Qantas scraps Australian Airlines
Date: 11/04/06
By Emma Ambler
Qantas Airways Ltd has scrapped its unprofitable niche leisure brand Australian Airlines and will turn low cost domestic carrier Jetstar into an international airline to fill the gap.
Australia's biggest airline said it would shut Cairns-based Australian Airlines in July, with the loss of 40 cabin crew jobs, ahead of the first full-scale Jetstar services to six cities in the Asia-Pacific in November.
Going forward, remaining Australian Airlines staff would operate under the Qantas brand and Jetstar would add more staff as it widens operations.
"A further 550 new positions will be created by mid-2007 for its international operations," Qantas chief executive Geoff Dixon said.
Under the plan, Jetstar will offer two classes of services to Thailand, Japan, Honolulu, Vietnam and Indonesia and aims in future years to add long-haul flights to destinations in Europe and North America not served by Qantas.
This would result in two separate, competitive brands, with Qantas targeting premium business and leisure passengers and Jetstar concentrating on leisure markets.
"What it does enable us to do, which we intend to do very aggressively over the next two or three years, is to push the two brands," Mr Dixon said.
"Jetstar, when it has 12 aircraft, will be around about 22 per cent the size of Qantas, and that's our aim going forward."
Jetstar, which was set up two years ago to compete with rival budget airline Virgin Blue, will offer economy and full-service premium "Star Class" fares.
Mr Dixon said the brand reshuffle was part of on ongoing restructure of the company to offset the negative impact of rising jet fuel costs caused by record world oil prices, which are now close to $US70 a barrel.
But he maintained Qantas was better placed than its rivals to withstand a high fuel price environment.
"We're well placed, probably better placed now I'd say than any international airline, to meet any major changes that may come in this industry through oil prices and cost structures," he said.
Mr Dixon said Jetstar's cost base was about 30 per cent lower than Australian's and 40 per cent below that of flagship carrier Qantas, helped by lower distribution costs, a buy-on-board service model and internet-based sales.
Jetstar chief executive Alan Joyce said the carrier's international services would probably overshadow its domestic operations within three to four years.
Its first goal would be to recover market share lost by Qantas which is battling Emirates and Singapore Airlines in the international travel market.
"Our intention is to recover the Qantas share in a number of different markets," Mr Joyce said.
The airline will initially use six Airbus A330-200 aircraft before upgrading to 12 Boeing 787 aircraft, as part of Qantas $20 billion fleet reinvestment program.
"We're planning with the 787s to have a network hopefully some day that will fly to Europe," Mr Joyce said.
Australian Airlines was relaunched by Qantas as a full-service, single class carrier in 2002 to supplement Qantas flights in the Asia-Pacific region.
But its success was hampered by factors such as the outbreak of the SARS virus and terrorism fears.
In the first half of this financial year, the business made an earnings before interest and tax loss of $6.9 million, compared with an $8.5 million profit in the same period a year earlier.
Subject to regulatory approval, the inaugural Jetstar international service will be launched from Melbourne International Airport, with fares and flight schedules to be unveiled in June.
Qantas shares fell six cents to $3.48.