Qantas Airways to target China travelers with 5 separate airlines

Manila Bulletin
September 17, 2011

MANILA, Philippines — Qantas Airways Ltd., seeking to revive unprofitable international operations, is counting on five different airline units to win travelers in China, a country 60 times bigger than its home market of Australia.

The company is forming a premium carrier in Southeast Asia and a budget venture in Japan that will give its bases closer to China, Chief Executive Officer Alan Joyce, 45, said in an interview in Sydney Friday. The two new airlines, which begin flights next year, will add to Qantas’s existing operations in Vietnam, Singapore, and Australia.

“There is a huge opportunity for Qantas within the Asian markets,” Joyce said. Having premium and low-cost units serving China and the rest of the region is “critical,” he said.

Winning sales in the world’s most populous country is central to Joyce’s plans to turn around overseas operations now losing about A$200 million ($207 million) a year because of competition from Middle East carriers on European routes. Delta Air Lines Inc. and American Airlines also added flights to China, where international air travel may grow 11 percent a year through 2014, according to the International Air Transport Association.

“I really think it is hard to overestimate China’s potential,” said Peter Harbison, chairman of the Sydney-based CAPA Center for Aviation, an industry adviser. The country’s size and rising intra-Asia trade provide “unbelievable upside internationally,” he said.

Sydney-based Qantas, Australia’s largest airline, will order as many as 110 Airbus SAS A320s, including 78 of the revamped neo version, to support the new Southeast Asia premium carrier and the Japan budget venture. It announced the new international airlines last month alongside plans to pare flights to Europe and shed 1,000 jobs in Australia.

Qantas’s low-cost budget arm Jetstar has led the company’s growth in China by offering flights to eight cities from its hub in Singapore. The budget carrier’s Vietnam unit also plans to add China flights, Joyce said. The main Qantas airline flies to Shanghai and Hong Kong from Australia.

Chinese services now represent more than 10 percent of Qantas’s international revenue, compared with “low single digits” five years ago, Joyce said. The Dublin-born CEO founded Jetstar in 2004, four years after joining Qantas. He previously had stints at Aer Lingus Group Plc and Ansett, which was Australia’s No. 2 carrier before collapsing 10 years ago.