QANTAS'S chief executive, Alan Joyce, insists he will accelerate strategic plans to forge closer alliances with other airlines and set up an ultra-premium carrier in south-east Asia as higher jet fuel prices and the fallout from industrial action severely dents profitability in the first half.
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The airline has warned its underlying profits will fall by as much as 66 per cent to $140 million in the first half due to high fuel prices and $194 million in costs arising from industrial action and the grounding of its fleet late last month.
The cost of the grounding included a $70 million hit from lost revenues, refunds and accommodation for stranded passengers over three days. Despite the precarious state of the global economy, Mr Joyce said Qantas still planned to establish a premium airline in the Malaysian capital, Kuala Lumpur, or Singapore next year. However, he conceded the airline maintained flexibility in its planning in the event global markets deteriorated significantly.
Qantas has indicated alliances with carriers such as Malaysia Airlines will be given top priority as part of its efforts to tap a burgeoning travel market in Asia and turn around its international operations. It remains in negotiations with Malaysia Airlines about forging a ''deeper alliance''.
''Nothing has changed about our preparedness to turn around our international business,'' Mr Joyce said. ''If anything, it means we have to accelerate and keep on going with
our plans to turn it around because the high fuel prices and the economic conditions mean that the turnaround plan is critical.''
Mr Joyce was responding to speculation that Qantas was about to walk away from plans to set up a premium airline - most likely to be called RedQ or OneAsia - in south-east Asia.
Kuala Lumpur has become a more attractive alternative for Qantas than Singapore since Malaysia Airlines embraced Oneworld, the same airline grouping the Australian airline belongs to, and Tony Fernandes, the founder of low-cost carrier AirAsia, took a 20 per cent stake in Malaysia's national flag carrier. However, a final decision from Qantas on plans for an ultra-premium carrier is still weeks away.
Macquarie Equities analysts said they believed management was ''leaning towards a less capital intensive, deeper codeshare arrangement with Malaysia Airlines to begin with rather than starting up its own Singapore-based premium carrier''.
Shares in Qantas ended a seven-day losing streak, closing up 5¢ at $1.505, despite the large financial hit from the industrial dispute.
Analysts said investors were banking on a return to more normalised earnings in the second half, following resolution of the industrial dispute. Qantas said the first-half performance reflected uncertainty in global economic conditions, higher fuel prices and volatile foreign-exchange rates. It has estimated that its fuel bill for the first half will increase by about $450 million to $2.2 billion.
