Interpac Business and Migration Solutions Melbourne Australia

(September 14, 2011)

Qantas plans to have five carriers flying into China as it seeks a larger share of the world's fastest-growing aviation market.

Qantas and its budget unit Jetstar already fly into China, while the company's Vietnamese offshoot may join new carriers it is creating in Japan and South-East Asia in servicing the world's most populous nation, chief executive Alan Joyce said yesterday.

Mr Joyce is focusing on new ventures in Asia to help turn around $200 million in annual losses on international services and tap into a region the International Air Transport Association expects will be the world's most profitable this year.

Rising affluence is boosting demand for travel services, with the number of domestic tourists rising 11 per cent to 2.1 billion last year.

"China is already a massive market in getting bigger but nothing happens easily there," said Neil Hansford, chairman of Strategic Aviation Solutions, an Australian consultancy.

"People can have whatever aspirations they want with China but you still have to make it work."

Qantas flies daily from Sydney to Shanghai, with connections to other Chinese cities through an agreement with China Eastern Airlines, the nation's third largest carrier. Jetstar flies to eight Chinese cities from its hub in Singapore.

Chinese services now represent more than 10 per cent of Qantas's international revenue, compared with "low single digits" five years ago, with the new services expected to drive traffic across its network, Mr Joyce said.

"We know the world is going to change dramatically in that direction," he said.

"We are planning growth in Asia and we think with a premium and low-cost brand we can compete there."

Qantas expects its new Asian carrier, which will offer business and economy class travel, to begin operations next year, with a decision on whether to base it in Singapore or Malaysia likely in the next two months.

The company would have a minority stake in the business to make it able to qualify for flying rights from either base.

A Kuala Lumpur base may involve teaming up with Malaysian Airline System, which last month agreed to a share swap with budget airline AirAsia, which is run by Tony Fernandes.

"Singapore has a stronger traffic base, a better yielding and bigger traffic base but a lot depends on the rights we get out of Singapore," Mr Joyce said. While Kuala Lumpur gets less corporate travel, teaming with Malaysian and AirAsia may offer more flying rights and "make it equally as good as Singapore.