Qantas will kill off unprofitable routes over the next six months to feed to its new low-cost international carrier - with Brisbane emerging as the frontrunner to win the airline's headquarters and operations.
The Flying Kangaroo yesterday confirmed that Australian Airlines would be used as the name for the start-up operation, with flights due to start by July.
Its livery, fleet composition and network will be confirmed in the next few weeks.
Qantas's chief executive, Mr Geoff Dixon, selected his own marketing boss, Mr Denis Adams, to head the new airline.
In October, the Qantas board will rule definitely on the airline's business plan.
Already seven ports have been nominated: Tahiti, Kuala Lumpur, Ho Chi Minh City, Shanghai, Seoul, Sapporo and Fukuoka.
But Mr Adams said Australian Airlines was likely to quickly expand in Asia and the Pacific, taking up areas from which Qantas would soon withdraw because of increasingly slim margins. He would not specify the destinations that would be sacrificed but confirmed he wanted to fly from cities including Darwin, Cairns and Perth.
"The name picked itself," said Mr Adams, a former boss of Jetset who spent more than 25 years with the old Australian Airlines, a brand Qantas had retained since its absorption in 1993.
"The absolutely critical thing is that this airline will not be competing with Qantas.
"It will have distinct routes so there will be no cannibalisation. It will be a full service airline because that is what it needs to be to be competitive. But the principal objective is to get the costs right and we believe we have a tremendous advantage because we are starting from scratch."
It is likely four to six planes will initially be bought, probably Boeing 767-200s with capacity for 270 passengers in economy and super-economy, or business class.
Mr Adams said frequent flyer points would be interchangeable with Qantas, just like other airline partners in the oneworldalliance.
The model created by Impulse, the low-cost domestic carrier Qantas swallowed last May, will be used to drive down costs, with emphasis on Internet-only ticketing, and possible non-union work areas, to cut overheads. Australian Airlines will also use only one type of aircraft - another cost saving.
The revelation of more cuts to Qantas's network - which requires a smaller workforce to operate - could heighten tensions with embittered unions over the slow progress of wage negotiations.
There have already been strikes, with disruptions threatened by some unions.
Qantas has held talks about where it will set up the base for Australian Airlines, with Queensland firming because of its access to Asia - and a big maintenance facility has recently been transferred to Brisbane.
A spokesman for the Queensland Premier, Mr Beattie, said the State had lower costs and a skilled workforce, and was working hard to win the headquarters.
News of Mr Adams's appointment was welcomed by tourism groups.
The Australian Tourist Commission's managing director, Mr Ken Boundy, said Asian and Japanese passengers accounted for 40 per cent of inbound tourists, a figure tipped to rise to 50 per cent in the next nine years.
The Australian Hotels Association also supported the decision.