The mile

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The          mile
            high club                                           by Ben Sandilands

When the Qantas board endorsed the Jetstar
International venture last December it set in
motion a profound change in the relationship
between airlines and tourism.

What have traditionally been short-term or        The Dreamliners kick in from late 2008
intermittent joint marketing exercises are        midway through an initial $10 billion capital
about to be overtaken by the need to use          expenditure program that began earlier in the
personal discretionary travel as the principal    decade, lead by orders for the Airbus A380.
source of the growth that is essential for
feeding unprecedented investments in new          Further tranches of orders, worth up to
fleets.                                           another $10 billion have been foreshadowed,
                                                  bringing the commitments to the aggressive
The industry relationship with Qantas, and        reconstruction of the Qantas fleet to an
Singapore Airlines as the next largest historic   overall $27-30 billion, all entered into over a
supporter of the state and more recently          five year period.
national tourism authorities, has always been
valuable but sporadic.                            Nor is this just a Qantas phenomenon.

It consisted of predominantly short-term          Comparable re-equipment and expansion
cooperative promotions measured in single         programs are underway at Emirates and
millions, inbound and outbound, and often         Singapore Airlines---the two most dynamic
coinciding with actual or forecast softness in    competitors directly faced by Qantas on its
the overall demand for air travel.                international routes.

But the placing of a $9.7 billion commitment      China-based carriers, hungry for what is
for up to 115 Boeing 787 Dreamliners for          forecast to be a major source of future
both Jetstar International and Qantas signals     large scale visitations to Australia, are being
change, as does the overseas ambitions of         courted by Airbus and Boeing for significant
Virgin Blue.                                      longer range fleet purchases, now that the
                                                  excitement of their collectively buying 300
Now that Australian Airlines is to be absorbed    more single aisle jets for their domestic
by Qantas, the 300 seat class jets will lead      expansion has passed.
the dual brand push of Qantas and Jetstar
International on new and secondary routes         If or when Qantas faces a trans Pacific entry
while the giant A380s that start flying next      by a Virgin Blue division it may have different
year to Los Angeles and London will address       investors to those that now own its domestic
trunk route capacity limitations.                 and Pacific Blue operations.

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