Australia's first low cost airline was Compass which launched operations in 1990 but was short lived. In 2000Impulse and Virgin Blue commenced low cost operations bringing fierce competition to Australian cities. Virgin Blue has become the nation's second largest airline, whilst Qantas purchased Impulse and operated it in a"wet leasing" arrangement before launching its new low cost carrier Jetstar. In 2006, Qantas discontinued a wet leasing aggreement with Australian Airlines and developed international destinations for.
In early 2007, Singaporean low-cost carrier Tiger Airways announced their intention to form a subsidiary airline in Australia. Tiger Airways Australia began operations out of Melbourne Airport in November 2007. Indonesian low-cost carrier Lion Air has also expressed interest in establishing domestic and international routes for 2009.
In 1995, Air New Zealand established a low-fare subsidiary, Freedom Air, in response to the commencement of discount trans-tasman services byKiwi Airlines. Fierce competition on trans-Tasman routes led to the collapse of Kiwi Airlines in 1996. Freedom Air continued to provide discount services between Australia and New Zealand until it ceased operations in March 2008. Wholly owned Qantas subsidiaryJetconnect was set up as a low cost New Zealand arm of Qantas, with Jetconnect operating all New Zealand domestic services and several trans Tasman services in a 'wet leasing' arrangement, using the Qantas brand. Qantas has also launched trans-Tasman Jetstar flights.