Qantas ends talks with Malaysia Airlines over premium carrier

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Qantas Airways has ceased its discussions with Malaysia Airlines (MAS) to set up a new premium carrier.

In a stock exchange filing, the carrier said this was because both parties were "unable to reach mutually agreeable commercial terms".

Asia, being the world's fastest growing region, will remain a priority for the Australian carrier. Qantas will continue to explore oppurtunities in the region, including through joint ventures and alliances, its chief executive Alan Joyce says.

"However, mindful of global economic uncertainty, and consistent with Qantas' focus on disciplined financial management, the group will allocate minimal capital to such ventures," Joyce says.

"The transformation of Qantas' international business remains vital, with plans to return the international business to profitability in the short term on track. In the medium term, the Qantas flying businesses, both domestic and international combined, will exceed the cost of capital on a sustainable basis," Joyce adds.

Last year, Qantas announced a five-year plan to tackle challenges in its international business, part of which was the setting up of the premium carrier.

Other strategies include restructuring the international network to create a "sustainable business model", improving customer experience and to focus more on Asia because of strong growth in the region.

The carrier previously said it wanted to establish a hub in Singapore and Malaysia, and was in talks with key stakeholders in both markets. With this setback, it unclear whether talks with Singapore remain ongoing.

Qantas posted a 52% decline in its profits in the first half of financial year of 2011/12 to Australian dollars (A$)202 million ($215 million), while MAS incurred a net loss of M$2.5 billion last year.