Qantas to launch low-cost carrier
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Dixon says the new carrier will be lean and highly competitive.
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SYDNEY, Australia (CNN) -- Australia's biggest airline Qantas is stepping up its battle with discount carrier Virgin Blue by launching a new low-cost domestic airline.
Qantas, which has about 70 percent of the Australian market, said Friday morning its new airline would begin flying in May next year, with at least 23 aircraft flying by mid-2005.
They will be either Airbus A320 or Boeing 737-800 aircraft.
CEO Geoff Dixon said the Qantas board had given its approval on Thursday for the new airline, which will go head to head with Virgin Blue in the low-cost sector.
While analysts say the Qantas move could spark a fare war, Dixon said the new airline would be "lean, highly competitive" and was designed to make money, not lose it.
U.K. entrepreneur Richard Branson launched Virgin Blue as a discount operation in Australia in September 2000, and has since been able to build it to about a 30 percent share following the collapse of Australia's then No. 2 airline, Ansett, in late 2001.
Branson and his joint venture partner, Australian logistics and transport company Patrick Corp, plan to float Virgin Blue in the next few months. Analysts value the airline at about Aust. $2 billion ($1.36 billion).
Dixon said Friday that Qantas would make a decision in the next six weeks on whether its new airline would be a completely "greenfields" company, or whether it would use the operation of the former low-cost carrier Impulse, which Qantas bought in May 2001.
The Qantas move on the domestic front replicates its action in the international arena, where it launched a low-cost offshoot last year. That carrier, Australian Airlines, operates on leisure routes that do not justify a full Qantas service.
Shares in Qantas are down 1.7 percent at A$3.52 in early trade Friday.
