The Iraq invasion and the SARS epidemic cut into earnings for the carrier which was already struggling in a battered airline sector.
But the carrier managed to eke out a better-than-expected full-year net profit. Chief executive Geoff Dixon on Thursday said Qantas' performance would improve in the 2004 financial year.
Qantas Airways Ltd reported net profit for the year to June down 19.7% to 343.5 million dollars (225.3 US dollars) from 428 million dollars last time.
The result beat market estimates of between 325 million dollars and 339 million dollars.
The carrier recorded a net loss of nine million dollars in the second half of the 2003 financial year compared with a profit of 274.5 million dollars last time.
"After a record first half we saw all sections of our business come under severe strain in the second half."
Geoff Dixon, Qantas chief executive
Dixon had warned in May that profits could be slashed by 30% as the airline battled against the "most difficult trading conditions in history".
In a statement to the Australian Stock Exchange, Qantas warned that industry conditions remained challenging.
"After a record first half we saw all sections of our business come under severe strain in the second half, with inbound visitors to Australia falling by more than 20 percent in some months and by up to 45 percent on some Asian routes," Dixon said.
There were other airlines that performed well during the period including Emirates Air, Qatar Airways and three of the major US airlines – Delta, Northwest and Continental. But normally good performers like Cathay Pacific and Singapore Airlines seemed destined to go into the red, similar to Qantas.