Qantas is under pressure to offer more clarity about its expansion in Asia as it faces the double-whammy of high fuel prices and economic upheaval in Europe weakening demand for travel in other markets.

The national carrier has been leaning towards Malaysia as a base for a premium airline joint venture with Malaysia Airlines, but will not offer investors details about its plans for at least a month.

Macquarie Equities said uncertainties over Qantas' plans to set up a hub for a new premium carrier in south-east Asia 'only serve to complicate the investment thesis'.

The broker's preference for investing in airline stocks has reverted to Virgin Australia because it had a 'better articulated strategy than Qantas' and was likely to benefit from a restructure aimed at snaring a bigger slice of the corporate travel market.

The uncertainty has led Macquarie Equities to downgrade Qantas from 'outperform' to 'neutral', and lower its share price target from AU$1.96 to AU$1.57. Goldman Sachs lowered Qantas from 'buy' to 'hold' on Friday.

Shares in Qantas have been trading in a narrow band between an all-time low of AU$1.375 -- struck in October at the height of a damaging industrial dispute -- and AU$1.705 for the past five months. The stock closed down 1.5¢ at AU$1.49 on Friday, while Virgin Australia rose 0.5¢ to 31.5¢.

Last month, the International Air Transport Association warned that weakness in air freight markets was being replicated inAU passenger traffic. The association reduced its forecasts for combined airline profits this year from US$4.9 billion (AU$4.75 billion) to US$3.5 billion.

In a worst-case scenario in which Europe enters a full-blown banking and economic crisis, IATA has said airlines could sustain a combined loss of more than US$8 billion.

Last week, AirAsia X, an offshoot of the region's largest budget airline, AirAsia, blamed high jet fuel prices and weakening demand for air travel for its decision to abandon flights to Europe and India.

Macquarie Equities analysts said Australian airlines were 'somewhat protected' from a fall in demand for premium traffic worldwide due to the strength of the resources and oil and gas industries. The domestic corporate travel market had been 'holding up well', they said.