Qantas looks at Jetstar going international

NEW YORK - Australian airline Qantas is looking to expand its low-cost domestic carrier Jetstar into international markets.

Qantas and Jetstar are working on a proposal for a two-class international carrier based in Australia, servicing holiday routes where Qantas does not operate.

Jetstar is due to start flying from Christchurch to Sydney, Melbourne, Brisbane and the Gold Coast from December 1.

Qantas' chief executive Geoff Dixon said there were major opportunities to expand the Jetstar brand internationally.

He told investors at the Merrill Lynch Australia investment conference that the carrier would operate on point-to-point markets not served by the full service Qantas product.

"Initial analysis indicates that this airline could deliver significant cost advantages over the core Qantas operation and many of the competitors, and achieve quick profitability," Mr Dixon said.

"This regional strategy is all about growth in predominantly leisure-based markets in which Qantas has withdrawn over the last 10 years following privatisation and our need to get the company on a very sure financial footing."

Jetstar, wholly-owned by Qantas, was launched in Australia in May 2004.

Qantas is also focused on developing the Jetstar brand in Asia. Mr Dixon said the recent merger of Jetstar Asia and Singapore budget carrier Valuair had provided the combined group with significantly increased scale to pursue expansion opportunities in the region.

"We see significant potential to develop the Jetstar brand in Asia through Jetstar Asia," he said.

"...We're also evaluating a number of options to create a pan-Asian system of value-based airlines which would be able to take advantage of traffic rights available in different ports and provide greater connectivity for customers."

Qantas has a 49 per cent stake in Jetstar Asia, with the remainder held by Singaporean investors.

Qantas itself is expanding presence in growing point-to-point markets, commencing services to Shanghai and Mumbai and announcing new services to Beijing and San Francisco.

Closer to home, Mr Dixon said Qantas had not seen any decrease in demand following the latest increase in the fuel surcharge on ticket prices.

In August, Qantas lifted its fuel surcharge for the fifth time since May last year amid record high oil prices.

"We haven't seen any dampening of demand from either the surcharges we put on internationally or we put on domestically," Mr Dixon said.

The latest surcharge increase did not apply to Jetstar airfares, although its fares have still risen slightly.

"They have put up a small price increase and that still hasn't dampened it," Mr Dixon said.

Australia's largest airline has warned that record high fuel prices will impact its profits this financial year, saying it does not expect to achieve the same levels of profitability this financial year as in 2004/05, when it posted a record A$763.6 ($849.67) million net profit.

- AAP