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A wholly-owned subsidiary of the Qantas Group, Jetstar is an Australian LCC headquartered in Melbourne. Established by Qantas in 2003 in response to market inroads being made by then-LCC Virgin Blue, Jetstar operates an extensive domestic network and is the world's largest long-haul LCC, operating to destinations in the Pacific Ocean and Asia.
The airline, which participates in the Qantas Frequent Flyer Programme, operates a fleet of Airbus A320-family and A330 aircraft. Parent Qantas has 50 Boeing 787s on order, the first of which are destined for Jetstar, for delivery in 2013. Jetstar also operates domestic service in New Zealand, and the brand is also operating in a Singapore JV (as Jetstar Asia) and a Vietnam JV (as Jetstar Pacific), and a Japanese JV (Jetstar Japan) in each of which parent company Qantas has equity stakes.
Location of Jetstar Airways main hub (Melbourne Tullamarine Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Jetstar Airways fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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With little fanfare Virgin Australia and Tigerair have made the first public change to their networks as part of the dual-brand strategy they are now pursuing following Virgin's purchase of one-time competitor Tigerair that gives Virgin a budget off-shoot to match the Qantas Group's Qantas-Jetstar pairing. Tigerair will enter the Brisbane-Darwin market at flight timings almost identical to Virgin, which will change its timings to match Qantas.
The nuances may seem local but the implications are global: Australia will be the first market to see two full-scale dual-brand strategies compete head-to-head with each other.
Product, service and brand are key ingredients to a successful dual-brand strategy, but the network underpins it. Many airlines have tried a dual-brand strategy but most bundle some – sometimes all – of the necessary components. Virgin Australia is not just going to attempt a dual-brand strategy but is doing so in the backyard of one of the airlines that pioneered it. In one of the ironies typical of the Australian market, Qantas developed Jetstar and the dual-brand strategy to combat then low-cost Virgin Blue. In response Virgin started to move upmarket and reached a point where it largely had to become full-service, exposing its inability to successful target the low-end of the market. Buying Tigerair completes a nearly decade-long circle, but begins the intricate process of making the two airlines work alongside each other.
Tigerair & Scoot poised for expansion in under-penetrated Singapore-China market as Jetstar retracts
The Singapore-China market has huge potential for low-cost carriers, which currently only account for 19% of capacity between the two countries. But the market has proven to be challenging for Jetstar, which is cutting two more Singapore-China routes and reducing the LCC group’s capacity share to an insignificant 3% compared to 10% two years ago.
Expansion from Tigerair and Scoot has filled some of the void left by Jetstar. But total LCC capacity and the LCC penetration rate in the Singapore-China market is on the decline, dropping to only 16% in Jan-2014.
Singapore’s overall LCC penetration is now 31% and is continuing to rise. The relatively low penetration in the Singapore-China market is surprising, particularly as the market enjoys open skies. But the long-term potential is there for more LCC services.
AirAsia X’s new affiliate in Thailand is gearing up to launch services in early 2014 with an initial fleet of two A330-300s and an initial network of three destinations. At least one destination in Australia and North Asia is expected to be served from a base at Bangkok’s Don Muang Airport.
Thai AirAsia X (TAAX) is one of three new low-cost carriers in Thailand but is strategically well positioned as it will be the country’s first medium/long-haul LCC. It will also have the advantage of being on the receiving end of Thailand’s largest short-haul LCC, Thai AirAsia.
TAAX will be the first of potentially several new joint venture carriers from Malaysia-based AirAsia X, which is using proceeds from a Jun-2013 IPO to accelerate expansion in line with a new multi-hub strategy. Indonesia is in line to host the second AirAsia X affiliate, potentially launching by the end of 2014 with a base in Bali. The Philippines for now is not being considered for an AirAsia X affiliate, although it remains a long-term possibility.
Virgin Australia and Tigerair Australia are beginning to flex their muscles with Tigerair Australia making its first strategic move since becoming part of the Virgin Australia Group in Apr-2013 by launching direct services between Sydney and Perth as the carrier takes delivery of its 12th A320 in Dec-2013.
Virgin Australia meanwhile has taken another step to challenge Qantas’ domestic regional network domination with the launch of the first direct link between its home base of Brisbane and Cloncurry.
The changes signal the start of Virgin Australia’s ambitions to duplicate the successful Qantas/Jetstar model which seeks to separately maximise the returns from the full service and leisure markets.
Vietnam’s VietJet Air has become the latest Asian low-cost carrier group to announce a major aircraft order in support of an ambition to build a portfolio of LCC affiliates.
VietJet’s commitment to buy 62 A320 family aircraft may be small in comparison to the massive orders placed by AirAsia and Lion in recent years. But it is significant in that it shows VietJet is serious in becoming a pan-Asia player, following the model of AirAsia, Jetstar, Lion and Tigerair.
AirAsia, Lion, Tigerair and Jetstar operate across Asia-Pacific and dominate the Southeast Asian LCC market, accounting for about 77% of LCC seat capacity and 75% of the ASEAN-based LCC fleet. While Southeast Asia is a large and fast-growing market, five is a potentially unsustainable number of LCC groups, particularly when taking into account some of the countries also have very strong independent LCCs.
Singapore is seeing another surge in low-cost carrier capacity, led by aggressive expansion from Tigerair. LCC groups Jetstar and AirAsia are also continuing to expand in Singapore but more modestly than Tiger.
Tigerair, Jetstar and AirAsia had equal shares of the Singapore market back in 2010. But Tigerair has since grown faster and will widen the gap from its rivals as it adds five more A320s in the current fiscal year. Tigerair will account for almost 11% of total capacity at Singapore Changi by the end of 2013 compared to just under 8% for AirAsia and Jetstar.
LCCs already account for a little over 30% of seats at Singapore – an impressive figure given Changi’s LCC penetration rate was virtually zero a decade ago and its lack of a domestic market. Tigerair’s forthcoming expansion will drive up the LCC penetration further, to about 32%, but it comes with risks as Singapore’s short-haul market could return to the over-capacity situation seen two years ago.
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