PAUL PHELAN / SYDNEY
Australian flag carrier's board to decide on launch of budget airline in bid to boost Asian sector as profits take a plunge
The Qantas board will make a decision on establishing a low-cost international airline in an effort to win back Asian traffic at its next meeting in September or October.
The move comes as the Australian carrier reports increased revenues for the year, but reduced profits as it battles with high costs and low domestic yields.
The unnamed, wholly-owned, two-class carrier, which would be low-cost but not no-frills, could be operating by mid-2002, says Qantas chief executive Geoff Dixon. The airline would be based in Sydney with operations from other Australian cities, initially serving seven destinations, likely to include Fukuoka, Ho Chi Minh City, Kuala Lumpur, Sapporo, Seoul, Shanghai and Taipei. The new airline would not expand beyond Asia, says Dixon. The carrier would be run separately from the major with its own chief executive, but will be closely allied with Qantas, participating in its frequent-flyer scheme.
Qantas has been pondering the low-cost move for months, with the board due to consider a final proposal at its next meeting.
Qantas reported a A$597 million ($314 million) pre-tax profit for the year ended 30 June, down A$165.7 million or 21.7% on last year, despite a 9.3% capacity hike which boosted revenue by 11.9% to A$10.2 billion.
Dixon says the result was dragged down by low domestic yield, which slumped 20% on key east-coast routes where Qantas has competition from Virgin Blue and last year from now-defunct Impulse Airlines, and by 8.2% overall. Profit after tax was A$415.4 million, down almost 20% on last year.
"Qantas has a good revenue story to tell. We've had over A$10 billion in revenue for the first time in our history, but our costs are too high and the major impact of the costs have come from fuel, which is at unprecedented levels," says Dixon.
He warned that results for the financial year 2002 would remain under pressure and predicted further major restructuring of the airline. Cutbacks will start with reducing transpacific services by four flights. "We'll continue to restructure our airline and we will pull out of routes where we believe there is no long term hope of profitability to the level that we would expect," says Dixon.
Source: Flight International
