UPDATED: In a turnabout blamed on the shambolic state of the world economy, Qantas has decided to shelve plans to launch a premium carrier in Asia and will instead form an alliance with Malaysia Airlines, the Australian Financial Review has reported.
Qantas executives lost confidence in the capital-intensive venture as the European debt crises worsened and began to spread, the report said, citing company interviews.
Appearing on ABC Radio today, Qantas CEO Alan Joyce downplayed the report, saying the airline remained in talks with parties in Singapore and Malaysia and that no final decision had been made. He refused to be drawn on whether the airline would pursue an alliance with Malaysia Airlines, saying only that Qantas was pursuing a “range of options.”
The plans for the new airline, sometimes dubbed ‘RedQ’, which would have seen Qantas form a joint ventures in Singapore or Kuala Lumpur, had emerged as a key obstacle in fraught contract negotiations between Qantas and labour unions. Citing the plans, unions argued that Qantas intended to outsource much of its workforce to cheaper Asian markets and as a result demanded job security clauses as part of new contracts. Qantas denied plans to send local jobs overseas but said it could never agree to the clauses.
It’s not clear what effect the decision to abandon the new airline will have on the industrial dispute, which is headed for binding arbitration before Fair Work Australia, but setting aside the plan could make it easier for Qantas to argue that the job security measures are unnecessary. The airline told the Financial Review it had no plans to change its stance on the issue.
Qantas and Malaysia Airlines are expected to finalise a letter of intent in the coming weeks for a codesharing alliance that would allow joint pricing, marketing and scheduling to begin in roughly six to nine months, according to the report. The alliance will be similar to the one between Qantas and British Airways, but aimed at the Chinese and Indian markets. The alliance could eventually extend to subsidiary budget carriers AirAsia X and Jetstar.
Joyce and other executives reportedly hope to revive the plans for a new Asian subsidiary once economic conditions improve. But the estimated $400 to $500 million initial investment in what had been codenamed Project Darwin was deemed too big a risk at a time of jittery markets.
