As expected, Australia's Qantas Group moved to rationalize its various airline brands, with leisure operator Australian Airlines being absorbed into the mainline from July and Jetstar International, the overseas arm of Qantas domestic LCC Jetstar, launching operations in November. CEO Geoff Dixon told media that "Australian Airlines has done an outstanding job over the past few years, but we are determined to take full advantage of Jetstar's success with its highly competitive cost structure and service standards." Australian was launched four years ago, but the twin Bali bombings and 2004 tsunami have taken a toll on passenger numbers. Australian's cost base is 30% below that of Qantas, but Jetstar International's costs will be 45% lower yet, according to analysts.

About 40 Australian cabin crew positions will be lost through the transition to Jetstar. However, the latter's expansion into long-haul international service will result in 550 new jobs. Qantas is determined to build on Jetstar's domestic success but is facing challenges from mainline pilots on its international plans.

Jetstar International will start operations with four A330-200s transferred from Qantas, growing to a fleet of six by mid-2007. Initial destinations are Osaka from Sydney and Brisbane, Ho Chi Minh City and Phuket from Sydney, Bangkok from Melbourne, Bali from three Australian markets and Honolulu from Sydney and Melbourne. Australian Airlines services will cease between Cairns and Sydney, Hong Kong and Gold Coast, while Cairns-Singapore will be operated by Qantas via Darwin.

Dixon said Jetstar International's network "will ultimately provide more services to Asia and the Pacific before expanding with second-stage flying to Europe and other destinations." It will transition to 311-seat 787-8s from August 2008, building to a fleet of 12, which will be used on routes to Europe and other long-haul destinations.

Unlike the budget version of Jetstar in Australia, Jetstar International will interline with selected connecting carriers. Its mainline parent also will codeshare on its flights.