The Centre for Asia Pacific Aviation, the leading global aviation intelligence provider, has published its response to this week’s signing of a landmark alliance between Qantas, Jetstar and AirAsia, noting there is “ample logic” in expanding the Australia-Malaysia aviation axis.

The Centre notes that Qantas, under Geoff Dixon’s leadership, was keen on a Malaysian linkage for quite some time. Apart from cultivating a relationship with AirAsia’s Tony Fernandes (pictured left), Dixon was responsible for getting almost to the finish line with a proposed “merger” with Malaysia’s flag carrier, Malaysia Airlines, in late 2008, just as Alan Joyce was taking over the reins at Qantas.

This "merger" was to involve commercial cooperation and profit sharing and clearly presaged a wider joint relationship. It was to have become a three-way merger, with Qantas also effectively taking over British Airways. But all this faltered as MAS and the government lost momentum, along with the global economy.

As long as Qantas/Jetstar has no direct service between Sydney and Kuala Lumpur, there is a void from the Qantas Group side. The only non-stop operator on the route is MAS, with AirAsia X prevented from flying the route by its own government, in order to protect the valuable market for the Malaysian flag carrier.

Despite the occasional media speculation about a highly improbable Qantas-SIA merger, Qantas has for some time seen Malaysia as its friendly potential partner/base for achieving its Asian expansion goals. Ever since Malaysia’s Australia-phobe Prime Minister, Dr Mahathir left office, the opportunity has been there.

Malaysia Airlines out in the cold; is there another shoe to drop?

That raises an intriguing scenario. The big potential loser in the AirAsia/Jetstar deal is Malaysia Airlines. After a remarkable turnaround in 2007 MAS is now again struggling seriously, as premium demand slips and as AirAsia, with its much lower cost base, becomes more powerful.

AirAsia’s tie up with the powerful Qantas Group will do nothing to reduce the Malaysian flag carrier’s problems. It may well even bring things to a head. MAS is going to need to take some difficult decisions. With market demand promising to remain slow in 2010, the carrier’s recent deterioration into loss making and its relatively poor performance alongside AirAsia, the majority government owned carrier cannot afford to stand still.

Qantas’ previous close link with MAS CEO Idris Jala has gone, following the dynamic executive’s promotion into a key government role, but the links are still there. And the potential is compelling, especially for the Malaysian government, as its investment appears to be in jeopardy once again. A strengthened AirAsia in a relationship with Qantas Group will heighten that awareness.

Now for a four-way tie-up?

A three-way (or even four-way) tie-up between Qantas/Jetsar/AirAsia/MAS, albeit apparently unlikely at this stage, could really be a killer combination, with major benefits for all concerned. So it would be risky to rule out any such deal, most notably as Qantas has already signalled its keenness to be there.

The twin-brand Qantas/Jetstar, full service/low cost model has been a world leader, helping preserve the Group’s position domestically and internationally and a similar matching of resources could also work in the Malaysian market, between MAS and AirAsia.

As CEO Fernandes frequently suggests, the future of the international airline marketplace will be similar to the domestic one – there will be two types of carrier, one which focuses on premium travellers and the other which targets the low cost, discretionary travel end. He obviously sees AirAsia as the latter of these, with MAS providing the other limb, not dissimilar from Qantas/Jetstar.

So, just as the symmetry between Qantas and Jetstar has been remarkable, why not a MAS/AirAsia parallel?

Then, add to that a double-header, linking Australian and Malaysian markets, with multiple hubs and you have a killer combination would really create waves. Great for consumers, great for the respective airports and airlines, a great trade link between the two countries and a massive opportunity to plunder the growing Asian market.

That really would be a model for the future.

The full report is available at CAPA’s website.