CEO Bill Astling told ABC that Koala would compete with Qantas and Virgin by filling a market niche.
He's also reportedly promised a guaranteed cash refund, and if you don't fly, you'll get your money back.
But Astling has admitted "you have to have a degree of insanity" to start a new airline in Australia.
"I've had a few people who've said: 'Have you appointed the liquidator yet?'" he said.
Earlier this year, Bonza Airlines joined the long list of airlines that have tried and failed to compete with Qantas and Virgin in the domestic market, while Rex Airlines cut metropolitan services.
"Our population is small, but the vast distances mean we can only travel by air. It can't all be done by two airlines," he said.
"We've got a lot of support. We've also got a lot of sceptics. That's understandable, they just think we're going to be another one of the many that have collapsed … and we're not."
