Troubled Australian airline, Qantas International, has confirmed it is to restructure its business, buy new aircraft and launch two new airlines - one budget and one of a premium nature - for the Asian market.

The new budget airline, which is to be a partnership in conjunction with Japan Airlines and Mitsubishi Corp., is called Jetstar Japan, and the carrier is expected to take to the skies in late 2012. The premium airline is yet unnamed, but will not carry Qantas branding. It is likely to be based in Malaysia or Singapore, to capitalise on the growing Asian travel market, in which Qantas' share has dropped to just 14%.

In a statement, Qantas confirmed plans to spend over $2.3 billion on 110 new aircraft for the new airlines by 2021 - the majority of which will be new Airbus A320s. Transformation costs for the whole programme of development are estimated to be in the region of AU$350-$450 million.

Further changes include plans for renovation of several Boeing 747-400s; airport lounge expansion/upgrades in Hong Kong, Los Angeles and Singapore, and expansion of its airline partner network to enable a larger range of destinations and routes. Malaysian Airlines and Chilean operator, Lan, are expected to join British Airways and American Airlines as network partners.

As part of the restructuring effort, four 747-400s will be cut from the Qantas fleet, which will result in around 1,000 job losses from its 35,000 strong workforce. Engineering roles at Qantas' Avalon airport maintenance facility are likely to be most at risk.

Establishing a base in Asia will allow Qantas to benefit from reduced operating costs - which it claims are around 20% higher than many other airlines.

The five year plan was outlined by Qantas CEO, Alan Joyce, who explained: "[Quantas]is suffering big financial losses and a substantial decline in market share. To reverse that decline we need fundamental change. To do nothing, or tinker around the edges, is not an option."

Author: Lee Marriott, Analyst