Qantas To Launch Two New Asia Airlines
Australia's Qantas Airways unveiled plans on Tuesday to set up two new Asia-focused airlines and launch a USD$9 billion-plus fleet upgrade, part of a do-or-die makeover that also gives a major boost to plane maker Airbus.
Qantas, which has been reviewing its offshore operations to cut costs and unprofitable routes, said up to 1,000 jobs could be lost as it launches a new, premium Asian airline and a Japanese budget carrier, the latter jointly with Japan Airlines and Mitsubishi.
These new airlines will fly Airbus A320 jets, cementing their reputation as plane of choice on regional networks over rival Boeing. Qantas plans to acquire up to 110 of them, worth more than USD$9.4 billion at list prices.
As Qantas rebases its loss-making international operations in Asia, it also plans to give up some of its long-haul routes and retire older planes as well as cut jobs.
"To do nothing, or tinker around the edges, would only guarantee the end of Qantas International in our home Australian market," the airline's chief executive, Alan Joyce, told a news conference. He said the international operation's cost base was around 20 percent higher than its major rivals.
"That would be a tragedy," Joyce added as Qantas shares rose 4 percent on the news.
He did not say when the new premium airline would be launched, but said it could be based in Kuala Lumpur or Singapore and would not be majority owned by Qantas.
Qantas faces a likely escalation of industrial action at home over the plan's estimated 1,000 job cuts, with unions opposed to any move by Qantas to shift its international operations offshore.
The union representing Australia's aircraft engineers reacted swiftly, threatening industrial action within two weeks and considering a court challenge on grounds that Qantas' plan was in breach of the terms of its privatisation in the early 1990s.
Australia's union body, ACTU, said it would seek urgent talks with Qantas.
"We cannot see any need for there to be any forced redundancies from the plan announced today and we will seek to ensure that is the case at the earliest possible opportunity," said Jeff Lawrence, secretary of the Australian Council of Trade Unions.
An Australian senator raised the stakes further, saying he would introduce legislation in parliament to prevent Qantas from "under-paying" its offshore-based crews.
Qantas' plan refocuses its offshore business squarely on Asia, a region that should make more than half of global airline profits this year, according to the International Air Transport Association.
Qantas plans to acquire between 106 and 110 Airbus A320 aircraft, including planes for Jetstar Japan and the new premium Asia-based airline. Between 28 and 32 of these planes would be current-generation A320s and the rest the fuel-efficient, next-generation A320neo aircraft.
Airbus has scored resounding victories over Boeing with its narrow-body A320neo aircraft, taking a commanding lead in the single-aisle market once dominated by Boeing's 737 family.
Just last month AirAsia announced a deal worth USD$18.2 billion at list prices for 200 A320neo planes while American Airlines, previously an all-Boeing customer, ordered 260 narrow-body A320 planes.
Qantas also delayed the delivery of its final six A380s for up to six years in a move aimed at conserving capital and bolstering its balance sheet.
It said it would also retire four Boeing 747s and would make no change to its existing order of Boeing 787s.
Qantas reaffirmed its earnings guidance, though it said the restructuring would cost more than AUD$350 million (USD$367 million).