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SCMP Reporter

AUSTRALIA'S flagship carrier Qantas Airways has lost its designation as the nation's official carrier on the China route to an upstart new company with no experience in aviation.

     The office of the Ministry of Transport and Communications confirmed tonight that the designation has been switched from Qantas to newly formed Australia Air International.

     The decision clears the way for Australia Air to begin services to Beijing and Guangzhou in September.

     Qantas last month urged the government to retain its status as designated carrier on the China-Australia route, even though it suspended flights on the route in 1987 because it was a money loser.

     However, China is now viewed as a potentially lucrative route. The Australian Tourist Commission has labelled China a ''sleeping giant'' for inbound tourism to Australia in the next 10 years.

     Jim Wolfe, an aviation spokesman for the ministry, said the government would open negotiations with the Chinese government to try to get a multiple designation on the route and restore Qantas's status.

     The Chinese government in the past has baulked at multiple designations. The current bilateral aviation agreement between both countries allows one carrier on the route for each nation.

     Sheldon Kasowitz, an airline analyst with Jardine Fleming Securities in Hongkong, said China seemed to prefer solo designations because it currently has only one international carrier on major international routes.

     Australia Air, a new Sydney-based privately owned company, won uncontested rights to fly to China in March.

   It threatened legal action if the government didn't clear the final hurdle of official route designation.

     Qantas began operating flights into China in the early 1980s, after the mainland opened its doors to foreign visitors.

     However, after money-losing weekly flights were suspended in 1987, Qantas maintained only a representative office in Beijing.

     Although it has never signaled an intent to reopen the route, Qantas said in a recent submission to the government that removal of its flag carrier status could inhibit its plans for the route.

     Qantas and Australia Air officials were unavailable for comment.

     A spokesman for Qantas last week said the airline had invested considerable time and effort in China and did not want to forfeit its position.

     ''We have no problem with a second carrier, but do not want to be locked out altogether,'' the spokesman said.

     Qantas is in the throes of restructuring before the planned public sale of the government's remaining 75 per cent stake in the airline, either late this year or early next.

     In the past year, it has been merged with domestic carrier Australian Airlines and 25 per cent of the combined carrier has been sold to British Airways by the government.

     Mr Kasowitz said he was not familiar with the specifics of Qantas operations, but the Chinese aviation market had changed dramatically since it dropped its services.

     ''I can only guess that Qantas was preoccupied with getting its current routes more profitable and restructuring itself,'' he said.

  ''Unfortunately, one of the costs of that may have been that it neglected profitable opportunities in China.''      He said if China orchestrated a slowdown in its economy, one of the sectors that would not be affected was aviation.

   ''Airlines are scrambling all over themselves to get a piece of the action,'' he said.

      Air China - China's government-owned carrier - is the only airline flying directly between both countries.

      Australia Air chairman and chief executive Colin Hendrick was in Asia last week finalising the airline's preparations for the start of services to Guangzhou and Beijing in September.



Qantas loses China route rights to an inexperienced newcomer