Qantas to launch new domestic low cost carrier in May

Qantas will launch the yet-to-be-named carrier in May, just 19 months after its low cost international carrier Australian Airlines took to the skies.

Chief executive Geoff Dixon was reluctant on Thursday to reveal how low the new carrier's fares would be but said they would be "considerably cheaper than what's available across the board now"

He also rejected suggestions that the decision to launch a new low cost carrier in Australia was designed to spark a price war with Virgin or dent its rival's plan to float on the Australian stock market.

"This isn't aimed at Virgin, it's aimed at growth, the leisure market in particular," he told reporters after addressing shareholders at Qantas' annual general meeting.

"We believe the domestic industry in Australia has the potential to grow.

"I don't see why Qantas as a very, very old and efficient airline isn't allowed...to take part in what is the biggest or largest growing segment in the industry."

Dixon added that he believed the new airline would help the Australian domestic travel market grow by close to 20 per cent.

Qantas has yet to decide on where the new airline will be headquartered but has already ruled out Sydney.

Its Australian Airlines carrier, which began flights last October, has its headquarters in Cairns, north Queensland, while Virgin Blue is based in Brisbane.

Dixon said the new carrier was expected to reach profitability "reasonably quickly" and have a cost base comparable to other discount carriers.

He said the new airline would be looking to hire staff and did not expect any trouble from unions when it came to negotiating their pay packages.

Dixon also revealed on Thursday that Australian Airlines was now trading profitably, after Qantas reported in August that the carrier had lost about $15 million since March this year and was expected to be profitable by last month.

Six names have been suggested for Qantas to consider attaching to its new carrier.

Qantas plans to run the new carrier as a separate business and base its operations on either the former Impulse airline it bought in 2001 or use a new "greenfields" company.

Qantas has begun talks with Boeing, Airbus and aircraft lessors so that the new carrier can have a minimum of 23 737-800 or A320 aircraft by mid 2005.

Alan Joyce has been appointed as executive general manager of the new airline.

Joyce, aged 37, joined Qantas in 2001 and has worked previously for Irish carrier AerLingus and Ansett.

Qantas has also hired several former senior executives from the successful low cost Ireland-based airline Ryanair to help Joyce set up the new carrier.

Earlier, during Qantas' annual meeting, Dixon reiterated to shareholders that Qantas expected to improve on its performance in 2003/04 despite challenging conditions in the aviation industry.

As previously reported, Qantas booked a net profit of $343.5 million for 2002/03.

Chairman Margaret Jackson also told shareholders that a decision by the New Zealand Commerce Commission on Qantas' proposed tie-up with Air New Zealand was expected next week.

The proposal has already been rejected by the Australian Competition and Consumer Commission and an appeal has been lodged with the Australian Competition Tribunal.

Jackson also told reporters that Qantas was now "pretty much back" to where it was before the outbreak of SARs and the Iraq war earlier this year.

"Indeed some of the (international) routes have larger capacity than they had before all the hostilities in Iraq and SARs," she said.