Wirraway
8th Sep 2002, 17:47
Mon "Mebourne Age" 9/9/02
Qantas bides time as its lean little Australian fills the seats
By Mark Todd
Sydney
September 9 2002
Qantas Airways' low-cost international offshoot Australian Airlines will not take to the skies until late October, yet the new carrier's inaugural flights from Cairns to Japan are almost fully booked.
Australian Airlines' chief executive Denis Adams said the first services would leave these shores with nearly every seat taken, while forward loads through to April were in excess of 60 per cent.
Qantas will be hoping for a similar response from small investors this morning, when it launches the $200 million retail tranche of its $800 million capital raising.
Executives also will be praying for a stronger opening market, given Qantas shares closed at $3.99 on Friday, well below the $4.20 offer price.
Qantas was reluctant to disclose the break-even point for its new airline, but Mr Adams said the business plan called for Australian Airlines to make a "small" profit in its first year. "Demand has never been a problem in these markets, the problem has been getting the yield," he said. "With the lower cost base we can make money out of the yields that are on offer."
Australian Airlines, which will launch its distinctive livery next Sunday, is designed to operate on a cost base 25 to 30 per cent less than that of its parent. It will fly an all-economy service to predominantly leisure destinations that Qantas has either found, or believes, will not produce an economic return for its traditional two-class fleet.
Initially the subsidiary will operate daily return services between Cairns-Nagoya and Cairns-Osaka starting on October 27, before adding Fukuoka, Singapore, Taipei, and Hong Kong in November.
Other destinations, including Kuala Lumpur, Vietnam, Sarawak, Phuket, Greece, and Turkey, are under consideration, with services to some of the new ports slated to begin in early 2003.
Mr Adams said it was intended for the fleet of four Boeing 767-300 aircraft to expand to 12 within two years, and for Australian Airlines to begin flying out of a southern port in this country from early next year.
"If we expand we'll do it on the basis that if we're increasing volume we're adding to the bottom line," he said.
Last month, Qantas chief executive Geoff Dixon made a commitment to expanding Australian Airlines "as quickly and as rapidly as we can". However, there are no plans to link the new domestic leisure-carrier business unit, flagged at Qantas' full-year results three weeks ago, with Australian Airlines.
Apart from the all-economy seating configuration, Australian Airlines plans to save costs by simplifying its processes from the check-in counter to the number of "service items", such as plates and cups, it uses. Its head office will number 20 people and the airline will outsource maintenance to Qantas on commercial terms.
"We've got to stand on our own," Mr Adams said. "Any cross-subsidies from the parent will build a business on a false premise."
Troy Angus, a portfolio manager at Sagitta Rothschild, said investors had not paid a great deal of attention to Australian Airlines, given its small contribution to profits, when assessing Qantas. However, he said the new carrier could prove a useful tool for expanding the business and competing with rivals.
Qantas bides time as its lean little Australian fills the seats
By Mark Todd
Sydney
September 9 2002
Qantas Airways' low-cost international offshoot Australian Airlines will not take to the skies until late October, yet the new carrier's inaugural flights from Cairns to Japan are almost fully booked.
Australian Airlines' chief executive Denis Adams said the first services would leave these shores with nearly every seat taken, while forward loads through to April were in excess of 60 per cent.
Qantas will be hoping for a similar response from small investors this morning, when it launches the $200 million retail tranche of its $800 million capital raising.
Executives also will be praying for a stronger opening market, given Qantas shares closed at $3.99 on Friday, well below the $4.20 offer price.
Qantas was reluctant to disclose the break-even point for its new airline, but Mr Adams said the business plan called for Australian Airlines to make a "small" profit in its first year. "Demand has never been a problem in these markets, the problem has been getting the yield," he said. "With the lower cost base we can make money out of the yields that are on offer."
Australian Airlines, which will launch its distinctive livery next Sunday, is designed to operate on a cost base 25 to 30 per cent less than that of its parent. It will fly an all-economy service to predominantly leisure destinations that Qantas has either found, or believes, will not produce an economic return for its traditional two-class fleet.
Initially the subsidiary will operate daily return services between Cairns-Nagoya and Cairns-Osaka starting on October 27, before adding Fukuoka, Singapore, Taipei, and Hong Kong in November.
Other destinations, including Kuala Lumpur, Vietnam, Sarawak, Phuket, Greece, and Turkey, are under consideration, with services to some of the new ports slated to begin in early 2003.
Mr Adams said it was intended for the fleet of four Boeing 767-300 aircraft to expand to 12 within two years, and for Australian Airlines to begin flying out of a southern port in this country from early next year.
"If we expand we'll do it on the basis that if we're increasing volume we're adding to the bottom line," he said.
Last month, Qantas chief executive Geoff Dixon made a commitment to expanding Australian Airlines "as quickly and as rapidly as we can". However, there are no plans to link the new domestic leisure-carrier business unit, flagged at Qantas' full-year results three weeks ago, with Australian Airlines.
Apart from the all-economy seating configuration, Australian Airlines plans to save costs by simplifying its processes from the check-in counter to the number of "service items", such as plates and cups, it uses. Its head office will number 20 people and the airline will outsource maintenance to Qantas on commercial terms.
"We've got to stand on our own," Mr Adams said. "Any cross-subsidies from the parent will build a business on a false premise."
Troy Angus, a portfolio manager at Sagitta Rothschild, said investors had not paid a great deal of attention to Australian Airlines, given its small contribution to profits, when assessing Qantas. However, he said the new carrier could prove a useful tool for expanding the business and competing with rivals.