Qantas eyes low-cost tie with AirAsia

Qantas eyes low-cost tie with AirAsia

Agence France-Presse, Sydney

Australian flag carrier Qantas is considering teaming up with Malaysia's AirAsia to form a Singapore-based, low-cost airline servicing the booming Southeast Asian market, it was reported here on Friday.

News Ltd. and Fairfax newspapers reported Qantas Airways Ltd. was considering the move as a back up if regulators blocked a proposed tie-up with Air New Zealand.

The venture would challenge arch-rival Singapore Airlines on its home turf.

Qantas already had a licence to operate a discount airline from Singapore that was granted more than 10 years ago after negotiations on access to Australian airports.

Melbourne's Herald-Sun said Qantas had already completed a feasibility study on running a low-cost airline from the Asian city-state while the Sydney Morning Herald reported Irish aviation consultant Conor McCarthy was brokering a deal between Qantas and AirAsia.

The reports said it was not clear whether Qantas would buy a stake in AirAsia, which is expected to hold a public float later this year, or the airlines would form a joint venture for the Singapore project.

"It would certainly be a positive move for Qantas," Center for Asia-Pacific Aviation managing director Peter Harbison said. "There's massive potential in that market.

Harbison said AirAsia appeared to favor the joint-venture model when doing business with other airlines.

"It wouldn't surprise me if they went down that track, it would help entrench AirAsia positively in the market," he said.

Qantas refused to comment on the reports, saying it did not respond to market speculation.

Qantas chief executive Geoff Dixon sparked the rumors at the airline's half-yearly results meeting last month when he was asked what Qantas would do if its plan to buy a 22.5 percent stake in Air New Zealand did not proceed.

"We're looking at other opportunities," he said, without elaborating.

Qantas will launch a domestic offshoot called Jetstar in May and already has a low-cost carrier called Australian Airlines flying into Asia, although it is based in Australia.

AirAsia has grown at a furious pace since its launch with Boeing 737-300 jets in 2001 plying Malaysia's domestic routes.

It now has a fleet of 14 and has expanded operations to Singapore and Thailand, with plans to fly into Indonesia next month.

The company has said it wants to be operating 30 aircraft by December and the Sydney Morning Herald said some of its planes could be Boeing 737-300s retired from the Qantas fleet.

AirAsia recently revealed it had filed an application for a licence to establish a Singapore-based, low-cost airline.

Singapore Airlines applied for an operating license this week for its own Singapore-based discount airline, Tiger Airways.

A foray into Singapore would weaken Qantas' argument against allowing Singapore Airlines to operate on the lucrative Sydney- Los Angeles route as part of an open skies agreement between Singapore and Canberra.

Talks on the deal were shelved last year amid the SARS crisis and an Iraq war-induced slowdown and Qantas has argued the aviation market has not yet recovered enough to revisit the issue.