Qantas: Deal with Malaysia Airlines crashes

Qantas Airways Limited (ASX: QAN) announced today that discussions with Malaysia Airlines on a partnership would not continue, due to both parties being unable to reach mutually agreeable commercial terms. The discussions included the establishment of a new premium airline.

Qantas chief executive officer Alan Joyce said Asia remained a priority for Qantas, and that it would continue to explore opportunities in the region, including joint ventures and alliances.  Minimal capital will be allocated to such ventures due to economic uncertainty and Qantas’ focus on disciplined financial management.

International Business not profitable

Qantas’s international business is currently loss making, and last year the company announced a five-year plan to address the challenges facing this business.

“The transformation of Qantas international business remains vital, with plans to return the international business to profitability in the short term on track.  In the medium term, the Qantas flying businesses, both domestic and international combined, will exceed the cost of capital on a sustainable basis,” said Qantas CEO Mr Alan Joyce.

Market Reacts

The market didn’t like the news much, with Qantas’ shares down 2.6% to $1.68 at 1pm, versus the S&P/ASX 200 Index up 0.4%. Qantas’ push into the growth markets of Asia is one of the company’s major strategies, and this announcement is a major blow to its hopes.

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Motley Fool contributor Mike King doesn’t own shares in Qantas. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy.

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