Jetstar, AirAsia firm low-cost alliance

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In a world first for low-cost airlines, Jetstar and AirAsia announced Wednesday they would form a new alliance that would reduce costs and pool expertise, ultimately resulting in cheaper fares for both.

The carriers said in a statement they would focus on cost reduction and potential savings.

The statement said the key to the agreement was a proposed joint specification for the next generation of narrow-bodied aircraft that would best meet the needs of the low fare customer of the future.

Both airline groups will also investigate opportunities for the joint procurement of aircraft.

Alan Joyce, chief executive officer of Australia’s Qantas Airways, Jetstar’s parent, said the historic non-equity alliance would give the two airlines a natural advantage in one of the world’s most competitive aviation markets.

“Jetstar and AirAsia offer unmatched reach in the Asia Pacific region… and this new alliance will enable them to maximize that scale,” he said.

The Asian aviation market is a growth market which has proven resilient over the past 12 months despite the tough operating environment, with significant growth in passenger numbers forecast in the region, the statement said.

“Year on year, Jetstar is reducing its controllable costs by up to 5 per cent annually. This agreement will enable a further change in our cost position and ensure sustainable low fares,” Jetstar CEO Bruce Buchanan said.

He said both carriers want to work with manufacturers on the next generation aircraft to ensure it best meets their business requirements.

AirAsia Group CEO Datuk Seri Tony Fernandes said the carrier strongly believed the strategic tie-up would help it maintain its position as the lowest-cost airline in the world despite rising costs associated with the fledgling global economic recovery.

These arrangements are, where required, subject to regulatory approval.

The two largest airlines in the Asia Pacific in revenue terms jointly earned revenues of nearly AUD$3 billion (US2.74 billion) in 2009 financial year, according to the statement.

Jetstar holds a 27 percent stake in Jetstar Pacific while the sovereign fund State Capital Investment Corporation owns 69.93 percent.

Reported by Minh Quang

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