Embattled Australian flag carrier, Qantas, is back to square one after it stopped talks with Malaysia Airlines for a premium carrier in Kuala Lumpur. Qantas Chief Executive Alan Joyce explained the bog down of talks to failure of both airlines "to reach mutually agreeable commercial terms."

The planned premium carrier, to be based in Asia, is the main reason behind the disruptive strikes made by pilots, ground crew and aircraft engineers that hit Qantas in mid-2011. Mr Joyce eventually grounded the Qantas fleet for two days which led to Fair Work Australia taking over the labour row.

However, Mr Joyce insisted that Qantas plans to push through with the premium carrier and will continue to find opportunities such as joint ventures and alliance in the region. He said the company would allocate only minimal capital for these types of ventures due to the economic uncertainty and Qantas' focus on disciplined financial management.

Mr Joyce declined to provide more details behind the failure of negotiation with Malaysia Airlines which last week reported a fourth consecutive quarterly loss. For 2011, Malaysia Airlines registered a $780-million due to rising aviation fuel cost. Industry observers believe the discontinued talk with Qantas is over Malaysia Airline's weak financial situation.

Qantas insisted on going ahead with the premium carrier to stem losses on its international operations. In 2011, the company lost more than $200 million in its international business because of soaring jet fuel costs and tougher competition from other air carriers, mainly Middle Eastern carriers subsidised by their governments.

By opening a hub in Asia, despite the opposition by Qantas unions which fear loss of jobs in Australia, the air carrier targets to cut costs and be in a better position to tap rising demand in the Asia-Pacific region.

"Last year, Qantas announced a five-year plan to address the challenge facing the international business. The transformation of Qantas's international business remains vital, with plans to return the (sector) to profitability in the short term on track," The Australian quoted Mr Joyce.

He added that Qantas's businesses, both domestic and international, will exceed the cost of capital on a sustainable basis in the medium term.

Following the failure of talks with Malaysia Airlines, Qantas pilots suggested that Mr Joyce should focus on improving the air carrier's international operations.

"Alan should realise that the grand expansion plan in Asia has fallen on fallow ground and we hope he now concentrates on the airline itself, to resurrect its fortunes rather than cede all the ground to his competitors," Australian and International Pilots Association Vice President Richard Woodward said.

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