Lower-cost subsidiary for Qantas?
Just saw this on "the age online" website and also read something about this in this morning's paper. Anybody else have any ideas, information or opinions about the plan. It certainly has some merit, but whether it is able to be pulled off successfully or not is another thing.
Lower-cost subsidary for Qantas?
By MARK TODD
SYDNEY
Monday 13 August 2001
Qantas Airways' board will consider a detailed plan this week to launch a low-cost international airline as the company tries to identify ways of expanding in a fiercely competitive aviation market.
The new airline would target markets, mostly in Asia, that are unviable for Qantas to serve under its present cost structure.
It is believed the proposal calls for the creation of a new entity operating under a separate management team and using a fresh logo, leaving the flying kangaroo to the main brand.
Analysts believe Qantas could launch the airline for relatively little outlay. Aircraft leases will comprise the bulk of the costs, as the company already has all the requisite terminal and administrative infrastructure in place.
It is estimated Qantas could start a service of six Boeing 767s initially using only $400 million in capital. Qantas would inject as much as $100 million in equity into a new subsidiary company and raise $300 million in debt funding.
Qantas would put the new carrier's employees - most likely based abroad - on separate, presumably inferior, awards and conditions while the airline's planes would have only one class of seating.
Macquarie Equities suggested in a recent research note that Qantas needs to expand its international business away from the traditional routes of the US, Europe, and Japan to increase revenue at better than the 5 to 7per cent at which the market is growing.
A low-cost carrier could open "at least" another 10routes for Qantas. Potential routes include Malaysia, Greece, Vanuatu, Vietnam, Korea, China, United Arab Emirates, Sri Lanka, and secondary ports in Thailand and Japan. Macquarie estimated a low-cost carrier could break even with a load factor of only 54 per cent, or little more than half a plane load. Qantas' current threshold on its international business is 66 per cent, meaning it is restricted to flying the busier routes.
Earlier this year Qantas was forced to suspend uneconomical services to Canada and China.
Qantas' board will meet on Wednesday to discuss the proposal. Some analysts are expecting that a decision on whether to proceed will accompany the full-year financial results scheduled for issue on Thursday.
A year of tough domestic and international competition, spiralling fuel prices, and a weak dollar have taken a heavy toll on the company. On average, analysts forecast Qantas earned net profit of $320 million in the 12 months to June 30, 2001, down more than 25 per cent from a year ago.
On another front, Qantas remains busy trying to garner support for its proposal to take a substantial stake in Air New Zealand as a precursor to closer relations between the two carriers.
Late last week Qantas chief executive Geoff Dixon held talks with Rob Cameron, representing the joint committee established by the Australia and New Zealand Governments to consider the issue.
The fact that the Australian Government is pushing the merits of the Qantas proposal was a "surprise", Air NZ chief Gary Toomey said yesterday. "I mean, Ansett in Australia employs around 15,000 people directly."
Also, does anyone heard any whispers on what the new brand name and logo will be??