Airlines Deals

QANTAS chief executive Geoff Dixon does not expect high fuel prices to damage the prospects of low-cost carrier Jetstar International when it launches in November.
Mr Dixon said yesterday he did not believe that high fuel costs meant low-cost airlines could not survive, although carriers that were not well run might well hit trouble.

He said Qantas was aware of the risks involved with fuel rises but it had a highly developed risk management system. “Fuel affects all airlines but at the moment with certain difficulties, we’re managing it through,” he said.

“Obviously, there’s a certain amount of hedging, which is not great at the moment, but the surcharges are offsetting a lot of this.

“And it’s interesting, the surcharges are a fare increase but travel is still very, very buoyant in most of the industry.”

Mr Dixon said Qantas was not discussing another fuel surcharge, although it was keeping a close watch on prices.

Jetstar International attracted an avalanche of web hits when launched commercially yesterday with international promotional fares as low as $169 one-way to Bali.

The launch, which was mirrored in Osaka and Bangkok, is part of the group’s strategy of developing two brands.

Qantas will use Jetstar to fly services on leisure routes and keep mainline services on those where there is a leisure and premium market.

It will start service with four two-class A330-200s, adding another two next year before switching to next-generation Boeing 787 Dreamliners.

Mr Dixon told tourism, travel and airline officials at the Sydney launch that Jetstar’s international service would be grown aggressively and that this would focus on developing inbound markets.

“At the end of the day, Jetstar International when it’s fully fledged will be principally an inbound carrier and I believe it will be of tremendous importance to the Australian tourism industry,” he said.

The Qantas boss also hit back at a push by a Queensland airport, tourism and marketing group to put pressure on the federal Government to further open Australian skies.

He said Australia could not have it all ways.

He said reports that Austrian Airlines had decided to abandon its Australian services highlighted problems with the viability of operations by end-point carriers competing against mid-point airlines.

“They insist that Qantas keeps all its jobs in Australia, keeps all its engineering operations in Australia, is virtually not allowed to consolidate like any other business and is also quite hampered in its ability to fly to various places because of bilateral agreements with other countries,” he said.

“But we’re then supposed to exist in this pure competitive world which doesn’t exist anywhere in the airline industry.”

Asked about the delays to the A380, Mr Dixon said the airline was still in talks with manufacturers about aircraft to replace the extra capacity provided by the big jets.

He said Airbus was still saying it would deliver the first Qantas A380 in October and the airline was happy with the way the jet was meeting its specifications in tests.

But there was no move at Qantas to follow the example of Singapore Airlines and order the redesigned A350 as well as 787s.

Figures released yesterday by the International Air Transport Association appeared to back up Mr Dixon’s optimism for Jetstar International. The figures showed international passenger traffic rose 6.7 per cent in the first half of 2006 and freight traffic grew 5.2 per cent.

Passenger load factors were also up compared with last year, rising 1.2 percentage points to 75.1percent.

Asia-Pacific passenger traffic rose 6.2 per cent while freight was up 4.8 per cent.

International Air Transport Association director general Giovanni Bisignani warned that near record oil prices would result in a $US112 billion ($147.4 billion) fuel bill for the global industry this year at an average price of $US66 a barrel. “The good news is that neither the extraordinary price of oil nor the inching-up of interest rates negatively impacted on demand,” he said.