Qantas Airways is scrapping its Australian Airlines brand in favour of low cost domestic carrier Jetstar, which is gearing up to fly international routes later this year.

The national airline is proposing to close down the Cairns-based Australian Airlines in July ahead of Jetstar's expansion in November, subject to regulatory approval, with the initial loss of 40 cabin crew jobs.

But going forward, remaining Australian Airlines staff would operate under the Qantas brand and Jetstar would add more staff as it widens operations.

"A further 550 new positions will be created by mid-2007 for its international operations," Qantas chief executive Geoff Dixon said.

"We are creating two distinct and viable flying businesses in what remains a very difficult operating environment of continuing record high fuel prices.

"Jetstar will be grown aggressively over the next three years while we continue to expand Qantas international operations."

This would result in two separate, competitive brands, with Qantas targeting premium business and leisure passengers and Jetstar concentrating primarily on leisure markets.

Jetstar plans to commence flights to six international destinations in Asia and the Pacific covering nine routes flying from Sydney, Melbourne and Brisbane.

The carrier, which was set up to compete with budget airline Virgin Blue in May 2004, will offer two classes of services with flights to Thailand, Japan, Honolulu, Vietnam and Indonesia proposed.

"The network will ultimately provide more services to Asia and the Pacific before expanding with second stage flying to Europe and other destinations," Mr Dixon said.

The airline will initially use six Airbus A330-200 aircraft before upgrading to 12 Boeing 787 aircraft.

"The Jetstar fleet will transition to the 311-seat Boeing 787 Dreamliner aircraft-part of Qantas $20 billion fleet reinvestment program-from August 2008," Mr Dixon said.

Jetstar, which will launch its inaugural international service from Melbourne International Airport, will unveil fares and schedules for its international flights in June.