I found this article on CNN.com, any questions, comments, ideas?
February 26, 2001
Web posted at: 1:20 PM EST (1820 GMT)
SYDNEY, Australia -- Australia's flagship carrier Qantas Airways, in the midst of a company-wide review to lift sagging profits, said it may start a low-cost airline to service routes it had abandoned.
"We may have to start another airline," chief executive-designate Geoff Dixon told Nine Network's Business Sunday television program.
Last week Qantas suspended flights to Canada and China, and said it planned more suspensions.
The withdrawals were the latest exits from underperforming routes, including Korea, Malaysia, Tahiti and the Japanese cities of Fukuoka, Osaka and Sapporo.
Dixon told Business Sunday that Qantas, with its current cost structure and three classes of service, could not return to suspended markets unless it did so with another type of vehicle.
"That vehicle would be a high-standard airline but at the lower cost base."
He stopped short of saying Qantas planned to set up a no-frills arm and a Qantas spokesman told Reuters on Sunday the company would not elaborate or comment further.
Dixon declined to detail how such a venture would be funded, telling Business Sunday: "We could fund it."
Dixon indicated that the main focus of any new airline would be the Asian region, saying it would service "mainly one-stops out of Australia."
Slumping profits, growing competition
Last week, Qantas posted a 22 percent slump in first-half profit to A$263 million (US$137 million)..
It said it still faced a rise in its full-year fuel bill and saw little to suggest a second-half pick-up.
Qantas also cut 1,470 job cuts, including 220 executive and middle-management positions.
Domestic competition has grown fierce with the entry of two new airlines since June. Sir Richard Branson's no-frills Virgin Blue and its cut-price counterpart Impulse Airlines have smashed the duopoly previously enjoyed by Qantas and Ansett.
Ansett, owned by Air New Zealand, said on Sunday it plans to begin flights to the United States by the end of the year and expand domestic capacity.
Dixon said Qantas was halfway through a six-month review of all parts of its business, with planned changes to go to the board in May.
Within the region, Dixon said Qantas would continue to fly to the Philippines but Indonesia, especially Bali, was in question.
He said the trans-Tasman route to New Zealand was not profitable and was unlikely to become so, but Qantas would keep flying there owing to its importance within the route network.
"It's a very important market. I would love to see it come back into profitability but it is a very, very difficult market," Dixon said of New Zealand.
Copyright 2001 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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