QANTAS will for the first time have routes that are economy class only, dispensing with business class for many holiday destinations.
Qantas executives were cagey about the details yesterday, refusing to say if the new "leisure class" flights would involve launching a no-frills domestic airline.
Qantas dropped business class from some flights to holiday destinations earlier this year and in October will launch the low-cost international Australian Airlines.
The airline is expanding its fleet of all-economy aircraft to bigger twin-aisle planes flying to holiday destinations such as the Gold Coast.
The move is part of strategy to reduce costs and potentially provide lower fares by matching aircraft to routes.
"We have some views going forward that the need of a different type of leisure operator in Australia is probably becoming very pronounced," Qantas chief executive Geoff Dixon said at the release of the airline's healthy $428 million net profit for the year.
Business class can account for less than 3 per cent of demand to holiday destinations.
"With our airline, with our costs and our mix at the moment it is difficult to make money on those routes," Mr Dixon said.
"We believe we can help ourselves by trying to look at it in a different way, but we also believe that if we can get it right, we can help the domestic tourism industry."
The airline is expanding its full-service high-frequency Cityflyer service to Adelaide, and is planning a trans-continental shuttle to Perth using its new 300-seat A330s, Boeing 767-300s and possibly jumbo jets.
Australian Airlines will start services between Cairns and Japan on October 27, and Mr Dixon said yesterday advance bookings had already filled 60 per cent of the seats.
Although Australian will offer a two-class service, its lower cost structure will allow it to compete on marginal routes too expensive for the main carrier.
Qantas hopes to grow Australian quickly and could expand its fleet from four planes to 12 by the end of next year and start flights from other Australian cities.
Chief financial officer Peter Gregg, who is responsible for the leisure project, said single-class services using wide-bodied aircraft would give the airline a "very competitive cost base".
"It can be an existing airline or it could be a new airline," he said. "We haven't got that far down the track with it yet."
Whatever its final form, the new service is likely to use the Ansett terminal at Sydney airport.
