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Qantas, JAL to launch low-cost domestic carrier in Japan

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The Qantas Group and Japan Airlines are believed to be in advanced talks about starting a low-cost domestic carrier in Japan.

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The Qantas Group and Japan Airlines are believed to be in advanced talks about starting a low-cost domestic carrier in Japan.

A decision is expected this year, although both sides say the proposal has yet to be finalised.

JAL says its investigations have been wider than a tie-up with Qantas subsidiary Jetstar.

The talks were put under the spotlight yesterday after the Japanese business paper Nikkei said the venture would be capitalised at between Y=10 billion ($116 million) and Y=20bn and would start next year.

JAL and Jetstar would each hold a 30 per cent stake.

The report said Mitsubishi and Toyota Tsusho had also been invited to invest IN the deal, and cited Tokyo, Osaka and the Nagoya region as likely destinations. Qantas and JAL, caught off guard by the report, both hosed down suggestions a deal had been signed. However, it is understood that elements of the report are correct, including the proposed shareholdings and the invitations to Mitsubishi and Toyota. It is believed nothing has been locked in.

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Qantas said it was looking at a range of opportunities across Asia but that “no agreements have been reached with any parties”.

JAL is taking a cautious approach to a low-cost offshoot because its priority has been to re-establish its financial viability and stability after a financial meltdown in 2009-10. JAL is keenly aware that new airlines are entering the market and that rival All Nippon Airways is launching a budget carrier.

JAL, which has been looking into the possibility of launching of a low-cost carrier, confirmed that Jetstar, as a successful subsidiary of an alliance partner, was one of the models being studied.

“But nothing has been decided,” a spokeswoman said.

Qantas early last year offered to help JAL set up a domestic low-cost carrier based on its Jetstar model. The offer was made as part of a wider rescue package put together by the Oneworld alliance after JAL hit financial strife. Qantas argued at the time that JAL would benefit from emulating its two-brand Qantas-Jetstar strategy and offered to share its expertise.

It is now prepared to become an equity partner in a venture with JAL as part of a wider international strategy under which it is seeking closer ties with other Oneworld partners such as American Airlines and LAN Chile.

Separately, the federal government predicts fares to Indonesia will drop as a result of a new Memorandum of Understanding that almost doubles the possible number of flights between the two countries.

The deal increases the capacity available for weekly services to and from Australia by 86 per cent to 27,500 seats each way, including up to 25,000 seats on direct flights to gateway destinations.

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Editor in chief is Linda Hohnholz.