Dow Jones
Qantas/Discount Carrier: Secures Fincl Incentives
MELBOURNE (Dow Jones)--Australia's largest airline Qantas Airways Ltd. confirmed Wednesday that its local budget offshoot will be based in Melbourne, Victoria state.
Qantas Chairwoman Margaret Jackson said the airline, which is still without a name, livery and fleet, will hire 1,000 staff over the next few years.
The airline will be run by former Aer Lingus and Ansett Australia executive Alan Joyce and include a team of former senior executives from Europe's low cost carrier Ryanair.
Jackson said the carrier will start flying from May 2004 as previously announced to the market.
Qantas Chief Executive Geoff Dixon was upbeat about the group's future.
"The new airline will start flying to leisure destinations in Australia from May next year and, with its headquarters in Melbourne, it will grow to employ about 1,000 Victorians over the next few years," Dixon said.
Victorian Premier Steve Bracks said at a joint media briefing that the state government gave Qantas "modest financial incentives" to base the new carrier in Melbourne.
Jackson said the size of the new local budget airline's aircraft fleet will be announced next week, but stressed no final decision has been made yet.
She said there is an "excellent opportunity" to access airplanes around the world.
According to a person close to the contract negotiations, Qantas is believed to have selected Airbus (F.ABI) A320 planes for the offshoot in preference to Boeing Co. 737-800 planes.
Joyce said the budget airline will be the lowest cost discount operator in Australia with the lowest airfares, a direct challenge to the country's only existing no-frills carrier Virgin Blue.
Virgin Blue has captured around 30% of the local market following its launch in August 2000, thanks in part to its cheap cost base and the demise of two local carriers, Ansett and Impulse Airlines.
It was given financial assistance by the Queensland state government to base its headquarters in Brisbane.
Virgin Blue, which counts Richard Branson and Australian transport group Patrick Corp. (PRK.AU) as its two biggest shareholders, is in the process of raising more than A$500 million via an initial public offering. The airline will make its debut on the Australian Stock Exchange on Dec. 8.
Joyce, who will move to Melbourne to run the carrier, said details of the airline's branding will be released in the next week or so.
In January, the group will unveil its route network and fee structure. The new carrier will start accepting bookings in February.
Jackson said the new airline will be "appropriately capitalized" and have access to the capital it needs, but declined to give any specific financial details.
She also down played concerns that the new airline will cannibalize its existing operations.
The announcement had little affect on Qantas shares.
At 0220 GMT, Qantas shares were down one cent and shares in Patrick were up 11 cents at A$14.58, while the benchmark S&P/ASX 200 index was down just 1.4 points at 3190.6 points.
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