Date: March 10 2012
QANTAS has finally ditched ambitious plans to set up a new ultra-premium airline in Asia - the centrepiece of efforts by the chief executive Alan Joyce to revive its international operations - after talks with Malaysia Airlines for a joint venture broke down.
In a big setback to its gamble to expand aggressively into Asia, Qantas said talks with Malaysia Airlines, which warned last week that it ''is in crisis'', had faltered because they could not agree on the commercial terms for a new premium airline.
Qantas will not revisit earlier plans to set up an ultra-premium airline in Singapore because that would require a significantly larger investment of up to $500 million.
Aviation insiders have been sceptical of Qantas' plans since they were first flagged because the regulatory, political and economic hurdles to launching a new airline in Asia were seen as extremely high.
The plans for a new airline - which was to be based in Kuala Lumpur - targeting Asia's fast-growing corporate market, were a key plank of Qantas management's aim to turn around its international operations, which suffered more than $200 million in losses last financial year.
''It is a significant blow to their international strategy,'' CBA Equities' transport analyst Matt Crowe said. ''It sets back the timing of turning around their international business.''
The collapse of talks leaves Qantas desperate to find another partner in Asia in order to help it meet the ambitious target of turning a profit on its international operations within three years and making them meet their cost of capital within five.
Malaysia Airlines was one of the few available bedfellows in Asia for Qantas, after Virgin Australia snared Singapore Airlines as an alliance partner last year. Cathay Pacific is seen as an ideal alliance partner but the chances of securing it are seen as slim.
Despite the setback, Mr Joyce said Asia remained a priority for the airline and it ''continued to explore opportunities in the region, including joint ventures and alliances''. But he again emphasised that any investment in Asia would be on the basis that Qantas would allocate ''minimal capital to such ventures''.
Shares in Qantas slumped as much as 4 per cent yesterday before closing down 4.5¢ at $1.68.
The long-haul pilots' union said the collapse of the Malaysian plan should be used as an opportunity to focus on ''rebuilding the badly damaged Qantas brand''.
Richard Woodward, the vice-president of the Australian and International Pilots Association, said that ''from the very start'' plans to divert resources into ventures in Asia were ''ridiculous and unfeasible''.
The union's long-running dispute with Qantas has primarily been over its plans to set up Asian subsidiaries, such as a premium airline, which employ staff on lower wages than their Australian-based colleagues.
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