Qantas: still the spirit of Australia?

Reducing Qantas's cost-base is central to the strategy. The latest job cuts are estimated to lop $118 million a year in costs from Qantas's international operations.

"I think any attempt to recreate the Qantas brand and intercontinental network from an … offshore base is doomed to failure, as the inevitable damage to the brand and operational synergies would greatly outweigh any labour savings," says Hubert Horan, a US aviation consultant who worked on the original merger proposal between Qantas and Air New Zealand in the 1980s. "Even if there were net cost savings, Brave New Qantas would still not close the … competitive gap [within Asia and on the kangaroo route] against Singapore Airlines, Emirates and others."

But Joyce, the founding CEO of Jetstar, insists Qantas has no choice.

His mantra has been that Qantas will go the way of Ansett, TWA and Pan Am if it does not shake up its premium international operations. "We could kick the can down the street. [But] eventually this great brand will disappear if we keep on kicking the can down the street. We need to fix it now," he said this week.

Many others see the logic of Joyce's desire to tap the world's fastest-growing aviation market in what has been labelled the Asian century. So far, the big end of town has publicly endorsed the move.

Andrew Sisson, the fund manager who famously stared down an $11 billion private-equity takeover bid for Qantas four years ago, believes the strategy is a step in the right direction.

"It seems to us to make sense," says Sisson, the founder of Qantas's second-largest shareholder, Balanced Equity. "They have got a great domestic business; they have got a great low-cost airline in Jetstar; they have got a great Frequent Flyer business; but they have an international business losing them money."

The big question, however, is whether Qantas can pull its ambitious strategy off in Asia.

Many Australian companies have thrown themselves into Asia only to return home red-faced. Telstra's tie-up with Richard Li's PCCW in Hong Kong became a disastrous foray.

Jetstar has struggled in Asia, too. Jetstar Asia finally posted a full-year profit in 2010, six years after it was set up in Singapore.

In Vietnam, where Qantas has a cornerstone stake in Jetstar Pacific, the challenges have been greater. Two Australian executives were barred from leaving Vietnam for six months last year after the airline suffered losses on a fuel-hedging contract.

So Joyce's strategy might be bold but it is inherently risky. History indicates Jetstar will continue to grow - and to some extent at the expense of its parent.

Two years after it was launched in 2003, Jetstar had just a few international flights. Today, the no-frills offshoot has an 8 per cent share of the passenger market into and out of Australia. In contrast, Qantas's market share has fallen from just over 30 per cent to about 18 per cent over the same period.

Virgin Australia, meanwhile, is going in the opposite direction, remaking itself as an upmarket competitor - albeit with a lower cost base - to Qantas. Under John Borghetti's leadership, the airline born as a no-frills upstart 11 years ago is now wanting to snare Qantas's lucrative corporate customers.

For Qantas, the launch of a premium airline in Asia is sure to be met with a strong response from rivals such as Singapore Airlines and Cathay Pacific. They will do their utmost to keep their grips on Asia's premium travel market which runs in a diamond shape from Tokyo and Hong Kong to Taipei and Singapore. "It's tough up there - you have all these new players coming into the market," a former airline executive says. "Even back in the '90s Asia was the growth market. You cannot go from the age of the abacus to the laptop computer overnight. Asia takes time, effort, skills, resources and lots of money."

Azran Osman-Rani, head of the long-haul Malaysian airline AirAsia X, says the rationale for Qantas's expansion is clear because of the huge growth prospects in Asia compared with Australia. But he warns the biggest challenge will be building a brand from scratch in a region with different languages, cultures and politics. "You can do it, but it is not going to be an overnight thing. It depends on how much effort you put into it."

When AirAsia X launched flights to Australia, the airline used locals to run the operations here.

"If you put a bunch of Australians in here in south-east Asia to try to run [Qantas's premium offshoot] you will find it is not easy because the market context is very different," Osman-Rani says.

"It certainly is not going to be a walk in the park. It is very competitive here, especially in south-east Asia."

Parts of the world's aviation industry - namely Europe and North America - have been swept up in cross-border mergers and acquisitions of airlines. British Airways merged with Spain's Iberia, Air France with KLM and Lufthansa has under its wings airlines such as Swissair and Austrian Airlines. In the US, United merged with Continental last year, not long after Delta Air Lines ate Northwest.

Qantas now argues it wants a seat at the table in Asia to prepare for when the market is opened up.

Terence Fan, an assistant professor at Singapore Management University, endorses the Qantas push into the region but says a freeing up of Asia's heavily regulated aviation market is still some time away. "It is a baby step," he says of looming liberalisation in south-east Asia. "People here are much more cautious."

To allow the industry consolidation seen in Europe, some Asian nations will have to permit what for many is unpalatable - their national flag carriers falling into the hands of others. "Unless countries are willing to do that, we will only march down the path of liberalisation at a cautious pace," Fan says.

Qantas's realignment of its centre of gravity is bold, but it is high risk. As AirAsia X's Osman-Rani puts it: "What we have learnt is that ideas are worth nothing - it is how you execute them."