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Qantas low-cost carrier takes off

Qantas CEO Geoff Dixon at the Jetstar launch earlier this year.
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SYDNEY, Australia -- Australia's biggest airline Qantas has launched its own discount airline in a bid to win back market share from competitor Virgin Blue.

The airline, called Jetstar, will concentrate on offering no-frills cut-price fares on Australia's heavily trafficked eastern seaboard.

The first flight took off Tuesday, travelling from the regional port city of Newcastle to the southern capital of Melbourne.

The airline offered early fares as low as A$29 ($20) for a one-way trip.

Another 86 flights leaving from 13 destinations were scheduled for the rest of the day.

Qantas has seen its dominant domestic position eroded following the launch by British entrepreneur Richard Branson of Virgin Blue in 2000 and Jetstar's mission is to redress that.

Virgin Blue has grabbed more than 30 percent of the domestic market since its launch four years ago, partly boosted by the collapse of Qantas' biggest rival Ansett in 2001.

But analysts warn the new airline must be careful not to cannibalize the main market of parent company Qantas.

Qantas chief executive officer Geoff Dixon however played down the suggestion the airline was a risky venture.

"I think our track record is that we know how to do these things," he told the Australian Broadcasting Corporation.

"There's risk in everything you do in business and aviation is obviously a volatile industry. But we're very confident this will work," he said.

The launch has already had a negative effect on Virgin Blue's share price, which slumped to as low as A$1.87on Tuesday -- a serious discount from the December 2003 peak of A$2.25 hit shortly after the airline went public.

Qantas shares are trading down 1.76 percent at A$3.35 Tuesday.

Initially Jetstar is flying from Melbourne, Sydney and Brisbane to eastern Australia destinations, including leisure gateways such as the Gold and Sunshine Coasts, Cairns, the Barrier Reef in Queensland state and the island state of Tasmania.

In January, Qantas announced first-half net profit for 2003-04 of A$357.8 million ($283 million) on the back of cost savings, strong domestic demand and a recovery in international travel.

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