About 25,000 Qantas staff will get a cash bonus of up to A$3000 ($3134) after the airline's full-year profit rose by 85 per cent to $1.03 billion, underpinned by a major operational overhaul and low oil prices.
Chief executive Alan Joyce said the airline was now "a more agile business" and had a platform to invest for the future as a result of the transformation programme that has cut thousands of jobs, revised the airline's fleet and unlocked A$1.66b in cost and revenue benefits since early 2014.
Joyce said the result was the best in Qantas' 95-year history and "the best result in Australian aviation history, full stop".
After a turbulent few years and a capacity war with Virgin Australia and cashed- up international carriers, Qantas has declared a fully franked final dividend of 7 cents a share, its first since 2009.
The dividend, costing A$134 million will be part of a A$500m capital return announced today, with the remaining A$366m committed to an on-market share buyback.
Workers have been subject to a wage freeze under the transformation programme and full-timers would get a bonus of up to A$3000 each and part-timers A$2500.
The company now expects to realise A$2.16b in savings and revenue benefits by next June.
The airline's underlying pre-tax profit jumped 57 per cent to a record A$1.53b.
Around two-thirds of earnings came from its domestic operations and loyalty business, and the rest from its international unit.
Domestic unit underlying earnings lifted 20 per cent to A$578m as cuts to flights limited the impact of weaker demand at the end of the year, while Qantas Loyalty signed up 580,000 new members.
Improved margins and falling costs helped Jetstar, increase earnings by 97 per cent to A$452m.
International earnings rose 92 per cent to A$512 million, helped by cost cutting and revenue growth as planes were added. Qantas booked a gain of A$664m on the back of lower global fuel prices.
Infometrics senior economist Benje Patterson said the Jetstar numbers in New Zealand were impressive.
Jetstar New Zealand's expansion into the regional market in December has seen rapid growth in passenger numbers in the first half of 2016. In the six months to June, domestic passenger numbers on the Jetstar New Zealand network rose 39 per cent from the same period a year ago, while Air New Zealand saw 2.3 per cent growth in passenger numbers over the same period.
Almost 1.2 million people flew in New Zealand with Jetstar in the first six months of 2016; the first time that Jetstar New Zealand has carried more than one million domestic passengers in a six-month period.
"Rather than simply cannibalising market share from Air New Zealand, the infusion of additional competition from Jetstar has expanded the domestic market by bringing flying within the budgets of a wider range of businesses and households. Over the six months to June, total passenger numbers across both airlines were up 7.9 per cent on a year earlier."
Air New Zealand will announce its full-year result on Friday. Like Qantas it has benefited from strong demand and reduced fuel costs.
Qantas didn't provide guidance for the next financial year although it indicated a further A$450m in transformation benefits were expected in the coming year and capital expenditure was likely to be around A$1.5b.