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Thursday December 31, 2009

AirAsia-Jetstar tie-up is on

PETALING JAYA: The proposed partnership between AirAsia Bhd and Jetstar is nearing fruition after a year of talks and the deal will be announced in the first week of January.

A media conference has been scheduled for Jan 6 in Sydney where both parties and Qantas will announce the details of a strategic agreement and how these parties will work “innovatively together’’ so as to drive greater cost efficiencies across AirAsia and Jetstar.

Datuk Seri Tony Fernandes and Jetstar CEO Bruce Buchanan will present the details on Jan 6.

AirAsia group chief executive officer Datuk Seri Tony Fernandes and Jetstar CEO Bruce Buchanan will be at hand to present the details. Jetstar’s parent, Qantas, will be represented by its CEO Alan Joyce.

AirAsia is Asia’s largest low-cost carrier whose unit cost is the lowest in the world. It flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. Its sister airline is AirAsia X which began flights to Australia in 2007 and has expanded to China, Britain and the Middle East.

The Jetstar group includes wholly-owned Qantas subsidiaries operating from Australia and New Zealand, partner carriers including Jetstar Asia and Valuair in Singapore and Jetstar Pacific in Vietnam. Jetstar Asia/Valuair is 51% owned by Westbrook Investments Pte Ltd and 49% owned by Qantas, which in turn has a 27% stake in Jetstar Pacific in Vietnam. The Jetstar group operates 1,900 weekly flights to 15 countries.

“Cost efficiencies is only one of the many things this new partnership will bring about,’’ said a source.

StarBiz was the first to report on a proposed partnership on Dec 23 last year. Then, both parties including Qantas had started preliminary talks for a proposed merger. The parties had met several times over the year and even conducted some audit work.

How the eventual partnership will pan out is unclear, but given the challenges the aviation industry faces, partnerships and mergers are not new and if parties can pool resources for greater efficienies, it helps airlines in difficult times.

AirAsia boss Fernandes, when contacted yesterday, did not want to shed any light on the partnership. Will this deal involve any codeshare arrangements between the two airlines?

Codeshare is a prominent feature with full service carriers and if low cost carriers can see some benefit from sharing of flights, then they may be setting new grounds.

An analyst, however, has a contrarian view. He said: “It goes against the (low cost) airlines’ rule of keeping it simple in the no-frills business to codeshare but a lot depends on the intention of the airlines.’’

One route that may be shared is the KL-Sydney sector which AirAsia has failed thus far to get rights to ply. Jetstar, even though it has stopped plying the route since September 2008, has the rights. Will that rights be shared by AirAsia?

The Kangaroo route (from any Australian point to KL and on to Europe) is a possible route that these airlines will capitalise on and with the partnership, AirAsia will be able to offer connectivity all over Australia via Jetstar Australia and it can take Jetstar’s passengers to Europe, India and the Middle East where Jetstar is not flying.

 
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