Qantas Asian airline in doubt as Malaysia talks fail

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Qantas Asian airline in doubt as Malaysia talks fail

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Qantas revealed plans to establish a joint-venture in Asia last August.

09 March,2012 09:33 am

Plans by embattled Australian carrier Qantas to create a premium joint-venture Asian airline were thrown into disarray Friday after talks with Malaysia Airlines collapsed.While Asia remained a priority for Qantas and it wanted to expand in the region, given global economic uncertainty and its focus on financial discipline, the group said it will allocate minimal capital to such ventures.The transformation of Qantass international business remains vital, with plans to return the international business to profitability in the short-term on track, Qantas chief Alan Joyce said, announcing negotiations had failed.In the medium-term, the Qantas flying businesses, both domestic and international combined, will exceed the cost of capital on a sustainable basis.Qantas revealed plans to establish a joint-venture in Asia last August as it repositions itself within the industrys fastest-growing region and seeks to turn around its loss-making international arm.Singapore and Malaysia were seen as the likely bases and it is understood that Qantas had been favouring Kuala Lumpur as it would involve lower costs.But in a statement, Qantas said talks with Malaysia Airlines on a partnership, including the establishment of a new premium airline, would not continue due to parties being unable to reach mutually agreeable commercial terms.The news comes just days after Malaysia Airlines admitted it was in trouble after posting a 2.52 billion ringgit (US$836 million) loss last year largely due to soaring fuel costs.The results make for unpleasant reading. The company is in crisis, Malaysia Airlines chairman Mohamad Nor Mohamad Yusof said, before adding that he was confident it could recover.It is understood Qantas is not in talks on establishing a tie-up with Singapore Airlines, long a fierce rival of the Australian carrier and whose new long-haul budget carrier Scoot will have a daily flight to Sydney.Qantass plans to establish a new Asian airline sparked a fierce backlash from the start, with unions concerned the move would see jobs sent abroad.The ensuing acrimony between management and unions saw Joyce ground the entire fleet last October, stranding thousands of passengers at airports around the world and digging into the airlines bottom line.The 48-hour grounding was ultimately ended by the national industrial relations umpire, which forced the disputing parties into arbitration.The pilots union, one of three that was in dispute with Qantas, welcomed what it termed the predictable collapse of the Malaysia plan.The plan to divert much-needed Australian resources into pie-in-the-sky ventures in Southeast Asia was ridiculous and unfeasible, Australian and International Pilots Association vice-president Richard Woodward said.But the companys share price dipped on the news, slipping close to 3.0 percent to Aus$1.675 in early afternoon trade.Last month Qantas announced it would slash at least 500 jobs, cut costs and close two international routes after an 83 percent slump in first-half net profits.Joyce said Friday the airline would continue to pursue its strategy of restructuring its international network, creating a sustainable business model, improving customer experience and increasing the groups focus on Asia.