Plans by embattled Australian carrier Qantas to create a premium joint-venture Asian airline were thrown into disarray yesterday after talks with Malaysia Airlines collapsed.

While Asia remained a priority for Qantas and it wanted to expand in the region, given global economic uncertainty and its focus on financial discipline, the group said it "will allocate minimal capital to such ventures".

"The transformation of Qantas's international business remains vital, with plans to return the international business to profitability in the short-term on track," Qantas chief Alan Joyce said, announcing negotiations had failed.

"In the medium-term, the Qantas flying businesses, both domestic and international combined, will exceed the cost of capital on a sustainable basis."

Qantas in August revealed plans to establish a joint-venture in Asia as it repositions itself within the industry's fastest-growing region and seeks to turn around its loss-making international arm.

Singapore and Malaysia were seen as the likely bases and it is understood that Qantas had been favouring Kuala Lumpur because it would involve lower costs.

But in a statement, Qantas said talks with Malaysia Airlines on a partnership, including the establishment of a new premium airline, "would not continue due to parties being unable to reach mutually agreeable commercial terms".

Malaysia Airlines did not comment on the development.

The news comes just days after Malaysia Airlines admitted it was in trouble after posting a 2.52 billion ringgit ($836 million) loss last year, largely due to soaring fuel costs.

"The results make for unpleasant reading. The company is in crisis," Malaysia Airlines chairman Mohamad Nor Mohamad Yusof said, before adding that he was confident it could recover.

It is understood Qantas is not in talks on establishing a tie-up with Singapore Airlines, long a fierce rival of the Australian carrier and whose new long-haul budget carrier Scoot will have a daily flight to Sydney.

Qantas's plans to establish a new Asian airline sparked a fierce backlash from the start, with unions concerned the move would see jobs sent abroad.-Reuters