April 6, 2004
Australia's Qantas, said Tuesday it plans to launch a Singapore-based budget carrier in a bid to tap the growing market for low-cost travel in Asia.
Qantas said the new airline, which will be a joint venture with the Singapore government investment agency Temasek Holdings and two Singapore businessmen, will start flying by the end of the year to Asian cities within five hours of the city state.
The owners will invest SGD$100 million (USD$60 million) in the new airline, of which Qantas will take a 49.9 percent stake. Temasek will hold 19 percent, and Singapore businessmen Tony Chew and F.F. Wong would own 21.1 percent and 10 percent respectively.
"This is a modest investment for Qantas but is an excellent opportunity to participate in the growing intra-Asia travel market," Chief Executive Geoff Dixon said in a statement.
Qantas, which is 19 percent owned by British Airways, said it would use existing cash to fund its stake in the new airline.
Budget airlines have recently sprouted in Asia, challenging the dominance of full-service carriers such as Singapore Airlines and Malaysia Airlines.
The new airline will be the fifth budget air operator to fly to and from Singapore, following Thai AirAsia, a joint venture between Malaysian budget carrier AirAsia and Thailand's Shin Corp, and Jakarta-based Lion Air, which are both already operating flights.
Tiger Airways, a budget venture between Singapore Airlines and the founder of Irish discount airline Ryanair, and Valuair, set up by ex-Singapore Airlines staff, are also expected to start operations this year.
Temasek holds 11 percent in Tiger Airways, while Qantas already has a domestic discount airline called JetStar, which is due to start flying in late May.
Qantas also owns Australian Airlines, launched in October 2002, which flies to Asian cities at cheaper rates than its parent.
PARTNERSHIP
Analysts said that having Singapore's Temasek as a partner would help Qantas in getting the airline off the ground.
"It's a very significant partner because it is the Singapore government's investment arm, which makes it interesting from a funding point of view. It's a very solid investor," said Peter Harbison, managing director of the Centre for Asia Pacific Aviation.
Singapore is planning to build a new airport terminal to cater for the surge in low cost airlines as it fights to preserve its status as Asia's fourth-largest air hub.
"The key thing is that Singapore wants to protect its status as a hub for the Asia Pacific aviation market," said Lim Chin, an analyst at Morgan Stanley.
Lee Kuan Yew, modern Singapore's founding father who spearheaded the island's development as an aviation hub, has also recently taken a keen interest in the sector, saying Singapore Airlines and Changi Airport must cut costs by up to 15 percent to compete in the industry.
Singapore Airlines needed major restructuring, including outsourcing some services and divesting several businesses to remain competitive and profitable, Lee told a meeting of unions and managers on Monday.
(Reuters)
