Paul Phelan/CAIRNS Andrew Doyle/SYDNEY

Qantas is to take over foundering low-cost rival Impulse Airlines, which was left high and dry after institutional investors withdrew their support. The collapse of Impulse makes it the third unsuccessful challenger to Qantas and Ansett since Australian airline deregulation.

Qantas will fund the carrier's executive chairman Gerry McGowan and his wife Sue to purchase a 60% stake in Impulse from the defecting investors. McGowan asked Qantas chief executive Geoff Dixon for backing after key shareholder, Singapore-based GIC Special Investments, signalled it wanted to shed its stake.

McGowan says Dixon "understood the sense and the synergies" of the deal, which will run for 10 years, when the plan was put to him in late March. McGowan says Impulse has been losing more than A$1 million ($500,000) per month due to rising fuel costs, the weakness of the Australian dollar and fare competition - complaining of a "lack of rigour" on the part of the Australian authorities in regulating the competitive environment.

The deal will see Qantas wet-lease Impulse's fleet of eight Boeing 717s and 13 Raytheon Beech 1900D regional airliners on a "cost plus" basis, mirroring a scheme in which Qantas Airlink controls Adelaide-based National Jet Systems' (NJS) BAe146 fleet. The deal also includes five 717s Impulse was due to lease from Boeing in September, though further expansion may be put on hold.


Impulse will be re-branded as a Qantas product, withdrawing from the lucrative Melbourne-Sydney-Brisbane triangle and redeploying its 717s on secondary routes to Queensland holiday destinations and between Melbourne and Hobart. The Beech 1900 fleet will be redeployed on regional routes and Sydney-Canberra services.

The Qantas move will liberate three of the airline's Boeing737-300s for an assault on New Zealand domestic routes between Auckland, Wellington and Christchurch from 1 June, an initiative announced on 1 May, in tandem with the Impulse deal. Qantas is filling the gap left by franchisee Qantas New Zealand's collapse last month, but intends to run the new operation independently.

Air New Zealand has plugged the gap, adding 737-200s on its low-cost trans-Tasman subsidiary Freedom Air linking Auckland, Wellington and Christchurch.

Air New Zealand-owned Ansett Australia says it will move to block the Impulse acquisition, and may make a counter offer. CEO Gary Toomey says the group has the reserves, but contact has not yet been made. Dixon counters saying Impulse's investors contacted ANZ shareholder Singapore Airlines for help but were declined.

McGowan adds a deal with Ansett could encounter regulatory hurdles since the carrier controls 70% of the New South Wales regional market after buying Hazelton Airlines. But Toomey says Ansett will consider options, including launching its own low-cost carrier and an alliance with Richard Branson's Virgin Blue.

Source: Flight International