Qantas has decided to launch Australian Airlines - a low-cost subsidiary slated for overseas flights. With single-class Boeing 767-300s, the new carrier's aim is to boost in-bound leisure traffic on routes Qantas cannot afford to fly.

The airline will start with four 767s and build to a fleet of 12 aircraft. Its first planned routes are from Cairns, a tourist destination on the east coast of Australia, to Osaka, Fukuoka, Nagoya, Singapore, Taipei and Hong Kong. Early next year it aims to add a second Australian gateway with flights to more points in Asia. This base, possibly at either Melbourne or Sydney, could open in early 2003. Australian aims eventually to operate from every state capital in Australia. It will only fly international routes and will not compete with Qantas on any route.

By taking over or adding overseas leisure routes, the new unit is following a model pioneered by Japan Airlines several years ago when it wet-leased aircraft from a low-cost subsidiary it created for that purpose. Denis Adams, chief executive of Australian Airlines, claims his airline will enjoy a 30% cost advantage over Qantas. The savings come mostly from a single-class operation, which adds 40 seats per jet, and key labour concessions.

The date for Australian's launch has been delayed twice, but Adams is certain it will meet its new 27 October target. Previous delays stemmed from the Qantas board's reluctance to approve the subsidiary without assurances of lower costs. Negotiations continued until unions accepted Australian needs on flexible work rules and rostering. Flight crews will be based in Australia. Some question still remains about what maintenance may be outsourced overseas.

Other negotiations took place with the Queensland state government and Cairns port authority over the size of subsidies and incentives to help launch the new airline, mostly with overseas tourist promotions.

Source: Airline Business