Qantas to launch low-cost airline in 2002

Qantas is bringing back an old name for its new lost-cost international airline

By CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- Australian airline Qantas will launch a new international carrier next year to serve Asian routes, it said Thursday.

The new low-cost carrier, to be known as Australian Airlines, will start operating in the second half of 2002.

It will open routes from Australian cities into potential Asian markets such as China, Vietnam, Japan, South Korea and Malaysia.

Qantas chief executive Geoff Dixon said Thursday the new airline would also take over some unprofitable routes from which Qantas planned to withdraw over the next six months.

At the Qantas annual results presentation earlier this month, Dixon mentioned cities such as Shanghai in China, Fukuoka in Japan and Seoul in South Korea as potential destinations.

Thursday's announcement also marks the resurrection of an old name in Australian aviation. Australian Airlines was a domestic carrier taken over by Qantas in 1993.

Exciting opportunities in new carrier

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Dixon said the new airline offered exciting opportunities that would not be possible under the existing Qantas cost structure.

It is understood the airline will set lower wages and conditions for employees. It will also use different cabin configurations.

"We believe the long term growth prospects for Australian Airlines are very promising, with benefits for employment and tourism," Dixon said.

Qantas executive Denis Adams will run the new airline, which is seen as a potential driver of higher growth for the group. No decisions have yet been made on aircraft types.

Competition in Asia-Pacific market

The Qantas announcement comes at a time of intense competition in the Asia Pacfic aviation market, primarily with Singapore Airlines over its 25 percent stake in Air New Zealand.

SIA, which is majority-owned by the Singapore government, wants to lift its stake in Air New Zealand, a move that is not favored by the New Zealand government.

For its part, Qantas -- which is 25 percent owned by British Airways -- opposes SIA lifting its equity in the New Zealand carrier and has instead proposed a closer trans-Tasman relationship between Qantas and Air New Zealand.

As part of that, it has proposed that Air New Zealand offload its wholly owned subsidiary Ansett Australia to Singapore Airlines.

Ansett is the biggest competitor for Qantas in the Australian domestic market, but has lost ground this year after its B767 fleet was grounded over safety concerns.

Air New Zealand, which on Wednesday delayed release of its annual results to September 13, needs to spend heavily on new aircraft for Ansett and its own fleet.