Australia's Qantas Airways is set to shelve plans for a new premium airline in Asia as global economic turmoil shakes management confidence in the project, the Australian Financial review reported without citing any sources.
The paper said that after spending a year putting together the plans for an up to AUD$500 million investment in the Asian unit, Qantas now favours a code share alliance with Malaysia Airlines.
The Asian carrier plan was aimed at using the region's low cost workforce to turnaround Qantas's loss-making international operations but sparked a union backlash.
Qantas felt the investment in the Asian airline would not sit well with the ratings agencies and its investment grade rating, the paper said. Qantas is the only airline globally with an investment grade rating.
Qantas and Malaysia Airlines are working towards a letter of intent in coming weeks on a code-sharing deal that would allow joint pricing, marketing and scheduling to begin about six to nine months after the agreement, the paper said.
Qantas chief executive Alan Joyce flew to Singapore last week for talks with Tony Fernandes, chief executive of Air Asia, which owns 20 percent of Malaysia Airlines. He then flew to Kuala Lumpur to thrash out the details of the proposed alliance, the paper said citing sources.
The Asian carrier plan was one of the reasons for strikes by parts of the workforce. Strikes led to Qantas grounding its entire fleet last month in a drastic move aimed at ending union action.
That sparked a government intervention and involvement of Australia's industrial umpire, which gave the warring parties 21 days to resolve differences or submit to binding arbitration. The parties have since moved to arbitration.