AirAsia chief says Kuala Lumpur best for Qantas hub

SYDNEY: Australian airline Qantas should base its Asian operations in Malaysia rather than Singapore if it is serious about expanding in the region, AirAsia chief Tony Fernandes said Wednesday.

Fernandes, who is in talks with Qantas and Malaysia Airlines on a three-way alliance, told The Australian Financial Review that a Qantas operation based in Kuala Lumpur would be the stronger option.

"Singapore is the better business hub for sure, but the majority of Singapore traffic is transit traffic -- just like Dubai," he said.

"Whether you connect in KL or Singapore, the key is connectivity."

Qantas in August announced plans to establish a joint-venture premium airline in Asia as it repositions itself within the industry's fastest-growing region and seeks to turn around its loss-making international arm.

Talks were reported to be on the backburner given uncertainty over global economic conditions and volatile fuel prices, but Qantas said Monday they were ongoing, with Kuala Lumpur and Singapore the most likely potential bases.

Fernandes, who over the past decade has revived Malaysia-based AirAsia to turn it into Asia's biggest budget carrier, said Qantas would have lower costs if it chose Kuala Lumpur.

"The main thing is cost saving, avoiding wasteful competition," he said.

Qantas chief Alan Joyce wants the Australian carrier to have, within five years, a hub in Asia feeding traffic into Qantas and budget offshoot Jetstar's networks.

"Our aim is to position ourselves within the Southeast Asian marketplace in advance of planned aviation liberalisation," Joyce said Monday.

"This is how we will end the disadvantage of being an end-of-the-line carrier."

Fernandes refused to comment on the status of talks with the Australian flag carrier.

But the former music industry executive who has built AirAsia one of the industry's biggest success stories since acquiring the then-failing company a decade ago, said no full mergers were being considered.

"Mergers are generally driven by a shrinking market, high cost base, or a lack of ideas about how to grow," he told the newspaper.

"In Asia there is less need for that."

But the AirAsia chief said Qantas under previous chief Geoff Dixon had attempted to buy his airline, an offer he refused.

Qantas's plans to establish a premium Asian airline sparked a fierce backlash from unions concerned at the outsourcing of jobs, culminating in the grounding of its entire fleet in October.

The government's industrial relations umpire was forced to step in and, with unions representing pilots, engineers and ground staff unable to resolve their disagreements with the airline, the dispute is now headed to arbitration.

Joyce has assured Australians that the 91-year-old "Flying Kangaroo" will always remain Australian.

Copyright AFP (Agence France-Presse), 2011