the 6 month period to 31 December 2007, is also available at its website at www.qantas.com.au.

5.3 Voting power resulting from Merger Proposal

5.3.1 QH Tours

As at the date of this Explanatory Memorandum QH Tours does not:

hold any JTL Shares; or
have any voting power in JTL.

If JTL Shareholders approve the Merger Proposal and the Merger is implemented, immediately following implementation of the Merger QH Tours will:

hold JTL Shares representing 58% of all JTL Shares; and
have voting power in JTL of 58% as a result of the Merger Proposal.

Consequently, the maximum extent of the increase in QH Tours’ voting power in JTL that will result from the Merger Proposal will be 58%.

5.3.2 Qantas Controlled Group

As at the date of this Explanatory Memorandum no member of the Qantas Controlled Group:

holds any JTL Shares; or
has any voting power in JTL.

If JTL Shareholders approve the Merger Proposal and the Merger is implemented, immediately following implementation of the Merger:

QH Tours will hold JTL Shares representing 58% of all JTL Shares; and
each member of the Qantas Controlled Group will have voting power in JTL of 58% as a result of the Merger Proposal.

Consequently, the maximum extent of the increase in each member of the Qantas Controlled Group’s voting power in JTL that will result from the Merger Proposal will be 58%.

==> picture [596 x 101] intentionally omitted <==

5. INFORMATION ABOUT QH TOURS (CONT)

5.4 Nominees to JTL Board

If JTL Shareholders approve the Merger Proposal and the Merger is implemented, it is intended that Geoff Dixon, Peter Gregg, Lesley Grant and Gareth Evans will become directors of JTL.

Lesley Grant was appointed Group General Manager Customer Product and Services in Qantas Airways in May 2002. Before joining Qantas Airways, Lesley was the Senior Vice President Customer Service at Ansett/ Air New Zealand Group. Lesley has over 15 years senior line management and operations experience in dynamic, highly competitive and complex airline businesses. She has managed across different jurisdictions, large, remote, and multi-cultural workforces, leading large scale transformational change programmes. Lesley has extensive experience in developing and implementing new products and services across diverse markets contributing to profitability, market competitiveness and innovation. Lesley has been a Director of UNICEF Australia since June 2006 and is a member of the Chief Executive Women organisation.

Gareth Evans is currently the Group General Manager Finance, Network, Operations and Pricing for Qantas Airways, and is a director of the Qantas Foundation. Gareth is responsible for the finance activities of the airline, including ticket pricing, revenue management and the implementation of major business change initiatives. Gareth’s role also covers a number of operational areas including scheduling for both the international and domestic network, airline operations on the day as well as readiness activities for the arrival of the A380. Gareth joined Qantas Airways in 1999 and has previously held a number of corporate finance roles. Prior to joining Qantas Airways, Gareth has worked for Caltex Australia and KPMG in Australia and the UK. Gareth is a member of the Institute of Chartered Accountants in England and Wales.

Further information regarding Geoff Dixon and Peter Gregg is included in Section 5.1.2 of this Explanatory Memorandum.

5.5 Intentions about future of JTL

This section sets out QH Tours’ intentions regarding the future of JTL if JTL Shareholders approve the Merger Proposal and the Merger is implemented, including QH Tours’ intentions in relation to:

any changes to the business of JTL;
any injections of further capital into JTL;
the future employment of the present employees of JTL;
any proposals to transfer any property between JTL and QH Tours or any persons associated with either of them;
any redeployment of the fixed assets or property of JTL; and
any significant changes to the financial or dividend policies of JTL.

These statements of intention are based on the information concerning JTL and the circumstances affecting the business of JTL that are known to QH Tours at the date of this Explanatory Memorandum. Final decisions on these matters will only be made in the light of all material facts and circumstances at the relevant time after JTL Shareholders approve the Merger Proposal and the Merger is implemented. Accordingly, the statements set out in this Section 5.5 are statements of current intention only, which may change as new information becomes available or circumstances change.

Qantas Airways’ intentions regarding the future of JTL are the same as the intentions of QH Tours.

==> picture [596 x 107] intentionally omitted <==

5.5.1 Continuation of business

QH Tours intends that JTL will continue to manage and develop its existing business under its existing brands (including Jetset and Travelworld) and, following implementation of the Merger, will operate the Qantas Holidays and Qantas Business Travel businesses under their existing trading names.

QH Tours intends that JTL management, in conjunction with the JTL Board, will determine how best to further develop those businesses, expand its franchise network, enhance revenues and otherwise maximise the operating performance of the Combined JTL Group, including through the combination of each businesses’ technical and managerial skills, and product offering, for the benefit of the Combined JTL Group. QH Tours intends that, subject to any determinations made by JTL management (in conjunction with the JTL Board), JTL’s existing business and the Qantas Holidays and Qantas Business Travel businesses will be operated along the same lines as in the recent past. To this end, QH Tours intends that the Qantas Group will provide transitional services (under the Separation Agreements as outlined in Section 6.5) to Qantas Holidays and Qantas Business Travel.

5.5.2 Injections of further capital

QH Tours does not currently intend to propose the injection of further capital into JTL.

5.5.3 Future employment of employees

Except as set out in this Explanatory Memorandum, QH Tours intends to continue the employment of the present employees of JTL. As noted in Section 2.2.4, it is intended that Peter Collins will be appointed as JTL’s new Chief Executive Officer and Andrea Slark will be appointed as JTL’s new Chief Financial Officer on implementation of the Merger Proposal. JTL’s current Chief Executive Officer and Chief Financial Officer will provide ongoing assistance to JTL for a transitional period of up to 6 months from the implementation of the Merger Proposal.

Peter Collins ’ 20-year career with Qantas has spanned a range of areas including industrial relations, sales strategy and pricing, and yield management. He has held a number of senior roles at Qantas Airways in Australia and overseas, including postings in New Zealand, the Philippines and Indonesia. He was previously General Manager of Qantas Holidays in 1999, with responsibilities including sales strategy and pricing, wholesale operations management and inventory and revenue management, and returned to Qantas Holidays as Group General Manager in 2007. In recent years, Peter has held the positions of General Manager International Pricing and Yield, Regional General Manager Australia Sales and General Manager Sales Strategy. Peter has served on a number of boards including Air Pacific Limited, the South Australian Tourism Commission, the New Zealand Tourism Industry Association and Harvey’s Choice Holidays. Peter has a Bachelor of Economics and a Master of Business.

Since joining Qantas Airways in 2004 as General Manager Strategy Mergers and Acquisitions, Andrea Slark has been involved in a number of important strategic projects for the Qantas Group, including the investment in Vietnam based Pacific Airlines. Andrea has extensive financial and investor relations experience and has assisted numerous companies in the preparation of management and statutory accounts. Prior to joining Qantas Airways, she was Group Manager Corporate Development for Pacifica Group Limited and was previously an Associate Director of Deloitte Corporate Finance and Coopers & Lybrand Corporate Finance. Andrea is a Fellow of the Institute of Chartered Accountants in England and Wales.

5.5.4 Transfers of property

Except for the sale by QH Tours and the purchase by JTL of the QH Shares in consideration for the issue of JTL Shares representing 58% of all JTL Shares as outlined in the Merger Implementation Agreement described in Section 6.3 and in the Separation Agreements described in Section 6.5, QH Tours does not intend to propose any transfer of property between QH Tours and JTL or any persons associated with either of them.

5.5.5 Redeployment of fixed assets or property

QH Tours does not intend to redeploy the fixed assets or property of JTL.

==> picture [596 x 101] intentionally omitted <==

5. INFORMATION ABOUT QH TOURS (CONT)

5.5.6 Financial policies

QH Tours intends to undertake further investigations into JTL’s accounting policies and, to the extent it is appropriate, change JTL’s accounting policies to align them with Qantas Airways’ accounting policies. QH Tours does not expect that this will result in any significant changes to JTL’s existing financial policies.

5.5.7 Dividend policies

QH Tours will seek to continue the current dividend policy of JTL, being that the payment and amount of dividends is in the sole discretion of the JTL Board and will depend on JTL’s earnings, financial condition, financial arrangements, financing requirements for future growth, the competitive environment and any other factors the directors of JTL consider relevant in the circumstances.

5.5.8 Continued ASX listing

QH Tours intends for JTL to maintain its listing, and the quotation of JTL Shares, on the ASX as long as it meets the relevant requirements of the ASX.

5.5.9 Limitations on intentions

The intentions and statements of future conduct set out in this Section 5.5 must be read as being subject to:

the law (including the Corporations Act) and the ASX Listing Rules, including in particular the requirements of the Corporations Act and the ASX Listing Rules in relation to conflicts of interest and ‘related party’ transactions, given that QH Tours and the Qantas Group will be treated as related parties of JTL for these purposes if the Merger is implemented;
the legal obligation of the JTL directors at the time, including any nominees of QH Tours, to act in good faith in the best interests of JTL and for proper purposes and to have regard to the interests of all JTL Shareholders;
the various legal obligations of JTL (and by extension its directors), including the legal obligation to act in the best interests of JTL Shareholders; and
the outcome of the determinations referred to in Section 5.5.1.

5.5.10 Other intentions

Other than as set out in this Section 5.5, if JTL Shareholders approve the Merger Proposal and the Merger is implemented, QH Tours intends to:

continue the business of JTL; and
continue the employment of the present employees of JTL;

and does not intend to:

make any major changes to the business of JTL;
make any injections of further capital into JTL;
transfer any property between JTL and QH Tours or any persons associated with either of them;
redeploy the fixed assets or property of JTL; or
make any significant changes to the financial or dividend policies of JTL.

==> picture [596 x 107] intentionally omitted <==

5.6 Regulatory approvals

5.6.1 FIRB approval

The Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), administered by the Foreign Investment Review Board (FIRB), regulates the acquisition of interests in certain Australian entities where the acquisition results in a foreign person acquiring a substantial interest in the Australian entity.

From time to time Qantas Airways is a foreign person for the purposes of the FATA because natural persons not ordinarily residents in Australia and foreign corporations hold in aggregate not less than 40% of its shares. If the Merger Proposal is implemented, Qantas Airways (through its wholly-owned subsidiary QH Tours) will acquire a substantial interest in JTL.

On 22 April 2008 the Foreign Investment Review Board notified Qantas that there are no objections to the proposal in terms of the Government’s foreign investment policy.

5.6.2 ACCC approval

The Trade Practices Act 1974 (Cth) (TPA), administered by the ACCC, prohibits mergers and acquisitions that substantially lessen competition in a market, or are likely to do so.

On 8 April 2008 the ACCC notified Qantas Airways that the ACCC does not propose to intervine in the proposed acquisition pursuant to section 50 of the TPA.

5.7 Other material information

Except as set out in this Explanatory Memorandum, there is no information known to QH Tours that is material to JTL Shareholders’ decision on how to vote on the Merger Proposal that has not previously been disclosed to JTL Shareholders.

==> picture [531 x 152] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION

6.1 JTL Directors’ recommendation

6.1.1 Interests of JTL Directors in the Merger Resolutions

None of JTL’s Directors have any personal interest in the issue of new JTL Shares to QH Tours under the terms of the Merger Implementation Agreement, except in their capacity as shareholders in JTL. The Directors’ relevant interests in JTL Shares are as follows:

Mr John King, Director, has a relevant interest in 27,600 JTL Shares.
Mr Peter Spathis, Director, has a relevant interest in 500,000 JTL Shares.
Mr Timothy Ryan, Director, has a relevant interest in 10,000 JTL Shares.
Mr Barry Samuels, Director, has a relevant interest in 154,688 JTL Shares.
Mr Michael Reed, Director, has no relevant interest in JTL Shares.

6.1.2 Directors who approved the proposal to put the Merger Resolutions to JTL’s non-associated shareholders

All of the JTL Directors approved the proposal to put the Merger Resolutions to JTL Shareholders who are not associated with QH Tours (Non-Associated JTL Shareholders).

6.1.3 Directors’ recommendation for the Merger Resolutions

The JTL Directors unanimously recommend that the Non-Associated JTL Shareholders vote in favour of the Merger Resolutions. Each JTL Director who holds or controls JTL Shares intends to vote those JTL Shares in favour of the Merger Resolutions.

Although the Independent Expert concluded that the Merger Proposal is not fair to Non-Associated JTL Shareholders, it also concluded that the Merger Proposal is reasonable on the basis that the possible advantages of implementing the Merger Proposal such as integration, diversification, competitive positioning, the benefit of the Qantas brand and synergy benefits, outweigh the possible disadvantages of implementing the Merger Proposal, such as the foregone opportunity to receive a future takeover premium and the risks of integration. The JTL Directors unanimously recommend that the Non-Associated JTL Shareholders vote in favour of the Merger Resolutions because they also consider that the possible advantages of implementing the Merger Proposal outweigh the possible disadvantages.

6.2 Terms of the proposed allotment

If the Merger Resolutions are passed by the Non-Associated JTL Shareholders, JTL will allot new JTL Shares to QH Tours as consideration for acquiring all of the issued share capital in Qantas Holidays under the terms of the Merger Implementation Agreement.

6.2.1 Number of JTL Shares to be issued

On the implementation of the Merger Proposal, QH Tours will be issued with such number of new JTL Shares as will provide QH Tours with 58% of all the JTL Shares on issue immediately following the implementation of the Merger Proposal. If no additional new JTL Shares are issued prior to the implementation of the Merger Proposal, QH Tours will be issued with 127,340,726 new JTL Shares.

6.2.2 Conditions

The Merger Implementation Agreement between JTL and QH Tours is subject to several conditions. JTL will not be able to complete the acquisition of all of the issued shares in the capital of Qantas Holidays, and QH Tours will not be issued any new JTL Shares, unless these conditions are satisfied, or if applicable, waived. These conditions are summarised in Section 6.3.2 of this Explanatory Memorandum.

6.3 Summary of the Merger Implementation Agreement

On 21 February 2008, QH Tours and JTL entered into the Merger Implementation Agreement relating to the merger of Qantas Holidays and Qantas Business Travel with JTL. The Merger Implementation Agreement was amended by way of an amending agreement dated 2 May 2008. The following is a summary of the material terms and conditions of the Merger Implementation Agreement (as amended).

==> picture [596 x 107] intentionally omitted <==

6.3.1 Sale and Purchase

QH Tours has agreed to sell to JTL, and JTL has agreed to acquire from QH Tours, the QH Shares free from encumbrances and with all rights, attached or accrued to them on the implementation of the Merger Proposal.

The consideration for the sale of the QH Shares by QH Tours to JTL is the issue to QH Tours of the number of new JTL Shares determined in accordance with the following formula:

New JTL Shares to be issued to QH Tours = A x B

where:

A = 58/42

B = the total number of JTL Shares on issue immediately before the issue of new JTL Shares to QH Tours on the implementation of the Merger Proposal.

The effect of this formula is that QH Tours will be issued with such number of new JTL Shares as will result in it holding 58% of the JTL Shares on issue immediately following the implementation of the Merger Proposal.

6.3.2 Conditions to Completion of the Merger

Implementation of the Merger Proposal cannot occur until all of the following conditions are fulfilled:

(a) the Treasurer consents to the Merger Proposal;
(b) the ACCC has consented to or stated in writing that it will not object to the Merger, subject to conditions or requirements that are reasonably acceptable to QH Tours and JTL;
(c) JTL Shareholders approve the Merger Resolutions at the EGM by the requisite majorities;
(d) the JTL Board continues to unanimously endorse the Merger and unanimously recommends in this Explanatory Memorandum that JTL Shareholders vote in favour of the Merger Resolutions;
(e) before implementation of the Merger Proposal, no event occurs or fails to occur which individually, or when aggregated with other events, will or is reasonably likely to materially adversely affect the net profit after tax of the JTL Group for the financial year ending 30 June 2008 by $2,000,000 or more;
(f) no Prescribed Occurrence in respect of a member of the JTL Group occurs before the implementation of the Merger Proposal;
(g) promptly after JTL Shareholders approve the Merger Resolutions, JTL confirms to QH Tours that there is nothing preventing JTL from providing a “cleansing notice” in respect of JTL Shares pursuant to sections 708A(5) and (6) the Corporations Act within 5 business days after the implementation of the Merger Proposal;
(h) before the implementation of the Merger Proposal, no event occurs or fails to occur which individually, or when aggregated with other events, will or is reasonably likely to materially adversely affect the net profit after tax of the QH Group for the financial year ending 30 June 2008 by $2,000,000 or more;
(i) no Prescribed Occurrence in respect a member of the QH Group occurs before the implementation of the Merger Proposal; and
(j) no Separation Agreement is amended, varied or terminated before the implementation of the Merger Proposal, except with the prior written consent of JTL.

Each party must use all reasonable efforts to ensure that each of the conditions is satisfied as soon as possible after the date of the Merger Implementation Agreement and before 5.00pm (Sydney/Melbourne time) on 15 July 2008 or continues to be satisfied until the last time it is required to be satisfied (as the case may require). If the conditions are not satisfied or, if applicable, waived by that date, the parties will consult in good faith to determine whether the transaction may proceed by alternative means or extend the date for satisfaction of the conditions.

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

6.3.3 Steps prior to Completion

JTL must do all acts and things within its power as may be necessary or desirable for the implementation and performance of the Merger. In this regard, JTL’s obligations include participating in, and ensuring the JTL Board participates in, efforts reasonably requested by QH Tours to promote the merits of the Merger, unless the JTL Board is permitted to and has changed its recommendation in relation to the Merger.

QH Tours must do all acts and things within its power as may be necessary or desirable for the implementation and performance of the Merger.

6.3.4 Recommendation of the JTL Board

JTL has represented and warranted to QH Tours that it has been advised by each JTL Director that he will:

(a) recommend that the Merger is in the best interests of JTL Shareholders and not subsequently change, withdraw or modify that recommendation;
(b) recommend that JTL Shareholders vote in favour of and approve the Merger Resolutions, and not subsequently change, withdraw or modify that recommendation;
(c) not make any public statement or take any other action that contradicts the recommendation of the Merger by the JTL Board,

and the Explanatory Memorandum will state that each JTL Director who holds JTL Shares, or on whose behalf JTL Shares are held, intends to vote in favour of the Merger Resolutions.

JTL has also represented and warranted to QH Tours that it has been advised by each JTL Director that he or she will not withdraw or modify his recommendation unless:

(a) the Independent Expert opines that the Merger is not fair and not reasonable to Non-Associated JTL Shareholders;
(b) an event occurs or fails to occur which individually, or when aggregated with other events, will or is reasonably likely to materially adversely affect the net profit after tax of the QH Group for the financial year ending 30 June 2008 by $2,000,000 or more;
(c) a Prescribed Occurrence in respect of the QH Group occurs; or
(d) JTL receives an offer or proposal from any person in relation to an alternative transaction that the JTL Board has unanimously determined is superior to the Merger Proposal and has publicly unanimously recommended is in the interests of JTL and JTL Shareholders.

6.3.5 Board Structure and Senior Management

On the implementation of the Merger Proposal, JTL will take all actions necessary to ensure that:

(a) 4 nominees of QH Tours are appointed as Directors of JTL and represent a majority of the Directors on the JTL Board;
(b) Peter Collins is appointed as Chief Executive Officer of JTL; and
(c) Andrea Slark is appointed as Chief Financial Officer of JTL.

6.3.6 Conduct of business prior to the implementation of the Merger Proposal

Conduct of the businesses

Until the implementation of the Merger Proposal, each of Qantas Holidays, Qantas Business Travel and JTL must conduct their respective businesses in the ordinary course consistent with past practice, including making all reasonable efforts to maintain their respective businesses and assets, keeping available the services of their officers and employees and preserving their relationships with customers, suppliers and others with whom they have business dealings.

==> picture [596 x 107] intentionally omitted <==

Integration Steering Committee

Until the implementation of the Merger Proposal, an Integration Steering Committee made up of John King, Michael Reed and Andrew Ferguson (of JTL) and Peter Collins and Andrea Slark (of Qantas Airways) (and such other persons as agreed from time to time) will plan the integration of JTL and the QH Group subsequent to the implementation of the Merger Proposal.

6.3.7 Completion of the Merger Proposal

QH Tours’ obligations

QH Tours must, among other things, ensure that Qantas Holidays has or will have cash of $190 million on the date of implementation of the Merger Proposal and deliver to JTL evidence that Qantas Holidays has or will have cash of no less than $190 million at that time. QH Tours must also deliver to JTL a duly executed counterpart of the Anti-Dilution Deed. An agreed form of the Anti-Dilution Deed is attached to the Merger Implementation Agreement.

JTL’s obligations

JTL must, among other things, issue the new JTL Shares to QH Tours and deliver to QH Tours a duly executed counterpart of the Anti-Dilution Deed.

Immediately following the implementation of the Merger Proposal, JTL must apply for official quotation by the ASX of the new JTL Shares to be issued to QH Tours and use all reasonable endeavours to obtain quotation of the new JTL Shares. JTL must also issue a “cleansing notice” in respect of those JTL Shares pursuant to sections 708A(5) and (6) the Corporations Act.

6.3.8 Transfer of Qantas Business Travel Contracts

As Qantas Business Travel has historically been a business division within Qantas Airways, rather than a separate legal entity, Qantas Airways or its wholly-owned subsidiaries have been the parties (Qantas Parties) that have entered into written arrangements with third parties relating to Qantas Business Travel’s business (QBT Contracts). Consequently, JTL and QH Tours have agreed to certain arrangements in the Merger Implementation Agreement in respect of the transfer of the QBT Contracts to Qantas Business Travel, as summarised below.

To the extent that the QBT Contracts have not already been transferred to Qantas Business Travel, QH Tours must use all reasonable endeavours to transfer the QBT Contracts to Qantas Business Travel by, or as soon as reasonably practicable after, implementation of the Merger.

Pending the transfer of a QBT Contract to Qantas Business Travel, from implementation of the Merger:

QH Tours must procure that the relevant Qantas Party holds all the benefits of the QBT Contract on trust for Qantas Business Travel, enforces the QBT Contract as directed by Qantas Business Travel and does not terminate, amend or waive rights under the QBT Contract without the approval of Qantas Business Travel;
JTL must procure that Qantas Business Travel assumes the burden (including the costs and expenses) of performing the QBT Contract; and
JTL must procure that Qantas Business Travel, and QH Tours must procure that the relevant Qantas Parties, account to one another in respect of the benefit and burden of each QBT Contract so Qantas Business Travel and the relevant Qantas Party are placed in the same economic position as they would have been in respect of the QBT Contract if the QBT Contract had been transferred to Qantas Business Travel with effect from implementation of the Merger and, to that end, must account to one another in respect of any profits or losses relating to each QBT Contract.

QH Tours must procure that the Qantas Parties perform all their obligations under the QBT Contracts that are due to be performed before implementation of the Merger.

JTL must procure that Qantas Business Travel performs all the obligations of the Qantas Parties under the QBT Contracts that are due to be performed after implementation of the Merger.

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

Subject to implementation of the Merger taking place:

JTL indemnifies QH Tours and each Qantas Party from liabilities incurred by them due to the breach or non-performance of any obligation under a QBT Contract due to be performed after implementation of the Merger, any claim made by a counterparty under a QBT Contract for events, acts or omissions occurring after implementation of the Merger and any breach by JTL of its obligations to procure performance by Qantas Business Travel.
QH Tours indemnifies Qantas Business Travel from liabilities incurred by it due to the breach or nonperformance of any obligation under a QBT Contract due to be performed before implementation of the Merger, any claim made by a counterparty under a QBT Contract for events, acts or omissions occurring before implementation of the Merger and any breach by QH Tours of its obligations to procure performance by the Qantas Parties.

6.3.9 Break Fee

QH Tours Break Fee

JTL agrees to pay to QH Tours a break fee of $3.5 million (Break Fee) if at any time after execution of the Merger Implementation Agreement, any of the following events occur:

(a) any JTL Director fails to recommend, or recommends against, qualifies their support of or withdraws his recommendation or approval of, the Merger and JTL Shareholders do not approve the Merger Resolutions by the requisite majorities;
(b) the Merger Proposal is not implemented before 15 July 2008 as a consequence of:
(i) non-compliance by JTL with any of its obligations under the Merger Implementation Agreement; or
(ii) a condition described in Section 6.3.2 (e), (f) or (g) of this Explanatory Memorandum, not being satisfied by that time;
(c) the Merger Proposal is not implemented before 15 July 2008 and:
(i) on or before that date any JTL Director recommends or promotes an alternative transaction; or
(ii) an alternative transaction is announced on or before that date and the alternative transaction is effected within 9 months of it being announced; or
(iii) on or before that date a person otherwise:
(A) obtains control of, or merges or amalgamates with JTL; or
(B) acquires directly or indirectly an interest in all or a substantial part of the business or assets of JTL.

The payment of any Break Fee by JTL to QH Tours must be made within 5 business days of receipt of a written demand for payment by QH Tours. The demand may only be made if the Merger Proposal has not been implemented within 20 business days after the occurrence of an event referred to above. If the Break Fee has been paid by JTL to QH Tours and the Merger Proposal is subsequently implemented, QH Tours must repay the Break Fee to JTL within 5 business days after the implementation of the Merger Proposal.

JTL Break Fee

Under the Merger Implementation Agreement, QH Tours agrees to pay to JTL a break fee of $3.5 million (Break Fee) if the Merger Proposal is not implemented before 15 July 2008 as a consequence of:

(a) non-compliance by QH Tours with any of its obligations under the Merger Implementation Agreement; or
(b) a condition described in Section 6.3.2(h), (i) or (j) of this Explanatory Memorandum, not being satisfied by that time.

==> picture [596 x 107] intentionally omitted <==

The payment of the Break Fee by QH Tours to JTL must be made within 5 business days of receipt of a written demand for payment by JTL. The demand may only be made if the Merger Proposal has not been implemented within 20 business days after the occurrence of an event referred to above. If the Break Fee has been paid by QH Tours to JTL and the Merger Proposal is subsequently implemented, JTL must repay the Break Fee to QH Tours within 5 business days after the implementation of the Merger Proposal.

6.3.10 Exclusivity

No-shop

During the period from the date of the Merger Implementation Agreement to 15 July 2008 or the implementation of the Merger Proposal (whichever is first to occur), JTL and its Representatives must not, directly or indirectly, solicit, invite, facilitate, encourage or initiate any enquiries, negotiations, discussions or proposals or communicate any intention to do any of these things with a view to obtaining any offer or proposal from any person in relation to an alternative transaction.

No-Talk

During the period from the date of the Merger Implementation Agreement to 15 July 2008 or the implementation of the Merger Proposal (whichever is first to occur), but subject to the fiduciary carve-out set out below, JTL and its Representatives must not, directly or indirectly, initiate, negotiate or enter into or participate in negotiations or discussions with any person or communicate any intention to do any of these things in relation to an alternative transaction even if that person’s alternative transaction was not directly or indirectly solicited, encouraged or initiated by JTL or any of its Representatives or the person has publicly announced the alternative transaction.

Alternative Transaction

If, during the period from the date of the Merger Implementation Agreement to 15 July 2008 or the implementation of the Merger Proposal (whichever is first to occur), JTL receives an unsolicited alternative transaction that it resolves to consider, JTL must:

a) notify QH Tours of the existence and material details of the alternative transaction;
b) notify QH Tours if JTL proposes to provide information to any third party, or allow any third party to undertake due diligence, in relation to the alternative transaction; and
c) notify QH Tours if the JTL Board has resolved to recommend an alternative transaction.

Exceptions

Nothing prevents JTL from:

a) providing information to its Representatives or credit agencies;
b) providing information to its auditors, bankers, customers or suppliers acting in that capacity, in the ordinary and usual course of business;
c) providing information required to be provided by law or the ASX Listing Rules; or
d) making presentations to brokers, portfolio investors and analysts in the ordinary and usual course of business.

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

Fiduciary carve-out

The “no-talk” and “alternative transaction” restrictions do not apply to the extent that:

a) in response to an approach by a third party, JTL writes to that third party in the following terms:
“ Under the merger implementation agreement signed by JTL and QH Tours, JTL can only participate in negotiations or discussions with you, or make information available to you, if you propose an alternative transaction that meets certain criteria and JTL’s directors determine in good faith and acting reasonably, after taking advice, that failing to respond to a bona fide alternative transaction would more likely than not constitute a breach of their fiduciary or statutory obligations. For further information, we refer you to the announcement made by JTL and QH Tours on 21 February 2008 and any information contained in an explanatory memorandum that has been issued or will be issued by JTL in relation to the transaction with QH Tours. ”; or
b) they restrict JTL or the JTL Board from taking or refusing to take any action with respect to an alternative transaction provided that the JTL Board has determined that the alternative transaction is a superior alternative transaction to the Merger.

6.3.11 Restraint

Prohibited conduct

Under the Merger Implementation Agreement, QH Tours will procure that, for as long as Holiday Tours and Travel Pte Limited (HTT) is a related entity of QH Tours, HTT and HTT’s subsidiaries do not establish a business in Australia that competes with JTL in the market in Australia for the sale of holiday packages to destinations outside Australia or wholesale Australian domestic holiday packages to the retail agency market in Australia.

Exceptions

The above prohibition does not restrict HTT or HTT’s subsidiaries from:

a) holding any number of JTL Shares or securities in any entity that acquires, merges or amalgamates with JTL or that acquires all or a substantial part of the business conducted by JTL;
b) holding up to 20% of any class of securities or interests in any entity, trust or scheme; or
c) entering into or exercising any rights under any mortgage, charge or other security, including the appointment of any liquidator, receiver, manager or other external administrator over any entity, trust or scheme that carries on any of the activities referred to above.

The restraint does not apply in respect of any activities of a person who acquires any part of or interest in HTT or a subsidiary of HTT.

Expiry of restraint

The restraint will be of no further force or effect upon the earliest of:

a) 4 years after the implementation of the Merger Proposal;
b) the sale of more than 20% of any class of securities of a QH Group Company by JTL;
c) the sale of a substantial part, or all, of the business conducted by a QH Group Company; or
d) the disposal by QH Tours of its interest in HTT or a subsidiary of HTT to a person that it does not control.

==> picture [596 x 107] intentionally omitted <==

6.3.12 Warranties

QH Tours and JTL have given each other standard representations and warranties about the execution of the Merger Implementation Agreement and the performance of their obligations under the Merger Implementation Agreement. They have given each other limited representations and warranties about their respective accounts, business contracts, employees and superannuation, litigation, tax, intellectual property, insurance, real property, compliance with statutory requirements and information provided during due diligence investigations. QH Tours has given JTL certain representations and warranties about the QH Group Companies and QH Shares and JTL has given QH Tours certain representations and warranties about the JTL Group, JTL’s share capital and the new JTL Shares to be issued to QH Tours.

6.3.13 Financial limits on claims

QH Tours or JTL (as the case may be) must not make any claim, and the other party has no liability for a claim under or in relation to or arising out of the Merger Implementation Agreement (including for a breach of warranty):

a) unless the amount of the claim is $200,000 or more; and
b) unless and until the aggregate of all such claims properly made under the Merger Implementation Agreement exceeds $4 million, in which event the other party will be liable for the entire amount and not just the excess.

6.3.14 Time limits on claims

QH Tours and JTL have no liability under or in relation to or arising out of the Merger Implementation Agreement (including for a breach of warranty) unless:

a) the party has given written notice of the claim to the other party on or before the date that is 18 months after the implementation of the Merger Proposal; and
b) the claim has been settled or legal proceedings in a court of competent jurisdiction in respect of the claim have been commenced by the party having the claim against the other party within 9 months of the claim being notified by the party making the claim to the other party.

6.3.15 Maximum aggregate liability for claims

The maximum aggregate liability of QH Tours or JTL (as the case may be) for loss or damage of any kind not otherwise excluded by the Merger Implementation Agreement under statute or relating in any way to the Merger Implementation Agreement or its subject matter is limited, in aggregate for any and all claims and amounts payable to the amount equal to $170 million.

==> picture [531 x 204] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

6.4 Anti-Dilution Deed

Under the terms of the Merger Implementation Agreement, on the implementation of the Merger Proposal, QH Tours and JTL must enter into an Anti-Dilution Deed, in the agreed form attached to the Merger Implementation Agreement. The following is a summary of the material terms and conditions of the AntiDilution Deed.

Following the implementation of the Merger Proposal, if there is any offer of further new JTL Shares to third parties, JTL must offer further new JTL Shares to QH Tours to allow QH Tours to maintain its percentage shareholding in JTL Shares at that time.

If JTL wishes to issue new JTL Shares (other than to QH Tours or pursuant to a pro rata issue of new JTL Shares (eg. rights issue), JTL must give prior written notice to QH Tours:

(a) specifying the total number of new JTL Shares that JTL will offer to other parties, the price at which each new JTL Share will be offered to other parties and the terms and conditions of the offer of new JTL Shares to other parties;
(b) offering QH Tours additional new JTL Shares at a cash issue price that is no more than the issue price for the new JTL Shares offered to other parties and on terms and conditions no less favourable to QH Tours than the terms and conditions of issue of the new JTL Shares offered to other parties; and
(c) specifying the last date QH Tours may exercise its rights under the Anti-Dilution Deed, which must be a date no less than 20 business days after the date on which JTL provides written notice to QH Tours.

QH Tours may, after receiving written notice from JTL and before the end of the specified response period:

(a) prohibit JTL from proceeding with the issue of new JTL Shares to other parties by giving JTL written notice stating that QH Tours does not support the issue of new JTL Shares to other parties if an independent expert appointed by QH Tours considers that the issue of new JTL Shares to other parties would not be reasonable in the circumstances if JTL and the other parties were dealing at arm’s length terms; or
(b) accept the applicable offer of additional new JTL Shares in whole or in part by giving written notice to JTL specifying the number of additional new JTL Shares QH Tours wants to subscribe for and any conditions that apply to QH Tours’ acceptance of the offer.

If JTL does not receive a response from QH Tours before the end of the specified response period then QH Tours will be deemed to have waived its right to veto the issue of new JTL Shares to other parties and rejected the offer of additional new JTL Shares, and JTL may proceed to issue new JTL Shares to other parties.

JTL must not issue any other new equity securities unless such an issue is made subject to terms and conditions agreed between JTL and QH Tours to ensure that:

(a) after conversion of all outstanding and any proposed other new equity securities into JTL Shares, in all circumstances QH Tours’ percentage shareholding in JTL Shares after conversion is the same as QH Tours’ percentage shareholding in JTL Shares immediately before the issue; and
(b) any issue to QH Tours is on terms no less favourable than those applicable to other parties being offered other new equity securities under the relevant issue.

Whilst the Anti-Dilution Deed is in effect, QH Tours is able to nominate suitably qualified people for the positions of Chief Executive Officer and Chief Financial Officer of JTL, and JTL agrees to consider in good faith the appointment of such nominees to these positions.

The Anti-Dilution Deed will automatically terminate if QH Tours’ percentage holding in JTL Shares falls below 20%.

==> picture [596 x 107] intentionally omitted <==

6.5 Summary of Material Separation Agreements

Summarised in this Section are a number of agreements which Qantas Holidays and Qantas Business Travel will be bound by following the Merger.

6.5.1 Trade Mark Licence Agreements

Pursuant to 3 separate agreements, Qantas Holidays and Qantas Business Travel have been granted licences in respect of the “Qantas Holidays”, “Qantas Business Travel”, “QBT”, “Viva”, “Viva!” and “Viva Holidays” brands.

Each licence is a royalty-free exclusive, non-transferable, revocable licence to use the relevant trade mark in the defined territory for a specified term.

The relevant territory for the licences in respect of the “Qantas Holidays” brand is Australia and for “Qantas Business Travel” and “QBT” brands is Australia, New Zealand, Singapore and other countries as agreed. The geographical scope of the licences for the “Viva”, “Viva!” and “Viva Holidays” trade marks is worldwide.

The term of the licences in relation to the “Qantas Holidays”, “Qantas Business Travel” and “QBT” trade marks is 5 years with the option (at the request of Qantas Holidays or Qantas Business Travel (as the case may be), subject to certain conditions being satisfied) for a further term of 5 years.

The term of the licences in relation to the “Viva”, “Viva!” and “Viva Holidays” trade marks is 10 years with the option (at the request of Qantas Holidays, subject to certain conditions being satisfied) for a further term of 10 years.

6.5.2 Services Agreements between Qantas Airways and Qantas Holidays and Qantas Business Travel

Qantas Holidays and Qantas Business Travel have agreed that Qantas Airways will provide the employment services of the staff that are employed by Qantas Airways and have historically been engaged to work in the Qantas Holidays and Qantas Business Travel businesses respectively.

Qantas Holidays and Qantas Business Travel are each responsible for the payment of all remuneration and benefits of the respective secondees and any other costs of their employment imposed by Qantas Airways. Qantas Holidays and Qantas Business Travel will also be responsible for the payment of any termination or redundancy costs in relation to their respective secondees.

Throughout the term of these agreements, Qantas Holidays and Qantas Business Travel must each maintain public liability insurance for an insured amount of not less than $20 million per occurrence, workers compensation insurance for any amount necessary to cover any potential liability under statute or at common law and property insurance for full replacement value.

The term of these agreements is indefinite. However, either Qantas Holidays or Qantas Business Travel (as the case may be) or Qantas Airways may terminate the agreement at any time by giving the other party 12 months written notice.

6.5.3 Agreements between Qantas Airways and Qantas Holidays and Qantas Business Travel in relation to qantas.com

Qantas Airways has entered into separate agreements with each of Qantas Holidays and Qantas Business Travel which set out the terms and conditions upon which Qantas Airways is willing to:

create, host and manage the operation of web pages, enquiry pages, booking engine and other associated web based facilities on dedicated pages on the qantas.com website; and
host and manage Qantas Holidays databases and Qantas Business Travel and other software supporting those web pages and facilities on Qantas Airways’ hosting infrastructure.

The agreements each have a term of 5 years from the implementation of the Merger Proposal and may be renewed for a single further term of 5 years (subject to certain conditions being satisfied) if requested by Qantas Holidays or Qantas Business Travel.

Under these agreements, Qantas Holidays and Qantas Business Travel are each required to pay to Qantas Airways a commission on the total sale price of all sales made by each of them of programs supplied by Qantas Airways to qantas.com.

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

6.5.4 Transitional Services Agreements between Qantas Airways and Qantas Holidays and Qantas Business Travel

Under separate agreements, Qantas Holidays and Qantas Business Travel have agreed to retain the services of Qantas Airways to continue to perform the services that Qantas Airways currently provides in relation to information technology, shared services and corporate services.

In respect of information technology services, Qantas Airways will provide desktop and network services, application support services, application hosting services, IT support and service desk and consultancy and IT resources.

In respect of shared services, Qantas Airways will provide financial services including fixed asset accounting services, customer payment and application services, credit management services and payment collection services, payroll services including payroll reporting services, award interpretation services and payroll payment services, people shared services including HR information administration services and switchboard and reception services and property and facility services including management of corporate inventory and mail distribution.

In respect of corporate services, Qantas Airways will provide financial transaction services and security services.

The term of these agreements commences on 1 July 2008 and is of 5 years duration. However, either party may terminate the agreement on 180 days notice. The parties may, by agreement, extend the term of their agreement.

Qantas Airways will invoice each of Qantas Holidays and Qantas Business Travel monthly in respect of the provision of services and Qantas Holidays and Qantas Business Travel must pay those invoices within 30 days from the date of invoice.

6.6 Chapter 2E disclosure for Resolution 2 - Anti-Dilution Deed

Under the terms of the Merger Implementation Agreement, on the implementation of the Merger Proposal, QH Tours and JTL must enter into an Anti-Dilution Deed in the agreed form attached to the Merger Implementation Agreement and as described Section 6.4 above. The Anti-Dilution Deed provides QH Tours with the ability to maintain its percentage shareholding in JTL.

Even though QH Tours and JTL were at all times dealing with one another, and the terms of the Merger Proposal as a whole were negotiated, on an arms length basis, the JTL Directors consider it is appropriate to obtain the JTL Shareholder approval set out in Resolution 2 in the Notice of EGM for the financial benefits that will be given to QH Tours under the Anti-Dilution Deed.

To that end, JTL makes the following disclosures for the purposes of section 219 of the Corporations Act:

(a) Those financial benefits that will be provided by JTL in connection with the Anti-Dilution Deed will be given to QH Tours.
(b) The financial benefits that will be provided by JTL under the Anti-Dilution Deed involve the issue of further JTL Shares and other equity securities in JTL to QH Tours. Further details of the financial benefits that will be provided by JTL under the Anti-Dilution Deed are set out in Section 6.4.
(c) The recommendation of each JTL Director and his reasons for that recommendation are contained in Section 2.3 of this Explanatory Memorandum.
(d) The interests of each JTL Director in the outcome of the proposed resolution is contained in Section 6.1 of this Explanatory Memorandum.
(e) All other information that is reasonably required by JTL Shareholders in order to decide whether or not it is in JTL’s interests to pass Resolution 2 in the Notice of EGM and is known to JTL or any of its advisers is contained in this Explanatory Memorandum.

==> picture [596 x 107] intentionally omitted <==

6.7 Chapter 2E disclosure for Resolution 3 - Separation Agreements and Merger Implementation Agreement

Under the Merger Proposal, JTL will acquire the shares in Qantas Holidays and the beneficial interest in Qantas Business Travel. This acquisition is being effected by a combination of arrangements that are provided for in the Merger Implementation Agreement and the Separation Agreements. Following the acquisition, Qantas Airways will, through its wholly-owned subsidiary QH Tours, control JTL, and Qantas Airways and its wholly-owned subsidiaries will be related parties of JTL.

Even though QH Tours and JTL were at all times dealing with one another, and the terms of the Merger Proposal as a whole were negotiated, on an arm’s length basis, the Merger Proposal will involve each of QH Tours and JTL procuring that, after the implementation of the Merger, certain of JTL’s and Qantas Airways’ wholly owned subsidiaries (including Qantas Business Travel) enter into agreements or otherwise perform and observe obligations, and enjoy rights, relating to arrangements that relate to the Qantas Holidays and Qantas Business Travel businesses. The JTL Directors therefore consider it is appropriate to obtain the JTL Shareholder approval set out in Resolution 3 in the Notice of EGM for the financial benefits that will be given to Qantas Airways or wholly-owned subsidiaries of Qantas Airways under the arrangements that are provided for in the Merger Implementation Agreement and the Separation Agreements. To that end, JTL makes the following disclosures for the purposes of section 219 of the Corporations Act:

(a) Those financial benefits that will be provided by JTL or its subsidiaries in connection with the implementation of the Merger will be given to Qantas Airways and various subsidiaries of Qantas Airways.
(b) The financial benefits that will be provided by JTL or its subsidiaries include the assumption of obligations owed to Qantas Airways or subsidiaries of Qantas Airways under the Separation Agreements, and the assumption of obligations owed by Qantas Airways or subsidiaries of Qantas Airways to third parties under existing agreements relating to the Qantas Holidays and Qantas Business Travel businesses. These financial benefits are described in greater detail in Sections 6.3.8 and 6.5 of this Explanatory Memorandum.
(c) The recommendation of each JTL Director and his reasons for that recommendation are contained in Section 2.3 of this Explanatory Memorandum.
(d) The interests of each JTL Director in the outcome of the proposed resolution is contained in Section 6.1 of this Explanatory Memorandum.
(e) All other information that is reasonably required by JTL Shareholders in order to decide whether or not it is in JTL’s interests to pass Resolution 3 in the Notice of EGM and is known to JTL or any of its advisers is contained in this Explanatory Memorandum or the Independent Expert’s Report that is attached to this Explanatory Memorandum.

6.8 Disclosure for Resolution 4 – increase the maximum aggregate annual remuneration of Non-Executive Directors

The current maximum aggregate amount which JTL Shareholders have approved as fees to be paid to the Non-Executive Directors of JTL, pursuant to clause 10.2 of JTL’s constitution, is $250,000 per annum.

With the appointment of four nominees of QH Tours to the Board of JTL, JTL may have up to 7 Directors following the implementation of the Merger Proposal, and most of these Directors are likely to be NonExecutive Directors.

Accordingly, it is necessary to increase the maximum aggregate amount payable to Non-Executive Directors to provide for the remuneration of the new Non-Executive Directors. Approval is therefore sought to increase the approved aggregate amount of Non-Executive Directors’ Fees by $550,000 per annum from $250,000 per annum to $800,000 per annum.

It is considered that this level of Non-Executive Director remuneration will be in keeping with other comparable listed companies having regard to the enlarged size and market capitalisation of JTL following the implementation of the Merger Proposal.

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

Further, it is important that JTL is able to attract and retain Board members with considerable industry and broader experience given the critical role the Board will have in the formation of the policy and strategy of the enlarged JTL going forward. Therefore, JTL must offer Director remuneration that is in keeping with industry standards.

6.9 Disclosure for Resolutions 5 and 6- Removal of current auditor and Appointment of new Auditor

JTL has decided to remove its current Auditor, Pitcher Partners, and appoint KPMG as its new Auditor.

In this regard, a written notice of intention of a resolution to remove Pitcher Partners as JTL’s current Auditor has been given to JTL by a member of JTL in compliance with section 329(1A) of the Corporations Act. JTL has sent a copy of that notice to Pitcher Partners and lodged a copy of that notice with ASIC. Further, a written notice of nomination of KPMG to become JTL’s Auditor has been given to JTL by a member of JTL in compliance with Subdivision A of Division 6 of Part 2M.4 of the Corporations Act. A copy of that notice of nomination accompanies this Explanatory Memorandum. In accordance with section 328A(1) of the Corporations Act, KPMG has provided its consent by notice in writing to JTL to act as Auditor of JTL.

The decision to appoint KPMG as Auditor of the Combined JTL Group is not due to any dissatisfaction with the professional services provided to JTL by its current Auditor, Pitcher Partners. JTL considers that as the current Auditor of the Qantas Group, and as the previous Auditor of JTL, KPMG is best placed to provide audit and assurance services to the Combined JTL Group.

The JTL Directors recommend the appointment of KPMG as Auditor of the Combined JTL Group and thank Pitcher Partners for the professional services they have provided to JTL.

==> picture [548 x 333] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

6.10 Explanation of regulatory requirements and resolutions

6.10.1 Merger Resolutions

JTL Shareholders must pass each of the following Merger Resolutions as a condition precedent to the Merger Proposal proceeding:

Type of Description of the Resolutions to be put at the EGM resolution Resolution 1 Subject to the passing of Resolutions 2 and 3, that for the purposes of item 7 of section 611 of the Corporations Act 2001 and all other purposes, approval be given to the issue to QH Tours of new JTL Shares equal in number to 58/42 multiplied by the total number of JTL Shares on issue immediately before the issue of the new JTL Shares to QH Tours on completion of the sale and purchase of all Ordinary the issued fully paid ordinary shares in the capital of Qantas Holidays Limited (Completion) pursuant to and in accordance with the terms and conditions of the Merger Implementation Agreement and as described in this Explanatory Memorandum, which will result in the acquisition by QH Tours of a relevant interest in JTL Shares giving QH Tours voting power in JTL of 58%. Resolution 2 Subject to the passing of Resolutions 1 and 3, that for the purposes of Chapter 2E of the Corporations Act 2001 and for all other purposes, approval be given to JTL entering into the Ordinary Anti-Dilution Deed with QH Tours under which JTL will give QH Tours the financial benefits described in Section 6.6 of this Explanatory Memorandum. Resolution 3 Subject to the passing of Resolutions 1 and 2, that for the purposes of Chapter 2E of the Corporations Act 2001 and for all other purposes, approval be given to JTL and its subsidiaries (including, from Completion, Qantas Holidays Limited and Qantas Business Travel Pty Limited) (Combined JTL Group) being party to the Separation Agreements and to members of the Combined Ordinary JTL Group performing and observing (or procuring the performance and observance of) all of their obligations under or otherwise contemplated by the Merger Implementation Agreement or the Separation Agreements, as described in Sections 6.3 and 6.5 of this Explanatory Memorandum, which will give Qantas Airways and its wholly-owned subsidiaries the financial benefits described in Section 6.7 of this Explanatory Memorandum.

==> picture [531 x 212] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

6.10.2 Other Resolutions

JTL Shareholders will be asked to approve the following Resolutions at the same time they consider the Merger Resolutions:

==> picture [484 x 202] intentionally omitted <==

----- Start of picture text -----

Description of the Resolutions to be put at the EGM Type of resolution
Resolution 4
Subject to the passing of Resolutions 1, 2 and 3, that, for the purposes of ASX Listing Rule 10.17
and in accordance with clause 10.2 of the existing constitution of JTL, the maximum aggregate Ordinary
annual remuneration that may be payable by JTL to JTL’s Non-Executive Directors as remuneration
for the services of those Non-Executive Directors be increased by $550,000 per annum from
$250,000 per annum to $800,000 per annum.
Resolution 5
Subject to the passing of Resolutions 1, 2, 3 and 6, that Pitcher Partners be removed as the Auditor Ordinary
of JTL.
Resolution 6
Subject to the passing of Resolutions 1, 2, 3 and 5, that KPMG, who has consented in writing to act Special
as Auditor of JTL, be appointed Auditor of JTL.
----- End of picture text -----

It should be noted that Resolutions 4, 5 and 6 are not “Merger Resolutions”, meaning that the implementation of the Merger Proposal is not subject to any or all of Resolutions 4, 5 and 6 being approved by JTL Shareholders. However, each of Resolutions 4, 5 and 6 are dependant on each of the Merger Resolutions (ie. Resolutions 1, 2 and 3) being approved by JTL Shareholders.

6.10.3 Requisite majorities

Resolutions 1, 2, 3, 4 and 5

Resolutions 1, 2, 3, 4 and 5 are ordinary resolutions. An ordinary resolution requires a simple majority of votes cast by members entitled to vote on the resolution. On a poll, each JTL Shareholder will be entitled to one vote for each JTL Share they hold.

Resolution 6

Resolution 6 is a special resolution. In order for a special resolution to be effective, it needs to be approved by at least 75% of those JTL Shareholders present at the meeting either in person or by proxy. On a poll, each JTL Shareholder will be entitled to one vote for each JTL Share they hold.

6.10.4 Resolution 1

Section 606 of the Corporations Act requires that (subject to specified exceptions) a person must not acquire a relevant interest in issued voting shares in a listed company, if as a result of that acquisition, any person’s voting power in the company would increase from 20% or below to more than 20%.

As consideration for the acquisition of the shares in Qantas Holidays, QH Tours will acquire a relevant interest in 58% of the JTL Shares on issue (ie. 58% voting power in JTL) immediately following the implementation of the Merger. Accordingly, the prohibition in section 606 applies to the proposed issue of new JTL Shares to QH Tours.

However, item 7 of section 611 of the Corporations Act permits an acquisition of shares that would otherwise contravene section 606 if:

it is approved beforehand by a resolution passed at a general meeting of the company in which the shares are being acquired;
no votes are cast in favour of the resolution by:
the person proposing to make the acquisition (ie. QH Tours) and their associates (eg. Qantas Airways); or

==> picture [596 x 107] intentionally omitted <==

the persons (if any) from whom the acquisition is to be made and their associates; and
all information known to the person proposing to make the acquisition (ie. QH Tours) and their associates (eg. Qantas Airways) or known to the company (ie. JTL) that is material to the decision on how to vote on the resolution is provided to shareholders.

If passed, Resolution 1 will constitute shareholder approval in accordance with item 7 of section 611 of the Corporations Act.

6.10.5 Resolutions 2 and 3

Section 208(1) of the Corporations Act requires that unless a specified exception under the Corporations Act applies, a public company must obtain the approval of its members to give a financial benefit to a related party of the public company.

JTL is obligated to exclude any votes cast on Resolutions 2 and 3 by:

a related party of the public company to whom the Resolutions would permit a financial benefit to be given; and
an associate of such a related party.

If passed, Resolutions 2 and 3 will constitute shareholder approval in accordance with section 208(1)(a)(i) of the Corporations Act.

6.10.6 Resolution 4

ASX Listing Rule 10.17 provides that a listed entity must not increase the amount of directors’ fees payable (not including the salaries of executive directors) without shareholder approval. Accordingly, the approval of JTL Shareholders is sought to increase the approved aggregate amount of Non-Executive Directors’ Fees by $550,000 per annum from $250,000 per annum to $800,000 per annum.

JTL is obligated to exclude any votes cast on Resolution 4 by:

any Director or proposed Director of JTL; and
an associate of a Director or proposed Director of JTL.

If passed, Resolution 4 will constitute shareholder approval in accordance with ASX Listing Rule 10.17.

6.10.7 Resolution 5

Section 329 of the Corporations Act provides for the removal of a current Auditor through an ordinary resolution. A written notice of intention of a resolution to remove an auditor has been given to JTL by a member of JTL in compliance with section 329(1A) of the Corporations Act. JTL has sent a copy of that notice to Pitcher Partners and lodged a copy of that notice with ASIC.

6.10.8 Resolution 6

Section 327D of the Corporations Act provides for the appointment of a new Auditor to replace an Auditor that has been removed from office through a special resolution. A written notice of nomination of KPMG to become JTL’s Auditor has been given to JTL by a member of JTL in compliance with Subdivision A of Division 6 of Part 2M.4 of the Corporations Act. A copy of that notice of nomination accompanies this Explanatory Memorandum. In accordance with section 328A(1) of the Corporations Act, KPMG has provided its consent by notice in writing to JTL to act as Auditor of JTL.

6.11 Rights attaching to new JTL Shares

The rights attaching to the new JTL Shares to be issued to QH Tours pursuant to the Merger Implementation Agreement will be governed by the constitution of JTL. The new JTL Shares to be issued to QH Tours will rank equally with all other JTL Shares on issue at that time. As noted elsewhere in this Explanatory Memorandum, the fully franked cash dividend of 11 cents per JTL Share (ie. the Special Dividend) will be paid only to those holders of JTL Shares as at the Record Date. QH Tours will not be issued the JTL Shares contemplated by the

==> picture [596 x 101] intentionally omitted <==

6. ADDITIONAL INFORMATION (CONT)

Merger Proposal until after the Record Date and, accordingly, those JTL Shares issued to QH Tours will not participate in the Special Dividend.

6.12 Taxation considerations

A report discussing the Australian taxation implications of the Merger Proposal has been prepared by Pitcher Partners Corporate Pty Ltd and is set out in Appendix D of this Explanatory Memorandum. The report of Pitcher Partners Corporate Pty Ltd is expressed in general terms and is not intended to provide taxation advice in respect of the particular circumstances of any JTL Shareholder. You should seek your own specific taxation advice for your individual circumstances.

Subject to certain assumptions and qualifications, as JTL Shareholders are not exchanging their current JTL Shares, the Merger Proposal will not have any immediate taxation consequences for JTL Shareholders who are Australian resident taxpayers and who hold their JTL Shares as capital assets. If JTL Shareholders subsequently dispose of their JTL Shares to other persons, there are a number of taxation implications depending on a number of factors specific to each JTL Shareholder.

6.13 Consents

The following persons have given and have not, before the date of issue of this Explanatory Memorandum, withdrawn their consent to be named in this Explanatory Memorandum in the form and context in which they are named:

Computershare Investor Services Pty Ltd as JTL’s share registrar;
Deloitte Corporate Finance Pty Limited, which is named in the Investigating Accountant’s Report as having undertaken a review of the forecast financial information that has been prepared by QH Tours and provided to JTL to assist it with the preparation of the information in Section 4.3;
Gadens Lawyers as JTL’s legal adviser;
Kidder Williams Limited as JTL’s corporate adviser;
KPMG as nominated auditor of the Combined JTL Group;
Pitcher Partners as JTL’s current auditor;
Pitcher Partners Corporate Pty Ltd as Investigating Accountant and taxation adviser;
PricewaterhouseCoopers Securities Ltd as Independent Expert;
Qantas Airways; and
QH Tours.

QH Tours has given, and has not withdrawn, its written consent to the inclusion of the information in the Letter from the Qantas Airways Chairman, Section 2.1.2, Section 3, Section 5, Appendix E and the forecast financial information about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours and provided to JTL to assist it with the preparation of the information in Section 4.3 of this Explanatory Memorandum and the references to that information in the form and context in which they are included in this Explanatory Memorandum.

PricewaterhouseCoopers Securities Ltd has given, and has not withdrawn, its written consent to the inclusion of the Independent Expert’s Report in Appendix B and the references to that report in the form and context in which they are included in this Explanatory Memorandum.

Pitcher Partners Corporate Pty Ltd as Investigating Accountant has given, and has not withdrawn, its written consent to the inclusion of the Investigating Accountant’s Report in Appendix C and, as taxation adviser, has given, and has not withdrawn, its written consent to the inclusion of the taxation report in Appendix D and the references to those reports in the form and context in which they are included in this Explanatory Memorandum.

==> picture [596 x 107] intentionally omitted <==

Each party referred to in this Section 6.13:

does not make, or purport to make, any statement in this Explanatory Memorandum or any statement on which this Explanatory Memorandum is based other than a statement included in this Explanatory Memorandum with the consent of that party; and
to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Explanatory Memorandum, other than as described in this Section with the consent of that party.

==> picture [531 x 533] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

7. GLOSSARY

In this Explanatory Memorandum except where the context otherwise requires:

ACCC means the Australian Competition & Consumer Commission.

Anti-Dilution Deed means the anti-dilution deed to be entered into by QH Tours and JTL the terms of which are summarised in Section 6.4.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited ACN 008 624 691.

ASX Listing Rules means the Listing Rules of the ASX.

Break Fee means $3.5 million.

Combined JTL Group means JTL post implementation of the Merger Proposal including Qantas Holidays and Qantas Business Travel.

Company means Jetset Travelworld Ltd ACN 091 214 998.

Completion means completion of the sale and purchase of the QH Shares and the issue and allotment of new JTL Shares to QH Tours as contemplated by the Merger Implementation Agreement.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of JTL as at the date of this Explanatory Memorandum.

EBIT means earnings before interest and tax.

EGM means the extraordinary general meeting of JTL Shareholders to be held on 18 June 2008.

Explanatory Memorandum means the Explanatory Memorandum required under item 7 of section 611 of the Corporations Act to be despatched to JTL Shareholders in respect of the Merger Proposal, the Merger Resolutions and the Other Resolutions, including or accompanied by the Independent Expert’s Report, notice convening the EGM and a proxy form for the EGM.

FTE means full time employee.

FY means financial year.

GDS means global distribution system.

Independent Expert means PricewaterhouseCoopers Securities Ltd ACN 003 311 617.

Independent Expert’s Report means the report of the Independent Expert contained in Appendix B of this Explanatory Memorandum.

Investigating Accountant means Pitcher Partners Corporate Pty Ltd ACN 082 323 868.

Investigating Accountant’s Report means the report of the Investigating Accountant contained in Appendix C of this Explanatory Memorandum.

JTL means Jetset Travelworld Ltd ACN 091 214 998.

JTL Board means the board of directors of JTL.

JTL Director means a member of the JTL Board.

JTL Group means JTL and its subsidiaries and controlled entities as at the date of this Explanatory Memorandum.

JTL Shareholder means the holder of JTL Shares.

JTL Share Registry means Computershare Investor Services Pty Limited ACN 078 279 277.

JTL Shares means fully paid ordinary shares in the capital of JTL.

Merger means the merger of JTL and Qantas Holidays and Qantas Business Travel as contemplated by the Merger Implementation Agreement described in this Explanatory Memorandum.

==> picture [596 x 107] intentionally omitted <==

Merger Implementation Agreement means the Merger Implementation Agreement dated 21 February 2008 between JTL and QH Tours (as amended by an amending agreement dated 2 May 2008).

Merger Proposal means the proposed acquisition by JTL of all of the fully paid ordinary shares in the capital of Qantas Holidays and the proposed issue by JTL of new JTL Shares to QH Tours as contemplated by the Merger Implementation Agreement to achieve the Merger.

Merger Resolutions means Resolutions 1, 2 and 3 set out in the Notice of EGM.

NPBT means net profit before tax.

NPAT means net profit after tax.

Notice of EGM means the notice of extraordinary general meeting dated 7 May 2008 in respect of the EGM contained in Appendix A of this Explanatory Memorandum.

Other Resolutions means Resolutions 4, 5 and 6 set out in the Notice of EGM.

Prescribed Occurrence includes the occurrence of any of the following:

(a) a person converting all or any of its securities into a larger or smaller number of securities;
(b) a person resolving to reduce its capital in any way or reclassifying, combining, splitting or redeeming or repurchasing directly or indirectly any of its securities;
(c) a person declaring, paying or distributing any dividend, bonus or other share of its profits or assets by way of dividend, capital reduction;
(d) a person entering into a buy-back agreement or resolving to approve the terms of a buy-back agreement under the Corporations Act;
(e) a person issuing securities, or granting an option (including a performance right) over its securities, or agreeing to make such an issue or grant such an option (including a performance right);
(f) a person issuing or agreeing to issue, securities or other instruments convertible into securities (including any performance right);
(g) a person making any change or amendment to its constitution;
(h) a person acquiring or disposing of, agreeing to acquire or dispose of, or offering, proposing, announcing a bid or tendering for the acquisition of, any securities, business, intellectual property, assets (in the nature of a business or part of a business), interests in a joint venture, entity or undertaking other than in the ordinary course of conducting its existing business, consistent with past practice or as publicly announced to the market prior to the date of the Merger Implementation Agreement;
(i) other than in the ordinary course of business, a person providing financial accommodation, other than to members of the same corporate group, irrespective of what form of financial indebtedness that accommodation takes;
(j) a person entering into or agreeing to enter into a contract or commitment requiring total payments of more than $50,000;
(k) a person incurring or agreeing to incur capital expenditure of more than $100,000;
(l) an insolvency event occurring in relation to a person; or
(m) a person making any significant change to its accounting practices or policies applied by it to report its financial position other than as a result of advice received from its auditors or to comply with accounting standards.

==> picture [596 x 101] intentionally omitted <==

7. GLOSSARY (CONT)

Pro-Forma Forecast Financial Information means the forecast financial information:

(a) about JTL that has been prepared by JTL; and
(b) about Qantas Holidays and Qantas Business Travel that has been prepared by QH Tours and provided to JTL to assist it with the preparation of the information, set out in Section 4.3 of this Explanatory Memorandum.

Qantas Airways means Qantas Airways Limited ACN 009 661 901.

Qantas Business Travel or QBT means Qantas Business Travel Pty Limited ACN 128 382 187, or the business of providing travel management services to businesses and government, including flights, accommodation, car hire, currency and visas currently operated by Qantas Business Travel Pty Limited ACN 128 382 187 and historically operated by Qantas Airways through its business division, “Qantas Business Travel” (as the context requires).

Qantas Group means Qantas Airways and its related bodies corporate (excluding the QH Group Companies).

Qantas Holidays or QH means Qantas Holidays Limited ACN 003 836 459 and the retail and wholesale travel services operated by it through locations in Australia and worldwide.

QH Group means Qantas Holidays and Qantas Business Travel.

QH Group Company means any one of Qantas Holidays and Qantas Business Travel.

QH Shares means all of the shares on issue in Qantas Holidays.

QH Tours means Q H Tours Ltd ACN 001 262 433.

Record Date means 7.00pm (Sydney/Melbourne, time) on 19 June 2008.

Resolutions means the Merger Resolutions and the Other Resolutions.

Representative means, in relation to a person, its related bodies corporate, controlled entities, directors, officers, employees, contractors, advisers and agents (but excludes the Independent Expert and the Investigating Accountant).

Separation Agreements means the agreements relating to the provision of shared services, including those agreements described in Section 6.5 of the Explanatory Memorandum.

Special Dividend means the special dividend of 11 cents per JTL Share payable on the approval of the Merger Proposal by JTL Shareholders to those JTL Shareholders on JTL’s share register as at the Record Date (which will not include QH Tours).

Total Transaction Value means the total value of all air tickets, holidays packages and other travel products sold from which income is derived.

==> picture [596 x 107] intentionally omitted <==

8. CORPORATE DIRECTORY

Jetset Travelworld Ltd

Level 28, 264 George Street Sydney, NSW 2000

Financial adviser

Kidder Williams Limited Level 35, 101 Collins Street Melbourne, VIC 3000

Legal adviser

Gadens Lawyers Level 25, 600 Bourke Street Melbourne, VIC 3000

Investigating Accountant

Pitcher Partners Corporate Pty Ltd Level 19, 15 William Street Melbourne, VIC 3000

Taxation adviser

Pitcher Partners Corporate Pty Ltd Level 19, 15 William Street Melbourne, VIC 3000

Independent Expert

PricewaterhouseCoopers Securities Ltd Freshwater Place, 2 Southbank Boulevard Southbank, VIC 3006

Share Registry

Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford, VIC 3067

==> picture [596 x 101] intentionally omitted <==

APPENDIX A – NOTICE OF EXTRAORDINARY GENERAL MEETING

Jetset Travelworld Ltd ACN 091 214 998

NOTICE IS HEREBY GIVENNOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the members of Jetset Travelworld Ltd that an Extraordinary General Meeting of the members of Jetset Travelworld Ltd ACN 091 214 998 ACN 091 214 998 (JTL)(JTL) will be held at will be held at [insert location] The Westin Melbourne, 205 Collins Street, Melbourne, Victoria,on 29 May 2008 at 11.00am (Sydney/Melbourne time).on 18 June 2008 at 11.00am (Sydney/Melbourne time). The business to be considered at the Extraordinary General Meeting is set out below. Information on the proposal to which the business relates is contained in the Explanatory Memorandum to which this Notice The business to be considered at the Extraordinary General Meeting is set out below. Information on the of Meeting is appended and forms part. This Notice of Extraordinary General Meeting should be read in proposal to which the business relates is contained in the Explanatory Memorandum to which this Notice conjunction with the Explanatory Memorandum. of Meeting is appended and forms part. This Notice of Extraordinary General Meeting should be read in conjunction with the Explanatory Memorandum. Terms used in this Notice of Meeting will, unless the context otherwise requires, have the same meaning given to them in the Glossary contained in Section 7 of the Explanatory Memorandum.Terms used in this Notice of Meeting will, unless the context otherwise requires, have the same meaning given to them in the Glossary contained in Section 7 of the Explanatory Memorandum.

AGENDA

SPECIAL BUSINESS

==> picture [484 x 465] intentionally omitted <==

----- Start of picture text -----

Resolution 1 Issue of new JTL Shares to Q H Tours
To consider and, if thought fit, pass the following resolution as an ordinary resolution:
“Subject to the passing of Resolutions 2 and 3, that for the purposes of item 7 of section 611 of
the Corporations Act 2001 and all other purposes, approval be given to the issue to Q H Tours of
new JTL Shares equal in number to 58/42 multiplied by the total number of JTL Shares on issue
immediately before the issue of the new JTL Shares to Q H Tours on completion of the sale and
purchase of all the issued fully paid ordinary shares in the capital of Qantas Holidays Limited
(Completion) pursuant to and in accordance with the terms and conditions of the Merger
Implementation Agreement and as described in the Explanatory Memorandum, which will result
in the acquisition by Q H Tours of a relevant interest in JTL Shares giving Q H Tours voting
power in JTL of 58%.”
Resolution 2 Anti-Dilution Deed
To consider and, if thought fit, pass the following resolution as an ordinary resolution:
“Subject to the passing of Resolutions 1 and 3, that for the purposes of Chapter 2E of the
Corporations Act 2001 and for all other purposes, approval be given to JTL entering into the
Anti-Dilution Deed with Q H Tours under which JTL will give Q H Tours the financial benefits
described in Section 6.6 of the Explanatory Memorandum.”
Resolution 3 Merger Implementation Agreement and Separation Agreements
To consider and, if thought fit, pass the following resolution as an ordinary resolution:
“Subject to the passing of Resolutions 1 and 2, that for the purposes of Chapter 2E of the
Corporations Act 2001 and for all other purposes, approval be given to JTL and its subsidiaries
(including, from Completion, Qantas Holidays Limited and Qantas Business Travel Pty Ltd)
(Combined JTL Group) being party to the Separation Agreements and to members of the
Combined JTL Group performing and observing (or procuring the performance and observance
of) all of their obligations under or otherwise contemplated by the Merger Implementation
Agreement or the Separation Agreements, as described in Sections 6.3 and 6.5 of the
Explanatory Memorandum, which will give Qantas Airways and its wholly-owned subsidiaries
the financial benefits described in Section 6.7 of the Explanatory Memorandum.”
Resolution 4 Increase in the maximum aggregate annual remuneration of non-executive
directors
To consider and, if thought fit, pass the following resolution as an ordinary resolution:
“Subject to the passing of Resolutions 1, 2 and 3, that, for the purposes of ASX Listing Rule
10.17 and in accordance with clause 10.2 of the existing constitution of JTL, the maximum
aggregate annual remuneration that may be payable by JTL to JTL’s Non-Executive Directors as
remuneration for the services of those Non-Executive Directors be increased by $550,000 per
annum from $250,000 per annum to $800,000 per annum”.
----- End of picture text -----

==> picture [596 x 107] intentionally omitted <==

APPENDIX A – NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [484 x 132] intentionally omitted <==

----- Start of picture text -----

Resolution 5 Removal of current Auditor
To consider and, if thought fit, pass the following resolution as an ordinary resolution:
“Subject to the passing of Resolutions 1, 2, 3 and 6, that Pitcher Partners be removed as Auditor
of JTL”.
Resolution 6 Appointment of new Auditor
To consider and, if thought fit, pass the following resolution as a special resolution:
“Subject to the passing of Resolutions 1, 2, 3 and 5, that KPMG who has consented in writing to
act as Auditor of JTL, be appointed Auditor of JTL”.
----- End of picture text -----

Dated: 7th May 2008

By order of the Board of Jetset Travelworld Ltd

==> picture [96 x 43] intentionally omitted <==

Stephen F Heesh Company Secretary

NOTES:

Voting Exclusions

Resolution 1- Issue of new JTL Shares to Q H Tours

JTL will disregard any votes cast on Resolution 1 by Q H Tours and its associates.

Resolution 2 - Anti-Dilution Deed

JTL will disregard any votes cast (in any capacity) on Resolution 2 by or on behalf of Q H Tours and its associates.

Resolution 3 – Merger Implementation Agreement and Separation Agreements

JTL will disregard any votes cast (in any capacity) on Resolution 3 by or on behalf of the Qantas Group and their associates.

Resolution 4 - Increase in the maximum aggregate annual remuneration of non-executive directors

JTL will disregard any votes cast on Resolution 4 by any Director or proposed Director of JTL and any associate of a Director or proposed Director of JTL.

Exceptions to Voting Exclusion Statements

JTL need not disregard a vote in accordance with the above voting exclusion statements if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

2. Voting Entitlements

For the purposes of this General Meeting, in accordance with Regulation 7.11.37 of the Corporations Regulations 2001, the Board of Directors has determined that a member’s entitlement to vote at the General Meeting will be the entitlement of that member set out in the register of members as at 7.00pm (Sydney/ Melbourne time) on 16 June 2008. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Extraordinary General Meeting.

==> picture [596 x 101] intentionally omitted <==

APPENDIX A – NOTICE OF EXTRAORDINARY GENERAL MEETING

3. Proxies

A member of JTL has the right to appoint a proxy. A proxy need not be a member of JTL.

A member is entitled to appoint not more than two proxies to attend and vote on behalf of such member.

A member entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the proportion or number of votes that each proxy may exercise is not specified then each proxy may exercise half of the votes (any fractions will be disregarded).

A proxy document or form is valid if it is signed by the member of JTL making the appointment and contains the member’s address, JTL’s name, the proxy’s name or the name of the office held by the proxy and the meeting at which the appointment may be used and is received in accordance with the instructions set out below.

For the appointment of a proxy, the proxy form enclosed with this Explanatory Memorandum may be used. In order for the appointment of a proxy to be valid, the proxy form must be received no later than 11.00am on 16 June 2008. If the proxy form is signed by the appointor’s attorney, the authority (or certified copy of the authority) under which the appointment was signed must be received no later than 11.00am on 16 June 2008.

Duly signed proxy forms (and, if applicable, authorities) must be received by the JTL Share Registry:

at JTL’s share registry:

In Person

Share Registry - Computershare Investor Services Pty Limited Yarra Falls

452 Johnston Street Abbotsford, VIC 3067

By Mail

Share Registry - Computershare Investor Services Pty Limited GPO Box 242

Melbourne, VIC 3001

By Facsimile

+61 3 9473 2555

==> picture [547 x 264] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

APPENDIX A – NOTICE OF EXTRAORDINARY GENERAL MEETING

In the case of joint holders of shares any one of such persons may vote at any meeting as if he were solely entitled thereto, but if more than one of such joint holders tenders a vote the vote of the senior who tenders a vote whether in person or by proxy or by attorney or howsoever shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members.

If a member is a corporation and wishes to appoint a proxy, the proxy form must be executed under its common seal or, in the absence of a common seal, must be signed by:

two directors of the corporation; or
a director and a company secretary of the corporation; or
if the corporation is a proprietary company that has a sole director who is also the sole company secretary – that director; or
the corporation’s appointed attorney under the power of attorney.

If a representative of the corporation is to attend the General Meeting, the appropriate “Certificate of Appointment of Representative” should be produced prior to admission. A form of the certificate may be obtained from JTL’s Registered Office, or the JTL share registry.

Majorities required for Resolutions to be passed

Resolutions 1, 2, 3, 4 and 5

Resolutions 1, 2, 3, 4 and 5 will not be passed unless more than 50% of the votes cast on each Resolution (either in person, proxy, attorney or by corporate representative) are in favour of the Resolution.

Resolution 6

Resolution 6 will not be passed unless at least 75% of the votes cast on Resolution 6 (either in person, proxy, attorney or by corporate representative) are in favour of Resolution 6.

==> picture [531 x 316] intentionally omitted <==

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [387 x 45] intentionally omitted <==

Independent Expert’s Report

Jetset Travelworld Limited

7 May 2008

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

The Directors Jetset Travelworld Limited Level 28 Australia Square 264 George Street Sydney NSW 2000

PricewaterhouseCoopers Securities Ltd ACN 003 311 617 ABN 54 003 311 617 Holder of Australian Financial Services Licence No 244572

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 Website:www.pwc.com/au Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999

7 May 2008

Dear Directors

Independent Expert’s Report in relation to the proposed acquisition of a majority interest in Jetset Travelworld Limited by QH Tours Limited, a wholly-owned subsidiary of Qantas Airways Limited

Introduction and Purpose of the Report

PricewaterhouseCoopers Securities Ltd (“PwCS”) has been retained to prepare an Independent Expert’s Report (“IER”) for Jetset Travelworld Limited (“Jetset” or “the Company”) with respect to the proposed acquisition of a controlling interest in Jetset by QH Tours Ltd, a wholly-owned subsidiary of Qantas Airways Limited (“Qantas”) in exchange for Jetset acquiring Qantas Holidays and Qantas Business Travel (collectively, “QHB”) (“the Proposal”). If the Proposal proceeds, Qantas will hold a 58% interest in Jetset. The transaction will be effected by Jetset acquiring all of the shares in Qantas Holidays Limited which includes the existing QHB businesses. PwCS has been requested to address whether or not the Proposal is fair and reasonable for Jetset’s non-associated shareholders.

Summary of Opinion

PwCS is of the opinion that in the absence of a superior proposal emerging, the Proposal is not fair but is reasonable to Jetset’s non-associated shareholders.

PwCS’ opinion should be read in conjunction with the remainder of this letter and the attached detailed IER which sets out PwCS’ scope and findings.

PwCS’ approach, decision criteria and evaluation process are set out in this IER.

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 101] intentionally omitted <==

Summary of the Proposal

Under the Proposal, Jetset is offering to issue new Jetset shares (“the Placement Shares”) to QH Tours Limited, a wholly-owned subsidiary of Qantas in exchange for 100% of QHB. Jetset will remain an Australian Securities Exchange (“ASX”) listed company with Qantas (through its subsidiary QH Tours) becoming a major shareholder holding 58% of Jetset following the implementation of the Proposal. The remaining 42% of Jetset will be held by existing Jetset shareholders.

Basis of Evaluation

PwCS has been asked to consider whether the Proposal is fair and reasonable to Jetset’s nonassociated shareholders in compliance with ASIC Regulatory Guide 111 and 74, and Item 7 of the table in Section 611 of the Corporations Act.

Regulatory Guide 111 provides that in considering a transaction where a person receives in excess of 20% of a company and obtains control through the receipt of securities in return for vending a business into the company, the transaction should be analysed as a takeover bid. In considering a takeover bid the words fair and reasonable are treated as two distinct criteria.

An offer is fair if the value of the offer price or consideration is equal to or greater than the value of the security which is the subject of the offer. The comparison is to be made assuming 100% ownership of the target, irrespective of whether the consideration is scrip or cash.

An offer is reasonable if it is fair. It might also be ‘reasonable’ if, despite not being ‘fair’, the expert believes there are sufficient reasons for security holders to accept the offer in the absence of any higher bid before the close of the offer.

Is the Proposal Fair for Jetset’s Non-associated Shareholders?

PwCS has assessed that the Proposal is not fair to Jetset’s non-associated shareholders.

PwCS has formed this opinion by comparing the value of Jetset pre the implementation of the Proposal on a controlling interest basis to the value of Jetset post implementation of the Proposal on a minority interest basis. PwCS assessed both values on a cumulative dividend basis (i.e. the value of the dividends is included in the valuation of Jetset pre and post the Proposal).

PwCS assessed the value of a Jetset share on a controlling cumulative dividend basis to be between $2.88 and $3.12 which compares to PwCS’ assessed value of Jetset post implementation of the Proposal (“the Combined Entity”) on a minority interest and cumulative dividend basis, at between $2.73 and $2.95 per share.

Whilst the value range for Jetset stand alone marginally overlaps the assessed range of the Combined Entity ($2.88 per share low value of Jetset compares with $2.95 high value of the Combined Entity), PwCS considers that the Proposal is not fair to Jetset’s non-associated shareholders.

iii

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Is the Proposal Reasonable for Jetset Non-associated Shareholders?

Advantages

Integration, diversification and competitive positioning

The completion of the Proposal will create a vertically integrated group bringing together complementary businesses with retail, wholesale, corporate and online travel capabilities. The Proposal will result in a strengthened market player with a multi-channel service offering and crossselling opportunities including enhanced direct, indirect and online sales channels.

The Proposal will increase Jetset’s content buying power and overall market presence (i.e. market share) and it will position Jetset to compete more effectively with its vertically integrated (i.e. Flight Centre and the Stella Group) and emergent online competitors. PwCS expects that Jetset will be better placed to compete in this market than if it remained stand-alone and attempted to enhance its business organically.

PwCS considers that the Proposal will improve Jetset’s growth prospects and competitive position through vertical integration and multi-channel diversification. For example, Qantas Business Travel’s expertise in the corporate travel segment has the potential to assist Jetset in creating a SME travel offering through its franchise network. Jetset will also be able to leverage from Qantas’ online expertise and advance its online capabilities for its franchisee network including dynamic packaging. Jetset will also be able to access the qantas.com channel to market (for a period of five years with a conditional review period of a further five years), which has approximately six million visitors per month.

Share market

Jetset, prior to and after implementation of the Proposal, will be capitalised with no debt. However, the increased market capitalisation of the Combined Entity will increase the capacity for Jetset to pursue larger organic and inorganic investment opportunities. Jetset will also have a wholly-owned subsidiary of Qantas as its major shareholder. Qantas is an ASX listed company with a market capitalisation of approximately $6.7 billion[1] .

There is currently little analyst coverage of Jetset. On implementation of the Proposal, some analyst coverage is more likely on the back of analysts’ coverage of Qantas, albeit PwCS does not expect the coverage to be extensive. This may increase market awareness of Jetset with resultant potential benefits regarding value and liquidity.

Jetset post implementation of the Proposal is likely to have a market capitalisation sufficient to support inclusion in the ASX 300 Index, which will also be dependent on the liquidity of the shares. Inclusion in an ASX index may lead to increased interest from institutional investors and market analysts.

Brand

1 Bloomberg data as at 5 May 2008

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

(with a conditional option to extend for a further ten years). After the expiry, or prior to expiry, the relevant Jetset subsidiaries will need to review an agreement with Qantas to extend the use of the brands (at a possible cost to Jetset) or re-brand the business activities which utilise Qantas Holidays (“QH”), Qantas Business Travel (“QBT”) and Viva! related branding.

Jetset will have access to and become the preferred supplier of land travel content to qantas.com. This should reduce the risks related to the traditional retail revenue erosion by recapturing or capturing incremental revenue through the online channel.

Earnings volatility

If the Proposal is implemented it is more likely that Jetset’s earnings will be less volatile due to the increased diversity of operating a fully integrated business (i.e. retail, wholesale, corporate and online travel services).

Synergy benefits

Jetset management expect that certain synergies will be realised if the Proposal proceeds. Jetset’s existing shareholders will benefit on a pro-rata basis (i.e. 42% of the synergy benefit).

PwCS analysis indicates that the net present value of the revenue benefits and cost savings identified by management is approximately $35 million. This represents a $14.7 million synergy benefit (or $0.16 per existing Jetset share) for Jetset shareholders. This excludes any other intangible benefits related to the strategic advantages of the Proposal described above.

Premium on Jetset’s value per share on a minority interest basis

PwCS’ assessed value range of between $2.73 to $2.95 for Jetset (on a minority interest, cumulative dividend basis) if the Proposal proceeds represents a premium of 14% above PwCS’ assessed value range determined for a Jetset share on a minority cumulative dividend basis of between $2.40 to $2.60.

Summary of Share Prices $
	Low High
Jetset (minority basis) Combined Entity (minority basis)	2.40 2.60 2.73 2.95
Premium / (Discount) %	$0.33 $0.35 14% 14%

Premium on Jetset’s trading share price

PwCS’ assessed value range per share for Jetset of $2.73 to $2.95 (minority interest, cumulative dividend basis) if the Proposal proceeds represents the following premiums to the following Jetset share prices:

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

11% to 19% premium to the share price of $2.47 as at 16 April 2008;
4% to 13% premium to the 1 month volume weighted average share price (“VWAP”) prior to 6 October 2007 (the date of press speculation relating to a possible transaction);
22% to 32% premium to the 3 month VWAP prior to 6 October 2007; and
28% to 38% premium to the 6 month VWAP prior to 6 October 2007.

Jetset’s non-associated shareholders should be aware that the estimate of the value of a share in the Combined Entity does not necessarily reflect the price at which the shares will trade if the Proposal is implemented. The share price at which the Combined Entity will ultimately trade depends on a range of factors including the supply and demand for Jetset’s shares, achievement of merger benefits, liquidity of market trading in Jetset’s shares future economic conditions.

Disadvantages

Foregone opportunity to receive a future takeover premium

Upon completion of the Proposal, Jetset will issue approximately 127.3 million shares to QH Tours. As a result QH Tours will hold 58% of the fully paid ordinary shares on issue. Qantas will also have the right to appoint 4 of Jetset’s directors, which will comprise a majority of the board. Based on Qantas’ announced strategy in relation to retaining full ownership of its travel businesses, it is unlikely that Qantas will increase its interest to 100% of Jetset in the immediate future. It is also likely that Qantas will maintain a controlling ownership (i.e. a minimum 51% interest) for the foreseeable future.

As a result of the Proposal, Jetset’s existing shareholders will no longer collectively control Jetset, and it is unlikely that Jetset will be the subject of a future transaction which would entitle Jetset shareholders to participate in the benefit of a control premium, from an alternative bidder to Qantas. Accordingly, if implemented, Jetset shareholders should consider that the prospect of benefiting from a future control premium is significantly reduced.

Observed average takeover premiums in the period 2005 to 2007, according to our research, were in the range of 20% to 30% with significant variances observed depending on the circumstances. For example, PEP’s attempted acquisition of Flight Centre in September 2006 implied a 39% premium over the 3 months VWAP prior to the announcement date.

Qantas and entities associated with Mr Spyros Alysandratos (Sintack Pty Ltd, S & I Nominees Pty Ltd, Just Super Co. Pty Ltd, and Chesters Nominees Pty Ltd or “Sintack and Associated Entities”) will together hold in excess of 75% of Jetset shares and, if entitled to vote, be able to pass special resolutions (on a combined basis).

At the date of this report Jetset’s market capitalisation was approximately $227.8 million. Of the 92.2 million issued Jetset shares, 55.2 million or 59.9% are held by Sintack and Associated Entities. This leaves approximately 40.1% or 37.0 million of Jetset’s shares available for trade on the ASX (in the absence of Jetset’s major shareholders electing to sell down their interests). Following the implementation of the Proposal, Jetset’s shareholders will be as follows:

Qantas 127.3 million or 58.0%
Sintack and Associated Entities 55.2 million or 25.2%
Other shareholders 37.0 million or 16.8%

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

In the absence of any sell down by the two major shareholders, the percentage of Jetset shares available for trade on the ASX will reduce from 40.1% to 16.8% (albeit that the number of shares available for trade will not alter – 37.0 million). Accordingly, PwCS does not expect that the Proposal will significantly improve Jetset’s market liquidity or reduce Jetset’s share price volatility.

However, for many of the existing Jetset shareholders (with the exclusion of Sintack and Associated Entities) this is not materially different to the current structure where 59.9% of Jetset is controlled by one shareholder.

Risks of integration

As with the integration of any business, there are costs and risks associated with successfully implementing the Proposal. These include cultural differences, risks that franchisees will not support the business being controlled by QH Tours Ltd (and ultimately Qantas), that anticipated synergistic benefits will not be realised or that implementation costs will exceed expectations.

The Combined Entity will be exposed to QH’s declining business (in its current form) as result of the trend towards unbundling and disintermediation of the travel services industry if the online growth strategy is not successful. If the online strategy for QHB does not successfully make up for this decline then Jetset’s earnings and growth prospects will be negatively affected.

Prospects of a Superior Alternative Offer

PwCS is not aware of any superior alternative offer for Jetset’s existing shareholders as at the date of this report.

Other Considerations

Share price movements

Jetset’s share price increased from $2.90 on 5 October 2007 to a VWAP of $3.38 in the following three months. This share price appreciation partly reflects the expectation of potential future benefits in relation to the initial speculation followed by the announcement of the Proposal on 18 October 2007. However, the share price has since moved broadly in line with the S&P/ASX 200 index to $2.60[2]

Earnings per share

The Proposal would result in a forecast increase in Earnings per share for Jetset shareholders for FY08 of $0.014 per share, or an increase of 8% over the forecast Earnings per share for Jetset if the Proposal does not proceed. Jetset shareholders will also receive a special dividend of $0.11 cents per share only if the Proposal proceeds, in addition to the interim dividend of $0.05 cents per share paid to Jetset shareholders on 31 March 2008.

2 Bloomberg data as at 24 April 2008

vii

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

	2007A	2008F
Proposal does not proceed (Jetset Standalone)
Jetset NPAT ($ mil normalised)	13.0	17.1
Number of shares outstanding (mil)	92.2	92.2
Earnings per Share	$0.141	$0.185
Proposal proceeds
Combined Entity NPAT ($ mil normalised)	39.5	43.6
Number of shares outstanding (mil)	219.6	219.6
Earnings per Share	$0.180	$0.199

Independent financial advice

The ultimate decision on whether to approve the Proposal, should be based on each Jetset’s shareholder’s assessment of the Proposal and their own circumstances. If in doubt about the proposed transaction, or matters dealt with in the IER, shareholders should seek independent professional advice. PwCS’ full opinion on the proposed transaction, and the reasoning behind its opinion, is included in this report. PwCS recommends that Jetset shareholders read the entire report before deciding whether or not to approve the Proposal.

The qualifications, declarations, disclaimers and consents contained in appendices to this IER form an integral part of and should be read with this report.

Conclusions

Overall, in PwCS’ opinion, the advantages of the Proposal to Jetset’s non-associated shareholders outweigh the disadvantages. Accordingly, PwCS considers that the Proposal is reasonable.

Yours faithfully

==> picture [109 x 65] intentionally omitted <==

Nigel Smythe Authorised Representative PricewaterhouseCoopers Securities Ltd

==> picture [140 x 53] intentionally omitted <==

James Garde Authorised Representative PricewaterhouseCoopers Securities Ltd

viii

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

1.	Introduction and Purpose of PwCS' Report....................................................................................... 2
2.	Basis of Evaluation ............................................................................................................................ 5
3.	Industry Overview.............................................................................................................................. 7
4.	Profile of Jetset................................................................................................................................ 21
5.	Profile of QHB.................................................................................................................................. 30
6.	Profile of Jetset/QHB Combined...................................................................................................... 35
7.	Valuation Methodologies ................................................................................................................. 37
8.	Valuation of Jetset ........................................................................................................................... 40
9.	Valuation of Jetset/QHB Combined................................................................................................. 47
10.	Comparison of the value of Jetset shares pre and post the Proposal............................................. 51
11.	Evaluation of the Proposal............................................................................................................... 52
Appendix A – Financial Services Guide ................................................................................................... 57
Appendix B - Sources of Information ....................................................................................................... 59
Appendix C - Qualifications, Disclaimers and Consents.......................................................................... 60
Appendix D - Comparable Company Descriptions................................................................................... 62
Appendix E - Comparable Multiples......................................................................................................... 63
Appendix F - Glossary of Terms............................................................................................................... 64

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 1 - Introduction and Purpose of PwCS Report

1. Introduction and Purpose of PwCS Report

1.1. Outline of the Proposal

On 21 February 2008, Jetset and Qantas jointly announced the Proposal.

Under the Proposal, Jetset is offering to issue Placement Shares to Qantas in exchange for 100% of QHB. Jetset will remain an ASX listed company with Qantas becoming a major shareholder holding 58% of Jetset post implementation of the Proposal. The remaining 42% of Jetset will be held by Sintack and Associated Entities (25%) and the existing Jetset minority shareholders (17%). The number of Placement Shares to be issued to Qantas is determined by the following formula:

58 X the total number of Jetset shares on issue immediately before 42 the issue of Jetset shares to Qantas on Completion.

Jetset currently has 92,212,250 issued shares. If no further shares are issued between now and the implementation of the Proposal, Jetset will issue 127,340,726 new shares to Qantas.

Jetset and QH Tours Limited, a wholly owned subsidiary of Qantas, have entered into a Merger Implementation Agreement and Amending Agreement (collectively “MIA”) in relation to the Proposal. Key terms including pre-implementation steps and conditions precedent of the MIA are summarised in the Jetset Explanatory Memorandum (“EM”).

The Proposal will require approval by a majority of Jetset shareholders at an extraordinary general meeting, expected to take place in June 2008. Upon shareholder approval of the Proposal, and prior to implementation, Jetset shareholders are to receive a special dividend of $0.11 per share, in addition to the half-year ordinary dividend of $0.05 per share paid on 31 March 2008.

1.2. Purpose of Report

Jetset has appointed PwCS to prepare an IER assessing whether the Proposal is fair and reasonable for Jetset’s non-associated shareholders. This report has been prepared to accompany the Explanatory Memorandum to be distributed to Jetset’s shareholders on or around May 2008.

Section 606 of the Corporations Law prohibits the acquisition of a relevant interest in the issued voting shares of a company from 20% or below to more than 20%. An exception to this general prohibition is allowed under Section 611 (7) where the acquisition is approved by a majority of company shareholders at a general meeting and no votes are cast in favour of the resolution by the acquirer or its associates.

Since the Proposal will result in the issue of more than 20% of the issued voting share capital of Jetset to Qantas, the Proposal requires the approval of Jetset shareholders not associated with Qantas.

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 101] intentionally omitted <==

Section 1 - Introduction and Purpose of PwCS Report

Section 611 (7) also requires that the shareholders are given all information known to the person or its associates proposing to make the acquisition, or known to the company, that is material to the decision on how to vote the resolution. In order to assist Jetset shareholders, PwCS has been requested to prepare this report on a basis consistent with the legislative requirements and other ASIC guidance relevant to expert’s reports considering a transaction under Section 611 (7).

1.3. Sources of Information

In compiling this IER, PwCS has had regard to public and non-public information. A listing of this information is detailed in Appendix B. PwC has used and relied on the information set out in Appendix B and representations made to it by and on behalf of Jetset.

PwCS has conducted such checks, enquiries and analyses on the information provided which it regards as appropriate for the purposes of this IER. Based on this evaluation, PwCS believes that the information used in forming the opinions in this IER is accurate, complete and not misleading and that PwCS has no reason to believe that material information relevant to this IER has been withheld. Whilst PwCS’ work has involved an analysis of financial information and accounting records, it does not constitute an audit of QHB or Jetset in accordance with generally accepted auditing standards or a review in accordance with AUS 902 applicable to review engagements, and accordingly no such assurances are given in this IER.

1.4. Limitations and Reliance on Information

PwCS’ assessment has been made as at the date of this IER. Economic conditions, market factors and performance changes may result in the IER becoming outdated. PwCS reserves the right to review its assessments, and, if it considers it necessary to issue an addendum to this IER in the light of any relevant material information which subsequently becomes known to PwCS prior to the vote to be held in June 2008.

1.5. Scope Exclusions

This IER has been prepared solely for the purpose of assisting Jetset shareholders in considering whether to approve the Proposal. This IER has not been prepared to provide information to other parties considering the purchase or sale of any securities in Jetset or Qantas. Accordingly, PwCS does not assume any responsibility or liability for any losses suffered as a result of the use of this IER contrary to the provisions of this paragraph.

1.6. Jetset Shareholders should seek Personal Advice

An individual Jetset shareholder’s decision in relation to the Proposal may be influenced by his or her particular circumstances. In undertaking the assessment, PwCS has considered the Proposal for Jetset non-associated shareholders as a whole. PwCS has not considered the effect of the Proposal on the particular circumstances of individual Jetset shareholders nor has it considered their individual objectives, financial situation or needs. Individual Jetset shareholders will have varying financial and tax circumstances and it is not practical or possible to consider the implications of the Proposal on

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 1 - Introduction and Purpose of PwCS Report

individual Jetset shareholders as their respective financial circumstances are not known to PwCS. Due to particular circumstances, individual Jetset shareholders may place different emphasis on various aspects of the Proposal from the one adopted in this IER. Accordingly, individual Jetset shareholders may reach different conclusions as to whether they should accept the Proposal. Individual Jetset shareholders should seek their own financial advice.

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 101] intentionally omitted <==

Section 2 - Basis of Evaluation

2. Basis of Evaluation

PwCS has been asked to consider whether the Proposal is fair and reasonable in order to assist Jetset satisfy the requirements of the Corporations Act and ASIC Regulatory Guides (“RG”). The requirements of the Corporations Act are specified in Item 7 of the table in Section 611. This item allows a party to obtain a greater than 20% interest in a company without making a formal takeover offer, if a majority of the non-associated shareholders pass an ordinary resolution approving the transaction at a general meeting. Without such approval the transaction would otherwise be in breach of Section 606 of the Corporations Act.

The requirements of the Corporations Act and the implications for our Report are considered below.

2.1.1. Increase in Shareholding – Section 611 of the Corporations Act

Strictly speaking, there is no statutory requirement to provide an independent experts report for the Proposal. In relation to transactions captured by Section 611, ASIC RG 74 states that in voting on such a proposal the shareholders of a company should be provided with an analysis of whether the proposal is fair and reasonable to the non-associated shareholders. RG 74 recognises that the commissioning of an independent experts report is one way the directors of a company may satisfy their obligations in this regard.

Notwithstanding this, the MIA states that Jetset has an obligation to “promptly appoint an independent expert to provide a report for inclusion in the Explanatory Statement to the extent required by RG 74, RG 111 and RG 112 and, if applicable, Listing Rule 10.10.2 and Listing Rule 11.1”.

RG 111 provides that in considering a transaction where a person receives in excess of 20% of a company and obtains control through the receipt of securities in return for vending a business into the company, the expert should consider the same criteria that would be considered if the transaction was a takeover bid. In considering a takeover bid the words fair and reasonable are treated as two distinct criteria.

An offer is fair if the value of the offer price or consideration is equal to or greater than the value of the security the subject of the offer. The comparison is to be made assuming 100% ownership of the target, irrespective of whether the consideration is scrip or cash.

RG 111 also indicates that if a bidder is offering non-cash consideration, the expert should examine the value of that consideration and compare it with the valuation of the target’s securities. Ordinarily the value of the securities being offered in a control transaction should be assessed on a minority basis, reflecting the fact that the security holders in the target are receiving scrip constituting minority interests in the combined entity. RG 111 also indicates that if, in a scrip bid, the target is likely to become a controlled entity of the bidder, the bidder’s securities can also be valued assuming a

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 2 – Basis of Evaluation

notionally combined entity. The expert should still allow for the fact that accepting holders are likely to hold minority interests in that combined entity.

In this instance, having regard to the substance of the transaction and the fact that Jetset shareholders will hold less than 50% of the Combined Entity following the Proposal, PwCS has assessed the value of 100% of Jetset on a controlling basis and compared this to the value of the 42% shareholding in the Combined Entity (on a minority interest basis) that the existing Jetset shareholders will be entitled to if the Proposal proceeds.

2.1.2. Fair and Reasonable – Factors Considered

In considering whether the Proposal is fair to Jetset non-associated shareholders, PwCS has had regard to the value of Jetset shares assessed on a controlling basis relative to the value of Jetset shares post implementation assessed on a minority basis.

In considering whether the Proposal is reasonable to Jetset non-associated shareholders PwCS has had regard to the other advantages and disadvantages for Jetset non-associated shareholders, if the Proposal proceeds compared to if the Proposal does not proceed. Specifically PwCS has considered:

The strategic rationale for the Proposal and the impact upon Jetset’s future growth and business risks;
The impact of the Proposal on Jetset, including the impact on:
Financial indicators such as earnings per Jetset share;
The potential liquidity of shares; and
Intended Management and Board arrangements.
The impact, if any, on potential future transactions for Jetset non-associated shareholders, such as a takeover; and
Alternatives to the Proposal, including transactions and maintaining a status quo position.

In the following sections, PwCS summarises its findings in relation to:

The value of Jetset shares (controlling basis), and the value of Jetset shares upon completion of the Proposal (minority interest basis); and
The advantages and disadvantages of the Proposal for Jetset non-associated shareholders.

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

==> picture [596 x 101] intentionally omitted <==

3. Industry Overview

3.1. Overview of the Travel Services Industry within Australia

Background

The Travel Services Industry in Australia plays an important role in facilitating domestic, outbound and to a lesser degree inbound travel within Australia. In addition to providing information to potential travellers, Australian travel agents offer a wide range of reservation and booking services for transportation, accommodation and tourist attractions.

The foundation of the industry is the ability for travel agents and/or wholesalers to purchase travel products in large volumes and at discounted prices (volume based discounts are used to support key supplier relationships in many cases). In addition to the discounts offered to bulk purchases, travel agents typically receive commission payments from sales they make on behalf of industry operators.

Success of Travel Services industry participants is largely dependent on the strength of relationships held with key suppliers of travel products and the ability of agents or wholesalers to be involved in large buying groups – thus reducing per unit purchase price. This allows travel agents to sell travel products to consumers at prices similar to, or less than retail prices whilst still making a reasonable margin.

The Travel Services industry in Australia is divided into three distinct segments which collectively are focused on providing cost-effective travel products for intermediaries or end-customers (travellers).

The main Travel Services industry products and service segments are wholesalers/ ticket consolidators (i.e. domestic and outbound/international package travels), travel agents (i.e. retail, private and business travels) and inbound tour operators (i.e. package travel for overseas visitors in Australia). Online travel booking is an alternative channel to market used principally by travel agents. IBISWorld estimate that total revenue for the Travel Services industry in Australia, which includes income relating to services provided to Australians travelling both domestically and internationally, will be $2.7bn for the year ending in 2008. The following chart indicates a revenue split by key segments.

FY08 breakdown of industry revenue by operator activity

$156m $575m $1,957m Wholesalers/ ticket consolidators Travel agencies Inbound tour operators Source: IBISWorld Travel Services in Australia, February 2008

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Wholesalers / ticket consolidators

Wholesalers are the first link in the travel agent industry value chain and play a key role in maximising margins/ profitability of the industry as a whole. The role of the wholesaler is to create travel packages which can be sold to individual travellers by travel agents, in most cases wholesalers negotiate discounted prices with travel industry operators (usually 25 to 30% below retail prices). Discounted travel products, including transport, accommodation and attractions are bundled together in a ‘holiday package’ and made available to travel agents. Travel agents are then paid a commission of approximately 10% to 12% when these packages are sold to end customers.

In some cases, wholesalers also purchase existing basic package products (at discounted prices) and then bundle a number of these basic packages into a single comprehensive package.

Ticket consolidators play a similar role to wholesalers. Like wholesalers, ticket consolidators rely on their relationships with providers of travel products, primarily airlines to make bulk purchases and obtain volume-based discounts. However, ticket consolidators are more focused on providing individual travel products rather than creating travel packages and these products then form the foundation of tailored travel packages pulled together by individual travel agents. Alternatively the products are then on-sold as an unpackaged product.

Travel agents (retail, private and business travel)

Retailers are the final link in the travel agent industry value chain. Travel agents act as intermediaries between travel industry operators (including transportation, accommodation & tourist attractions) and the buying public. Travel agents are able to provide travel advice and also enable consumers to consider a wide range of travel alternatives and find solutions that meet their individual needs. Travel products provided include individual bookings, such as point-to-point, pre-prepared packages and customised packages tailored to individual travellers’ needs.

Travel agents receive commission payments from travel operators (air, land and other) when sales are made and the rate of commission levels varies depending on the product sold. Travel agent’s main source of commission income is from the sale of international flights and holiday packages. In recent years commissions from domestic airlines have almost reduced to nil. This has been a result of the introduction of low cost carriers and an intensified level of competition amongst domestic airlines. However, commission income from the sale of domestic holiday packages, excluding airfares (i.e. accommodation, car hire and travel insurance) and continues to be a second key income stream for industry participants.

The customer base of travel agents includes business travel. It should be noted that business customers are also served by wholesalers, particularly in the case of large corporate clients. In most cases business travellers are more profitable than retail customers. Business customers demand a higher level of service and flexibility in making their travel purchases and are prepared to pay a premium for this additional level of service.

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Inbound tour operators

Inbound tour operators play a relatively small role in the travel agent industry, accounting for approximately 6% of industry revenues. Inbound tour operators are typically smaller and play specialist roles in formulating travel arrangements for inbound travellers. Roles played by Inbound tour operators include making bookings, providing local advice and planning, providing the ability to develop tailored itineraries, providing local guides and interpreters and providing updates on volume rebates available.

Online travel bookings

The rapid uptake of the internet is having a significant impact on the dynamics of the travel industry. Tourism Australia research shows that approximately 25% of travellers use the internet to book holidays online. Additionally, it is also estimated that 80% of consumers use the internet as a means of researching potential travel plans.

Virtually all players within the travel agent industry have some form of presence on the internet. In most cases consumers are able to book travel directly via the operators website.

IBISWorld notes that there are four key sub-segments within the online segment of the industry, as follows:

Proprietary tourism operator sites;
Travel agency sites;
Travel booking sites; and
Vertically-linked online sites.

A brief description of these are set out below:

Proprietary tourism operator sites

Examples of proprietary tourism operator sites include airlines (such as Qantas, Jetstar, Virgin Blue) and accommodation operators who allow customers to make bookings directly with the operator. As a result the operator is not required to pay commission to an agent and margins are improved.

Travel agency sites

Most large travel agency operators also have websites to complement their store-front operations. Customers are able to use agents’ websites to research and book travel products, typically these websites allow for users to book a combination of flights, accommodation and car hire for both domestic and international destinations. These items can either be booked individually or as part of a pre-prepared or customised package.

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Travel booking sites

Travel booking sites generally only facilitate accommodation bookings. The prime example of a travel booking site is Wotif.com where users are able to book accommodation at short notices and usually at discounted prices.

Vertically-linked online sites

Vertically-linked online sites are less common in Australia. Groups such as Stella are able to use integrated websites to promote and sell their products group wide.

In many cases the distinction between the above four sub-segments of the online market is blurred, however it is widely accepted that the use of the internet to make travel bookings will grow significantly in the future. Studies[3] predict that travel bookings made via the internet will grow from 6% of total bookings in 2002 to 30% by 2012. IBISWorld predicts that there will be further consolidation within and between these four categories and that within the next five years 4 to 5 dominant on-line players will emerge (excluding proprietary sites).

Travel Services Industry Historic Revenue Growth

Travel Services industry revenue rose steadily during the period 1998 to 2001, but it fell sharply in 2002 in 2003 largely as a result of the September 11 terrorist attacks in the United States and a weak Australian currency. The industry revenue has grown at a Compound Annual Growth Rate (“CAGR”) of 1.5% since then as depicted on the graph below due to rapid changes in the industry including increasing use of the internet for direct booking causing a disintermediation of the industry (i.e. product suppliers targeting end consumers directly). This was partly fuelled by the rise of low cost airlines with direct online booking systems (i.e. VirginBlue, Jetstar) and an increase in internet penetration in Australia.

Industry revenue and growth in revenue

==> picture [285 x 113] intentionally omitted <==

----- Start of picture text -----

3,500 10%
3,000 5%
2,500 0%
2,000 (5%)
1,500 (10%)
1,000 (15%)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
year
Industry revenue Revenue Growth
growth
%
Industry revenue ($Am)
----- End of picture text -----

Source: IBISWorld Travel Services in Australia, February 2008

3 Research conducted by LEK, PhoCusWright, NVS, IVS and Tourism Australia.

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Industry Market Segments

The Travel Services industry can also be divided into distinct segments based on the type of customer being serviced. Key segments include services provided to:

Australians travelling internationally;
International visitors to Australia (Inbound Visitors); and
Australians travelling domestically.

==> picture [289 x 123] intentionally omitted <==

----- Start of picture text -----

FY08 breakdown of industry revenue by customer segment
$403m
$1,478m
$806m
Australians travelling internationally International visitors to Australia
Australians travelling domestically
----- End of picture text -----

Source: IBISWorld Travel Services in Australia, February 2008

Australians travelling internationally

Revenue earned in relation to Australians travelling overseas is expected to account today for approximately two-thirds of industry turnover in FY08. Industry revenues have increased in recent years, primarily as a result of the increased number of Australian residents making overseas trips. This growth has been driven by a number of factors including:

Strengthening Australian dollar reducing the relative cost of overseas travel;
Increasing level of competition between international airlines, this has been primarily driven by the introduction of low cost carriers such as Jetstar; and
General increase in disposable incomes inline with economic growth experienced by the Australian economy in recent years.

The growth in outbound travel and industry wide revenue is presented in the following chart depicting the recent trend in the total outbound travel departures with a significant growth since 2004.

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

==> picture [306 x 131] intentionally omitted <==

----- Start of picture text -----

Outbound departures and growth in outbound departures
6,000 40%
5,000 30%
4,000 20%
3,000 10%
2,000 0%
1,000 (10%)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
year
Outbound departures Outbound Departure growth
(000's) growth
%
Outbound Departures
----- End of picture text -----

Source: IBISWorld Travel Services in Australia, Feb 2008 and Tourism Australia Tourism Forecasting Committee, 2007

The chart below shows a breakdown of outbound departures by travel type for the period 1998 to 2007.

Outbound market by travel type

==> picture [304 x 98] intentionally omitted <==

----- Start of picture text -----

6,000
5,000
4,000
3,000
2,000
1,000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Business Holiday VFR Other
departures (000's)
----- End of picture text -----*

Source: Tourism Australia Tourism Forecasting Committee, 2007

*** VFR = Visiting friends and relatives**

The three key customer types within the outbound market are business travellers, holiday makers and travellers visiting friends and relatives (“VFR”).

Inbound visitors

The number of international visitors to Australia has grown steadily during the past decade. During the forecast period inbound arrival volumes are expected to continue to grow primarily as a result of increased inbound airline capacity (associated with the introduction the new Airbus A380 and Boeing 787 aeroplanes). Current Tourism Australia forecasts indicate that inbound arrival growth will also grow as a result of an expected weakening of the Australian dollar and the continued rise in the prosperity of Asian economies.

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

==> picture [269 x 136] intentionally omitted <==

----- Start of picture text -----

International visitors to Australia
20%
7,000 15%
10%
5,000
5%
0%
3,000
(5%)
1,000 (10%)
2001 2002 2003 2004 2005 2006 2007
year
growth
%
Inbound arrivals (000's)
----- End of picture text -----

Source: IBISWorld Travel Services in Australia, Feb 2008 and Tourism Australia Tourism Forecasting Committee, 2007

Australians travelling domestically

The domestic travel industry accounts for approximately 15% of travel agents industry revenues. Research completed by IBISWorld shows that the domestic travel market has been growing at a rate of approximately half the rate of GDP over the last two decades. Domestic travel only represents a small portion of overall industry revenues, due to the relatively low level of commissions paid by industry operators and the general preference of consumers to make their own travel arrangements independent of travel agent advice. The majority of travel agent income from the domestic travel segment is sourced from business related travel. The following chart shows a breakdown of the domestic market by travel type for the period 1998 to 2007.

Domestic visitor nights

==> picture [252 x 114] intentionally omitted <==

----- Start of picture text -----

300 10%
5%
0%
(5%)
250 (10%)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
year
visitor
growth
%
nights (000's)
Domestic
----- End of picture text -----

Source: IBISWorld Travel Services in Australia, February 2008

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

3.2. Competitive Overview

Key players

The Travel Services industry is served by a small number of key players as presented in the table below. As a result of the trend in industry consolidation, each participant typically owns a number of competing brands, which operate within each industry segment or in some cases across multiple segments.

Key players in the travel agency services industry in Australia

	TTV¹ market		Retail outlets in Australia	International
Company	share²	Ownership	(approximate)	operations
Flight Centre Limited	25.0%	ASX listed	850	Yes
Stella Group	25.0%	CVC Asia Pacific/ MFS	1,650	Yes
Jetset Travelworld Ltd	8.0%	ASX listed	627	No
Other	42.0%
	100.0%

¹ Total Transaction Value (TTV)

²PwC estimate

Competitive overview

The following table sets out an overview of the Travel Services industry competitive landscape and the major players within the industry. As the industry has grown and competition has intensified, participants have started to vertically integrate their businesses across multiple market sub-segments. Examples include Flight Centre and The Stella Group.

==> picture [388 x 221] intentionally omitted <==

----- Start of picture text -----

Australian Travel Market: Competitive overview
Product Wholesaler / End
suppliers packaging Retail Consumers
Traditional Wholesale Traditional retail
QH AOT Pelegrine APT Jetset Travelworld Stella (HWT/ TS Amex)
Globus Travel Corporation Flight Centre/ FCm travel
Vertically Integrated Retail/ Wholesale
Explore/ Infinity/ FCm Travel / Flight Centre
Specialists Wholesalers/ Transcene Amex / Gullivers (NZ) / Stella
Online retail
Webjet Wotif travel.com.au
Exedia Zuji Most retailers
Supplier direct
qantas.com virginblue.com hertz.com
jetstar.com breakfree.com.au avis.com
----- End of picture text -----

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Key brands by segment

The Proposal will result in the creation of a third major integrated player within the Travel Services industry within Australia. The following table shows key brands within the industry by segment and industry player:

==> picture [398 x 184] intentionally omitted <==

----- Start of picture text -----

Key brands by market segment
Market segment Jetset/ Qantas Flight Centre Limited Stella Group Other
Retail
Corporate
Wholesalers
Online
Other
----- End of picture text -----

Description of key players

Flight Centre Limited

Flight Centre Limited (“Flight Centre”) is a publicly listed Australian company with over 26 years experience in the travel agency industry. The group has grown to be a fully integrated player in the industry and has a presence in retail, wholesale (Infinity Holidays), online reseller (quickbeds.com) and corporate (FCm). Unlike other players in the Australian industry, Flight Centre has a significant presence outside Australia, including United Kingdom, New Zealand, South Africa, North America, Hong Kong, China & India. Approximately 600 of Flight Centre’s 1500 retail outlets are located outside of Australia.

Flight Centre’s growth has been partly driven by acquisitions made over the past 20 years. As a result, Flight Centre now owns a number of brands which operate across the market both within and outside of Australia. In addition to the brands outlined in the table above, Flight Centre also owns brands including Great Holiday Escapes, Corporate Traveller, SBT Business Travel Solutions, Travel Associates, quickbeds.com, Overseas Working Holidays, CiEvents, Kistend and Campus Travel.

The Stella Group

The Stella group is an integrated player that has a range of operations across the broader travel industry. Its operations include the Harvey World Travel and Travelscene brands within the travel

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

agent industry, in particular the retail and wholesale segments, however, unlike other integrated players Stella Group also has a presence in the hospitality industry, including brands such as Peppers, Mantra, Saville, Pacific International and Breakfree. Stella Group is currently owned by ASX-listed Octaviar Limited. Octaviar Limited recently announced the sale of 65% of the Stella Group to CVC Asia Pacific. In the last two years, Stella has acquired travel agents Harvey World Travel, Transonic, Gullivers (NZ), Travelbag (UK) and Travelscence AMEX.

STA Travel

Other major participants with a particular focus on leisure include STA Travel which is owned by Diethelm Keller Ltd, a private trading company based in Zurich, Switzerland, who has a history dating back over 100 years. STA Travel, which is owned by STA, has more than 450 branches worldwide across 75 countries. STA has a strong presence in Australia, with over 100 of their branches located in Australia and New Zealand. STA primarily targets the business of student and youth leisure travellers.

3.3. Market Trends

As noted above, the travel industry is going through a phase of consolidation. This is being achieved through acquisition (for example, the expansion of Stella and Flight Centre through acquisitions) and growth through vertical integration. The major retail players are also increasingly developing and using their own wholesale content and the increasing use of the internet for direct booking by travellers facilitates the unbundling of travel purchases. For example, more than half of Qantas’ domestic air flights are booked direct (mostly via qantas.com).

Technology / disintermediation and channel shift

Introduction of the internet and online booking has resulted in a disintermediation and channel shift as product suppliers can now reach end customers directly.

Impact of low cost airlines

The uptake of airlines such as Jetstar has had an impact on the industry in terms of the targeting of new market segments and the use of online booking to reduce costs.

Services and change in commission and fee business model

Domestic travel has experienced the ‘unbundling’ of air and land travel whilst international travel, packaged holidays still retain a large proportion of total sales. Unbundling has been driven by the growth of the online direct channel. Packaging is likely to grow in absolute terms driven by international travel growth and fuelled by new ‘dynamic’ packaging of air and land content.

As a result of major changes in the industry noted above, resulting in airlines paying no commission to retailers for domestic bookings, retailers have started to adopt fee service models.

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Competition / industry consolidation

The level of competition amongst industry players is intense. Competition between travel agents is primarily price-based, given that there is relatively little difference between the travel products and packages provided by each agent, the ability to differentiate is mainly limited to price. In most cases travellers are looking for the lowest price travel option that meets their individual needs. Price pressure is also driven by the increasing number of proprietary tourism operator websites.

Consolidation of industry activities allows for companies to increase their critical mass, this affords a crucial advantage of being able to purchase larger volumes of travel products at an increased discount, thus having a direct impact on profitability.

To a lesser extent, the high level of competition amongst travel agents is also driven by other non-price factors, such as the quality of service provided by agents, the level of detailed knowledge of destinations and products that agents can provide and word of mouth recommendations.

Travel agents are also facing an increased level of external competition from other travel industry players, such as airlines and accommodation providers, who are marketing their product directly to customers over the internet. Consumers are becoming increasingly comfortable making travel bookings directly, without feeling they need to obtain advice from travel agents

Barriers to entry

Barriers to potential new players entering the Travel Services industry are medium and expected to remain at current levels in the short-term. The two key factors that will limit a new player from entering the Australian Travel agent industry are considered to be economies of scale and regulatory requirements.

Economies of scale

In the Travel Services industry there are four main players who according to IBISWorld research had a combined market share of 46% of the available market in 2007. It would be challenging for a new player to establish a dominant position in the industry given the current market shares of key players and level of competition in the market. A potential new entrant would also have to establish relationships with airlines and accommodation providers to maintain profitable operations. Large players, generally, are more profitable than smaller players primarily as a result of being able to purchase large volumes of travel products and receive volume based discounts. However new niche players may be able to develop a small market share (e.g. Peregrine or Wotif).

Given the current trend towards consolidation in the industry the emergence of a new key player is unlikely, apart from the online segment, which is bound to become increasingly competitive with new potential entrants in the coming years.

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Regulatory environment

All agents operating within the industry are required to be registered with the Consumer Affairs Department in the state or territory in which they operate. Once licences are granted travel agents are required to pay annual licence fees and also contribute to the Travel Compensation Fund (TCF) trust fund. The TCF is a national compensation fund that has been established to compensate people who have suffered financial loss as a result of a travel agent's failure to account for money or other considerations entrusted to them.

Industry life cycle

According to IBISWorld the Travel Services industry is in the decline phase of its industry lifecycle. This is principally due to an erosion of traditional retail and wholesale revenues due to the increased competition from direct online bookings. However, the overall Australian leisure travel market is forecast to grow at a compounded average growth rate (CAGR) of approximately 6% (in terms of TTV) in the next five years driven by international travel growth according to Tourism Research Australia.

The Travel Services industry is moving toward a structure where in most cases competition is solely based on price, particularly in the sale of tour and travel packages. Margins are also being squeezed as a result of the continual push by industry participants to reduce commission payments, this is particularly relevant in the case of domestic and to a lesser extent international airlines.

In addition to reduced prices and commission payments the competitiveness of travel agents is also being impacted by proprietary tourism operator websites where consumers can purchase travel products directly from industry operators, in particular airlines and accommodation operators.

Some players in the Australian travel agent industry have expanded their networks outside of Australia by setting up operations in foreign countries. This provides further benefits as companies are able to both increase volume purchased and offer a wider range of products to both inbound and outbound travellers.

3.4. Key Demand Determinants

The Australian dollar exchange rate

The Australian dollar value relative to other currencies directly affects demand for wholesale travel services that makes travel to certain destinations ‘more’ or ‘less’ attractive. An appreciating (depreciating) Australian dollar makes overseas travel and accommodation relatively cheaper (more expensive). The Australian dollar appreciated relative to the US dollar by roughly 20 cents over the period 2003-2006, during which total industry revenues and international holiday travel by Australian residents both also increased .

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 3 – Industry Overview

Changes to household disposable income

Total household disposable income in Australia (a critical demand driver for international travel) increased by 22.1% from 2004 to 2007 according to RBA Statistics. Over the same period, international travel by Australian residents increased by 800,000 departures or 18.2%.

A slowdown in disposable income growth is expected. A report issued by the Tourism Australia forecasting committee in 2007 estimates an 8.4% rise in household disposable income over the next 3 years. This is a considerable slowdown in disposable income growth against the 18.2% rise over the years 2004 to 2007.

Other demand determinants in the Travel Services industry include:

The introduction of new low cost airlines and airline technology such as direct online booking services, making airfares relatively cheaper and also increasing airline capacity;
Fluctuations in aviation fuel prices;
The propensity for the workforce to have fewer extended periods of leave;
Increasing use of video conferencing by large corporates;
Average number of nights spent on holidays by international visitors, domestic tourists, business travellers and major international events in Australia; and
Advancement in travel systems and technology, making it easier for travellers to book both travel and accommodation over the internet.

3.5. Industry Outlook

The following tables outline forecast growth in travel agent industry revenues and traveller volumes for the period 2008 to 2012. IBISWorld research indicates that growth in travel agent industry-wide revenues will slow to an annual average of 1.5% during the forecast period 2008 to 2012. This slowdown will primarily impact the period 2010 to 2012.

==> picture [298 x 151] intentionally omitted <==

----- Start of picture text -----

Outlook: Industry revenue
3,000 10%
2,500 8%
6%
2,000
4%
1,500
2%
1,000
0%
500 -2%
0 -4%
2007 2008 2009 2010 2011 2012
Industry revenue ($m) % grow th
% growth
Industry revenue ($m)
----- End of picture text -----

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 107] intentionally omitted <==

Section 3 – Industry Overview

Source: IBISWorld Travel Services in Australia, February 2008

The significant level of outbound departures with a growth range from 4.6% to 8.5% in the forecast period will continue to be the main driver of the industry revenue growth . Fluctuations in volumes of domestic and inbound travellers will not have a significant impact on travel agent industry revenue growth. Inbound travellers typically make their travel bookings outside of Australia with revenues flowing to foreign travel agencies while agent commissions received from domestic bookings for airline travel and accommodation are generally low and do not represent a significant portion of industry revenues.

During the forecast period there will be only limited opportunities for growth in the traditional travel agent industry over and above the growth rates forecast by IBISWorld primarily as a result of increased competition among industry players, reduced commissions from suppliers and an increased use of the internet as a distribution channel.

Some key themes that will impact growth in industry revenues during the five year period ending 2012 include:

Positive impact on industry wide revenues

Strong growth in outbound travel by Australian residents. This should be considered in light of expected reductions in commissions and continued price based competition among industry players;
Continued move toward travel agents charging customers a service fee to supplement reduced commission income;
As a result of continuing industry consolidation, emerging key industry players will be able to negotiate larger discounts based upon increased purchase volumes, this will be particularly relevant in the case of accommodation, activity and car hire components of outbound packages; and
It is expected that some key players will move toward serving niche sectors of the travel market, (e.g. particularly focusing on the corporate travel market and cruising).

Negative impact on industry revenues

Increased competition among existing industry players, particularly given the level of saturation of retail outlets in the market combined with current key players reluctance to set up new retail outlets;
Increased effort by industry operators/ suppliers to sell travel products directly to consumers, eliminating the need for a travel agent. Concurrently, it is expected that consumers will become increasingly comfortable making their own travel bookings over the internet; and
Reduced commission levels, particularly from airlines and domestic accommodation operators.

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 - Profile of Jetset

4. Profile of Jetset

4.1. Overview of business activities

Jetset is an Australian public company listed on the ASX. The group derives the bulk of its revenue from travel agency franchising and associated commissions in Australia.

Current business structure

Jetset is the second largest franchise travel agent group in Australia with a total of 627 outlets as at December 2007, out of a total of approximately 3,270 outlets industry wide in Australia.

Approximately 300 of Jetset’s 630 franchises are either Jetset or Travelworld outlets, the balance of franchisees are independent brands who are affiliated with Jetset. A breakdown of Jetset’s franchisee base by type and state is outlined in the following table:

==> picture [288 x 144] intentionally omitted <==

----- Start of picture text -----

Jetset's geographic spread as at 31 December 2007
200
150
100
50
0
WA VIC/ TAS SA/ NT QLD NSW
Travelw orld Jetset Affiliates
retail outlets
Agent
----- End of picture text -----

Source: Jetset Travelworld Limited

In recent years Jetset has focused on the development of a multi-channel distribution strategy focused around the following six brands, which are:

Jetset
Travelworld
Orient Pacific
Travellers Assistance
National Ticket Centre
E-commerce (OBE)

==> picture [55 x 19] intentionally omitted <==

==> picture [47 x 20] intentionally omitted <==

==> picture [71 x 19] intentionally omitted <==

==> picture [90 x 19] intentionally omitted <==

==> picture [21 x 20] intentionally omitted <==

==> picture [96 x 19] intentionally omitted <==

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

Jetset does not provide inbound travel products.

Jetset’s two key brands are Jetset and Travelworld. Both of these brands are franchised and have a physical storefront presence in the marketplace. Jetset targets “mid-life customers,” these are customers who trust their agent to offer them rewarding packaged travel experiences. In comparison, Travelworld’s “young couples” customers are seen to be youthful and independent and want a travel product that is tailored to their own needs. Both brands offer travellers the ability to book a range of travel products including a combination of flights, accommodation, vehicles and package holidays. Customers are also able to book travel via the Jetset and Travelworld websites.

Orient Pacific is a brand which Jetset acquired as part of the purchase of the assets of Orient Pacific Holidays Pty Ltd on 4 April 2007. Orient Pacific is primarily a travel wholesaler whose focus is on travel packages with a Pacific Island destination. The purchase of the Orient Pacific brand has allowed Jetset to re-establish a market presence in products with a Pacific destination.

The Travellers Assistance brand is essentially an insurance product which Jetset and its franchisees can on sell to customers. Travellers Assistance insurance is underwritten by Allianz.

The National Ticket Centre (“NTC”) was established in May 2004. The NTC has 5 ticket centres operating in Australian capital cities Brisbane, Sydney, Melbourne, Adelaide and Perth. NTC administers an exclusive private fare database providing ticketing facilities to all members of the group and allows Jetset to consolidate purchasing from preferred suppliers and maximise volume based discounts.

The NTC uses Quikticket technology which enables non-IATA (“International Air Transport Association”) agents to search, validate and issue tickets on the same basis as IATA accredited agents. This use of the NTC allows for streamlined operations which enhances both customer service and increased revenue.

Jetset has developed an On-line Booking Engine (”OBE”), which provides the Group and individual franchisees with a third key channel to market. OBE was deployed in two stages, the first stage in April 2007 allowed for customers to book domestic and trans-tasman airfares as well as hotels, cars and travel insurance, either as individual items or part of a customised package. The second stage of the OBE online deployment will allow users to book international travel products and is scheduled for completion during 2008.

Jetset will play a central role in the Corporate travel market with the launch of its Business Select initiative in 2008/2009.

100

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

History

Jetset’s listed predecessor, Heartlink Limited was listed on the ASX in September 2000. During 20002001 Heartlink changed its business focus from health to travel agency franchising following acquisitions of NSW based National World Travel and QLD based Traveland. Travelworld evolved through the combination of National World Travel and Traveland. During 2002 the Jetset Retail network was acquired from Air New Zealand. Jetset Travelworld Limited was formed in April 2002 (after changing the name of the listed Heartlink business) and the head office was shifted from Perth to Sydney.

The Jetset and Travelworld brands, including predecessors have been present in the marketplace and serving Australian travellers for over 40 years. Both brands have been actively developed during this period and are now currently both well recognised in the Australian market place.

Jetset has approximately 65 employees within the head office function providing key activities such as IT, finance, operations and Orient Pacific Holidays.

Relationships with suppliers

Jetset has formed relationships with a number of key suppliers including airlines, and providers of accommodation and hire cars. Jetset also has strong relationships with other key suppliers including wholesalers and cruise companies. The strength of these relationships combined with the buying power of the group has contributed to Jetset’s profitability in recent periods as it has established volume based discounts with most suppliers.

101

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

4.2. Strengths, Weaknesses, Opportunities and Threats

The following table outlines strengths, weaknesses, opportunities and threats (“SWOT”) for Jetset prior to the implementation of the Proposal.

Strengths � Differentiation of key brands allows Jetset to target different types of customers. � Jetset is large enough to support a wholesaling function which consolidates purchasing of travel products. This enables Jetset to maximise volume based purchase discounts. � Jetset recently developed an Online Booking Engine which allows customers to book domestic travel (flights/ accommodation/ car hire) over the internet. The OBE also has access to international travel. The OBE facility is fully integrated to include all franchisees regardless of brand.	Weaknesses � Approximately half of Jetset’s franchisees are affiliate members. Jetset’s position in the market place could be eroded if franchisees leave the group for another competitor. � Jetset only provides travel products to outbound and domestic travellers whereas some of its competitors have an international presence and provide travel products to inbound travellers. � Developing but limited exposure to corporate / business travel. � Competing against two larger market parties who are vertically integrated.
Opportunities � Jetset has no net external borrowings which may enable expansion through acquisitions without the need to raise additional equity capital. However, given Jetset’s market capitalisation of approximately $231 million, only relatively small scale acquisitions would be achievable without equity contribution. � Jetset does not have a significant presence in the corporate travel segment of the market place. Jetset may be able to increase its revenues and customer base by increasing its focus on this segment of the market. � Jetset is expecting to leverage from the high growth currently being experienced in the cruise industry.	Threats � High level of competition in the industry. This includes price based competition from other travel agent industry players and direct competition from other travel industry operators who are promoting their product to consumers directly over the internet. � Associated with increased direct sales over the internet, some key suppliers are reducing commission payments to travel agents. � Travel agent industry revenues are largely dependent on the level of outbound travel. Any general economic downturn will reduce travel agent revenues. � Continued vertical integration of competitors decreasing Jetset’s: o attractiveness to franchisees; o ability to develop leading product content; and o ability to maintain control over profit margins.

Strengths
�
Differentiation of key brands allows Jetset to
target different types of customers.
�
Jetset is large enough to support a wholesaling
function which consolidates purchasing of travel
products. This enables Jetset to maximise
volume based purchase discounts.
�
Jetset recently developed an Online Booking
Engine which allows customers to book
domestic travel (flights/ accommodation/ car
hire) over the internet. The OBE also has access
to international travel. The OBE facility is fully
integrated to include all franchisees regardless
of brand.

Weaknesses
�
Approximately half of Jetset’s franchisees are
affiliate members. Jetset’s position in the market
place could be eroded if franchisees leave the
group for another competitor.
�
Jetset only provides travel products to outbound
and domestic travellers whereas some of its
competitors have an international presence and
provide travel products to inbound travellers.
�
Developing but limited exposure to corporate /
business travel.
�
Competing against two larger market parties
who are vertically integrated.

Opportunities
�
Jetset has no net external borrowings which may
enable expansion through acquisitions without
the need to raise additional equity capital.
However, given Jetset’s market capitalisation of
approximately $231 million, only relatively small
scale acquisitions would be achievable without
equity contribution.
�
Jetset does not have a significant presence in
the corporate travel segment of the market
place. Jetset may be able to increase its
revenues and customer base by increasing its
focus on this segment of the market.
�
Jetset is expecting to leverage from the high
growth currently being experienced in the cruise
industry.

Threats
�
High level of competition in the industry. This
includes price based competition from other
travel agent industry players and direct
competition from other travel industry operators
who are promoting their product to consumers
directly over the internet.
�
Associated with increased direct sales over the
internet, some key suppliers are reducing
commission payments to travel agents.
�
Travel agent industry revenues are largely
dependent on the level of outbound travel. Any
general economic downturn will reduce travel
agent revenues.
�
Continued vertical integration of competitors
decreasing Jetset’s:
o
attractiveness to franchisees;
o
ability to develop leading product content;
and
o
ability to maintain control over profit
margins.

Source: PwCS analysis, IBISWorld Travel Services, Feburary 2008

102

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 - Profile of Jetset

4.3. Financial Performance

Jetset’s consolidated financial performance for the half year ended 31 December 2007 and comparative results for each of the years ended 30 June 2007, 2006 and 2005 are presented below.

Jetset Travelworld Limited

Income statement

	30 Jun 05	30 Jun 06	30 Jun 07	31 Dec 07
$ mil	Audited	Audited	Audited	Reviewed
	full year	full year	full year	half year
Revenue
Rendering of services (excluding interest income)	101.2	115.0	125.9	61.0
Expenses
Service revenue expenses	(83.0)	(94.3)	(100.4)	(47.2)
Selling and marketing expenses	(3.6)	(3.2)	(3.3)	(1.9)
Administration expenses	(4.6)	(4.5)	(4.0)	(2.3)
Other operatingexpenses	(1.1)	(0.7)	(0.5)	(0.5)
EBITDA	8.8	12.3	17.7	9.0
Depreciation & amortisation	(0.2)	(0.2)	(0.3)	(0.3)
EBIT	8.6	12.0	17.3	8.7
Interest income	0.6	0.8	1.3	1.0
Profit before income tax	9.2	12.8	18.6	9.7
Income tax expense	(2.8)	(3.8)	(5.6)	(2.9)
Profit attributable to members of
Jetset Travelworld Limited	6.3	9.0	13.0	6.7

Source: Jetset Annual & Half year reports

Jetset has experienced strong growth during the three financial years ended 30 June 2007. Revenue from rendering of services has grown during the period by 24.4% to $125.9 million. During the same period EBIT has increased by $8.7 million or 101% to $17.3 million. Results for the half year to 31 December 2007 are consistent with the results for the year ended June 2007 when compared on a pro-rata basis.

Jetset’s management have attributed Jetset’s strong growth during the three year period to a number of factors, such as:

Continued growth in the number of Australian residents travelling, particularly overseas. IBISWorld figures show international departures by Australian residents have increased from 4.8 million in FY05 to a forecast 5.4 million in FY08 (growth of 3.1% p.a.);
A reduction on the number of preferred suppliers and resulting strengthening of preferred supplier relationships and agent reward programmes has led to reduced costs and improved incentive structures. Key changes include the move toward volume-based incentive agreements and better use of technology links with consumers. The general reduction in preferred suppliers has been partly driven by a lowering in basic commission levels (during FY02-05);
The establishment of NTC in May 2004 has contributed to additional revenues during the period FY05 to FY07 to the group; and
Development of the online booking engine.

103

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

4.4. Financial Position

Jetset’s financial position as at 31 December 2007 is outlined below, together with comparative figures as at 30 June 2007, 2006 and 2005.

Jetset’s net assets have increased during the period between 30 June 2005 and 31 December 2007 by $11.7 million. The key movements within the balance sheet during this period are an increase in cash and cash equivalents of $18 million and a decrease in working capital of $7.4 million, reflecting strong growth in business profitability during the period.

Jetset Travelworld Limited

Statement of Financial Position

	30 Jun 05	30 Jun 06	30 Jun 07	31 Dec 07
$ mil	Audited	Audited	Audited	Reviewed
	full year	full year	full year	half year
ASSETS
Current Assets
Cash and cash equivalents	13.5	21.9	31.5	31.5
Trade and other receivables	16.5	17.2	21.3	14.4
Prepayments	0.2	0.2	0.1	0.1
Total Current Assets	30.3	39.3	52.9	45.9
Non-current Assets
Property, plant & equipment	0.5	0.4	0.9	0.9
Intangible assets and goodwill	7.6	7.8	8.1	8.0
Deferred tax assets	0.4	0.5	0.5	0.6
Total Non-current Assets	8.5	8.7	9.5	9.5
TOTAL ASSETS	38.7	48.0	62.4	55.5
LIABILITIES
Current Liabilities
Trade and other payables	(19.0)	(23.5)	(31.0)	(24.1)
Income tax payable	(2.0)	(2.1)	(2.3)	(2.0)
Employee benefits	(0.3)	(0.3)	(0.3)	(0.3)
Total Current Liabilities	(21.3)	(25.9)	(33.6)	(26.5)
Non-current Liabilities
TOTAL LIABILITIES	(21.4)	(25.9)	(33.6)	(26.5)
NET ASSETS	17.3	22.2	28.7	29.0

Source: Jetset Annual & Half year reports

104

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

Intangible assets include goodwill and software development costs. For the financial years ending 30 June 2005 to 2007 goodwill has remained constant at $7.4 million. Capitalised software development costs have increased from $0.2 million at 30 June 2005 to $0.7 million at 30 June 2007.

On 21 February 2008, the directors of Jetset declared an interim dividend on ordinary shares in respect of the December 2007 half year. The total amount of the dividend is $4.6 million, being 5.0 cents per share fully franked. Furthermore, Jetset’s shareholders will receive a special dividend of 4.0 cents per share, fully franked, should the Proposal be approved.

4.5. Capital Structure and Share Price History

Jetset’s earnings per share and dividend payments (fully franked) history is as follows:

Jetset Travelworld Limited Dividend history

		Final	Interim
	EPS	Dividend	Dividend	Total	% of EPS
Financialyear	(cents)	(cps)	(cps)	Dividend	paid
30 Jun 2007	14.1	7.0	3.0	10.0	70.8%
30 Jun 2006	9.7	4.0	2.0	6.0	61.7%
30 Jun 2005	6.2	2.5	1.5	4.0	64.8%

Source: Jetset Annual and Half year reports

Currently the top 10 shareholders have a combined holding of approximately 76% of Jetset’s issued capital. The largest shareholder is Sintack and Associated Entities which hold 59.7% of Jetset.

Upon completion of the Proposal an additional 127.3 million shares will be issued to Qantas as consideration for the Qantas businesses acquired. Current shareholders will be diluted to 42% of their original holdings (assuming no change in the number of shares held). A summary of the relative shareholdings post the implementation of the Proposal is set out below:

105

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

		Pre-Proposal	Pre-Proposal	Post-Proposal	Post-Proposal
Shareholder		Shareholding	%	Shareholding	%
	QH Tours			127,340,726	58.0%
1	Sintack Pty Ltd Level¹	54,193,165	58.8%	54,193,165	24.7%
2	HSBC Custody Nominees (Australia) Limited	4,626,951	5.0%	4,626,951	2.1%
3	Equitas Nominees Pty Limited	4,565,603	5.0%	4,565,603	2.1%
4	Ethnic Publications Pty Ltd	2,276,361	2.5%	2,276,361	1.0%
5	ANZ Nominees Limited	1,941,412	2.1%	1,941,412	0.9%
6	Tip Top Poultry (Vic) Pty Ltd	1,701,700	1.8%	1,701,700	0.8%
7	Mrs Dana Andrea Rosenzweig	650,000	0.7%	650,000	0.3%
8	Mr Peter Spathis & Mr George Miaoulis	500,000	0.5%	500,000	0.2%
9	Citicorp Nominees Pty Limited	496,697	0.5%	496,697	0.2%
10	Just Super Co Pty Ltd¹	468,666	0.5%	468,666	0.2%
11	All Day Distribution Pty Ltd	396,560	0.4%	396,560	0.2%
12	Mr Roger John Donazzan	350,000	0.4%	350,000	0.2%
13	Mr George Thermos & Mrs Konstantina Thermos	338,735	0.4%	338,735	0.2%
14	Zarn Nominees Pty Ltd	336,989	0.4%	336,989	0.2%
15	Chesters Nominees Pty Ltd¹	327,212	0.4%	327,212	0.1%
16	Kingstrust Pty Ltd	325,000	0.4%	325,000	0.1%
17	Mr James Edgar Everett & Mrs Jocelyn Ann Everett	308,554	0.3%	308,554	0.1%
18	Mr Tony Antonopoulos	300,601	0.3%	300,601	0.1%
19	Mr Thomas Joseph Falvey	300,170	0.3%	300,170	0.1%
20	Mr John Edward Horton	300,000	0.3%	300,000	0.1%
	Other	17,507,874	19.0%	17,507,874	8.0%
	Total	92,212,250	100%	219,552,976	100%

Source: FY07 Annual report and Jetset ASX announcement, 21-Feb-08 ¹ Sintack and Associated Entities

Share price history

The following table outlines Jetset’s share price performance in comparison to the S&P/ASX 200 since 1 January 2005.

==> picture [392 x 163] intentionally omitted <==

----- Start of picture text -----

JET share price in comparison to ASX S&P 200
$4.00 7,000
$3.50 6,500
$3.00
6,000
$2.50
5,500
$2.00
5,000
$1.50
4,500
$1.00
$0.50 4,000
$0.00 3,500
Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan-
05 05 05 05 05 05 06 06 06 06 06 06 07 07 07 07 07 07 08
Share price ASX S&P200
ASX S&P 200
JET share price ($)
----- End of picture text -----

Source: Bloomberg

Jetset’s share price has increased significantly since January 2005 inline with improving profitability. The share price was affected by speculation of a potential transaction in the months prior to the announcement of the Proposal on 21 February 2008. The share price has since declined in line with

106

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 4 – Profile of Jetset

the S&P/ASX 200, largely reflecting current market volatility and uncertainty, particularly for retail related stocks.

In the following table we have presented historical details of Jetset’s share price and trading volume since 1 January 2007. Overall, Jetset is considered an illiquid stock and its share price can move markedly on small volumes of trade. In most cases significant movements in Jetset’s share price have corresponded with announcements made to the ASX by Jetset, as follows:

==> picture [400 x 255] intentionally omitted <==

----- Start of picture text -----

Date Announcement
� 11 Dec 06 Forecast increase of 40 - 45% in interim result for half year ended 31 December 2006
� 20 Feb 07 FY07 Half year report released to shareholders
� 16 May 07 Forecast increase of 40% in interim result for year ended 30 June 2007
� 20 Aug 07 Unaudited FY07 results disclosed to the market
� 27 Sep 07 FY07 Financial report released to shareholders
� 06 Oct 07 Media speculation that Qantas close to striking a deal with an listed retail travel business
� 18 Oct 07 Qantas in preliminary negotiations with a number of parties including Jetset Travelworld Ltd
� 23 Oct 07 FY07 Annual report released to shareholders
� 21 Feb 08 Proposed merger with Qantas Airways announced and FY08 half year report released to shareholders
Source: http://www.asx.com.au
Jetset trading history
$4.00 600
�
$3.50 � � 500
$3.00 �
$2.50 � 400
$2.00 � � � 300
$1.50 � 200
$1.00
$0.50 100
$- 0
Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08
Daily volume traded Closing share price
Source Bloomberg
p rice (000's)
share trad ed
clo sin g vo lum e
JET d aily
----- End of picture text -----

107

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 5 - Profile of Qantas Holidays and Qantas Business Travel

5. Profile of Qantas Holidays and Qantas Business Travel

5.1. Overview of business activities

The two business units of Qantas which will form part of the Proposal are Qantas Holidays Limited and Qantas Business Travel. An overview of each is provided below.

5.1.1. Qantas Holidays

Current business structure

Qantas Holidays Limited (QH) is Australia’s largest travel wholesaler providing packages to retail travel agencies, wholesale travel agencies and consolidators on a wholesale basis. It has been operating for approximately 30 years. The business operates as a separate legal entity within Qantas and is wholly owned by QH Tours Limited (which in-turn is a wholly owned subsidiary of Qantas). Approximately 1.1 million travellers used services provided by Qantas Holidays in FY07.

QH operates under a multi-channel distribution model providing a range of domestic and international outbound package holidays to both intermediate and direct customers. QH’s intermediary customers include travel agents (including Jetset, Flight Centre and Stella) as well as holiday package resellers (including Infinity Holidays and Harvey’s Choice Holidays). QH also operates as a retail travel agent by distributing package holidays to customers directly via its call centres and the qantas.com website. QH has call centres in Brisbane, Sydney, Perth and Melbourne. More than 75% of its revenue relates to land content. QH also sells packages that include other airlines (i.e. non-Qantas and Jetstar flights), packages which are sold under the Viva! brand.

Qantas has a contractual relationship with QH, under this agreement Qantas is the major provider of Qantas and Jetstar flights to QH for domestic routes and the majority of international routes. Historically QH sales of Jetstar flights have been limited due to issues associated with systems integration. As a result of this contractual arrangement the majority of QH holiday packages use Qantas flights.

During FY09, QH will offer 26 holiday brochures each including a variety of packages. These 26 packages represent a different travel destination and are domestic consumer focused rather than corporate travel focused.

The QH business has three distinct income streams of Offline outbound, Offline domestic and Other trading.

Offline outbound

The offline outbound division includes revenue (and margins) from all Australian outbound packages that are sold to travel agents.

108

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 5 – Profile of Qantas Holidays and Qantas Business Travel

Approximately 60% of offline outbound income is received from the sale of air and land packages (including both flights and accommodation). The balance of offline outbound revenue is received from the sale of land only packages.

Offline domestic

Represents revenue generated from all domestic travel packages sold to travel agents for travel within Australia. Qantas is the sole provider of airline flight for all domestic packages, both those with city and regional destinations.

Other trading

Other trading income includes revenue generated from package holidays sold to other resellers and package holidays sold to related entities.

QH has approximately 475 full time employees. In addition, QH has access to customers through its in-house databases, Qantas frequent flyer members, and to the qantas.com website.

Traveller destinations

QH packages are split between domestic and outbound international packages. For the 2007 year these two categories each represented 50% of QH’s packages when measured by destination.

75% of QH international packages sold for 2007 are those with destinations in Asia, the Pacific or New Zealand, as shown:

International Destinations by Passengers

4% 2% 18% 51% 25% Asia South Pacific and New Zealand USA Europe Other

Source: Qantas Management Presentation.

109

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 5 – Profile of Qantas Holidays and Qantas Business Travel

Relationships with suppliers

Similar to other key players in the travel agency industry, QH has formed relationships with a number of key suppliers including airlines and providers of accommodation and hire cars. These relationships are primarily held with major hotel / accommodation chains, car hire and attraction / event operators. QH also has some key relationships with some foreign airlines whose flights are sold as part of the Viva packages. The strength of these relationships is key to QH’s leading position in the wholesale sector of the market.

SWOT analysis

The following table outlines strengths, weaknesses, opportunities and threats associated with QH.

Strengths � Strong diversified supplier relationships over all ‘air’ ‘land’ and ‘other’ components of a holiday package. � Ability to sell ‘land’ and ‘other’ components of a holiday package via traffic through qantas.com (link on qantas.com to Qantas Holidays webpage). � QH is the major wholesaler with a frequent flyer points offering (Qantas frequent flyer points). � Brand.	Weaknesses � International destination by passenger is highly dependent on travel to five destinations (Thailand, Fiji, USA, Bali and Hong Kong) accounting for over 70% of international destinations by passenger. � No physical ‘travel agent’ office locations. Reliance on wholesale to agents, as opposed to also acting as a physical travel agent. � Some restriction in availability of international destinations as there is a preference to use Qantas flights, therefore packages must suit Qantas routes.
Opportunities � Development of physical ‘travel agent’ offices to compete with retailers such as Flight Centre, Harvey World Travel (“HWT”) and Jetset. � Strengthen relationships with European suppliers of ‘air’, ‘travel’ and ‘land’ in order to capture more European travel per passenger and limit the current reliance on five key international destinations.	Threats � Political unrest or security concerns in any of the five key international destinations. � Downturn in domestic economy, given the fact 51% of passenger destinations are domestic. � Vertical integration of competitors.

Strengths
�
Strong diversified supplier relationships over all
‘air’ ‘land’ and ‘other’ components of a holiday
package.
�
Ability to sell ‘land’ and ‘other’ components of a
holiday package via traffic through qantas.com
(link on qantas.com to Qantas Holidays
webpage).
�
QH is the major wholesaler with a frequent flyer
points offering (Qantas frequent flyer points).
�
Brand.

Weaknesses
�
International destination by passenger is highly
dependent on travel to five destinations
(Thailand, Fiji, USA, Bali and Hong Kong)
accounting for over 70% of international
destinations by passenger.
�
No physical ‘travel agent’ office locations.
Reliance on wholesale to agents, as opposed to
also acting as a physical travel agent.
�
Some restriction in availability of international
destinations as there is a preference to use
Qantas flights, therefore packages must suit
Qantas routes.

Opportunities
�
Development of physical ‘travel agent’ offices to
compete with retailers such as Flight Centre,
Harvey World Travel (“HWT”) and Jetset.
�
Strengthen relationships with European
suppliers of ‘air’, ‘travel’ and ‘land’ in order to
capture more European travel per passenger
and limit the current reliance on five key
international destinations.

Threats
�
Political unrest or security concerns in any of the
five key international destinations.
�
Downturn in domestic economy, given the fact
51% of passenger destinations are domestic.
�
Vertical integration of competitors.

Source: PwCS analysis, IBISWorld Travel Services, Feburary 2008

110

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 101] intentionally omitted <==

Section 5 - Profile of Qantas Holidays and Qantas Business Travel

5.1.2. Qantas Business Travel

Current business structure

Qantas Business Travel (“QBT”) is the corporate travel business of Qantas providing travel management services to businesses, including arranging flights, accommodation, car hire and a visa facilitation service. QBT has six travel centres across Australia and one in New Zealand and it employs over 500 staff.

QBT has a high quality client base and long term client relationships (i.e. over 10 years for many clients). Currently QBT has approximately 180 clients of which 50% are government organisations and a further 30% are large corporates.

QBT generates revenues from customers (based on either a flat management or a per transaction) fee and commissions and incentives from suppliers.

SWOT analysis

The following tables outline strengths, weaknesses, opportunities and threats associated with QBT.

Strengths � Strong diversification in client base (50% Government, 30% Large Corporate and 20% Small to Midsize Enterprises (“SME”). � Strong relationships with long-term clients exceeding 10 years. � Strong brand through association with Qantas and a reliable service and product offering. � Low staff attrition and turnover.	Weaknesses � Inflexible back office system with Qantas which currently has no Travel Management Company (“TMC”) functionality. � Limited management reporting and no ability to tailor or customise reports based on clients needs or requests. � Limited customer facing personnel.
Opportunities � Greater presence in South East Asian countries such as Hong Kong, South Korea, Singapore. � Utilise QH content to market to business travellers. � New mid office and back office systems to increase efficiencies, reporting capabilities and customisation. � Greater presence in New Zealand and introduction of an e-travel online booking tool � Opening QBT Singapore in 2008 � Utilise QH content to market to business travellers and jointly negotiate preferred supplier hotel deals.	Threats � Potential downturn in the Australian economy may result in reduction in business travel. � Increased competition in the business travel segment of the market offering lower fees for service. � Discount carriers offering premium travel products at a reduced rate lowering revenue and profit margins.

Strengths
�
Strong diversification in client base (50%
Government, 30% Large Corporate and 20%
Small to Midsize Enterprises (“SME”).
�
Strong relationships with long-term clients
exceeding 10 years.
�
Strong brand through association with Qantas
and a reliable service and product offering.
�
Low staff attrition and turnover.

Weaknesses
�
Inflexible back office system with Qantas which
currently has no Travel Management Company
(“TMC”) functionality.
�
Limited management reporting and no ability to
tailor or customise reports based on clients
needs or requests.
�
Limited customer facing personnel.

Opportunities
�
Greater presence in South East Asian countries
such as Hong Kong, South Korea, Singapore.
�
Utilise QH content to market to business
travellers.
�
New mid office and back office systems to
increase efficiencies, reporting capabilities and
customisation.
�
Greater presence in New Zealand and
introduction of an e-travel online booking tool
�
Opening QBT Singapore in 2008
�
Utilise QH content to market to business
travellers and jointly negotiate preferred supplier
hotel deals.

Threats
�
Potential downturn in the Australian economy
may result in reduction in business travel.
�
Increased competition in the business travel
segment of the market offering lower fees for
service.
�
Discount carriers offering premium travel
products at a reduced rate lowering revenue and
profit margins.

Source: PwCS analysis, IBISWorld Travel Services, February 2008

111

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 5 - Profile of Qantas Holidays and Qantas Business Travel

5.2. Financial Performance

An aggregated statement of financial performance for QH and QBT is included in the table below:

	Unaudited*
$ mil	30/06/2007
Revenue	783.9
Operatingexpenses	(761.6)
EBITDA	22.3
Depreciation expense	(0.8)
EBIT	21.5
Interest income	13.4
Profit before income tax	34.9
Income tax expense	(9.0)
Netprofit after tax	25.9

Source: Qantas management * Subject to audit only as part of Qantas.

Different revenue recognition accounting policies have been historically applied for QH (gross revenue reported) and QBT (net revenue reported). The revenue presented above for QHB represents an aggregation of reported revenue for QH and QBT and has not been adjusted for the different recognition policies.

5.3. Financial Position

At the date of preparing this IER, an audited or audit reviewed historic balance sheet for QHB was not available from Qantas management.

The balance sheets of QH and QBT primarily consist of working capital balances such as trade receivables and trade payables. There are no significant tangible non-current assets or liabilities. As at the implementation date of the Proposal, the net asset balance of QHB is expected to be positive.

The Proposal if implemented is expected to generate a substantial amount of intangible assets which will be recognised in the balance sheet of the Combined Entity. Whilst the precise amount of intangible assets has not been determined, it is expected that the net tangible asset position of QHB will be of nominal value relative to the total intangible asset value of the Combined Entity.

112

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [596 x 101] intentionally omitted <==

Section 6 - Profile of Jetset/QHB Combined

6. Profile of Jetset/QHB Combined

6.1. Key Activities

If implemented, the Proposal will create a vertically integrated travel services business in Australia. The business activities will include retail, corporate, wholesale and online. The Combined Entity will comprise two of the leading brands in the travel industry market, specifically retail and wholesale. The strategic alignment of the complementary businesses will enable Jetset to offer full services, through improved buying power in a consolidated travel services market and improved platform for further growth.

The Combined Entity will have a Total Transaction Value (“TTV”) of up to $3 billion a year and revenues in excess of $800 million a year.

The Combined Entity will benefit from revenue and cost synergies and have access to broader travel product content which will provide customers with a one-stop-shop and an enhanced product range, offer multi-channel distribution, including direct and indirect channels as well as an improved dynamic packaging/online offering, and offer a more attractive proposition for potential Jetset Travelworld franchisees.

6.2. Pro-forma Profit and Loss

An aggregated Income Statement for the Combined Entity is included in the table below:

Combined Entity

Pro-forma Summary of Income

	Unaudited	Forecast	Forecast
$ mil	2007	2008	2009
EBITDA	40.0	45.8	57.4
Depreciation expense	(1.1)	(1.8)	(3.3)
EBIT	38.9	44.0	54.1
Interest income	14.7	15.8	16.5
Profit before income tax	53.6	59.8	70.6
Income tax expense	(14.6)	(18.0)	(21.2)
Netprofit after tax	39.0	41.9	49.4

Source: Jetset and Qantas management Any variation to EM is due to rounding

The actual NPAT performance of the Combined Entity may differ significantly from the pro-forma NPAT included in the EM and summarised above. An example of such a difference is the amortisation / write-off of any intangible assets that may arise if the Proposal is implemented.

PwCS has had discussions with Qantas management and have been advised that in accordance with the MIA, QHB will have a minimum of $190 million of cash or cash equivalent to fund the working capital requirements of the business (i.e. the minimum $190 million of cash should be sufficient to fund the current liabilities of the Combined Entity upon implementation of the Proposal).

113

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 6 - Profile of Jetset/QHB Combined

Whilst Jetset and QHB are complementary businesses, there is a risk of potential cannibalisation of sales, in particular in the online booking channel to market. There is a risk that competitors may attempt to consolidate their content offering with non-Qantas related airlines. It is likely that franchisees will assess the risks and opportunities of the new business model under the Combined Entity. However, Jetset management anticipate that franchisees will react positively to the Proposal.

6.3. Revenue and Cost Synergies

Jetset management have made assessment of the level of synergies expected to be derived if the Proposal is implemented. The synergies include revenue benefits as well as some cost synergies. The synergies are anticipated to be realised from FY09 but will not make a positive profit contribution until FY10 due to any benefits being offset by the costs of integration. The full benefits from synergies are expected to be realised over the next five years and are estimated to be approximately $13.3 million in FY13 (before tax). Jetset management does not anticipate any significant loss of revenues to result from the Proposal.

114

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 7 - Valuation Methodologies

7. Valuation Methodologies

7.1. Introduction

There is no single generally accepted approach to determining value and the approach adopted depends upon the specific circumstances. PwCS has considered common market practices and the valuation methodologies recommended by ASIC Practice Note 43 – “Valuation Reports and Profit Forecasts” and guidance provided by RG 111. The approaches PwCS has considered are discussed below.

7.2. Discounted Cash Flow (“DCF”) Approach

DCF approaches are premised directly on the principle that the value of a company is dependant upon the future economic benefits it can generate.

This method indicates the value of a business enterprise based on the present value of the free cash flows that the business is expected to generate in the future. Such cash flows are discounted at a discount rate (the cost of capital) that reflects the time value of money and the risks associated with the forecast cash flows.

This approach is typical for companies with:

high levels of growth,
reasonably accurate forecast cash flows (preferably 5 years),
earnings or cash flows that are expected to fluctuate from year to year, or
irregular capital expenditure requirements.

7.3. Market Based Approaches

Market based approaches estimate the value of a company through reference to the market value of comparable companies and trading in the company’s own shares. There are a number of variants including:

Capitalisation of Earnings

This method is commonly used for the valuation of relatively mature businesses. It involves the application of an earnings multiples (derived from an analysis of comparable companies and/or transactions) to an assessment of the future earnings of a business. The earnings must be maintainable by the business and must not include one-off gains or losses. Hence, this method is generally not appropriate for a business with fluctuating earnings. The method is appropriate for businesses with indefinite lives where stable earnings or trends in earnings are evident.

Dividend Based Valuations

Dividend based valuations involves the capitalisation of the future maintainable dividend payments of the company. The capitalisation rate reflects the investor’s required rate of return. This method is appropriate for companies with:

115

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 7 - Valuation Methodologies

stable growth rates and profits,
high payout ratios that are an approximation of free cash flows to equity, and
stable leverage.

ASX Market Price Valuation

ASX Market Price Valuation is an indication of value if:

the shares are actively traded, and
the market is assumed to be efficient.

This valuation approach can be used at the prevailing spot rate at the valuation date or VWAP across a given period up to the valuation date, such as 30, 60 or 90 trading days.

7.4. Asset Based Approach

This method analyses the value of the assets used in the business. This is done by separating the business into assets which can be readily sold and determining a value for each asset based on the net proceeds that could be obtained in the market place if the asset were sold. The value of the assets can be determined in the context of:

orderly realisation: this method estimates the value by determining the net assets of the underlying business including any allowances or costs involved in carrying out the sale. This method is not a valuation under a forced liquidation where the value could be materially different from their market value
liquidation: this is based on the premise of a forced sale in terms of liquidation. In this case, the price the assets could be sold at (and hence value) is typically materially lower than their market value, or
going concern: this method estimates the value of the net assets on a replacement cost basis, but does not consider realisation costs.

This approach is typically used for asset rich companies, dormant companies or loss making companies. The net assets basis is usually inappropriate for businesses in which intangible assets are significant, the value of which is usually best determined by reference to future income streams.

7.5. Approach Adopted

Having regard to the business activities performed, the nature of assets held and the financial information available, PwCS has adopted the capitalisation of earnings as the primary valuation approach for both Jetset and for the Combined Entity.

PwCS has adopted the capitalisation of earnings as the primary valuation approach based on the following:

116

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 7 - Valuation Methodologies

The established nature of the Jetset and QHB businesses;
The availability of information in respect of broadly comparable companies; and
The relative stability of earnings trends for the Jetset and QHB businesses.

As a cross-check PwCS has compared the value derived for Jetset to the recent ASX share trades for Jetset (noting the lack of liquidity in Jetset trades) and has also undertaken a high level DCF calculation for Jetset and the Combined Entity.

117

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

8. Valuation of Jetset

8.1. Approach

PwCS has adopted the capitalisation of maintainable earnings as the primary valuation methodology, specifically a capitalisation of Net Profit After Tax (“NPAT”). As a cross-check, PwCS has also performed a high-level DCF valuation, and has had regard to implied EBITDA multiples and the price at which Jetset’s shares have been trading on the ASX.

In selecting the capitalisation of NPAT as the primary methodology, PwCS has had regard to the following:

For Jetset and comparable companies in the travel agency services industry, interest income is generally a material component of revenue. Companies may not be consistent in how this interest revenue is recorded, either as a component of revenue or as net interest income / (expense) below the EBIT line. These inconsistencies may distort comparability of EBITDA or EBIT multiples, however using a NPAT multiple removes this potential inconsistency;
Adopting an EBITDA multiple is appropriate for capital intensive industries, where different depreciation or amortisation accounting principles may be adopted. The travel agency services industry is not highly capital intensive, therefore multiples will not be distorted by using a NPAT multiple; and
Jetset and the comparable companies all have either low or zero net debt, therefore multiples will not be distorted by varying interest expenses among comparables using a NPAT multiple.

The application of the capitalisation of NPAT approach involves the following steps:

Estimate the current level of maintainable NPAT for the business;
Determine an appropriate NPAT multiple (Price / Earnings (“P/E”) multiple); and
Adjust the derived value for surplus assets or liabilities.

8.2. Estimate of Future Maintainable NPAT

In determining a future maintainable NPAT for Jetset, PwCS has had regard primarily to the FY07 financial performance as set out in Section 4.3 of this report and forecast FY08 NPAT. PwCS has also considered potential normalisation adjustments, to account for one-off or non-recurring items. Potential normalisation items include:

Gain / loss on sale of assets;
Foreign exchange gains / losses; and
Restructuring costs.

In its analysis of Jetset’s financial statements, PwCS has identified one-off adjustments including adjustments relating to:

118

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

Occupancy costs in FY08;
A sign-on fee for travel insurance provided in FY08; and
A ‘super incentive revenue bonus’ in FY09 sales. Currently the receipt of any super incentive bonuses occurs one year subsequent to the year in which it is earned. However, FY09 forecasts have been prepared assuming this bonus will be incurred and realised in the same year. This results in both the FY08 and FY09 bonuses being recognised in FY09.

PwCS has assessed the future maintainable NPAT for Jetset to be $13.0 million for FY07 (historical NPAT) and $17.1 million for FY08 (prospective NPAT).

8.3. Estimate of P/E multiple

In selecting an appropriate P/E multiple to apply to the assessment of Jetset’s maintainable NPAT, PwCS has considered the following:

Reported historic P/E multiples of comparable listed companies;
Forecast P/E multiples for comparable listed companies and of Jetset based on NPAT forecasts prepared by market commentators;
Implied P/E multiples for relevant transactions in the travel agency services industry, where sufficient information is disclosed to reliably determine implied multiples;
The relative size of Jetset’s business activities as compared with the set of comparable companies;
The risk profile of Jetset relative to the comparable companies, including earnings diversification. Jetset’s market position and potential for growth in earnings relative to the comparable companies; and
Other relevant factors including general economic conditions.

Comparable company multiples

Figure 8.1 provides a summary of FY07 historic and FY08 forecast P/E multiples of comparable Australian and International listed companies in the travel agency services industry. Inherently, the P/E multiples reflect the value of a minority interest, and do not reflect any premium for control. A more detailed summary, including brief descriptions of the business activities of each company and transaction, is provided in Appendix E.

119

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

Figure 8.1 Comparable Companies

			Market
		Financial Year	Capitalisation	FY07 EBITDA	FY08 EBITDA	FY07 P/E	FY08 P/E
Company	Country	End	(In AUD $m)	multiple*	multiple	multiple*	Multiple
Australia
Jetset Travelworld Limited	Australia	30 Jun	239.8	12.7	9.8	18.7	14.3
Flight Centre	Australia	30 Jun	2171.3	9.2	7.4	18.7	15.4
Wotif.com Holding Limited	Australia	30 Jun	814.8	19.3	12.9	30.7	22.7
Webjet Limited	Australia	30 Jun	118.5	25.9	12.9	30.0	18.6
Mean				16.8	10.8	24.5	17.7
Median				16.0	11.4	24.4	17.0
International
Expedia Incorporated	USA	31 Dec	7587.4	11.9	8.6	24.2	19.7
Orbitz Worldwide Inc	USA	31 Dec	633.1	9.8	7.7	16.7	n/m
Priceline.com	USA	31 Dec	6010.1	30.7	16.2	34.8	32.1
Thomas Cook India Limited	India	31 Dec	387.5	19.9	n/a	48.4	n/a
Thomas Cook Group plc	UK	31 Oct	5281.3	4.5	3.0	13.6	10.4
International Travel Limited	India	31 Mar	30.8	4.2	n/a	11.6	n/a
YTB International Inc	USA	31 Dec	246.4	n/m	n/a	n/m	n/a
Hotel.de AG	Germany	31 Dec	142.4	19.8	8.8	40.2	10.8
Kuoni Reisen Holding AG	Switzerland	31 Dec	1771.4	7.5	5.8	15.2	12.3
Mean				13.5	8.3	25.6	17.1
Median				10.9	8.1	20.5	12.3

Overall Mean				14.6	9.3	25.2	17.4
Overall Median				12.3	8.7	21.5	15.4

Source: Bloomberg, CapitalIQ, Jetset management forecasts Market Capitalisation as at 24 April 2008

EBITDA multiples have been prepared on the basis of how EBITDA is disclosed in the company's financial statements (i.e. no adjustments have been made to reflect interest income earned on cash held within EBITDA). All multiples reflect the inclusion of any interim dividends paid (i.e. cumulative dividend).

PwCS normalised multiple

In analysing the comparable company P/E multiples, PwCS notes the following:

The FY07 P/E multiples of the comparable companies range from 11.6 for International Travel Limited to 48.4 for Thomas Cook India;
PwCS has determined the current multiples based on FY07 financial statements, and has also determined forecast FY08 earnings and multiples as a cross check, based on publicly available information;
The Australian comparable companies have greater relevance to the valuation of Jetset, than multiples relating to international companies. Demand for travel internationally is primarily driven by domestic economic conditions, and international valuation benchmarks are not as directly comparable due to differences between Australian and international growth rates, inflation expectations, market conditions, competitive environments, and varying tax and regulatory regimes. PwCS also notes that whilst many of the international comparators are substantially larger than Jetset, many of the comparable travel agency services businesses have some global exposure, both through international operations, and exposure to global risk regarding local demand for travel overseas;
In determining an appropriate P/E multiple PwCS has had regard to both the FY07 and FY08 multiples. The current FY07 financial statements provide greater surety for determining normalised earnings, compared with using consensus market forecast earnings in determining forecast multiples. However, the FY08 data provides the most current market perspective regarding the expected performance of Jetset and the comparable companies;
The P/E multiples for Wotif.com and Webjet are expected to be higher. Wotif and Webjet are currently going through a high growth period, due to their exposure to the online travel

120

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

bookings segment, where they have a greater market presence than Jetset. This is consistent with the relative growth expectations in market consensus forecasts[4] [;] and

While no listed company is directly comparable to Jetset, Flight Centre is considered to be the closest listed comparable to Jetset, notwithstanding its greater market capitalisation and diversified business operations. Both Flight Centre and Jetset have significant ‘shop front’ presence, in contrast to many of the listed comparable companies which are primarily on-line travel agency services businesses. Given Flight Centre’s greater market capitalisation and diversified business operations, it is expected that the multiple adopted for Jetset would be below that of Flight Centre.

Transaction Multiples

PwCS has also had regard to successful transaction multiples within the industry, as provided in Figure 8.2 below. These reported multiples will include a takeover premium.

Figure 8.2 Comparable Transactions

Date	Target Name	Target Country	Acquirer	% of shares	Value of	P/E Multiple
Announced				acquired	transaction
					($mil)
*Australasia*
29/05/2006	Gullivers Travel Group Ltd	New Zealand	S8 Ltd	100.0%	156.0	31.6
6/03/2006	Transonic Travel Ltd	Australia	S8 Ltd	100.0%	95.2	17.5
5/09/2005	Harvey World Travel Group	Australia	S8 Ltd	80.1%	53.2	34.4
Mean						27.8
Median						31.6
*Other*
27/04/2006	Navigant International Inc	United States	Carlson Wagonlit Travel	100.0%	298.0	17.8
2/12/2004	ebookers PLC	United Kingdom	Cendant Corp	100.0%	423.6	N/A
Mean						17.8
Median						17.8

Source: Thompson SDC Platnum

In analysing the comparable transaction P/E multiples, PwCS notes the following:

The average transaction P/E multiples reported are likely to be higher than for trading multiples as they will include a takeover premium;
The acquisition of Harvey World Travel Group was made following a decline in earnings reflected in the higher historic P/E multiple; and
Most of the above transactions are two to three years old.

Adopted P/E multiple

PwCS has adopted a historic P/E multiple range of 17.0 to 18.0 times maintainable FY07 NPAT and 13.0 to 14.0 times maintainable FY08 NPAT (as a cross-check).

4 Sourced from Bloomberg

121

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

These multiples are broadly in line with the implied earnings multiples on which Jetset is currently trading.

Controlling Basis

ASIC Regulatory Guide 111 requires the valuation of the target be performed assuming 100% ownership, therefore including a premium for control. Evidence from studies of market data suggest that takeover premiums are generally in the range of 20% to 40% for successful takeovers. These premiums vary significantly across individual transactions and include the benefit of any control premium as well as a share in any synergistic benefits expected to be derived.

PwCS have assessed the appropriate control premium for Jetset to be 20%. This assessment is at the lower end of the observed average takeover premiums in the period 2005 to 2007[5] . PwCS considers a premium at the low end to be appropriate given the limited synergies expected to be realised from the Proposal.

8.4. Summary Value of Jetset

PwCS has assessed the equity value of Jetset (on a stand-alone minority cumulative dividend basis) to be in the range of between $221 million to $239 million or between $2.40 and $2.60 per share.

On a controlling cumulative dividend basis, the assessed equity value of Jetset is in the range of $265 million to $287 million, or between $2.88 and $3.12 per share.

The equity value of Jetset on both a minority and controlling interest basis, prior to the payment of dividends is calculated as follows:

Figure 8.3 Valuation of Jetset based on FY07 NPAT and Historic P/E Multiple

	Low High $ million $ million

*Minority Basis*
Future maintainable NPAT 2007 P/E multiple Value of equity on a minority basis Number of issued shares (million) Assessed value per share ($) (minority basis)	13.0 13.0 17.0 18.0 221.0 234.0 92.2 92.2 2.40 2.54
*Controlling Basis*
Control premium range Value of equity on a controlling basis Number of issued shares (million) Assessed valueper share($) (controlling basis)	20% 20% 265.2 280.8 92.2 92.2 2.88 3.05

5 PwC Analysis based on Thomson data relating to 4 weeks and 1 week bid premium over pre-bid share price data

122

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

Figure 8.4 Valuation of Jetset based on FY08 NPAT and Prospective P/E Multiple

	Low High $ million $ million

*Minority Basis*
Future maintainable NPAT 2008 P/E multiple Value of equity on a minority basis Number of issued shares (million) Assessed value per share ($) (minority basis)	17.1 17.1 13.0 14.0 222.3 239.4 92.2 92.2 2.41 2.60
*Controlling Basis*
Control premium range Value of equity on a controlling basis Number of issued shares (million) Assessed valueper share($) (controlling basis)	20% 20% 266.8 287.3 92.2 92.2 2.89 3.12

8.5. Valuation Cross Checks

Comparison with Trading Market Price

The announcement of the Proposal was made on 21 February 2008. The share price of Jetset rose to $3.30 at the close of trading on the announcement date.

However, press speculation in respect of the transaction commenced on 6 October 2007 relating to Qantas striking a deal with a listed related travel business. This speculation was confirmed by Qantas on 18 October 2007.

Prior to the announcement date, Jetset shares traded at the following spot and volume weighted average (“VWAP”) prices:

At 19 February 2008 (prior to announcement)
Closing price 19 Febuary 2008	$3.10
VWAP previous 1 month	$2.75
VWAP previous 3 month	$3.09
VWAP previous 6 month	$3.05

At 5 October 2007 (prior to media speculation)
Closing price 5 October 2007	$2.90
VWAP previous 1 month	$2.62
VWAP previous 3 month	$2.24
VWAP previous 6 month	$2.14
Source: Bloomberg

123

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 8 - Valuation of Jetset

Following the announcement of the Proposal, Jetset’s share price has ranged from a high of $3.30 on 21 February 2008 to a low of $2.03 on 19 March 2008, based on closing prices.

In considering the prices above, PwCS notes that:

Jetset’s shares are not traded as actively as larger companies listed on the ASX. As highlighted in Section 4.5, Jetset’s single largest shareholder and its related entities hold approximately 59.7% of Jetset listed shares;
The traded prices reflect minority interest trades in Jetset shares; and
The decline in Jetset’s share price since 27 February is consistent with a decline in the overall market and with Flight Centre. Flight Centre’s share price has declined 17% from 19 February to 12 March 2008, in comparison with a decline in Jetset’s share price of 27% over the same period. However, PwCS notes that the P/E multiples utilised above are based on 5 March 2008 share prices for Jetset and the comparable companies and therefore reflects these relative re-ratings. The overall fall in Jetset and Flight Centre’s share price is likely to reflect current market conditions, in particular market concerns for a slowing of broad economic growth following recent interest rate rises, which have negatively impacted the retail sector in particular due to its dependence on consumer disposable income.

The valuation range for Jetset shares determined by PwCS on a minority basis lies within the range of share prices observed since the announcement of the Proposal on 21 February 2008.

DCF Valuation

PwCS has compared the range of values determined utilising the capitalisation of earnings methodology with an inclusion of a premium for control to that derived by a high level DCF methodology. The values determined by the high level DCF analysis support the range of values determined using the capitalisation of earnings methodology.

EBITDA Multiple

The equity valuation range determined on a minority interest basis of $221 million and $239 million implies an enterprise value of 11.0 to 12.0 times Jetset’s EBITDA for FY07 (8.5 to 9.2 times FY08 EBITDA), adjusting for net cash. The corresponding equity value range on a controlling basis of between $265 million and $287 million implies an enterprise value of 13.4 to 14.6 times Jetset’s FY07 EBITDA (10.3 to 11.3 times FY08 EBITDA). PwCS considers these ranges to be reasonable based on EBITDA multiples of comparable companies (refer to comparable multiples summary, Appendix E).

124

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 9 - Valuation of Jetset/QHB Combined

9. Valuation of Jetset/QHB Combined

9.1. Approach

PwCS has adopted the capitalisation of maintainable earnings as the primary valuation methodology, specifically a capitalisation of NPAT. As a cross-check, PwCS also performed a high-level DCF valuation, and had regard to implied EBITDA multiples.

9.2. Estimate of Future Maintainable NPAT

In determining a future maintainable NPAT for the Consolidated Entity, PwCS has had primary regard to the FY07 pro-forma financial performance for Jetset, Qantas Holidays and Qantas Business Travel, as set out in Section 4.3 and 5.2 of this report and pro-forma FY08 as set out in Section 6.2. PwCS has also considered potential normalisation adjustments, to account for one-off or non-recurring items.

The normalisation adjustments relating to Jetset’s NPAT are summarised in Section 8.2. Normalisation adjustments to QBT NPAT include adjustments relating to:

The acquisition of Travelbox and the redevelopment of online platforms in FY07; and
Implementation of online system in FY08.

PwCS has assessed the future maintainable NPAT for the Combined Entity to be $39.5 million for FY07 (historic NPAT) and $43.6 million for FY08 (prospective NPAT).

9.3. Estimate of NPAT multiple

In selecting an appropriate P/E multiple to apply to the assessment of a maintainable NPAT, PwCS has considered the following:

The FY07 and FY08 multiples adopted for Jetset on a standalone (minority interest) basis. PwCS has considered the future growth and profitability of the Combined Entity in relation to the current operations of Jetset. The resulting entity will be larger, more established and will have greater diversification in its operations;
The two businesses which comprise QHB have significantly different growth profiles. Whilst Qantas Holidays is a larger and more established business, growth is expected to be flat for the next five years[6] . In contrast, relatively strong growth is anticipated for QBT over the same period, albeit on a much smaller revenue and profit base. There also exists some risk relating to expected revenue growth from Qantas Holidays’ online platform, and the extent to which it will offset the decline in revenue from traditional retail;
In determining an appropriate P/E multiple for the Combined Entity, PwCS considered applying an uplift to the range of multiples to account for the qualitative benefits from the formation of the new entity. However these benefits are difficult to quantify and are subjective, particularly given the expected continuing lack of liquidity for Jetset stock. The lack of liquidity

6 Qantas Management estimates

125

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 9 - Valuation of Jetset/QHB Combined

is likely to mean that any re-rating may not be reflected in the company’s share price. Accordingly, an uplift in the multiple for the Consolidated Entity has not been included; and

PwCS has also had particular regard to the FY07 and FY08 Flight Centre multiples. The operations of Flight Centre include wholesale, retail leisure and corporate wholesale, similar to the Combined Entity. However, Flight Centre will remain a significantly larger company by market capitalisation and will not be exposed to the same level of integration risk in the short term. The Combined Entity will also operate a similar business as a result of Jetset’s retail, QH’s wholesale and QBT’s corporate operations.

Adopted P/E multiple

PwCS has adopted a P/E multiple range of between 14 and 15 times 2007 historic maintainable NPAT and a P/E multiple range of 12.5 to 13.5 times 2008 prospective maintainable NPAT.

9.4. Dividends

Jetset will pay a special dividend of $0.11 per share to its shareholders prior to the implementation of the Proposal. This is in addition to the interim dividend of $0.05 per share paid to Jetset shareholders on 31 March 2008.

PwCS has deducted the value of the dividend from the assessed value of the Combined Entity as the dividend will not be available to all Jetset shareholders if the Proposal is implemented. However, the dividend will be received by Jetset’s existing shareholders. Accordingly, PwCS has added back the value of the dividend after calculating the value of a 42% interest in the Combined Entity. This is to enable a comparison of Jetset’s pre-proposal value (prepared on a controlling cumulative dividend basis) to the value retained in the Combined Entity by Jetset’s existing shareholders if the Proposal is implemented (on a minority, cumulative dividend basis).

9.5. Synergies

Jetset management have advised on the synergy benefits expected to be realised prior to the implementation of the Proposal. Details can be found in Section 6.3 of this IER. PwCS has assessed the value of the synergies using a DCF approach to be in the order of $34.9 million taking into account the preliminary nature of Jetset’s management assessment and the inherent uncertainty relating to the benefits, costs and timing of realisation.

9.6. Summary Value of the Combined Entity

PwCS has assessed the equity value of the Combined Entity (on a minority, cumulative dividend basis) to be between $580 million to $627 million (or between $2.73 and $2.95 per share to Jetset shareholders). These calculations are summarised below:

126

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 9 - Valuation of Jetset/QHB Combined

Figure 9.1 Valuation of the Combined Entity utilising FY07 NPAT and Historic P/E Multiple

	Low High $ million $ million
Future maintainable NPAT 2007 P/E multiple Value of equity on a minority basis Add: Synergies Value of equity after synergies Less: Interim and special dividend Value of equity post dividend Number of issued shares Assessed value per share ($) (minority basis) Add: Interim and special dividend (per share) Assessed valueper share to Jetset shareholders($)	39.5 39.5 14.0 15.0 553.0 592.5 34.9 34.9 587.9 627.4 (14.8) (14.8) 573.1 612.6 219.6 219.6 2.61 2.79 0.16 0.16 2.77 2.95

Figure 9.2 Valuation of the Combined Entity utilising FY08 NPAT and Prospective P/E Multiple

	Low High $ million $ million
Future maintainable NPAT 2008 P/E multiple Value of equity on a minority basis Add: Synergies Value of equity after synergies Less: Interim and special dividend Value of equity post dividend Number of issued shares Assessed value per share ($) (minority basis) Add: Interim and special dividend (per share) Assessed valueper share to Jetset shareholders($)	43.6 43.6 12.5 13.5 545.0 588.6 34.9 34.9 579.9 623.5 (14.8) (14.8) 565.1 608.7 219.6 219.6 2.57 2.77 0.16 0.16 2.73 2.93

127

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 9 - Valuation of Jetset/QHB Combined

9.7. Cross Check

FY09 P/E Multiples

As a further cross-check, PwCS has also had regard to the implied FY09 earnings multiple utilising the NPAT determined by the IAR of $49.4 million. The implied FY09 P/E multiples of between 11.4 and 12.4 support the value ranges utilising the FY07 and FY08 NPAT.

DCF Valuation

PwCS has compared the range of values determined utilising the capitalisation of earnings methodology to that derived by a high level DCF methodology (after allowing for a minority interest discount). The values determined by the high level DCF analysis support the range of values determined using the capitalisation of earnings methodology.

EBITDA Multiple

The FY07 equity valuation range determined on a minority interest basis of $573 million and $613 million, implies an enterprise value of 10.6 to 11.4 times the Combined Entity’s EBITDA for FY07 (9.2 to 9.9 times EBITDA for FY08).

PwCS considers the implied EBITDA ranges to be reasonable based on the EBITDA multiples of comparable companies and the implied EBITDA multiples of Jetset on a standalone basis.

128

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 10 - Comparison of the Value of Jetset Shares pre and post the Proposal

10. Comparison of the Value of Jetset Shares pre and post the Proposal

Jetset is issuing shares to Qantas which will result in Qantas obtaining control of Jetset. The consideration offered in exchange for control of Jetset is a 42% shareholding in the Combined Entity.

To determine whether the Proposal is fair for Jetset’s non-associated shareholders, PwCS has compared the value of a Jetset share being acquired (assuming 100% ownership of Jetset) with the consideration represented by a 42% interest in the Combined Entity on a minority basis. This comparison is presented below:

Fairness Test	Low	High	Mid
Jetset (controlling basis) ($mil)	265.2	287.3	276.2
Combined Entity (minority basis) ($mil)	252.1	272.1	262.1
Jetset (controlling basis) (per share)	$2.88	$3.12	$3.00
Combined Entity (minority basis) (per share)	$2.73	$2.95	$2.84

Based on PwCS’ assessment, the high end of the value range for the Combined Entity marginally exceeds the low end of the value range for Jetset on a stand-alone basis.

Accordingly, in PwCS’ opinion the Proposal is not fair to Jetset’s non-associated shareholders.

129

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 11 - Evaluation of the Proposal

11. Evaluation of the Proposal

Advantages

Integration, diversification and competitive positioning

Share market

7 Bloomberg data as at 5 May 2008

130

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 11 - Evaluation of the Proposal

Brand

Through QHB, the Combined Entity will be able to use and be associated with the Qantas brand in relation to Qantas Holidays and Qantas Business Travel for a period up to five years (with a conditional option for a further five year term) and the Viva! Holiday brand for a period up to ten years (with a conditional option to extend for a further ten years). After the expiry, or prior to expiry, the relevant Jetset subsidiaries will need to review an agreement with Qantas to extend the use of the brands (at a possible cost to Jetset) or re-brand the business activities which utilise Qantas Holidays (“QH”), Qantas Business Travel (“QBT”) and Viva! related branding.

Earnings volatility

Synergy benefits

Jetset management expect that certain synergies will be realised if the Proposal proceeds. Jetset’s existing shareholders will benefit on a pro-rata basis (i.e. 42% of the synergy benefit).

Premium on Jetset’s value per share on a minority interest basis

Summary of Share Prices $
	Low High
Jetset (minority basis) Combined Entity (minority basis)	2.40 2.60 2.73 2.95
Premium / (Discount) %	$0.33 $0.35 14% 14%

131

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 11 - Evaluation of the Proposal

Premium on Jetset’s trading share price

11% to 19% premium to the share price of $2.47 as at 16 April 2008;
4% to 13% premium to the 1 month volume weighted average share price (“VWAP”) prior to 6 October 2007 (the date of press speculation relating to a possible transaction);
22% to 32% premium to the 3 month VWAP prior to 6 October 2007; and
28% to 38% premium to the 6 month VWAP prior to 6 October 2007.

Disadvantages

Foregone opportunity to receive a future takeover premium

132

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 11 - Evaluation of the Proposal

Qantas 127.3 million or 58.0%
Sintack and Associated Entities 55.2 million or 25.2%
Other shareholders 37.0 million or 16.8%

Risks of integration

Prospects of a Superior Alternative Offer

PwCS is not aware of any superior alternative offer for Jetset’s existing shareholders as at the date of this report.

Other Considerations

Share price movements

133

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Section 11 - Evaluation of the Proposal

Earnings per share

	2007A	2008F
Proposal does not proceed (Jetset Standalone)
Jetset NPAT ($ mil normalised)	13.0	17.1
Number of shares outstanding (mil)	92.2	92.2
Earnings per Share	$0.141	$0.185
Proposal proceeds
Combined Entity NPAT ($ mil normalised)	39.5	43.6
Number of shares outstanding (mil)	219.6	219.6
Earnings per Share	$0.180	$0.199

Independent financial advice

The qualifications, declarations, disclaimers and consents contained in appendices to this IER form an integral part of and should be read with this report.

Conclusions

Overall, in PwCS’ opinion, the advantages of the Proposal to Jetset’s non-associated shareholders outweigh the disadvantages. Accordingly, PwCS considers that the Proposal is reasonable.

134

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix A – Financial Services Guide

PwCS

This Financial Services Guide is dated 7 May 2008.

About Us

PwCS (ABN 54 003 311 617, Australian Financial Services Licence no 244572) has been engaged by Jetset to provide a report in the form of an Independent Expert’s Report (“the Report”) for inclusion in this Explanatory Memorandum.

You have not engaged us directly but have been provided with a copy of the Report as a retail client because of your connection to the matters set out in the Report.

This Financial Services Guide

This Financial Services Guide (“FSG”) is designed to assist retail clients in their use of any general financial product advice contained in the Report. This FSG contains information about PwCS generally, the financial services we are licensed to provide, the remuneration PwCS may receive in connection with the preparation of the Report, and how complaints against us will be dealt with.

Financial Services We are Licensed to Provide

Our Australian Financial Services Licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities, interests in managed investment schemes, derivatives, superannuation products, foreign exchange contracts, insurance products, life products, managed investment schemes, government debentures, stocks or bonds, and deposit products.

General Financial Product Advice

The Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs.

You should consider your own objectives, financial situation and needs when assessing the suitability of the Report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment.

Fees, Commissions and Other Benefits We May Receive

PwCS charges fees to produce reports, including this Report. These fees are negotiated and agreed with the entity who engages PwCS to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. For the preparation of this Report our fees are approximately $180,000 excluding GST.

135

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix A – Financial Services Guide

Directors, authorised representatives or employees of PwCS, PricewaterhouseCoopers (“PwC”), or other associated entities, may receive partnership distributions, salary or wages from PwC.

Associations with Issuers of Financial Products

PwCS and its authorised representatives, partners, employees and associates may from time to time have relationships with the issuers of financial products. For example, PwC may be the auditor of, or PwCS may provide financial advisory services to, the issuer of a financial product in the ordinary course of its business.

Complaints

If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. In addition, a copy of our internal complaints handling procedure is available upon request. If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Industry Complaints Service (“FICS”), and external complaints resolution service. You will not be charged for using the FICS service.

Contact Details

PwCS can be contacted by sending a letter to the following address:

Mr Nigel Smythe Authorised Representative PricewaterhouseCoopers Securities Ltd GPO Box 1331L MELBOURNE VIC 3001

136

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix B - Sources of Information

In preparing this Report PwCS has had access to and relied upon the following major sources of information:

Jetset Annual Reports (audited) for the 3 years ended 30 June 2007;
Jetset Management accounts for the year ended 30 June 2007;
Management forecasts for Jetset to the year ended 30 June 2010;
Qantas Holidays Management Report for the month ended 30 June 2007;
Qantas Holidays Business Plan dated December 2007;
Management forecasts for Qantas Holidays and Qantas Business Travel to the year ended 30 June 2013;
Deloitte Financial Due Diligence Report dated 20 December 2007;
Investigating Accountants Report dated 18 April 2008;
Explanatory Memorandum in relation to the proposed merger of Jetset and QHB dated 21 April 2008;
Merger Implementation Agreement and Amending Agreement for the Proposal;
Submission to the Australian Competition and Consumer Commission regarding the proposed merger of Jetset and QHB dated 27 February 2008;
IBISWorld Industry Report dated February 2008 - Travel Services in Australia;
Tourism Australia Tourism Forecasting Committee data;
Selected Board Papers for Jetset;
Press releases issued by Jetset and Qantas;
Discussions and correspondence with Jetset management;
Discussions and correspondence with Qantas Holidays and Qantas Business Travel management;
Financial information sourced from Bloomberg;
Information on comparable listed companies sourced from Bloomberg, Capital IQ, and annual reports; and
Other publicly available information including information from website.

PwCS has not performed an audit, review or any other verification of the information presented to it. Accordingly, PwCS expresses no opinion on the reliability of the information supplied to it.

137

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix C - Qualifications, Disclaimers and Consents

Qualifications

PwCS is a member of PricewaterhouseCoopers, a large international firm of Chartered Accountants which has had extensive experience in providing corporate financial advice and in the preparation of Independent Expert Reports. PricewaterhouseCoopers Securities Ltd is a licensed Dealer (No 11203) under the Corporations Act. Mr Nigel Smythe is an associate of The Institute of Chartered Accountants in Australia and a Senior Fellow of the Financial Services Institute of Australia. He holds a Bachelor of Business and a Graduate Diploma in Applied Finance & Investment. He has in excess of 12 years experience preparing independent expert reports and business valuations with

PricewaterhouseCoopers and is an authorised representative of PwCS. Mr James Garde is a Chartered Accountant and a Fellow of the Financial Services Institute of Australasia. He holds a Bachelor of Commerce and a Masters of Commerce with a specialisation in Finance. He has 22 years experience with PricewaterhouseCoopers. He is also a partner of PricewaterhouseCoopers, and is an authorised representative of PwCS.

Declarations

Neither PwCS nor PricewaterhouseCoopers has any interest in the outcome of the Proposal. PwCS is entitled to receive a fee of approximately $180,000 for the preparation of this Report based on time spent at our normal hourly rates for this type of work and will be reimbursed for out of pocket expenses incurred. The fee payable to PwCS is payable regardless of the outcome of the Proposal. In addition, PwCS has been indemnified by Jetset in relation to any claim arising from or in connection with its reliance on information provided by Jetset. None of PwCS, PricewaterhouseCoopers, Mr Garde nor Mr Smythe hold shares/units in Jetset and have not held any such beneficial interest in the previous two years. A draft of this Report dated 26 March 2008 was presented to the Directors of Jetset and their respective advisors for review of factual information contained in the Report. No significant changes were made to the Report as a result of those reviews.

PwCS have historically provided services to Qantas in the nature of advisory related services none of which relate to, nor impair its ability to prepare an independent assessment of the Proposal.

Purpose of Report

This Report has been prepared at the request of the Directors of Jetset for inclusion in the Explanatory Memorandum and should not be used for any other purpose. In particular, it is not intended that this Report should serve any purpose other than an expression of our opinion on whether the Proposal is fair and reasonable for the shareholders of Jetset. This Report has been prepared solely for the benefit of the Directors of Jetset and for the benefit of those persons who hold shares in Jetset. Neither the whole or any part of this Report nor any reference to it may be included in or attached to any document, circular, resolution, letter or statement (other than the Explanatory Memorandum

138

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix C - Qualifications, Disclaimers and Consents

mentioned above) without the prior written consent of PwCS to the form and context in which it appears.

Special note regarding Forward-looking Statements and Forecast Financial Information

Certain statements in this Report may constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance and achievements of the Jetset and QHB, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following:

trading conditions in the retail or travel agency sectors;
the future movements in interest rates and taxes;
the impact of terrorism and other related acts on broader economic conditions;
changes in laws, regulations or governmental policies or the interpretation of those laws, the regulations or Jetset or QHB in particular, and
other factors referenced in this Report.

Disclaimer and Consents

PwCS’ sole involvement in this Explanatory Memorandum has been the preparation of this Report. Accordingly PwCS takes no responsibility for the content of the Explanatory Memorandum as a whole.

PwCS has consented to the inclusion of this Report in the form and context in which it is included as an appendix to the Explanatory Memorandum.

In preparing this Report, Jetset has indemnified PwCS, PricewaterhouseCoopers and its employees, officers and agents against any claim, liability, loss or expense, cost or damage, including legal costs on a solicitor client basis, arising out of reliance on any information or documentation provided by Jetset which is false and misleading or omits any material particulars or arising from a failure to supply relevant documentation or information.

In addition, Jetset has agreed that if it makes any claim against PricewaterhouseCoopers or PwCS for loss as a result of a breach of our Contract, and that loss is contributed to by its own actions, then liability for its loss will be apportioned and is appropriate having regard to the respective responsibility for the loss, and the amount Jetset may recover from PwCS will be reduced by the extent of its contribution to that loss.

139

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix D - Comparable Company Descriptions ________________

Appendix D - Comparable Company Descriptions

Company Name	Descriptions

Australia
Jetset Travelworld Limited Jetset Travelworld Limited operates as a travel agency franchise group in Australia. The company provides various travel related products and services, includingthe operation of an integrated airline ticketingfacility.
Flight Centre Flight Centre Limited sells international and domestic travel and travel related services. Services include arranging flights, coach tours, accommodation, rail passes, cruises, car hire,visas,traveller’s cheques, andtravel insurance. The company providestravelservicesfor leisure and businesstravellers.
Wotif.com Holding Limited Wotif.com Holdings Limited, through its subsidiaries, provides online accommodation booking services worldwide. The company, through its Web site, Wotif.com, brings accommodation suppliers and customers together. It focuses on hotels, motels, apartments, resorts, and bed and breakfasts. Wotif.Com Holdings allows the customers to book accommodation. The company offers its services to business travellers and short-break leisure travellers.
Webjet Limited Webjet Limited, together with its subsidiaries, provides Internet based travel booking services in Australia. It offers airline ticketing and travel packages.
International
Expedia Incorporated Expedia, Inc., together with its subsidiaries, operates as an online travel company in the United States and internationally. The company offers travel products and services to leisure and corporate travellers, offline retail travel agents, and travel service providers including: facilitating the booking of hotel rooms, airline seats, car rentals, and destination services from its travel suppliers; and acting as an agent in the transaction, passing reservations booked by its travellers to the relevant airline, hotel, car rental company, or cruise line.
Orbitz Worldwide Inc Orbitz Worldwide, Inc. operates as an online travel company that enables leisure and business travellers to research, plan, and book a range of travel products. It provides a set of travel products, including air, hotels, vacation packages, car rentals, cruises, travel insurance, and destination services, such as ground transportation, event tickets, andtoursworldwide.
Priceline.com priceline.com Incorporated operates as an online travel company in the United States and Europe. The company provides various travel services, including airlinetickets,hotel rooms, car rentals, vacationpackages, cruises, destinationservices, andtravel Insurance.
Thomas Cook India Limited Thomas Cook (India) Ltd. operates as an authorized dealer in foreign exchange and as a travel agent. The Company also offers packaged tours, cargo services and travel related insurance.
Thomas Cook Group plc Thomas Cook AG, together with its subsidiaries, operates as a leisure travel company. The company’s services include airlines, accommodation, tour operation, and distributionand service agencies.
International Travel Limited International Travel House Limited provides travel related services in India. Its services include air ticketing, car rentals, corporate travel services, inbound tourism, overseas and domesticholiday packages, and exhibition management.
YTB International Inc YTB International, Inc. offers travel services. The Company franchises travel agencies, offers home-based travel businesses, and offers net-to-phone technologythat allows users to book reservations with restaurants,hotels,cruise lines and tour operators.
Hotel.de AG hotel.de AG operates in the online hotel reservations market. The company provides Internet-based hotel reservation services by acting as an agent between customers and hotels. The company offers business and private customers to book hotels of various categories worldwide through its Web site, hotel.de, or via its callcentre.
Kuoni Reisen Holding AG Kuoni Travel Holding, Ltd., a tourist travel company, focuses on leisure travel and destination management businesses. It provides personal advice on holidays, aswellas offersvariousleisuretravelproducts.
Source: CapitalIQ

140

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix E - Comparable Multiples

			Market
		Financial Year	Capitalisation	FY07 EBITDA	FY08 EBITDA	FY07 EBIT	FY08 EBIT	FY07 P/E	FY08 P/E
Company	Country	End	(In AUD $m)	multiple*	multiple	multiple*	multiple	multiple*	Multiple
Australia
Jetset Travelworld Limited	Australia	30 Jun	239.8	12.7	9.8	13.0	10.0	18.7	14.3
Flight Centre	Australia	30 Jun	2171.3	9.2	7.4	11.3	9.0	18.7	15.4
Wotif.com Holding Limited	Australia	30 Jun	814.8	19.3	12.9	21.4	14.2	30.7	22.7
Webjet Limited	Australia	30 Jun	118.5	25.9	12.9	26.4	13.4	30.0	18.6
Mean				16.8	10.8	18.0	11.6	24.5	17.7
Median				16.0	11.4	17.2	11.7	24.4	17.0
International
Expedia Incorporated	USA	31 Dec	7587.4	11.9	8.6	13.7	11.8	24.2	19.7
Orbitz Worldwide Inc	USA	31 Dec	633.1	9.8	7.7	18.5	20.6	16.7	n/m
Priceline.com	USA	31 Dec	6010.1	30.7	16.2	39.2	18.0	34.8	32.1
Thomas Cook India Limited	India	31 Dec	387.5	19.9	n/a	24.2	n/a	48.4	n/a
Thomas Cook Group plc	UK	31 Oct	5281.3	4.5	3.0	8.1	4.1	13.6	10.4
International Travel Limited	India	31 Mar	30.8	4.2	n/a	6.2	n/a	11.6	n/a
YTB International Inc	USA	31 Dec	246.4	n/m	n/a	n/m	n/a	n/m	n/a
Hotel.de AG	Germany	31 Dec	142.4	19.8	8.8	21.2	9.4	40.2	10.8
Kuoni Reisen Holding AG	Switzerland	31 Dec	1771.4	7.5	5.8	10.4	7.9	15.2	12.3
Mean				13.5	8.3	17.7	12.0	25.6	17.1
Median				10.9	8.1	16.1	10.6	20.5	12.3

Overall Mean				14.6	9.3	17.8	11.8	25.2	17.4
Overall Median				12.3	8.7	16.1	10.9	21.5	15.4

Source: Bloomberg, CapitalIQ, Jetset management forecasts

Market Capitalisation as at 24 April 2008

PwCS normalised multiple

141

==> picture [596 x 107] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

Appendix F - Glossary of Terms

==> picture [407 x 455] intentionally omitted <==

----- Start of picture text -----

Term Definition
AGAAP Australian Generally Accepted Accounting Principles
AIFRS Australian International Financial Reporting Standards
Announcement Date 21 February 2008
ASIC Australian Securities and Investments Commission
ASX Australian Stock Exchange Limited and the market it operates
AUD Australian Dollar
Combined Entity The proposed merged entity of Jetset and QHB
Corporations Act The Corporations Act 2001 including the Corporations Regulations 2001
DCF Discounted Cash Flow
EBT Earnings Before Tax
EBIT Earnings Before Interest & Tax
EBITDA Earnings Before Interest, Tax, Depreciation & Amortisation
Enterprise Value Value of the business (includes debt and equity)
EPS Earnings per share
Explanatory Memorandum The explanatory memorandum for the Extraordinary General Meeting
FME Future Maintainable Earnings
FY Financial Year
GDP Gross Domestic Product
IER Independent Expert’s Report
Independent Expert PricewaterhouseCoopers Securities Ltd (In relation to this Report)
Independent Expert’s Report The Report prepared by the Independent Expert set out in the Explanatory
Memorandum
Jetset Jetset Travelworld Limited
Market capitalisation Value of shares outstanding multiplied by the current price per share
NPAT Net Profit After Tax
NPBT Net Profit Before Tax
NTA Net Tangible Assets
PwC PricewaterhouseCoopers
PwCS PricewaterhouseCoopers Securities Ltd
Qantas Qantas Airways Limited
QBT Qantas Business Travel, a business operated within of Qantas
QH Qantas Holidays, a business operated within of Qantas
QHB Proposed consolidated entity of Qantas Holidays and Qantas Business Travel
QH Tours QH Tours Limited
TTV Total Transaction Value
VWAP Volume Weighted Average Price
----- End of picture text -----

142

==> picture [596 x 101] intentionally omitted <==

APPENDIX B – INDEPENDENT EXPERT’S REPORT

==> picture [547 x 641] intentionally omitted <==

143

==> picture [596 x 107] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

==> picture [38 x 58] intentionally omitted <==

==> picture [203 x 36] intentionally omitted <==

Ref: TJB:amp

7 May 2008

The Directors Jetset Travelworld Limited Level 28 Australia Square 264 George Street SYDNEY NSW 2000

Dear Directors

INVESTIGATING ACCOUNTANTS' REPORT (“IAR”) ON FORECAST FINANCIAL INFORMATION

This IAR has been prepared at the request of the Directors of Jetset Travelworld Limited (the “Company”, or “JTL”) for inclusion in an Explanatory Memorandum (“EM”) to be dated on or around 7 May 2008. The EM is in relation to the proposed merger of JTL and Qantas Holidays Limited (“QH”) which owns 100% of Qantas Business Travel Pty Limited (“QBT”) through the acquisition by JTL of all the issued fully paid shares in the capital of QH for the consideration of new fully paid ordinary shares in JTL to be issued to QH Tours Ltd (“QH Tours”), a wholly owned subsidiary of Qantas Airways Limited (“Qantas”). The effect of this proposed share issue will be that QH Tours will hold 58% of all the JTL shares on issue immediately following the implementation of the merger.

Pitcher Partners Corporate Pty Ltd (“Pitcher Partners Corporate”) has been requested to prepare a report covering the pro forma Forecast Financial Information described below and set out in the EM. Pitcher Partners Corporate holds the appropriate Australian Financial Services Licence for the issue of this report.

References to the Company and other terminology used in this report have the same meaning as defined in the Glossary in the EM.

Background

On 21 February 2008 JTL and QH Tours entered into a Merger Implementation Agreement. This established the terms and conditions under which the parties would implement the merger of JTL and QH and QBT.

144

==> picture [596 x 101] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

2

The merger is conditional upon a number of matters including the passing of the Merger Resolutions by the shareholders of JTL. Once all other conditional matters are satisfied certain steps including those set out in Sections 1.2 and 6.3 of the EM will need to be undertaken.

Pro forma Forecast Financial Information

You have requested Pitcher Partners Corporate to prepare a report covering the Pro forma Forecast Financial Information. The Pro forma Forecast Financial Information set out in Section 4.3 of the EM comprises:

The summary pro forma combined forecast income statement for the year ending 30 June 2008 which comprises:
the summary forecast income statement of JTL for the year ending 30 June 2008 (“the JTL Forecast”);
the summary pro forma combined and forecast income statement of QH and QBT for the year ending 30 June 2008.
The summary pro forma combined forecast income statement of JTL, QH and QBT for the year ending 30 June 2009.

The Pro forma Forecast Financial Information is based on an aggregation of the forecast income statements of JTL and the pro forma forecast income statements of QH and QBT for the years ending 30 June 2008 and 2009. Consequently, the Pro forma Forecast Financial Information does not reflect the impact of any intercompany transactions that may take place during these financial years.

The Directors are responsible for the preparation and presentation of the forecast, including the best-estimate assumptions, which include the Pro forma assumptions on which they are based. The forecasts have been prepared for inclusion in the EM. We disclaim any assumption of responsibility for any reliance on this report or on the forecasts to which it relates to any purposes other than for which it was prepared.

Scope

Review of Pro forma Forecast Financial Information

JTL

We have reviewed the forecast income statements of JTL for the years ending 30 June 2008 and 30 June 2009, as identified above together with the underlying assumptions on which the JTL Forecast is based as set out in Section 4.3 of the EM in order to give a statement thereon to the Directors of the Company.

Our review of the JTL Forecast has been conducted in accordance with AUS 902 “Review of Financial Reports” applicable to review engagements. Our procedures consisted primarily of enquiry, comparison and analytical review procedures including discussions with management and Directors of the Company of the factors considered in determining their assumptions. Our procedures included examination, on a test basis, of evidence supporting the assumptions, amounts and other disclosures in the JTL Forecast and the evaluation of Accounting Policies used in the JTL Forecast.

145

==> picture [596 x 107] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

3

These procedures have been undertaken in order to state whether anything has come to our attention which causes us to believe that:

the Directors’ best-estimate assumptions, as set out in Section 4.3.3, of the Pro forma Forecast Financial Information of the EM, do not provide reasonable grounds for the preparation of the JTL Forecast; and
in all material respects, the JTL Forecast is not properly compiled on the basis of the Directors’ best-estimate assumptions, consistent with the accounting policies adopted and used by JTL and in accordance with the recognition and measurement principles prescribed in the Australian Accounting Standards and other mandatory professional reporting requirements in Australia and accounting policies of JTL to present a view consistent with our understanding of JTL forecast operations.
the JTL Forecast itself is unreasonable.

QH and QBT

Deloitte Corporate Finance Pty Limited has been engaged by the Directors of QH, QBT and QH Tours to review the pro forma aggregated forecast financial income statements of QH and QBT for the years ending 30 June 2008 and 30 June 2009, as identified above (“the QH/QBT Forecasts”). This review was conducted in accordance with AUS 902 “Review of Financial Reports”. Deloitte has issued an unqualified report on the QH/QBT Forecasts.

The assumptions underlying the QH/QBT Forecasts are subject to uncertainties and contingencies which are often outside the control of the Directors of QH and QBT. The QH and QBT businesses conduct a significant level of transactions in foreign currencies. This has resulted in material foreign currency gains and losses historically. No gain or loss on foreign currency transactions has been included in the Forecasts as such gains and losses cannot be reliably forecast.

The QH/QBT Forecasts also assume that there are no changes in the economic conditions pertaining to the travel industry.

Combined/Aggregated Pro forma Forecast Financial Information

The Directors are responsible for the preparation of the aggregated pro forma Forecast Financial Information and the JTL summary forecast income statement which is provided to potential shareholders as a guide to the potential future performance of the Combined JTL Group. There is a significant degree of subjective judgement in the preparation of forecasts. As such, actual results may vary materially from the Pro forma Forecast Financial Information. Accordingly, shareholders should have regard to the risk factors set out in Section 4.5 of the EM, the sensitivity analysis set out in Section 4.3.5 of the EM, and the possible disadvantages of the Merger Proposal outlined in Section 2.5 of the EM.

Our review, which is not an audit, is substantially less in scope than an audit examination conducted in accordance with Australian Auditing and Assurance Standards and provides less assurance than an audit. Accordingly, we do not express an opinion on the Pro forma Forecast Financial Information.

146

==> picture [596 x 101] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

The Pro forma Forecast Financial Information relates to events and actions that have not yet occurred and may not occur. Whilst evidence may be available to support the underlying assumptions, these assumptions are generally future-orientated and, therefore, speculative in nature. Actual financial performance may vary from the pro forma Forecast Financial Information presented in the EM and such variations may be material.

Review Statement on the Pro forma Forecast Financial Information

Based on our review, which is not an audit, of the Pro forma Forecast Financial Information contained at Section 4.3.1 - 4.3.3, Financial Information of the EM, and based on an investigation of the reasonableness of the Directors’ best estimate assumptions which give rise to the Pro forma Forecast Financial Information, nothing has come to our attention which causes us to believe that:

The Directors’ best-estimate assumptions do not provide reasonable grounds for the preparation of the Pro forma Forecast Financial Information;
The Pro forma Forecast Financial Information is not properly compiled on the basis of the Directors’ best-estimate assumptions, consistent with the accounting policies adopted and used and in accordance with the recognition and measurement principles prescribed in the Australian Accounting Standards; and
The Directors’ Pro forma Forecast Financial Information is not itself unreasonable.

Actual financial performance is likely to be different from the Pro forma Forecast Financial Information since anticipated events frequently do not occur as expected and the variations may be material. Accordingly, we express no opinion as to whether the Pro forma Forecast Financial Information will be achieved.

Subsequent Events

Apart from the matters dealt with in this report and having regard for the scope of our report, nothing has come to our attention that would cause us to believe that matters arising after 31 December 2007, up to the date of this report, other than the matters dealt within this report, to the best of our knowledge and belief, no material transactions, or events outside of the ordinary business of JTL has come to our attention that would require comment on, or adjustment to, the information contained in this report or would cause such information to be misleading or deceptive.

Independence and Disclosure of Interest

Pitcher Partners Corporate and Pitcher Partners do not have any interest in the outcome of this Merger Proposal other than the preparation of this report and the provision of financial due diligence and other advisory services in relation to the Merger Proposal, and acting as auditor and tax adviser of JTL, for which normal professional fees will be received.

147

==> picture [596 x 107] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

Financial Services Guide

Our Financial Services Guide has been included at the end of this report to assist retail investors in their use of any general financial product advice that may be in our report.

Yours faithfully PITCHER PARTNERS CORPORATE PTY LTD

==> picture [83 x 46] intentionally omitted <==

T J BENFOLD Director and Representative

148

==> picture [596 x 101] intentionally omitted <==

APPENDIX C – INVESTIGATING ACCOUNTANT’S REPORT

==> picture [179 x 45] intentionally omitted <==



Pitcher Partners Corporate Pty Ltd ABN: 28 082 323 868 AFSL: 229841

Level 19 15 William Street MELBOURNE VIC 3000 Tel: +61 (0) 3 8610 5000

25 September 2007

What is a Financial Services Guide?

This Financial Services Guide (“FSG”) is an important document the purpose of which is to assist you in deciding whether to use any of the general financial product advice provided by Pitcher Partners Corporate Pty Ltd. The use of “we”, “us” or “our” is a reference to Pitcher Partners Corporate Pty Ltd as the holder of Australian Financial Services Licence (“AFSL”) No. 229841. The contents of this FSG include:

who we are and how we can be contacted
what services we are authorised to provide under our AFSL
how we (and any other relevant parties) are remunerated in relation to any general financial product advice we may provide.
details of any potential conflicts of interest
details of our internal and external dispute resolution systems and how you can access them.

Information about us

We have been engaged by Clean Teq to give general financial product advice in the form of a report to be provided to you in connection with a financial product to be issued by another party. You are not the party or parties who engaged us to prepare this report. We are not acting for any person other than the party or parties who engaged us. We are required to give you an FSG by law because our report is being provided to you. We are only responsible for the financial product advice provided in our report and for the contents of this FSG. You may contact us by writing to GPO Box 5193, MELBOURNE VIC 3001, or by telephone on +61 (0) 3 8610 5000.

Pitcher Partners Corporate Pty Ltd is ultimately owned by the Victorian partnership of Pitcher Partners, a provider of audit and assurance, accounting, tax, corporate advisory, insolvency, superannuation, investment advisory and consulting services. Directors of Pitcher Partners Corporate Pty Ltd are partners of Pitcher Partners.

The Victorian partnership of Pitcher Partners is an independent partnership of Pitcher Partners. As such, neither it nor any of the other independent partnerships has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the name “Pitcher Partners”, or other related names.

The financial product advice in our report is provided by Pitcher Partners Corporate Pty Ltd and not by the Victorian partnership of Pitcher Partners or its related entities.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, we and the Victorian partnership of Pitcher Partners (and its related bodies corporate) may from time to time provide professional services to financial product issuers in the ordinary course of business.

What financial services are we licensed to provide?

The AFSL we hold authorises us to provide the following financial services to both retail and wholesale clients:

to provide general financial product advice only in respect of securities, derivatives, debentures, stocks or bonds issued or proposed to be issued by a government and interests in managed investment schemes including investor directed portfolio services and deposit and payment products limited to basic deposit products and deposit products other than basic deposit products.

Information about the general financial product advice we provide

The financial product advice provided in our report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is being provided to you in connection with the acquisition or potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant Product Disclosure

Statement (“PDS”) or offer document provided by the issuer of the financial product. The purpose of the PDS is to help you make an informed decision about the acquisition of a financial product. The contents of the PDS will include details such as the risks, benefits and costs of acquiring the particular financial product.

How are we and our employees remunerated?

Our fees are usually determined on an hourly basis; however they may be a fixed amount or derived using another basis. We may also seek reimbursement of any out-of pocket expenses incurred in providing the services.

Fee arrangements are agreed with the party or partied who actually engage us and we confirm our remuneration in a written letter of engagement to the party or parties who actually engage us.

Neither Pitcher Partners Corporate Pty Ltd nor its directors and officers, nor any related bodies corporate or associates and their directors and officers, receives any commissions or other benefits, except for the fees for services rendered to the party or parties who actually engage us. Our fees for such services are based on time spent at our professional hourly rates.

All of our employees receive a salary with partners also having an equity interest in the partnership. We do not receive any commissions or other benefits arising directly from services provided to you. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance.

We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

What should you do if you a complaint?

If you have any concerns regarding our report, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerns promptly and equitably. Please address your complaint in writing to:

The Managing Partner Pitcher Partners GPO Box 5193 MELBOURNE VIC 3001

If you are not satisfied with the steps we have taken to resolve your complaint, you may contact the Financial Industry Complaints Service (“FICS”). FICS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry. Complaints may be submitted to FICS at: Financial Industry Complaints Service GPO Box 579 Collins Street West MELBOURNE VIC 8007 Telephone: 1300 780 808 Fax: +61 3 9621 2291 Internet: http://fics.asn.au

The Australian Securities and Investments Commission (“ASIC”) regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit. Their website contains information on lodging complaints about companies and individual persons and sets out the types of complaints handled by ASIC. You may contact ASIC as follows:

Info line: 1 300 300 630 Email: [email protected] Internet: http://www.asic.gov.au/asic/asic.nsf

149

==> picture [596 x 107] intentionally omitted <==

APPENDIX D – TAXATION REPORT

==> picture [37 x 58] intentionally omitted <==

Ref: TJB:gn 7 May 2008

==> picture [202 x 36] intentionally omitted <==

The Directors Jetset Travelworld Limited Level 28 Australia Square 264 George Street SYDNEY NSW 2000

Dear Directors

TAX IMPLICATIONS REPORT: THE PROPOSED MERGER OF JETSET TRAVELWORLD LIMITED WITH QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL (“THE MERGER PROPOSAL”)

Pitcher Partners Corporate Pty Ltd (“Pitcher Partners Corporate”) has been requested to prepare a report covering the general Australian taxation implications of the Merger Proposal. The opinions expressed in the report are based on the tax legislation and practice as at the date of this report.

Given the general nature of this report, it is important that current JTL Shareholders seek their own, independent taxation advice, specific to their own circumstances, before consenting to the Merger Proposal.

Terminology used in this report have the same meaning as defined in the Glossary in the EM.

BACKGROUND

The statements made in this Tax Report are based on the details of the Merger Proposal as provided in the EM.

Pursuant to the Merger Implementation Agreement (“MIA”), the following steps would be undertaken as part of the Merger Proposal:

JTL is to declare a fully franked cash dividend of $0.11 per JTL Share to holders of JTL Shares as at the Record Date;

150

==> picture [596 x 101] intentionally omitted <==

APPENDIX D – TAXATION REPORT

In accordance with Clause 7.2(a) of the MIA, QH Tours is to deliver to JTL duly executed and completed transfers in favour of JTL of the ordinary shares in Qantas Holidays in registrable form (except for the impression of duty);
In accordance with Clause 7.3(a) of the MIA, and in exchange for the shares in Qantas Holidays, JTL is to issue and allot such number of new JTL Shares to QH Tours as will result in QH Tours holding 58% of the issued shares in the merged entity;
In relation to the transaction described immediately above and in accordance with Clause 8.3 of the MIA, JTL is to make a joint election with Qantas Airways, as head company of the Qantas Airways Limited tax consolidated group (“Qantas Airways tax consolidated group”), to choose scrip for scrip roll-over in accordance with section 124-780(3)(d) of the Income Tax Assessment Act 1997 (ITAA97);
As soon as reasonably practicable after Completion, Qantas Airways is to advise JTL of the cost base for the Qantas Holiday shares in accordance with section 124-780(3)(e) ITAA97;
Qantas Airways is to notify the Australian Taxation Office that Qantas Holidays and Qantas Business Travel have exited the Qantas Airways tax consolidated group;
JTL is to notify the Australian Taxation Office that Qantas Holidays and Qantas Business Travel have joined the Jetset Travelworld Limited tax consolidated group (“JTL tax consolidated group”); and
Qantas Airways, in its capacity as representative member of the Qantas Airways GST group, is to notify the ATO that Qantas Holidays and Qantas Business Travel are no longer members of the Qantas GST group.

The above proposed transaction steps will have direct tax implications for the JTL shareholders and for JTL. This report is intended to provide general comments on these tax implications, both the immediate tax implications and where appropriate the ongoing tax implications.

1. TAXATION IMPLICATIONS FOR JTL SHAREHOLDERS

a) Immediate Taxation Implications

It is proposed that JTL Shareholders will receive a fully franked dividend which may give rise to an income tax liability to resident individual shareholders. It is intended by JTL that the dividend is to be fully franked and will carry franking credits that generally represent a tax offset benefit under the Australian tax system. The taxation implications for each shareholder in respect of the receipt of the proposed dividend and the attached franking credits will depend on the specific circumstances of each shareholder, but the taxation implications will be the same as for any other JTL dividend received by shareholders.

151

APPENDIX D – TAXATION REPORT

==> picture [596 x 107] intentionally omitted <==

The remainder of the transaction steps that make up the Merger Proposal will have no immediate taxation implications for the JTL shareholders:

The proposed acquisition by JTL of shares in Qantas Holidays will not of itself trigger any taxing event for the JTL Shareholders;
The proposed issue by JTL of new shares to QH Tours will not of itself trigger any taxing event for JTL or the JTL Shareholders. In this case there is no CGT event that arises in respect of the pre-existing shares as a result of the increase in share capital. The JTL Shareholders’ cost base in their current shareholdings will also remain unchanged following the share issue.

The above comments as to tax treatment do not contemplate non resident shareholders or shareholders that hold their JTL Shares on revenue account.

b) Ongoing Taxation Implications

It is not possible to comment on any ongoing taxation issues for JTL Shareholders following the Merger Proposal. Such issues, if any, would be subject to the specific circumstances of the JTL Shareholders and any future developments that may impact the share capital of the Company.

2. TAXATION IMPLICATIONS FOR JTL

2.1. INCOME TAX

a) Immediate Taxation Implications

We are not aware of any immediate income tax liabilities for JTL arising from the Merger Proposal.

The proposed acquisition of the shares in Qantas Holidays by JTL in its capacity as head company of the JTL tax consolidated group will cause both Qantas Holidays and Qantas Business Travel to automatically become “subsidiary members” of the JTL tax consolidated group.

The immediate implications of Qantas Holidays and Qantas Business Travel becoming subsidiary members are:

JTL, as head company of the JTL tax consolidated group, will be required to notify the Commissioner of Taxation of Qantas Holidays and Qantas Business Travel becoming members of the group within 28 days of the acquisition date.
The tax costs that JTL can recognise for the acquired QH Group assets will be reset in accordance with the tax consolidations regime cost setting rules.

152

==> picture [596 x 101] intentionally omitted <==

APPENDIX D – TAXATION REPORT

The resetting of the tax cost of assets will primarily impact JTL in terms of (i) the ongoing capital allowance deductions it can claim for QH Group depreciating assets, and (ii) the extent of any capital gains tax liability that may arise on any future sale of Qantas Holidays or Qantas Business Travel assets, whether this be a share or business assets sale. Subject to a review of the accounts of the QH Group, it is not expected that the resetting process will trigger any income tax liabilities for JTL.

The following gives a broad overview of how the tax cost setting process operates in the context of the QH Group assets. It does not purport to be a comprehensive technical or policy summary of the tax consolidations regime and the tax cost setting process.

Setting the tax cost of QH Group Assets

The aim of the cost setting process is to align the cost of the QH Group assets with the cost to JTL of acquiring its interest in Qantas Holidays.

The process for determining the cost of the QH Group assets is governed by the tax consolidation regime cost setting rules. There are essentially two steps to the process:

Identifying the total effective cost of assets held by the Qantas Holidays and Qantas Business Travel companies. This amount is described under the cost setting rules as “the allocable cost amount” and takes into account the cost of Qantas Holidays shares and Qantas Holidays and Qantas Business Travel liabilities.
Allocating this amount across the assets of Qantas Holidays and Qantas Business Travel. The amount allocated to each asset becomes its tax cost for the purpose of all future dealings with that asset while in the JTL tax consolidated group. For most non-current assets, this allocation will be made in accordance with the asset’s proportionate market value at the time of the QH Group joining the JTL tax consolidated group.

1. Cost of Acquisition (“Allocable Cost Amount”)

The allocable cost amount is broadly the tax cost base of JTL’s shareholding in Qantas Holidays, increased by the liabilities of Qantas Holidays and Qantas Business Travel, and adjusted for retained profits and certain deductions within the two companies.

In respect of JTL’s cost base for the proposed shareholding in Qantas Holidays, this amount is modified by the operation of the “scrip for scrip” roll-over provisions.

153

APPENDIX D – TAXATION REPORT

==> picture [596 x 107] intentionally omitted <==

Consequences of scip for scrip roll-over

The terms of the MIA require JTL to make a joint election with Qantas Airways for ‘scrip for scrip’ capital gains tax roll-over relief (“roll-over”) to apply to the Merger.

The roll-over will operate to defer any capital gain that would otherwise arise for the Qantas Airways tax consolidated group upon the transfer of the shares in Qantas Holidays to JTL.

The roll-over in this case[1] causes the cost base that Qantas Airways (as head company) had in the Qantas Holidays shares to be transferred to JTL. JTL effectively inherits the Qantas Airways cost base[2] .

The allocable cost amount is therefore calculated using the original Qantas Airways cost base, such that on any later sale by JTL of the shares in Qantas Holidays or the business assets of the QH Group any capital gains tax liability will be calculated by reference to Qantas Airways’ existing cost base for those assets. QH Tours has undertaken to advise JTL of the original cost base as soon as practicable, but it is possible that, in the event of any future sale of these assets, JTL may crystallise a significant capital gain.

2. Allocation of Costs

In respect of allocating the above amount across the QH Group assets, the cost setting rules may require some of the acquired QH Group assets to be allocated a portion of the allocable cost, relative to their proportionate market values. It may be necessary to secure market valuations of these assets before the allocation process can be resolved.

The other implication of allocating the tax cost according to market values is that high value assets will take a greater share of the allocable cost amount, and achieve greater tax cost bases for income tax purposes, than those with a low market value. Assets most likely to be impacted by this cost allocation in the QH Group are goodwill and plant and equipment.

It is not possible to quantify what impact the tax cost setting process will have until a formal tax cost setting exercise can be conducted.

1 In the present case, for tax purposes head company Qantas Airways has a stake in JTL of greater than 30% following the transfer of its shares in Qantas Holidays. In these circumstances section 124-782 operates to modify the normal cost base rules.

2 There will likely be some difference from the original Qantas Airways’ cost base. For instance some amount of the incidental transaction costs associated with the share transfer will be reflected in the Merger Proposal cost base.

154

APPENDIX D – TAXATION REPORT

==> picture [596 x 101] intentionally omitted <==

b) Ongoing Taxation Implications

Other than as mentioned above, we are not aware of any impact on the ongoing income tax position of the JTL tax consolidated group as a result of the Merger Proposal.

2.2. GOODS AND SERVICES TAX (“GST”)

a) Immediate Taxation Implications

If Qantas Holidays exits the Qantas Airways GST group before the end of a tax period, it will be required to account for GST on transactions that occurred during that tax period (unless the Australian Taxation Office agrees that separate accounting is not necessary). This will involve Qantas Holidays separately reporting its taxable supplies during the final tax period (those supplies would have previously been reported as part of the Qantas Airways GST group). The GST component of charges to clients for these taxable supplies may need to be made available by Qantas Airways. This will also involve a payment of GST to Qantas Airways on acquisitions that were made during the period (that had originally been treated as transactions between GST group members). Qantas Holidays will be entitled to claim input tax credits of that GST.

No adjustment will be necessary for the time that Qantas Business Travel was a business segment of Qantas Airways but if the separately established company was part of the Qantas Airways GST group then similar adjustments to those described above will be necessary.

JTL will need to consider its entitlements to claim input tax credits on expenses relating to the Merger Proposal. Because the Merger Proposal involves JTL acquiring shares in Qantas Holidays and issuing shares to QH Tours, the prima facie position is that there would be a denial of input tax credits. This would mean that the GST-inclusive price of each acquisition would be a cost to JTL. However, individual expenses might give an entitlement to reduced input tax credits (75% of the GST component) and expenses will need to be reviewed to determine the extent of this entitlement.

b) Ongoing Taxation Implications

From a GST perspective, the operations of Qantas Holidays and Qantas Business Travel are to a large extent similar in character to the operations of the current JTL group. Therefore the associated GST issues are likely to mirror those as currently exist in the JTL group (but not in the same ways that the matters were treated while Qantas Holidays and Qantas Business Travel were part of the Qantas Airways GST group).

155

APPENDIX D – TAXATION REPORT

==> picture [596 x 107] intentionally omitted <==

Qantas Holidays and Qantas Business Travel may make creditable acquisitions of air travel from Qantas Airways. The price payable should include a component of GST (where applicable) and Qantas Holidays and Qantas Business Travel will be entitled to claim input tax credits of that GST.
Qantas Holidays and Qantas Business Travel may make taxable supplies to clients (where applicable). The price charged should include the recovery of the GST liability on the taxable supplies. The GST liability should be payable in Business Activity Statements.
JTL might consider adding Qantas Holidays and Qantas Business Travel to the JTL GST group. Adding members to a GST group can only occur at the beginning of a tax period. If an expanded GST group was registered, a single Business Activity Statement would be lodged by the representative member of that GST group accounting for the GST liabilities and input tax credit entitlements of all of the members of that GST group (with the exception of transactions between members of the GST group that are treated as if those transactions had no GST consequences).

2.3. STAMP DUTY

a) Immediate Taxation Implications

The transfer of shares in Qantas Holidays Limited will give rise to a stamp duty liability for JTL. Qantas Holidays Limited is an unlisted company, incorporated and registered in New South Wales. Under the New South Wales stamp duty regime, duty will be charged on the transfer of the shares in Qantas Holidays. The rate of duty will be 0.6% of the value of the shares in Qantas Holidays. As purchaser, JTL will be liable to pay this duty. While the exact amount of duty cannot be confirmed at this time, it is estimated to be approximately $1.8 million.

Qantas Airways has undertaken to pay the stamp duty liability, if any, that may arise in respect of the pre-Merger restructure of the Qantas Business Travel operations (Clause 18.5(b) of the MIA).

b) Ongoing Taxation Implications

We are not aware of any stamp duty liabilities that would arise in respect of the ordinary operations of Qantas Holidays and Qantas Business Travel going forward.

156

APPENDIX D – TAXATION REPORT

==> picture [596 x 101] intentionally omitted <==

2.4. EMPLOYMENT TAXES

a) Immediate Taxation Implications

The proposed transaction does not of itself create any specific employment tax liabilities for JTL. It will however trigger changes in pay-roll tax and WorkCover group compositions going forward.

Pay-roll Tax

The proposed sale will result in JTL becoming part of a mandatory group for pay-roll tax purposes with Qantas Airways and its subsidiaries. This will include Qantas Holidays and Qantas Business Travel.

The application of the pay-roll tax grouping provisions will mean that JTL will not be entitled to claim a pay-roll tax deduction in its own right but rather will have an entitlement with all Qantas Airways group members to only one deduction collectively.

In addition, all members of a payroll tax group are jointly and severally liable for any pay-roll tax liability incurred by any member of the group during the period that they are a member of that group. Effectively, JTL will be exposed to any pay-roll tax liability incurred by Qantas Airways or its subsidiaries from the date of the transaction should Qantas Airways or its subsidiaries not be in a position to pay their liability.

WorkCover

WorkCover provisions in some States, including Victoria and New South Wales, contain grouping provisions which are technically similar to the payroll tax provisions. Primarily, the provisions impact on premium calculations by using group size and claims experience to determine premium payable and will have some impact on JTL’s premium calculations post-sale (the precise impact is indeterminable at this point in time). In addition, the fact that Qantas Airways is a self-insurer in Victoria and Queensland will have an impact as it may be the case that JTL will fall under the self-insurance regime in those States post sale.

The WorkCover grouping provisions also provide that each member of the group is jointly and severally liable for any unpaid premium incurred by any other member of the group. These provisions can impact on JTL in a similar manner as do the corresponding pay-roll tax grouping provisions by potentially exposing JTL to a liability for unpaid premium of Qantas Airways or its subsidiaries.

157

==> picture [596 x 107] intentionally omitted <==

APPENDIX D – TAXATION REPORT

b) Ongoing Taxation Implications

In relation to FBT, PAYG withholding and the Superannuation Guarantee charge, the Qantas Holidays and Qantas Business Travel operations will give rise to similar tax issues as are currently considered for JTL and its subsidiaries.

INDEPENDENCE AND DISCLOSURE OF INTEREST

Pitcher Partners Corporate does not have any interest in the outcome of this Merger Proposal other than the preparation of this report and the provision of financial due diligence and other advisory services in relation to the Merger Proposal, for which normal professional fees will be received.

Yours faithfully

PITCHER PARTNERS CORPORATE PTY LTD

==> picture [83 x 46] intentionally omitted <==

T J BENFOLD Director and Representative

158

==> picture [596 x 101] intentionally omitted <==

==> picture [547 x 641] intentionally omitted <==

159

==> picture [596 x 107] intentionally omitted <==

APPENDIX E – QANTAS CONTROLLED GROUP

==> picture [484 x 639] intentionally omitted <==

----- Start of picture text -----

Qantas Group
Country of Ownership
Controlled Entities ACN/ABN Incorporation Interest
%
738 Leasing 1 Pty Limited 33 099 119 641 Australia 100
738 Leasing 2 Pty Limited 71 099 119 801 Australia 100
AAL Aviation Limited 83 008 642 886 Australia 100
AAFE Superannuation Pty Limited 064 186 214 Australia 100
TAA Superannuation Pty. Ltd. 065 318 461 Australia 100
Australian Regional Airlines Pty. Ltd. 25 006 783 633 Australia 100
Sunstate Airlines (Qld) Pty. Limited 82 009 734 703 Australia 100
Southern Australia Airlines Pty Ltd 38 006 604 217 Australia 100
Airlink Pty Limited 76 010 812 316 Australia 100
Eastern Australia Airlines Pty. Limited 77 001 599 024 Australia 100
Impulse Airlines Holdings Proprietary Limited 67 090 590 024 Australia 100
Impulse Airlines Australia Pty Ltd 17 090 379 285 Australia 100
Jetstar Airways Pty Limited 33 069 720 243 Australia 100
Jetstar Holidays Co. Ltd. Japan 100
Team Jetstar Pty Limited 64 003 901 353 Australia 100
First Brisbane Airport Proprietary Limited 60 006 912 116 Australia 100
Second Brisbane Airport Proprietary Limited 49 006 912 072 Australia 100
First Brisbane Airport Unit Trust n/a 100
Second Brisbane Airport Unit Trust n/a 100
TAA Aviation Pty. Ltd. 17 008 596 825 Australia 100
In Tours Airline Unit Trust No 1 n/a 100
Denmell Pty. Limited 24 008 636 093 Australia 100
Denmint Pty. Limited 22 008 636 084 Australia 100
Denold Pty. Limited 64 008 636 262 Australia 100
Denpen Pty. Limited 66 008 636 271 Australia 100
Denpet Pty. Limited 60 008 636 244 Australia 100
----- End of picture text -----

160

==> picture [596 x 101] intentionally omitted <==

APPENDIX E – QANTAS CONTROLLED GROUP

==> picture [484 x 638] intentionally omitted <==

----- Start of picture text -----

Denpost Pty. Limited 58 008 636 235 Australia 100
Denrac Pty. Limited 56 008 636 226 Australia 100
Denseed Pty. Limited 39 008 636 155 Australia 100
Australian Airlines Limited 85 099 625 304 Australia 100
BD No 1 Limited Cayman Islands 100
Express Ground Handling Pty Limited 19 107 638 326 Australia 100
Jetconnect Limited New Zealand 100
Qantas Investments (NZ) Limited New Zealand 100
Jetstar Asia Holdings Pty Limited 86 108 623 123 Australia 100
Jet Turbine Services Pty Limited 15 106 473 965 Australia 100
Kurrajong Limited Cayman Islands 100
Q H Tours Ltd 81 001 262 433 Australia 100
Holiday Tours and Travel Pte Ltd Singapore 75
Jetabout Holidays Pte Ltd Singapore 75
Tour East Australia Pty Limited 106 526 096 Australia 75
Tour East Singapore (1996) Pte Ltd Singapore 75
Tour East (Hong Kong) Limited Hong Kong 75
PT Biro Perjalanan Wisata Tour East Indonesia Indonesia 60
PT Pacto Holiday Tours Indonesia 52.5
Holiday Tours and Travel Ltd Taiwan 75
Holiday Tours and Travel Limited Hong Kong 75
Hangda Consulting (Shanghai) Co. Ltd China 75
Holiday Tours and Travel (Korea) Limited Korea 56.25
QH International Co, Limited Japan 100
Jetabout Japan Inc Japan 100
QH Tours (UK) Limited United Kingdom 100
Qantas Holidays Limited 24 003 836 459 Australia 100
Qantas Business Travel Pty Limited 128 382 187 Australia 100
Qantas Viva! Holidays Pty Limited 82 003 857 332 Australia 100
----- End of picture text -----

161

==> picture [596 x 107] intentionally omitted <==

APPENDIX E – QANTAS CONTROLLED GROUP

==> picture [484 x 645] intentionally omitted <==

----- Start of picture text -----

QH Cruises Pty. Limited. 13 003 895 556 Australia 100
Qanfad Pty Limited 071 955 578 Australia 100
Qanlease Limited 78 064 157 839 Australia 100
Qantas Cabin Crew (UK) Limited United Kingdom 100
Qantas Asia Investment Company Pty Ltd 125 048 044 Australia 100
Qantas Asia Investment Company (Singapore) Pte Ltd Singapore 100
Qantas Defence Services Pty Limited 53 090 673 466 Australia 100
QDS Richmond Pty Ltd 58 092 691 140 Australia 100
Aerial Operations Services Pty Limited 52 123 140 152 Australia 100
Qantas Flight Catering Holdings Limited 34 003 836 440 Australia 100
Qantas Flight Catering Limited 35 003 530 685 Australia 100
Caterair Airport Services Pty. Limited 51 008 646 302 Australia 100
Caterair Airport Services (Sydney) Pty Limited 37 062 648 140 Australia 100
Airport Infrastructure Finance Pty. Limited 14 011 071 248 Australia 100
Qantas Freight Enterprises Limited 128 862 108 Australia 100
Express Freighters Australia Pty Limited 73 003 613 465 Australia 100
Express Freighter Australia (Operations)
Pty Limited 119 093 999 Australia 100
Qantas Road Express Pty Limited 130 392 111 Australia 100
Qantas Freight Holdings Pty Limited 125 573 113 Australian 100
Qantas Freight Asia Holdings Pte Limited Singapore 100
Asia Express Holdings Pte Ltd Singapore 100
DPEX Transport Group Pte Ltd Singapore 100
DPEX Ventures Pte Ltd Singapore 100
Document Parcel Express Korea Ltd Korea 83.33
DPEX Worldwide Express Pte
Ltd Singapore 100
DPEX Worldwide Express
Limited Hong Kong 100
Kilda Express Pte Limited Singapore 69.26
DPEX Worldwide Co Ltd China 51.945
----- End of picture text -----

162

==> picture [596 x 101] intentionally omitted <==

APPENDIX E – QANTAS CONTROLLED GROUP

==> picture [484 x 549] intentionally omitted <==

----- Start of picture text -----

Qantas Foundation Trustee Limited 130 129 449 Australia 100
Qantas Frequent Flyer Limited 129 456 908 Australia 100
Qantas Group Flight Training Pty Limited 128 258 104 Australia 100
Qantas Group Flight Training (Australia) Pty Limited 128 258 677 Australia 100
Qantas Information Technology Ltd 99 000 005 372 Australia 100
Qantas Superannuation Limited 47 003 806 960 Australia 100
QF 738 Leasing 5 Pty Limited 75 100 511 706 Australia 100
QF 738 Leasing 6 Pty Limited 83 100 511 742 Australia 100
QF 744 Leasing 3 Pty Limited 18 100 511 466 Australia 100
QF 744 Leasing 4 Pty Limited 24 100 511 493 Australia 100
QF A332 Leasing 1 Pty Limited 11 100 511 813 Australia 100
QF A332 Leasing 2 Pty Limited 13 100 511 886 Australia 100
QF A332 Leasing 3 Pty Limited 86 100 510 503 Australia 100
QF A332 Leasing 4 Pty Limited 84 100 510 558 Australia 100
QF BOC 2008-1 Pty Limited 22 100 510 674 Australia 100
QF BOC 2008-2 Pty Limited 35 100 510 727 Australia 100
QF A333 Leasing 3 Pty Limited 50 100 510 352 Australia 100
QF A333 Leasing 4 Pty Limited 44 100 510 389 Australia 100
QF A388 Leasing 1 Pty Limited 62 100 510 843 Australia 100
QF A388 Leasing 2 Pty Limited 66 100 510 861 Australia 100
QF Cabin Crew Australia Pty Limited 128 382 105 Australia 100
QF Dash 8 Leasing Pty Limited 86 107 164 750 Australia 100
Snap Fresh Pty Limited 55 092 536 475 Australia 100
Southern Cross Insurances Pte Limited Singapore 100
Thai Air Cargo Holdings Pty Limited 19 112 083 584 Australia 100
----- End of picture text -----

163

==> picture [596 x 107] intentionally omitted <==

APPENDIX F – NOTICE OF NOMINATION OF NEW AUDITOR

7 May 2008

The Directors Jetset Travelworld Limited Level 28, Australia Square 264 George Street SYDNEY NSW 2000

Dear Sirs

Nomination of KPMG as Auditor of Jetset Travelworld Limited

Pursuant to Subdivision A of Division 6 of Part 2M.4 of the Corporations Act 2001, I, Andy Miridakis, being a member of Jetset Travelworld Limited ABN 60 091 214 998 (Company) hereby nominate KPMG of 10 Shelley Street, Sydney for appointment as Auditor of the Company at the next General Meeting of the Company to be held on or about 18 June 2008.

Please distribute copies of this notice as required by section 328B(3) of the Corporations Act 2001.

Yours faithfully

==> picture [132 x 47] intentionally omitted <==

Andy Miridakis

164

NOTES

==> picture [596 x 101] intentionally omitted <==

165

NOTES

==> picture [596 x 107] intentionally omitted <==

166

NOTES

==> picture [596 x 101] intentionally omitted <==

167

==> picture [596 x 107] intentionally omitted <==

168

==> picture [200 x 59] intentionally omitted <==

000001 000 JET MR JOHN SMITH 1 FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

All correspondence to: Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia Enquiries (within Australia) 1300 850 505 (outside Australia) 61 3 9415 4000 Facsimile 61 3 9473 2555 www.computershare.com

Securityholder Reference Number (SRN)

I1234567890

I 1234567890 I ND

I/We being a member/s of Jetset Travelworld Limited and entitled to attend and vote hereby appoint

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Extraordinary General Meeting of Jetset Travelworld Limited to be held at The Westin Melbourne, 205 Collins Street, Melbourne VIC on Wednesday 18 June 2008 at 11.00am and at any adjournment of that meeting.

IMPORTANT: FOR ITEM 4 BELOW

If the Chairman of the Meeting is your nominated proxy, or may be appointed by default, and you have not directed your proxy how to vote on Item 4 below, please place a mark in this box. By marking this box you acknowledge that the Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of that Item and that votes cast by him, other than as proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on Item 4 and your votes will not be counted in computing the required majority if a poll is called on this Item. The Chairman of the Meeting intends to vote undirected proxies in favour of Item 4.

==> picture [546 x 127] intentionally omitted <==

----- Start of picture text -----

For Against Abstain For Against Abstain
Item 1 Issue of New JTL Shares to Q Item 4 Increase in Maximum Annual
H Tours Limited Non-Executive Director
Remuneration Amount
Item 2 Anti-Dilution Deed
Item 5 Removal of Current Auditor
Item 3 Merger Implementation
Agreement and Separation Item 6 Appointment of New Auditor
Agreements
----- End of picture text -----

In addition to the intention advised above, the Chairman of the Meeting intends to vote undirected proxies in favour of each of the other items of business.

If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

In addition to signing the Proxy Form in the above box(es) please provide the information below in case we need to contact you.

J E T

7 P R

JET_PROXY_135529/000001/000001/i

How to complete the Proxy Form

1 Your Address

This is your address as it appears on the company’s Share register. If this information is incorrect, please mark the box and make the correction on the form. Securityholders sponsored by a broker (in which case your reference number overleaf will commence with an ‘x’) should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

2 Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the individual or body corporate you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the full name of that individual or body corporate in the space provided. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a securityholder of the company. Do not write the name of the issuer company or the registered securityholder in the space.

3 Votes on Items of Business

You may direct your proxy how to vote by placing a mark in one of the three boxes opposite each item of business. All your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company's Share registry or you may copy this form.

To appoint a second proxy you must:

(a) indicate that you wish to appoint a second proxy by marking the box.
(b) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.
(c) return both forms together in the same envelope.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint Holding: where the holding is in more than one name, all of the securityholders should sign.

Power of Attorney: to sign under Power of Attorney, you must have already lodged this document with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of a corporate Securityholder or proxy is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be produced prior to admission. A form of the certificate may be obtained from the company's Share registry or at www.computershare.com .

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below no later than 48 hours before the commencement of the meeting at 11.00am on Wednesday 18 June 2008. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Documents may be lodged using the reply paid envelope or: IN PERSON Share Registry - Computershare Investor Services Pty Ltd, Yarra Falls, 452 Johnston Street, Abbotsford VIC 3067 Australia BY MAIL Share Registry - Computershare Investor Services Pty Ltd, GPO Box 242, Melbourne VIC 3001 Australia BY FAX 61 3 9473 2555

AI assistant

HELLOWORLD TRAVEL LIMITED — Proxy Solicitation & Information Statement 2008

65057_rns_2008-05-13_a13d5073-91dc-4f28-ad21-83ebb8132234.pdf

EXTRAORDINARY GENERAL MEETING DOCUMENTATION

Yours faithfully

IMPORTANT NOTICES

Date

Purpose of Explanatory Memorandum

Entire document

ASIC

ASX

Glossary

Responsibility

Forward looking statements

JTL’s Half Yearly Accounts

Investment decisions

JTL information line

KEY DATES

16 June 2008, 11.00am

16 June 2008, 7.00pm

18 June 2008, 11.00am

19 June 2008, 7.00pm

27 June 2008

1 July 2008

1 July 2008

LETTERS FROM JTL & QANTAS AIRWAYS CHAIRMEN

Dear Shareholder,

Dear Jetset Travelworld Shareholder,

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED

1.1 A snapshot of the post merger JTL

1.2 Overview of the Merger Proposal and the key JTL steps to the Merger Proposal

1.3 Key benefits for JTL Shareholders

1.4 Possible disadvantages of the Merger proposal

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED (CONT)

1.5 Independent expert opinion

1.6 JTL Shareholder approvals

1. OVERVIEW OF MERGER PROPOSAL AND KEY QUESTIONS ANSWERED (CONT)

2. THE MERGER PROPOSAL

2.1 Introduction

2.1.1 JTL

2.1.2 Qantas Holidays and Qantas Business Travel

2.2 The Merger Proposal

2.2.1 Key rationale for the Merger Proposal

2.2.2 Overview of the Merger Proposal

2.2.3 Key financial information

2.2.4 Board and Management Changes

2. THE MERGER PROPOSAL (CONT)

2.3 Directors’ recommendations

2.4 Possible advantages of the Merger Proposal

2.4.1 Strengthened business

2.4.2 Premium on JTL’s value per share on a minority interest basis

2.4.3 Larger capital base and improved access to capital markets

2.5 Possible disadvantages of the Merger Proposal

2.5.1 Current JTL Shareholders will no longer collectively control JTL

2.5.2 Board representation and ability to pass ordinary resolutions

2.5.3 Additional business risks

2. THE MERGER PROPOSAL (CONT)

2.5.4 Merger and Integration Risks

2.5.6 Conditions to implementation

2.6 No immediate negative tax consequences to JTL Shareholders

2.7 Implications if the Merger Proposal does not proceed

2.8 Independent Expert’s conclusion

The Offer is not fair

The Offer is reasonable

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL

3.1 Qantas Holidays

3.1.1 Overview

3.1.2 Business model

Qantas Holidays business model

3.1.3 Competitive advantages

Broad offering

Significant buying power

Product knowledge difficult to replicate

Strong brand recognition

Strong customer reach

3. PROFILE OF QANTAS HOLIDAYS AND QANTAS BUSINESS TRAVEL (CONT)

3.1.4 Products

Outbound holidays

Domestic holidays

Special events

HELLOWORLD TRAVEL LIMITED Proxy Solicitation & Information Statement 2008