Qantas overhauls with $ 9 b fleet order, two new airlines

SYDNEY (Reuters): Australia’s Qantas Airways is setting up two new airlines in Asia and ordering $ 9 billion of new Airbus aircraft as part of a do-or-die makeover to salvage its loss-making international business.

Qantas will also cut 1,000 jobs in Australia as it shifts its focus to the world’s fastest-growing aviation market, triggering threats by unions to block the move and a government pledge to scrutinise the plans.

Qantas, which has been reviewing its offshore operations to cut costs and unprofitable routes, said it will launch a new, premium Asian airline and a Japanese budget carrier, the latter jointly with Japan Airlines and Mitsubishi Corp.

The new airlines will fly Airbus A320 jets, cementing their reputation as the plane of choice on regional networks over archrival Boeing Co. Qantas plans to acquire up to 110 of them, worth more than $9.4 billion at list prices.

As Qantas rebases its loss-making international operations in Asia, it also plans to give up some of its long-haul routes and retire older planes as well as cut jobs.

“Right now 82 out of every 100 people flying out of Australia are choosing to fly with an airline other than Qantas, not including Jetstar,” the airline’s Irish-born Chief Executive, Alan Joyce, told a news conference.

Joyce has cut costs and jobs since taking the helm at Qantas in 2008, with growth increasingly focused on the budget offshoot Jetstar, which he ran before becoming chief executive. “To do nothing, or tinker around the edges, would only guarantee the end of Qantas International in our home Australian market. That would be a tragedy,” he said, adding that the international operation’s cost base was around 20 per cent higher than its major rivals.

Joyce said the new premium airline was expected to be launched next year with an initial fleet size of 11 A320s. It may be based in Kuala Lumpur or Singapore and would not be majority owned by Qantas, he said. China was also being considered, one source familiar with the airline earlier told Reuters.

Qantas has an existing relationship with Malaysia’s AirAsia, which this week agreed to swap shares with Malaysian Airline system as part of a partnership deal.