Jetstar Group stated the brand is expected to continue its double-digit growth trajectory despite a consolidation phase that will see no new JVs in the near term. According to a report in The Australian, the carrier will instead focus on its recently-launched Jetstar Japan JV and the establishment of Jetstar Hong Kong in partnership with China Eastern Airlines (the JV is still subject to regulatory approval). Both JVs are expected to drive growth in the next two to three years, with Qantas Group CEO Alan Joyce noting even the initial growth plans for the two JVs would see expansion equivalent to around half of the current Jetstar Group fleet.
Jetstar Group has no plans for new JVs in near term, double-digit growth to continue
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China-Japan aviation: LCCs Peach, Jetstar Japan gain traffic rights, raising overcapacity concerns
Jetstar Japan and Peach Aviation have received air traffic rights for China which, if utilised, would grow the Japanese LCC footprint in China – Japan's largest visitor source market. Spring Japan became the first Japanese LCC to serve China in Feb-2016. The absence of Japanese LCCs in China may seem surprising, but there are regulatory hurdles, market access questions and conservatism at Japanese LCCs. AirAsia Japan, launching in 2017, will likely leverage the group's China experience; it is the largest non-greater China airline group serving China.
The prospect of further growth comes as incumbents cite overcapacity. What was once a profitable market now only produces returns in the peaks. All Nippon Airways, the largest airline between Japan and China, reported lower revenue on the back of "a deterioration in the supply-demand environment". Spring China has told Bloomberg that some competitors "aren't well-prepared", and will be "phased out". Overall Japanese LCC routes and capacity may be small but will be watched by Chinese airlines, ever mindful of the need to find new business models.
South Pacific aviation markets will be defined by China’s expansion
The nature of the South Pacific's geography makes finding the right partners for its airlines essential for their survival in international long haul markets – as most are.
The region is characterised by relatively liberal access regimes and by partnerships of varying levels – in New Zealand especially, where Air New Zealand’s international network is dominated by JVs. Virgin Australia has built a ‘virtual alliance’ alongside HNA, Singapore Airlines, Etihad and Delta, with very little of its own metal flying outside Australia. At Qantas Group, international performance has improved markedly following its Emirates partnership, as its operating focus has shifted from Europe toward Asia and North America, with local JVs, and close partnerships with American Airlines and China Eastern continuing to grow and mature.
For all airlines in the region, the China market will define much of the growth over the coming decade. (This report is taken from the Jul/Aug-2016 issue of CAPA's Airline Leader)