Qantas, AirAsia in talks on cost-saving JV

Qantas, AirAsia in talks on cost-saving JV

Sydney: Two of Asia’s major low-cost airlines, Malaysia’s AirAsia and Qantas Airways-owned Jetstar, are in talks to form a joint venture, in a sign budget carriers are under pressure to drive costs even lower.

AirAsia, the region’s biggest low-cost carrier, and Jetstar have grown rapidly and now fly routes across Southeast Asia and Australia, serving some of the same destinations such as Cambodia’s Siem Reap and Australia’s Gold Coast.

Qantas, seeking regional alliances to exploit Australia’s growing ties with Asia, said a joint venture would look to cut costs. Airlines worldwide have been grappling with falling demand, higher funding costs and volatile fuel prices.

“Qantas confirms that its wholly-owned subsidiary, Jetstar, and AirAsia have entered discussions regarding a potential cost-saving joint venture," Qantas said in a brief statement, adding that discussions were at a preliminary stage and nothing had yet been agreed.

Earlier this week, Australia unveiled plans to scrap some foreign-ownership rules for Qantas in a move aimed at helping it play a bigger role in global airline consolidation.

For several years a takeover target, Qantas has emerged from global recession in relatively strong shape and is now seen as more of a predator than prey - with a keen interest in Asia.

Despite the government’s move to relax some ownership restrictions on Qantas, and allow foreign airlines to take major minority stakes, the national carrier remains subject to an overall cap of 49 percent on total offshore ownership.

Shaw Stockbroking senior dealer Jamie Spiteri said an AirAsia deal might only be the beginning for Qantas’s ambitions in Asia. “There’s a number of different potential partnerships, but there will be delicacy over those negotiations because Qantas themselves hold dominance over some quite profitable routes within Australia and to London and west coast USA," he said.

“Some potential alliance partners would like to get involved in those profitable routes as well."

AirAsia, headed by CEO Tony Fernandes, has said it plans to list in both Thailand and Indonesia in a bid to tap into other liquid Asian stock markets. In September, the carrier raised $144 million in a new share placement as it sought to reduce debt.

AirAsia and Jetstar compete regionally with Tiger Airways, which is 49 percent-owned by Singapore Airlines and this week halved the size of a planned initial public offering due to a lukewarm response from potential investors, sources told Reuters.