Monday, March 26, 2012

Qantas, China Eastern to set up Hong Kong budget airline

SYDNEY: Australian carrier Qantas and China Eastern Airlines will launch a new Hong Kong-based budget carrier as they try to tap into Asia's booming aviation market, they announced on Monday.

The airlines have formed a joint venture to start the first Hong Kong-based budget carrier, Jetstar Hong Kong, in 2013, which will have a maximum capitalisation of US$198 million, they told the Australian Stock Exchange.

The new low-cost carrier will fly short-haul routes, including in China, Japan, South Korea and Southeast Asia, the partners - who will each have an equal stake in Jetstar Hong Kong - said in a statement.

"We believe there are huge opportunities in the Jetstar low fares model throughout Asia, including Greater China," said Shanghai-based China Eastern's chairman, Liu Shaoyong.

Jetstar is a Qantas' budget carrier that flies domestic Australian routes as well as international routes to Asia.

"We see tremendous potential for the Qantas Group in Asia and we're looking forward to working more closely with China Eastern Airlines to deliver on it," Qantas Chief Executive Alan Joyce said in a statement.

The airline will launch with a fleet of three Airbus A320s, but will boost the number of A320 twin jets to 18 by 2015.

The announcement came just over two weeks after Qantas, which has been struggling to refocus on the lucrative Asian market, revealed that talks over forming a premium joint-venture Asian airline with Malaysia Airlines had collapsed.

Embattled Qantas in August announced plans to establish a joint-venture in Asia as it repositions itself within the world's most profitable airline market and seeks to turn around its loss-making international arm.

Singapore and Malaysia were seen as the likely bases for the new joint-venture premium airline and Qantas was said to have favoured Kuala Lumpur because of the lower costs involved.

But the mooted new Asian airline sparked a fierce backlash, with Australian unions concerned the move would see jobs sent abroad.

The ensuing acrimony between management and unions saw Joyce ground the entire fleet in October, stranding thousands of passengers at airports around the world and digging into the airline's bottom line.

The airline had said the refocusing of its business was crucial to its long-term survival as it struggles at a difficult time for the global industry.

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.

But since the talks with Malaysian Airlines, Qantas is moving to cash in on the success of its budget arm Jetstar, which also has a Japanese operation, Jetstar Japan, by slashing fares and boosting traffic.

"Jetstar's fares will be 50 percent less than existing full service carriers, which we've seen create new travel demand in our markets across Asia because it enable people to make more trips, more often," Jetstar's Chief Executive Bruce Buchanan said.

The new airline's base in Hong Kong gives it a springboard from one of Asia's key aviation hubs, through which around 40 million passengers pass each year.

- AFP/de

View the original article here

Source From Channel News Asia

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