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Feb 20, 2012

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Air Canada is continuing its infatuation with the Jetstar model according to a report today, so much so that it is surprising Qantas isn’t talking up a Jetstar Canada franchise instead of what is looking like Dead Q in Asia.

The Canadian report also quotes advice from the the Australian and International Pilots Association to Air Canada pilots to get a ‘seat at the table’ at this stage, rather than be left out in the cold as happened in Australia.

Captain Brad Hodson, vice-president of the Australian and International Pilots Association (AIPA), is warning his Canadian counterparts not to let Air Canada push ahead with its LCC plans without having some say in how it is shaped.

“You might not be able to stop the LCC, and I’m not saying you should stop it, because there might be a market for it. But you need to get those jobs for your members, and work with the company,” he said in an interview Friday. “You need to have a seat at the table.”

Capt. Hodson said the AIPA, which represents 2,500 pilots at the Qantas Group, including some of the Jetstar pilots, wasn’t given an option when Qantas launched Jetstar. The subsidiary was launched without consultation with the AIPA, and using pilots outside of the union at lower wages, he said.

The brand has since morphed into an international operation through Qantas establishing a series of offshore joint ventures for Jetstar in Vietnam, Singapore and Japan that employ cheaper local labour than is used in the domestic Jetstar service.

“What we are really seeing now is a franchising of that brand that amounts to essentially offshoring the airline to cheaper cost bases,” Capt. Hodson said. “You lose control of your regulation, your standards and all of those things because they’re not based in your country.”

In Australia, offshoring of the Jetstar brand has led to the loss of lucrative overseas flying for Qantas pilots, including numerous routes to Japan and New Zealand, he said.

“At the start, they didn’t want us because they wanted a whole fresh, clean start,” he said. “I would suggest to Air Canada and its pilots to work together if that is what’s going to happen. I’m not sure whether or not Air Canada wants to do that. The low cost model is probably not to do that.”

In an earlier report this month, Air Canada sources said it was considering setting up a low cost carrier based outside of Canada for the purpose of flying Canadian domestic routes, similar in principle to the basing by Qantas of Jetstar A330s in Singapore to fly to and from Australia under Singaporean labor laws, and the use or abuse of tag flights to rotate Asia based cabin attendants through several entirely domestic Australian Jetstar sectors on duty tours starting and finishing in Singapore,  which as a tactic appears to be coming unstuck.

The logical place for Air Canada to attack its more costly obligations under Canadian industrial law with a similar arrangement would be the US.

Qantas might be tempted by the thought of a Jetstar Canada deal, but Air Canada is looking for a rapid buildup of a large new low cost operation, something that would not be ‘capital light’ as Qantas CEO Alan Joyce most recently said was a preferred course for an Asian based venture.

His comments to this effect last week have caused some analysts to argue that the Qantas plans for a premium single aisle Asia based carrier in a venture that would include Air Asia, the major Malaysian rival to its Jetstar franchise, is in fact dead.

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