B A Lert
27th Apr 2007, 03:05
Would this be a material change to Qantas' prospects that requires a further adcice to shareholders vis a vis the APA offer?
Qantas to integrate Asia buy
* The Flying Kangaroo hopes to take Pacific Airlines under its wing, writes Steve Creedy
* April 27, 2007
AS Asia's air wars intensify, Qantas has long-term plans to bring Vietnam's Pacific Airlines under the Jetstar brand, after spending $US50 million ($60 million) for a 30 per cent stake in the low-cost carrier.
Qantas chief financial officer Peter Gregg flew to Vietnam yesterday to sign the contract on the long-discussed deal to make Qantas a strategic partner in the airline, with Vietnam's State Capital Investment Corp.
It will see Jetstar's expanding Asian reach bolstered by Pacific's routes between Ho Chi Minh City and Da Nang and Hanoi as well as international routes to Tapei.
Although the deal does not hand over management control of the airline, Gregg says Qantas will put staff into the airline to work with the Vietnamese Government.
He says Pacific fits well with the Qantas Group's plans to use the value-based Jetstar brand to expand the group's footprint in Asia. "We won't brand them as Jetstar yet, but we have high hopes that in due course we can get the Government up there to agree once we're satisfied about the operational standards," he says.
Jetstar International and Jetstar Asia both serve Vietnam, which is a growing tourist destination from Australia and has strong potential for VFR (visiting friends and relatives) traffic.
"It's a great tourist spot and it's a huge domestic population, so it just works well," Gregg says. "There's an incredible amount of VFR and if you have a look at Jetstar International's operations it fits very well with that.
"They fly into the old Saigon-Ho Chi Minh City. Pacific Airlines is based out of there, so it all works."
Pacific Airlines is the Qantas Group's second venture in southeast Asia, as it moves to try to set up a network of carriers to capitalise on the burgeoning region's huge population base.
Its first investment, Singapore-based start-up Jetstar Asia, had a bumpy take-off but is reportedly headed for smoother air, as chief executive Chong Phit Lian brings costs under control and gets the network running more effectively.
Qantas is also looking for an Indonesian partner, although accident-prone low-cost carrier Adam Air is no longer on the cards.
But even as the Flying Kangaroo is expanding in Asia, Asian airlines have set their sights on Australia.
Singapore-backed Tiger Airways is setting up a domestic carrier and Malaysia's AirAsia announced this week it was planning to start services to Australia using its long-haul, no-frills start-up, AirAsiaX.
Tony Fernandes, AirAsiaX chief executive, confirmed that he was planning to bring AirAsiaX here later this year and promised to halve the lowest airfares currently available to southeast Asia.
He expects to enter the Australian market with promotional airfares to Kuala Lumpur of $30-40 return and everyday return fares from destinations such as Melbourne to Malaysia starting at $300.
The Kuala Lumpur-based start-up has ordered 15 Airbus A330-300 widebody aircraft and is already looking at boosting that order to 25.
Fernandes plans to have an Australian city among the start-up's launch destinations and says discussions are already under way with a number of interested parties. He wants to ultimately expand to multiple Australian destinations and says he is looking at possibilities, including secondary airports such as Victoria's Avalon.
The increased interest in Australia by Asian carriers has put Qantas on its guard and prompted it to boost Jetstar's domestic fleet to protect market share. But Gregg appears unfazed by the latest development.
Gregg says it is an inevitable trend that people will follow Jetstar International and attempt to translate value-based flying to the long-haul model.
He believes Jetstar will be able to compete with AirAsiaX, if it decides to come to Australia, noting that "talk's cheap, sometimes; operations are tough".
"Tony's a good copycat," Gregg says. "He always has been.
"The fundamental issue, and we've talked about this a lot, is that the Asian labour base is a lot lower than the Australian labour base.
"We have a great amount of faith in Jetstar's operations and we believe it can stand up and compete with anybody in the world, even with those lower labour bases."
For his part, Fernandes does not see Jetstar - which flies with two classes, code shares with Qantas and as part of a network - as a direct competitor "per se".
He says AirAsiaX will be a true no-frills carrier, with all economy class seating, one class, and operating point-to-point services from Kuala Lumpur.
He believes there is plenty of potential for growth to and from Australia, in a market he characterises as "fairly stagnant over the past few years".
This includes tapping into a new pool of tourists eager to visit Australia by providing cheap flights to southeast Asians previously deterred by high airfares.
"We're after creating a market of people who never dreamt of going to Australia and of Australians who have never dreamt of coming to southeast Asia," Fernandes says.
"Australian tourism has done a super job in promoting its product, but most people just find it out of their wallet.
"And I know tons of Australians who would like to spend more time in southeast Asia."
The AirAsia founder also does not see low-cost long hauls as a threat to the traditional full-service carriers.
"Interestingly enough, when I went on a British Airways flight the other day the smallest cabin was in fact the economy cabin," Fernandes says.
"More and more airlines are putting more emphasis into first class, business class and a new category, premium economy.
"So I think over the next five years you'll see airlines segmenting even more.
"They have a very different product, the code share, the interlining, the first class, the business class, so I think we can coexist very nicely."
AirAsiaX is being watched closely because of the phenomenal growth of its short-haul sister, AirAsia. In five years, AirAsia has grown to become Asia's leading low-cost carrier, with 300 flights a day, 18 million passengers and more than 50 aircraft.
Fernandes says AirAsiaX will bring the same kind of energy to its operations and sees itself quickly growing to 25 aircraft capable of carrying eight to 10 million passengers.
"What we're seeing is so much excitement and interest over this," he says.
"People see the focus and discipline of what we're doing, plus the fact that they know there is a huge 18 million feed from AirAsia short haul.
"I think people who have been very sceptical about this model say, 'Yes, it makes sense and you can do the things that everybody said you can't do before'."
The reputation built up by AirAsia would also help establish the bona fides of the new venture.
From todayss issue of "The Australian".
Qantas to integrate Asia buy
* The Flying Kangaroo hopes to take Pacific Airlines under its wing, writes Steve Creedy
* April 27, 2007
AS Asia's air wars intensify, Qantas has long-term plans to bring Vietnam's Pacific Airlines under the Jetstar brand, after spending $US50 million ($60 million) for a 30 per cent stake in the low-cost carrier.
Qantas chief financial officer Peter Gregg flew to Vietnam yesterday to sign the contract on the long-discussed deal to make Qantas a strategic partner in the airline, with Vietnam's State Capital Investment Corp.
It will see Jetstar's expanding Asian reach bolstered by Pacific's routes between Ho Chi Minh City and Da Nang and Hanoi as well as international routes to Tapei.
Although the deal does not hand over management control of the airline, Gregg says Qantas will put staff into the airline to work with the Vietnamese Government.
He says Pacific fits well with the Qantas Group's plans to use the value-based Jetstar brand to expand the group's footprint in Asia. "We won't brand them as Jetstar yet, but we have high hopes that in due course we can get the Government up there to agree once we're satisfied about the operational standards," he says.
Jetstar International and Jetstar Asia both serve Vietnam, which is a growing tourist destination from Australia and has strong potential for VFR (visiting friends and relatives) traffic.
"It's a great tourist spot and it's a huge domestic population, so it just works well," Gregg says. "There's an incredible amount of VFR and if you have a look at Jetstar International's operations it fits very well with that.
"They fly into the old Saigon-Ho Chi Minh City. Pacific Airlines is based out of there, so it all works."
Pacific Airlines is the Qantas Group's second venture in southeast Asia, as it moves to try to set up a network of carriers to capitalise on the burgeoning region's huge population base.
Its first investment, Singapore-based start-up Jetstar Asia, had a bumpy take-off but is reportedly headed for smoother air, as chief executive Chong Phit Lian brings costs under control and gets the network running more effectively.
Qantas is also looking for an Indonesian partner, although accident-prone low-cost carrier Adam Air is no longer on the cards.
But even as the Flying Kangaroo is expanding in Asia, Asian airlines have set their sights on Australia.
Singapore-backed Tiger Airways is setting up a domestic carrier and Malaysia's AirAsia announced this week it was planning to start services to Australia using its long-haul, no-frills start-up, AirAsiaX.
Tony Fernandes, AirAsiaX chief executive, confirmed that he was planning to bring AirAsiaX here later this year and promised to halve the lowest airfares currently available to southeast Asia.
He expects to enter the Australian market with promotional airfares to Kuala Lumpur of $30-40 return and everyday return fares from destinations such as Melbourne to Malaysia starting at $300.
The Kuala Lumpur-based start-up has ordered 15 Airbus A330-300 widebody aircraft and is already looking at boosting that order to 25.
Fernandes plans to have an Australian city among the start-up's launch destinations and says discussions are already under way with a number of interested parties. He wants to ultimately expand to multiple Australian destinations and says he is looking at possibilities, including secondary airports such as Victoria's Avalon.
The increased interest in Australia by Asian carriers has put Qantas on its guard and prompted it to boost Jetstar's domestic fleet to protect market share. But Gregg appears unfazed by the latest development.
Gregg says it is an inevitable trend that people will follow Jetstar International and attempt to translate value-based flying to the long-haul model.
He believes Jetstar will be able to compete with AirAsiaX, if it decides to come to Australia, noting that "talk's cheap, sometimes; operations are tough".
"Tony's a good copycat," Gregg says. "He always has been.
"The fundamental issue, and we've talked about this a lot, is that the Asian labour base is a lot lower than the Australian labour base.
"We have a great amount of faith in Jetstar's operations and we believe it can stand up and compete with anybody in the world, even with those lower labour bases."
For his part, Fernandes does not see Jetstar - which flies with two classes, code shares with Qantas and as part of a network - as a direct competitor "per se".
He says AirAsiaX will be a true no-frills carrier, with all economy class seating, one class, and operating point-to-point services from Kuala Lumpur.
He believes there is plenty of potential for growth to and from Australia, in a market he characterises as "fairly stagnant over the past few years".
This includes tapping into a new pool of tourists eager to visit Australia by providing cheap flights to southeast Asians previously deterred by high airfares.
"We're after creating a market of people who never dreamt of going to Australia and of Australians who have never dreamt of coming to southeast Asia," Fernandes says.
"Australian tourism has done a super job in promoting its product, but most people just find it out of their wallet.
"And I know tons of Australians who would like to spend more time in southeast Asia."
The AirAsia founder also does not see low-cost long hauls as a threat to the traditional full-service carriers.
"Interestingly enough, when I went on a British Airways flight the other day the smallest cabin was in fact the economy cabin," Fernandes says.
"More and more airlines are putting more emphasis into first class, business class and a new category, premium economy.
"So I think over the next five years you'll see airlines segmenting even more.
"They have a very different product, the code share, the interlining, the first class, the business class, so I think we can coexist very nicely."
AirAsiaX is being watched closely because of the phenomenal growth of its short-haul sister, AirAsia. In five years, AirAsia has grown to become Asia's leading low-cost carrier, with 300 flights a day, 18 million passengers and more than 50 aircraft.
Fernandes says AirAsiaX will bring the same kind of energy to its operations and sees itself quickly growing to 25 aircraft capable of carrying eight to 10 million passengers.
"What we're seeing is so much excitement and interest over this," he says.
"People see the focus and discipline of what we're doing, plus the fact that they know there is a huge 18 million feed from AirAsia short haul.
"I think people who have been very sceptical about this model say, 'Yes, it makes sense and you can do the things that everybody said you can't do before'."
The reputation built up by AirAsia would also help establish the bona fides of the new venture.
From todayss issue of "The Australian".