Wed "The Australian" 26/2/03
Airline spreads wings
By Alan Wood
February 26, 2003
QANTAS Airways Ltd plans to expand its low-cost Queensland-based subsidiary Australian Airlines in the Asia Pacific, despite increased tension in the region driving the airline's share price lower.
Chief executive Geoff Dixon said Qantas planned to increase the number of routes serviced by Australian Airlines to destinations including Bali.
The airline was also considering adding Australian Airlines routes to Shanghai, China and Sabah, Malaysia, later in the year.
Shaw Stockbroking head dealer James Spiteri said the Qantas share price was hurt yesterday on reports of increased tension in North Korea, with a missile being fired into the Sea of Japan.
Qantas shares closed 16¢, or almost 5 per cent, weaker at $3.23 on high volume of 16 million. Last Thursday Qantas shares slumped more than 10 per cent on concerns the airline's 2002-03 profit might be hurt by a fall-off in bookings amid war tension.
Mr Dixon said yesterday the first definite low-cost route to Bali would start from the end of July, as well as the introduction of Australian Airlines services between Cairns and Sydney from mid-year.
By the end of July Australian Airlines would operate three services a week from Sydney to Bali and one a week from Melbourne, with more possible in 2004.
The number of aircraft in the Australian Airlines fleet, operating since October, would increase to six from four by the end of 2003, with the aircraft being leased from the Qantas parent.
However, Mr Dixon said despite the increasing influence of no-frills carriers in a rationalising world airline industry, Qantas had no plans to become a total low cost operator.
"Qantas – a fully commercial, full service airline confronts both the non-frills players and the Government subsidised airlines," he told a trans-Tasman business circle lunch. " . . . While we will never operate in the same fashion as the no-frills carriers, they have none the less created a paradigm shift in aviation.
"We need to scrutinise every thing we do to reduce process complexity and costs."
Mr Dixon also said the airline intended to have further talks with the Federal Government regarding the limits on foreign investment in Qantas.
The current 49 per cent limit helped drive up costs, he said.
"We are talking to the Government again because it adds about two percentage points to our cost of capital . . . it makes it very hard for us to compete," he said.
Mr Dixon said changes to airline alliance groupings were very likely in the future, given the turbulent climate for world airlines.
The main alliance groupings comprise the Star Alliance with members including United, Air NZ, Thai Airways and SIA; and an opposing Oneworld group including Qantas.
"(We) will probably see the overall alliance issue, involving the likes of Oneworld, Star . . . start to, not break up but, certainly there will be some movement around," he said.
Mr Dixon would not comment directly about Air New Zealand leaving the Star Alliance, given that Qantas proposes to take a 22.5 per cent, $NZ550 million ($515 million) stake in the New Zealand carrier.
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Wed " Australian Financial Review"
Qantas to use low-cost subsidiary on new routes
Feb 26
Jane Boyle
Qantas Airways plans to use its low-cost subsidiary Australian Airlines to restore flights to Bali and launch new routes to Shanghai and East Malaysia, despite comments last week that forward bookings had dropped markedly on some major international routes.
Qantas shares fell to a 16-month low yesterday - closing down 16¢ at $3.23 - amid fears full-year earnings will be hit by war fallout and weak tourism numbers.
The airline said last week that bookings on routes to Japan and UK were down by up to 20 per cent and an overall 6 to 8 per cent decline in international bookings over the next 16 weeks could deteriorate sharply if war breaks out in Iraq.
Qantas plans to use Australian Airlines as a way of expanding while keeping a lid on costs.
Australian Airlines chief executive Denis Adams said that instead of Qantas adding two flights between Sydney and Denpasar in April as previously planned, the lower cost Australian Airlines will use a fifth plane to be added in July to begin four return services a week between Denpasar and Sydney and Melbourne. Australian will also begin six-weekly Cairns-Sydney services mid-year and plans a new weekly service between Cairns and Kota Kinabalu in East Malaysia.
When a sixth plane is delivered in November, Australian plans three new weekly services between Cairns and Shanghai - Qantas's first direct flights to China since it abandoned the route two years ago.
Australian Airlines also plans additional flights into Singapore, in a move expected to rattle Singapore Airlines.
Australian Airlines, with seat costs around 25 per cent less than Qantas's main operations, will fly at least daily and possibly more frequently to Singapore, with ambitions to expand it as a hub from which to tap new leisure markets.
Meanwhile, Qantas chief executive Geoff Dixon told a Trans-Tasman Business Circle Function the airline was still talking to the federal government about getting its foreign ownership caps lifted.
On the industrial front, Qantas faces more strife after the Flight Attendants Association of Australia threatened further action after a stopwork yesterday over a pay dispute.
It will also meet today with the Australian Services Union, which is demanding an explanation of plans for cuts to staffing levels. About 65 Air New Zealand staff in Australia also went on strike yesterday over a pay dispute.
Last edited by Wirraway; 25th Feb 2003 at 16:56.