jetjockey696
20th Dec 2009, 05:56
Two of Asia’s major low-cost airlines, Malaysia-based AirAsia and Qantas Airways-owned Jetstar, are in talks to form a joint venture, in a sign that budget carriers are under pressure to cut costs.
Reacting to the news, the country’s biggest low-cost carrier, PT Lion Air, said any alliance would likely make competition in Indonesia, one of the region’s largest markets, even more cutthroat.
AirAsia and Jetstar have grown rapidly and now fly routes across Southeast Asia and Australia, serving some of the same destinations, including Cambodia’s Siem Reap and Australia’s Gold Coast.
Qantas said a joint venture would cut costs as airlines worldwide grapple with falling demand, higher funding costs and volatile fuel prices.
“Qantas confirms that its wholly owned subsidiary, Jetstar, and AirAsia have entered discussions regarding a potential cost-saving joint venture,” Qantas said in a brief statement on Friday, adding that discussions were at a preliminary stage.
This week, Australia unveiled plans to scrap some foreign-ownership rules for Qantas in a move aimed at helping it play a bigger role in the global airline consolidation.
Qantas has emerged from global recession in relatively strong shape and is now seen as more of a predator than prey — one with a keen interest in exploiting Australia’s growing ties with Asia.
Despite the government’s move to relax some ownership restrictions on Qantas, allowing foreign airlines to take major minority stakes, the national carrier remains subject to an offshore ownership cap of 49 percent.
Jamie Spiteri, a senior dealer at Australia’s Shaw Stockbroking, said a deal with AirAsia, Southeast Asia’s largest budget carrier, might only be the beginning for Qantas’s ambitions regarding Asia.
“There’s a number of different potential partnerships, but there will be delicacy over those negotiations because Qantas holds dominance over some quite profitable routes within Australia and to London and the west coast of the USA,” he said. “Some potential alliance partners would like to get involved in those profitable routes as well.”
Led by chief executive Tony Fernandes, AirAsia plans to list in both Thailand and Indonesia. In September, the carrier raised $144 million in a new share placement as it sought to reduce debt.
AirAsia and Jetstar compete regionally with Tiger Airways, which is 49 percent-owned by Singapore Airlines. Singapore Airlines this week halved the size of a planned initial public offering due to a lukewarm response from potential investors, sources told Reuters.
In Indonesia, AirAsia’s major competitors are Lion Air and state flag carrier PT Garuda Indonesia. Lion Air is planning to expand regionally and is considering flights to China, South Korea and Japan by mid-2010. Like AirAsia, it has been weighing partnerships with other regional airlines.
Edward Sirait, Lion Air’s general director, told the Jakarta Globe on Friday that the airline would wait for details of the AirAsia-Jetstar joint venture before developing a strategy.
Joint ventures were “good for minimizing cost and risk but for an airline it is only one option,” Edward said.
However, he said Lion Air was taking the joint venture seriously as it could create a dominant regional player.
Edward said Lion Air had not decided on any partnerships of its own.
“There are some issues that need to be solved first before we talk about consolidation because it requires trust,” he said.
Reuters, JG
Reacting to the news, the country’s biggest low-cost carrier, PT Lion Air, said any alliance would likely make competition in Indonesia, one of the region’s largest markets, even more cutthroat.
AirAsia and Jetstar have grown rapidly and now fly routes across Southeast Asia and Australia, serving some of the same destinations, including Cambodia’s Siem Reap and Australia’s Gold Coast.
Qantas said a joint venture would cut costs as airlines worldwide grapple with falling demand, higher funding costs and volatile fuel prices.
“Qantas confirms that its wholly owned subsidiary, Jetstar, and AirAsia have entered discussions regarding a potential cost-saving joint venture,” Qantas said in a brief statement on Friday, adding that discussions were at a preliminary stage.
This week, Australia unveiled plans to scrap some foreign-ownership rules for Qantas in a move aimed at helping it play a bigger role in the global airline consolidation.
Qantas has emerged from global recession in relatively strong shape and is now seen as more of a predator than prey — one with a keen interest in exploiting Australia’s growing ties with Asia.
Despite the government’s move to relax some ownership restrictions on Qantas, allowing foreign airlines to take major minority stakes, the national carrier remains subject to an offshore ownership cap of 49 percent.
Jamie Spiteri, a senior dealer at Australia’s Shaw Stockbroking, said a deal with AirAsia, Southeast Asia’s largest budget carrier, might only be the beginning for Qantas’s ambitions regarding Asia.
“There’s a number of different potential partnerships, but there will be delicacy over those negotiations because Qantas holds dominance over some quite profitable routes within Australia and to London and the west coast of the USA,” he said. “Some potential alliance partners would like to get involved in those profitable routes as well.”
Led by chief executive Tony Fernandes, AirAsia plans to list in both Thailand and Indonesia. In September, the carrier raised $144 million in a new share placement as it sought to reduce debt.
AirAsia and Jetstar compete regionally with Tiger Airways, which is 49 percent-owned by Singapore Airlines. Singapore Airlines this week halved the size of a planned initial public offering due to a lukewarm response from potential investors, sources told Reuters.
In Indonesia, AirAsia’s major competitors are Lion Air and state flag carrier PT Garuda Indonesia. Lion Air is planning to expand regionally and is considering flights to China, South Korea and Japan by mid-2010. Like AirAsia, it has been weighing partnerships with other regional airlines.
Edward Sirait, Lion Air’s general director, told the Jakarta Globe on Friday that the airline would wait for details of the AirAsia-Jetstar joint venture before developing a strategy.
Joint ventures were “good for minimizing cost and risk but for an airline it is only one option,” Edward said.
However, he said Lion Air was taking the joint venture seriously as it could create a dominant regional player.
Edward said Lion Air had not decided on any partnerships of its own.
“There are some issues that need to be solved first before we talk about consolidation because it requires trust,” he said.
Reuters, JG