Qantas spreads wings one more time

SINGAPORE, Sept. 29 (UPI) -- Australian national carrier Qantas' timing for expansion can sometimes be awkward. It announced the first major expansion of Australian Airlines, it leisure class offshoot launched in 2002, just on the eve of SARS hitting Asia. This time around, it is launching its international low cost carrier Jetstar Asia just as oil prices break the all-time high $50 per barrel. Still Qantas Chief Executive Office Geoff Dixon is optimistic that once the dust settles his latest baby will be one of the survivors.

"This is going to be a very, very substantial airline," Dixon said, while announcing Jetstar Asia would take to the skies within 10 weeks at the latest.

"We are very confident despite the difficulties that surround the aviation industry that it will be successful...We will be affected by the oil prices the same as other airlines in the world. It will be a competitive issue," he added, saying at this stage there was no plan to introduce on oil surcharge.

Jetstar Asia, a sister airline to Jetstar Australia launched in May, will be based out of Singapore, making it the third low-cost carrier based out of the city-state after Valuair and Tiger Airways. Thai AirAsia, which is flying out of Bangkok and Phuket to Singapore will also be a competitor on the busy Thai route, while parent carrier AirAsia, starting to look like a grand-father after two years in existence, has applied for its own license to fly out of Singapore.

Con Korfiatis, Chief Operating Officer of Jetstar Asia, told UPI he believed there was room for many low cost carriers in Asia, pointing that despite the recent flurry of budget airlines, their overall number was still quite small when compared to the over 40 low cost airlines flying in Europe.

"As to which one gets it right and which ones get it wrong, time will only tell...You need to work out what's your competitive advantage. For us, it's providing good value fare to customers," he noted.

The new carrier has yet to announce which routes it will fly as it is still in negotiations with Singapore's Ministry of Transport. Yet it indicated it would fly within a five hour radius, which could include Australia, China and India.

Jetstar Asia is a partnership between Qantas (49 percent), Singaporean businessmen Del Monte chairman Tony Chew (22 percent) and Boustead chairman FF Wong (10 percent) and Temasek Holdings (19 percent), the investment arm of the government.

Temasek is already a shareholder in Singapore Airlines and sister Silkair, and has also taken a stake in Tiger Airways. Market watchers have been speculated that Temasek as an astute investor is keeping its fingers in every pie waiting to see where the chips will fall.

Dixon confirmed Temasek had also acquired a 3 percent stake in Qantas when British Airways sold its 18.2 percent stake in the Australian carrier earlier this month.

Dixon indicated he did not see Temasek's multi-ownership as a conflict of interest, pointing there were quite a lot of crossholding in the airline industry anyway.

Qantas is investing about $30 million with the Singaporean investors putting in the same sum, no more cash injection is expected to be needed after the initial layout.

"This is a very serious investment by Qantas, which will continue to have a significant managerial role as move forward," Dixon said.

Ever since AirAsia started two years ago the budget airline industry in Asia has been booming despite the lack of open-sky regulation and budget terminal.

Many have quickly jumped on the bandwagon with fierce competition quickly developing. Some may say Jetstart Asia is coming to the game late, but Dixon argued that being first in this industry is not always the best thing.

"I often think it's best to wait and see how everybody else destroys themselves and then you come in and maybe pick up some of the pieces," he said, adding he was very confident about the "timing of this airline."

"I don't know where the other airlines will end up. But I can assure you that Jetstar Asia and Jetstar Australia will be around in three to four years' time," Dixon added.

As the market liberalizes further in the years, there should be plenty of room for many budget carrier to prosper, said Korfiatis.

"The market is growing and the main thrust of a low cost model is to stimulate demand," he added.

With its orange star, leather seat and chic uniform in traditional Qi Pao style, the airline is hoping to position itself as comfortable and stylish.

"It's our people that will really make the difference," said Korgiatis.

While the new airline promises to be "very competitive" with its prices, it also wants to be known for its customer ethos and branding. "Most certainly we are a low fare carrier and are about providing value for the consumer," said Koriatis.