Qantas, which is also under threat from the launch of cut-price UK airline Virgin, said it will add video screens and telephones with entertainment, news, sport, weather and games channels to all classes.
The text-based news and weather channels will be updated via satellite during flights and a moving map plotting the route of the aircraft will be accessible by passengers. An intranet will also provide access to selected websites, Qantas said.
The entertainment system will be supplied by US-based Rockwell Collins, one of the world's largest commercial air transport companies, Qantas deputy CEO Geoff Dixon said.
From the first half of 2001 the upgrades will go into the airline's international long-haul Boeing 747-400 aircraft. Qantas said it would make a decision later regarding the international 767-300 fleet.
Dixon said the investment would maintain the airline's position at the forefront of customer service and in-flight technology.
Qantas is also investigating the introduction of an in-flight email system that would enable passengers to send and receive messages. "There may also be the potential to investigate opportunities that emerge as a result of the recent deal between Rockwell Collins and News Limited to develop an in-flight satellite network," Dixon said.
"This partnership has the potential to deliver a vast range of entertainment, information and communications options directly to the aircraft via satellite creating a virtual 'cable network' in the air for every passenger."
Qantas operates the B747-400 primarily between Australia and the UK, Europe, the US and Hong Kong.