AirAsia-Jetstar merger brewing

Airlines’ bosses mulling over idea

PETALING JAYA: Something may be in the air between Qantas Airways Ltd and AirAsia Bhd. If things work out, a merger between AirAsia and the Australian carrier’s units Jetstar and JetstarAsia may be in the offing.

The talks are still in preliminary stages and it is learnt that AirAsia’s boss Datuk Seri Tony Fernandes and Qantas new chief executive officer Alan Joyce have been mulling over it. They last talked on the issue last week, a source said.

This comes at a time when Malaysia Airlines (MAS) is also in talks with Qantas for a possible alliance, but any alliance between Qantas and MAS will be between the network airlines.

Last week Qantas and British Airways announced the calling off of plans to merge into a mega carrier after failing to agree on key terms. The merger could have created an A$8bil plus carrier by market value with a fleet of about 500 planes.

The end of talks with BA opens new doors for other players such as MAS and AirAsia to search for synergies with Qantas. Now the brewing merger involves the low-cost carriers – AirAsia, Melbourne-based Jetstar and Singapore-based JetstarAsia.

Fernandes, when contacted yesterday, told StarBiz that “we are always talking and looking at ways to strengthen AirAsia into a global brand. If there are opportunities of equals which will enhance the brand, then it is something worth considering.’’ He declined to comment further.

Qantas’ Joyce was not immediately available for comment.

Datuk Seri Tony Fernandes

But a Qantas spokesman, in an e-mail response to a query from StarBiz, said: “We talk to airlines all the time about possible partnerships, relationships and cooperative agreements.’’

Jetstar’s Australian operation is wholly owned by Qantas but is managed separately and operates independently. Jetstar’s intra-Asian operation – JetstarAsia – is a Singapore-based partnership between Qantas (49%), local businessmen Tony Chew (22%) and FF Wong (10%), and Temasek Holdings (19%). JetstarAsia officials declined to comment when contacted yesterday.

In an economic downturn when passenger traffic is on a decline, airlines look to cooperate by forming code shares, alliances, strategic partnerships and even mergers to sustain operations. If a merger shapes up, it could possibly involve a share swap, a source said.

“A possible merger of Jetstar, JetstarAsia and AirAsia would mean that the operations of the airlines will be merged to create a stronger airline which could potentially be known as AirAsia/Jetstar with a larger network, a bigger aircraft fleet and wider access to many more markets.

“There are synergies by combining AirAsia and Jetstar. With a merger, passengers from Asia will have wider choices to fly to Asia, Australia, New Zealand, India, China and even Honolulu (via Jetstar),’’ he said.

The Kangaroo route (from any Australian point to KL and on to Europe) is a possible route that these airlines will capitalise on. Jetstar stopped flying the Sydney-KL route in September due to the economic slowdown.

Qantas and MAS talks were still progressing, another source added. He said the alliance would be modelled alongside the KLM/Air France structure. That model allows MAS to retain its identity.

MAS first began talking to Qantas a year ago.

Yesterday Qantas also announced that it has reduced its international and domestic fuel surcharges for the third time in recent months because of falling oil prices.

The new surcharges apply to tickets bought on, or after, Dec 23. Qantas executive general manager John Borghetti said the group’s fuel bill this financial year would still be A$400 million higher than in 2007/08. The surcharge has been cut by A$20 to A$35 for shorter-haul Asian destinations such as Bali.

The fuel surcharge for a one-way ticket from Australia to the United Kingdom and Europe has been cut by A$30 to A$160.

Qantas joins the league of airlines that are reducing fuel surcharges since crude oil prices have fallen over 70% from its July height of US$147 a barrel.