Qantas has suffered a major setback as plans for its premium airline in Kuala Lumpur hit the skids following a breakdown in talks with Malaysian Airlines.
The failure to strike a deal with Malaysian has led some analysts to question whether Qantas will press ahead with wooing a potential partner such as Cathay Pacific, or abandon its plans to establish a high-end carrier in Asia.
The Flying Kangaroo has now missed the chance to stitch up a partnership deal with Singapore Airlines, and now Malaysian Airlines as it tries to turn its fortunes around.
Disappointed shareholders sold Qantas shares on Friday as news emerged that the Malaysian deal was off.
It’s the latest major blow to Qantas after Singapore Airlines established a strategic alliance with Virgin at the end of last year.
Commonwealth Bank Institutional Equities analyst Matt Crowe said the failed Malaysian strategy had set Qantas back.
“They’re saying it doesn’t but I think it has to,” Mr Crowe told AAP.
“If they can’t find an alliance partner then I’m not sure that going into Asia on their own is really feasible.
“It hasn’t come to it yet but I guess the risk is growing that this expansion into Asia doesn’t happen.”
Mr Crowe predicts Qantas, which wants to use minimal capital to lure business passengers to its new carrier, will have to move further afield to win over an Asian partner.
“Singapore Airlines might have been one that they looked at but they’re now aligned with Virgin so perhaps Cathay Pacific out of Hong Kong but none of those airlines tick as many boxes as Malaysian Airlines did.”
He said it would now be hard to find another partner that was as willing and suitable as Malaysian.
Malaysia Airlines reported a fourth consecutive quarterly loss last week as airlines around the world endure uncertain trading conditions.
Qantas last year announced a five-year plan to turn around its faltering international business and last month said it was in discussions with existing and potential partners about setting up a new premium carrier based in Asia.
At the close of trade Qantas shares were 4.5 cents, or 2.6 per cent, lower at $1.68.
Despite the pessimism among investors, Qantas chief executive Alan Joyce said Asia remained a priority for the airline and opportunities in the region would continue to be explored.
“The transformation of Qantas international business remains vital, with plans to return the international business to profitability in the short term on track,” Mr Joyce said in a statement.
“In the medium term, the Qantas flying businesses, both domestic and international combined, will exceed the cost of capital on a sustainable basis.”
Mr Joyce said minimal capital would be allocated to such ventures due to economic uncertainty and the company’s focus on disciplined financial management.
The Australian International Pilots Association said Qantas could view the failed Malaysian plan as an opportunity to repair and rebuild the brand.
“Take this as a lesson, adapt your strategy, recognise the damage that has been caused and start working with your staff to improve things,” the association said in a statement.
Meanwhile, unions and governments around the country recently expressed concern about the airline’s plans to shed 500 jobs amid fears of more to come.