Jetstar teams up with AirAsia, Services sector still struggling: Economy Roundup

Jetstar has formed an alliance with budget carrier AirAsia in order to cut costs, which will see the two companies produce a joint specification list for a new generation of aircraft.

Additionally, the two companies will also develop arrangements for passenger and ground handling, and will combine inventories for aircraft components and spare parts.

“Jetstar and AirAsia offer unmatched reach in the Asia Pacific region, with more routes and lower fares than their main competitors, and this new alliance will enable them to maximise that scale,” Qantas chief executive Alan Joyce said in a statement to the ASX.

“Just as both carriers have pioneered the development of the low cost, long haul airline model, today’s announcement breaks the mould of traditional airline alliances and establishes a new model for achieving reduced costs and increased efficiency.”

Joyce also said after a press announcement the alliance would remain non-equity, but there could be arrangements made to look at co-share deals.

Also in the travel industry, Webjet shares have risen following an announcement from the company detailing a lift in the value of ticket sales for the first half of the financial year.

The company’s performance has also prompted investors to expect similar results from Flight Centre and Wotif, both of which could amend their guidance statements.

Webjet announced a 37% rise in the value of ticket sales to $248 million, with managing director David Clarke saying the figures “totally defied” the downturn.

”We are seeing a massive increase in shopping activity, which would suggest pent-up demand, but we are not necessarily seeing that same growth in bookings yet,” he told The Age. ”Consumers are still hoping that fares will go back to July levels [when they reached decade lows].”

Services index flat in December

Meanwhile, the Australian Industry Group-Commonwealth Bank performance of services index has risen 2.5 points to 50, exactly at the level separating growth from contraction.

The survey of 200 firms found interest rates were noted as the main reason for the slowdown. AIG chief executive Hither Ridout said the result could be a forewarning of activity in the next few months, as interest rates are expected to rise.

“Softer demand for services in December reflects remaining uncertainties about the durability of the economic recovery and the impact of rising interest rates in the quarter,” she said, adding this could warrant a pause in interest rate rises.

The Australian sharemarket has opened flat today, following similar leads from Wall Street where disappointing home sales data brought stocks down.

The benchmark S&P/ASX200 index was up 1.2 points or 0.03% to 4925.5 at 12.00 AEST, while the Australian dollar fell slightly to US91c.

ANZ shares lost 0.7% to $22.84, while Commonwealth Bank shares gained 0.4% to $55.95. Westpac lost 0.4% to $25.40, as NAB also fell 0.8% to $27.54.

Antamina approves copper-zinc project with BHP

In the mining sector, Antamina has now approved its $US1.288 billion expansion after shareholders in the Pervuain copper-zinc mine, a joint venture with BHP Billiton, agreed to the scheme.

BHP holds about 33.27% of the project, and said the expansion would see its ore volumes lift by 38% to 130,000 tonnes a day. Construction is expected to begin in the first half of this year.

Bankers have said mergers and acquisition activity is likely to increase during 2010 due to activity in financial, resources and consumer-driven sectors.

“Last year was all about equity and recapitalising balance sheets. This year will be much more balanced in terms of the mix of transactions you’ll see,” Rob Stewart, co-head of investment banking at Credit Suisse, told Reuters.

“The most buoyant of the investment banking markets right now has to be our time zone, the Asia-Pacific time zone. Certainly for our business that has been the busiest time zone,” Michael Carapiet said, head of Macquarie Capital.

Meanwhile, building approvals have gained 5.9% to 13,724 units in November, the latest figures from the Australian Bureau of Statistics show.

Approvals for private homes fell 1.9% to 9,386 units, while approvals for “other dwellings” jumped 27.5% to 3,404 units, following a November drop of 19.3%.

Non-residential building approvals gained a massive 52.8%, with the value of all new residential buildings gaining 2.2%.

Overseas, Wall Street stocks ended flat after gains from higher than expected factory orders were negated by a decline in pending home sales. The Dow Jones Industrial Average fell 11.94 points or 0.11% to 10,572.02.