Just announced: New low-cost airline for Asia - QF to invest

[Tuner 2]

ASX release -
http://www.asx.com.au/asxpdf/20040406/pdf/3l68k4pt5nvvd.pdf

[Wirraway]

AAP

Qantas to launch low-cost Asian carrier
April 6, 2004 - 2:24PM

Qantas Airways Ltd said today it would be the major investor in a new intra-Asia, low cost airline based in Singapore.

Qantas chief executive Geoff Dixon said the airline would fly to a range of Asian cities within five hours of Singapore and operate a fleet of single aisle aircraft.

These would either be Boeing 737-800s or Airbus A320s, Mr Dixon said.

Mr Dixon said new the airline would begin flying before the end of 2004 with four aircraft and build to a fleet of more than 20 aircraft over the following three years.

He said Qantas would own 49.9 per cent of the new airline, with 21.1 per cent owned by Tony Chew and 10 per cent owned by FF Wong, both prominent Singaporean businessmen.

He added that Qantas did not currently fly on any of the new airline's preferred routes.

Temasek Holdings Ltd, a major investment company based in Singapore, will own the remaining 19 per cent.

A release from Qantas said the owners would invest a total of $S100 million in the new airline, with Qantas contributing $S50 million, with all aircraft to be financed through operating leases.

"This is a modest investment for Qantas but it is an excellent opportunity to participate in the growing intra-Asia travel market," Mr Dixon said.

"The region, which has a population of more than 3 billion people, is enjoying strong economic growth and features many potential destinations for point-to-point travel from Singapore."

Qantas said it has had considerable experience competing against low cost carriers in the Australian market over the past ten years while its Australian domestic offshoot, Jetstar, will begin flights on May 25.

Qantas said a team from within its ranks, headed by Con Korfiatis, had been working on this project for the past nine months.

"The team, plus people to be recruited throughout Asia in coming months, will open offices in Singapore and be responsible for bringing the airline on line," the airline said.

"Our aim with the new airline is to stimulate this market, as other low cost carriers have done in other parts of the world."

Qantas said the new airline did not aim or expect to be a threat to the major established airlines in the region.

At 1459 AEST, Qantas shares were down four cents to $3.54.

AAP

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Dow Jones

Airways, Temasek to Start Singapore-Based Low-Cost Airline in 2004

April 6 (Bloomberg) -- Qantas Airways Ltd., Australia's largest carrier, said it plans to form a budget carrier with Singapore's state-owned investment agency Temasek Holdings Ltd. to fly between Asian destinations.

Qantas will own 49.9 percent of the S$100 million ($59.5 million) carrier, Chief Executive Officer Geoff Dixon in a press release. Temasek, which also owns a 57 percent stake in Singapore Airlines Ltd., will own 19 percent of the new airline. Singapore-based businessmen Tony Chew owns 21.1 percent of the carrier while F.F. Wong owns 10 percent, the press release said.

"This is a modest investment for Qantas but it is an excellent opportunity to participate in the growing intra-Asia travel market,'' Dixon said in the press statement.

The investment by Qantas in the unnamed Singapore-based carrier is its second such venture. Jetstar, a low-cost carrier based in Australia, is due to begin flying in May and compete with Richard Branson's Virgin Blue Holdings Ltd., which has captured about one third of the Australian market.

"This gives Qantas additional room for growth outside their domestic market,'' said Kenneth Tang, who help manage $3 billion at Credit Agricole Asset Management Asia Ltd., which owns shares in both carriers.

Crowded Skies

The new budget carrier will compete with Singapore Airlines and its Tiger Airways low-cost airline unit. Singapore Airlines, the world's second largest carrier by market value, owns 49 percent of Tiger Airways. The budget carrier competes with Malaysia's AirAsia Sdn. A Singapore-based company Valuair Ltd. also plans to start flights in May offering cheaper fares.

"For Singapore Airlines, this is going to create more uncertainty on its domestic front, which will hurt its share prices,'' said credit Aricole's Tang.

Tiger Airways, in which Temasek also owns a stake, plans to start flights in the fourth quarter of the year and has announced plans to lease four new Airbus SAS A320 aircraft. Valuair has also leased two Airbus A320 planes.

AirAsia's Thai unit has started flights between Bangkok and Singapore, and is awaiting regulatory approval for a low-cost carrier venture based in Singapore.

"Qantas will be entering an incredibly competitive market, where there will be other low-cost carriers,'' said Tim Ross, an analyst at UBS Securities Ltd. "They have got a lot on their plate if they're doing this.''

The Airline

The unnamed budget carrier formed by Qantas and Temasek will start flying with four aircraft and aims to have more than 20 aircraft in its fleet within three years, Dixon said in his statement.

The carrier will use single-aisle planes, either the 737- 800 model made by Boeing Co. or the A320 model made by Airbus SAS, Dixon said.

The carrier will begin flying from Singapore before the end of 2004 to destinations within five hours from the city, Dixon said. It did not identify its first route.

Cities within five hours of flying time from Singapore include Perth in western Australia, the Malaysian capital Kuala Lumpur, the Thai capital Bangkok, Manila in the Philippines and Hanoi in Vietnam.

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[Wirraway]

Wed "The Australian"

Qantas joins the Asian fray
By Geoffrey Thomas
April 07, 2004

AT the launch of Jetstar Asia yesterday, Qantas chief executive Geoff Dixon claimed that commercial aviation would be completely changed within the next two years. Some analysts, say, however that at the current rate it will be completely different within one year.

In fact, aviation is changing faster than Concorde, but the trouble for Qantas and many other airlines is that the regulators are still bumping along in Tiger Moths.

That's one of the reasons Qantas has turned northwards. Frustrated with Australian and New Zealand regulators not seeing the big picture, Dixon has found willing partners in the Singapore Government and its investment arm Temasek.

There is far more behind the announcement than just the setting up of another low-cost airline.

For Qantas, it is a stake in potentially the world's biggest travel market, with up to 3 billion people - the overwhelming majority of whom have never flown. It also has the ability to build traffic into its largest hub.

Dixon quips that the airline market in Singapore may be crowded but so are the countries he intends to serve.

The move to Singapore and another low-cost airline also pressures the Qantas international unions to moderate pay demands, just as Jetstar in Australia is a response to Virgin Blue's union-blessed, significantly lower pay structure.

For Singapore, the issue is ensuring that its Changi Airport remains the major hub in South-East Asia.

Qantas has received strong support from Temasek, which is the largest shareholder in Singapore Airlines (SIA). Separately, Temasek is also a stakeholder in SIA's new low-fare initiative, Tiger Airways.

By aligning itself with Temasek, which has taken 19 per cent in the new airline, Qantas ensures that it will get critical traffic rights to countries such as India, China, Hong Kong, and Vietnam.

Temasek's ownership of SIA is 56.76 per cent, which is worth $S7.54 billion ($5.9 billion). Additionally, it owns Changi Airport, in which it has invested $S6.5 billion.

Altogether Changi Airport and the aviation industry contribute $S13.3 billion or 9.2 per cent to Singapore's GDP.

However, Temasek executives have made it quite clear to SIA unions that in a choice between preserving its assets in SIA and protecting Changi's hub status, the priority is definitely Singapore's hub status.

The Singapore Government is aware that Emirates and the Dubai hub are emerging as a major threat to the viability of both SIA and Changi and also for Qantas's hub operations in Singapore.

Emirates can offer passengers many more one-stop destinations - 17 at this stage - into Europe than can SIA (eight) and Qantas (three). Tourists are flocking to Dubai, with a 30 per cent rise in 2002.

On the drawing boards is Dubailand, a $US4.9 billion tourism city development of six different entertainment worlds. The Mall of the Emirates, which is under construction, will be the largest mall outside the US and will have the world's largest indoor ski resort.

While Dubai has seen tourism soar, Singapore has experienced a steady decline. Since 1993 Singapore's tourism receipts have dropped, by 21 per cent to $S8.8 billion in 2002, and the sector's contribution to GDP declined from 6 per cent to just 3 per cent. Worse, this decline was against a backdrop of increasing tourism in the region, with Thailand, Malaysia and China the big winners.

Meanwhile Hong Kong's $US3 billion ($3.95 billion) Disneyland theme park is due to open by the end of 2005, while Macau is rapidly moving to become the "Las Vegas" of Asia.

Changi also faces stiff competition from Kuala Lumpur International Airport (KLIA) and the new Bangkok Airport.

For Qantas, Bangkok offers a more direct route to Europe, while KLIA's landing charges are the lowest in Asia.

Dixon, however, dismisses the suggestion that Qantas's move will allow SIA to gain access to the Sydney-Los Angeles route. "SIA can set up an airline in Australia with a minority shareholding, just as we have done in Singapore," Dixon says. "Qantas is still limited in its traffic rights beyond Singapore."

Jetstar Asia has enormous upside for Qantas and while it will have a modest start with just four aircraft, insiders suggest that 40 aircraft within three years is the growth target.

According to Centre for Asia Pacific Aviation managing director Peter Harbison, this latest move clearly shows an aviation industry in a massive transition phase.

"The old competitive rules are gone forever. The opening of aviation markets and low-cost operating models are a cocktail for rapid change and every airline in this region will have to think twice," he says. "For Qantas, the move recognises the crucial role low-cost airlines will play in the development of point-to-point leisure travel in the Asia-Pacific region and at $S50 million, it is a fairly small investment for Qantas to defend its Singapore operation and participate in what should be a very high growth market."

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[proplever]

Reckon Impulse will crew it for next to nothing?:} :} :} :}

[spinout]

JETSTAR ASIA A320’s hmmm I will do it for a bowl of rice and a dim sim…:yuk:

[yellow rocket]

Frustrated with Australian and New Zealand regulators not seeing the big picture, Dixon has found willing partners in the Singapore Government and its investment arm Temasek.

Doesn't seem to be any difference between 'QF/IntraAsia' and Jetconnect so why blame regulators.

[Wirraway]

Wed "Straits Times" (Singapore)

Big boys seem to have the edge
Transport Ministry says it will give preference to airline that will best benefit country and Changi Airport
By Karamjit Kaur and Goh Chin Lian

FOUR players have thrown their hats into the ring to set up low-cost carriers here but it will not be a case of first-come-first-served when the Government decides who gets a licence and where and how often they can fly.

Mr Tony Chew and Mr Wong Fong Fui (below) have taken stakes in the new airline of 21.1 per cent and 10 per cent respectively.
The Transport Ministry said yesterday it will give preference to the airline that brings the 'most benefits to Singapore and to Changi Airport' as it competes with other regional airports to retain its air-hub status.

Although Qantas is the last of the four to enter the fray, after Valuair - set up by Singapore Airlines (SIA) veteran Lim Chin Beng - SIA's Tiger Airways and Malaysia's AirAsia, the ministry hinted yesterday that the Australian-backed entrant might not be the last to get the licence.

On average, it takes six to nine months for the papers to be processed, but the spokesman said that 'we have reached a sufficient level of understanding with them (Qantas) which will enable the processing to take place smoothly and speedily'.

Industry observers say the ministry's comments yesterday clearly give the two budget carriers backed by heavyweights Qantas and SIA a distinct advantage over the other two in getting their licences processed speedily and also in securing both their choice of destinations and frequency of flights.

Only after the licence is issued, can the airlines apply for these rights to fly to the destinations of their choice, most of which are within a five-hour radius.

If the carriers are competing for the same destinations and there are not enough air rights to go around, the ministry will look at an airline's 'ability to leverage on their networks elsewhere and their ability to strengthen Singapore as a regional aviation hub'.

Making it clear the big boys have the advantage, the spokesman said: 'In terms of value-add to Changi and Singapore, Qantas stands out as it has obvious strengths and advantages.

'The new carrier's operations will tie in with that of its parent airline and help the parent airline consolidate its operations here.

'It can also leverage on its parent airline's global marketing network to bring more traffic to and through Singapore.'

Analysts also pointed out that by giving the Qantas-backed venture priority, Singapore could be seeking to strengthen its bargaining position with Australia when talks resume for an Open Skies Agreement (OSA) between the two countries.

Asked about this, the ministry spokesman said: 'Australian Deputy Prime Minister John Anderson and Minister Yeo Cheow Tong had agreed last year that they would work towards an OSA once the industry stabilises.

'Qantas' announcement clearly shows that this is indeed the case. We hope that Singapore and Australia can now progress to sign a full OSA in the very near future.'

Does all this spell bad news for the two smaller budget carriers, especially AirAsia, which has already faced problems with the ministry in getting permission to take its passengers by bus to Senai Airport?

In typical fashion, chief executive officer Tony Fernandes brushed aside the possibility that AirAsia would be at the bottom of the list when it came to getting its licence and air rights.

He told The Straits Times yesterday: 'We should top the list because we know what we are doing but I don't think it will be the case.

'It will be fun watching the kangaroos and tigers from across the border.'

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Good read
From a thread on the same subject from a angry Singaporian
at airliners net:
http://www.airliners.net/discussions/general_aviation/read.main/1497792/

Now for some tongue in cheek comments. This is how it will end. Temasek Holdings will sell part of their 56% stake to Qantas on condition that Qantas hubs all its flights through Singapore, including PER-SYD and SYD-LAX. A further discount would be offered to QF if they hub the Melbourne-Launceston flights through SIN, thus boosting SIN's airhub status.

Qantas, now the most blessed airline in Singapore, will be offered a special cabin crew deal. Singapore Airlines girls will have to carry QF crew bags and dust their coats as a gratitude to QF for maintaining SIN's hub status.

Dixon is tempted to steal SQ A345s to do SYD-LHR direct, but since it will diminish SIN's air hub status, he can't.

At the very very end, Dixon is made honourary Singapore citizen and a statue of him is unveiled at Changi Airport, labelling him as the man who "preserved Changi's airhub status". He is invited to move to Chew Choon Seng's office but he declines, and insists on moving into the office of Senior Minister Lee Kuan Yew.

As a small token of appreciation, the Senior Minister agrees. After all, isn't it Dixon himself who made Singapore Changi Airport the hub it is today?

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