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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, with long term plans to commence service to Europe.
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), in each of which parent company Qantas has equity stakes. A JV has been established with Japan Airlines and other Japanese interests to operate a Japan-based LCC, Jetstar Japan, commencing in Dec-2012. The Jetstar group today employs more than 7,000 staff across the Asia Pacific region.
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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This is the third report in a three-part series on Jetstar’s Singapore-based operations, which includes Jetstar Asia, Jetstar Airways and Valuair. The first two reports analysed Jetstar’s position in two key markets, Singapore-Indonesia and Singapore-China. This report looks at other markets and Jetstar’s overall outlook in Singapore.
Over the last year Jetstar has slowed down fleet and ASK expansion from Singapore after a period of rapid capacity growth for all of the country’s major LCCs, intensifying competition and impacting profitability. Seat capacity, however, has continued to grow rapidly as Jetstar Asia has increased its focus on short-haul Southeast Asian markets, particularly Malaysia, while decreasing its focus on medium-haul flights to North Asia, particularly mainland China.
In the coming months Jetstar Asia/Valuair will take two more A320s for a total of 20 aircraft, with the additional capacity once again being allocated to short-haul markets, primarily neighbouring Malaysia and Indonesia.
This is the second report in a three-part series on Jetstar’s Singapore-based operations, which includes Jetstar Asia, Jetstar Airways and Valuair. The first report analysed the booming Singapore-Indonesia market, where Jetstar is now looking to expand after several years of flat capacity.
This report looks at Jetstar’s position in the Singapore-China market while the third part will look at the overall outlook for Jetstar Asia. Jetstar has significantly cut back in the China market since the end of 2011, reversing a strategy from 2010 and 2011 that focused on using its Singapore hub to pursue rapid growth throughout mainland China. This strategy included using Jetstar Asia’s A320 fleet to operate medium-haul flights to southern China while using Jetstar Airways’ A330 fleet to access markets in northern China that are beyond narrowbody range from Singapore.
Jetstar aims to catch up in Indonesia after squandering first mover advantage inherited from Valuair
The Jetstar Group is preparing to increase its presence in the booming Indonesia market with additional services from its Singapore hub. The expansion follows several years of relatively flat capacity to Indonesia for Jetstar while its LCC competitors have pursued rapid growth.
Jetstar faces challenges as it tries to catch up on several years of missed opportunities in the Indonesian market. The group may struggle to compete with larger players, most of which are also pursuing rapid capacity expansion. Jetstar lacks an Indonesian affiliate, making it difficult to sell in the local Indonesian market, which remains heavily dependent on travel agents.
But the opportunities in Indonesia are too humongous for the usually conservative Jetstar to pass up. It needs to make a push or risk being shut out entirely in one of the largest and fastest growing markets in Asia.
Virgin Australia has been granted approval to buy a 60% stake in LCC Tiger Australia by the Australian Competition and Consumer Commission (ACCC) and in so doing puts in place the final piece of a puzzle that allows Virgin Australia to compete against the Qantas Group on a level footing.
The ACCC agonised over the ground-shifting decision with concerns that returning the Australian market to a duopoly would remove the benefits that Tiger Australia had brought as a third competitor when it launched in Nov-2007. The commission delayed its decision by nearly six weeks while it sought more information from Virgin Australia and Tiger Australia to provide the comfort it needed.
Ultimately ACCC chairman Rod Sims concluded that “this acquisition is unlikely to lead to a substantial lessening of competition in the Australian market for domestic air passenger transport services”.
Virgin Australia chief executive John Borghetti said: “By partnering with Tiger Airways, we can use our local expertise to build a sustainable budget carrier, which will offer great value airfares and benefit jobs and tourism in Australia.”
Scoot selects Nanjing, capping a busy first year of operations for the Singapore Airlines subsidiary
Singapore Airlines' (SIA) low-cost long-haul subsidiary Scoot has completed the last phase of its initial network development, announcing on 8-Apr-2013 the selection of Nanjing as its 11th destination and fourth in mainland China. Scoot will be the only foreign LCC at Nanjing, which like most secondary cities in China is underserved from an international perspective.
Singapore-Nanjing will be launched on 3-Jun-2013 and give Scoot a total of eight routes by its first year anniversary on 4-Jun-2013. After celebrating its first year anniversary the start-up is expected to take a hiatus from fleet and network and expansion for at least 18 months. The hiatus will allow the carrier to focus on improving profitability as its initial network and business model beds down.
The hiatus also gives Scoot ample time to prepare for the delivery of the first of at least 20 787s in late 2014. The 787 will usher in a new era of growth and improved profitability for the carrier. But while Scoot waits for its mix of 787-9s and 787-8s, competitors could pursue faster expansion, leaving Scoot with a smaller slice of Asia’s emerging low-cost medium/long-haul market.
AirAsia X is close to finalising plans for establishing an affiliate in Thailand, a fast-growing market with favourable conditions for long-haul low-cost operations. The new joint venture project between AirAsia X and Thai partners, which will almost certainly include sister short-haul carrier Thai AirAsia, will put further pressure on the Thai Airways Group.
Thai Airways has already been struggling to fend off increasing LCC competition in the domestic and regional international market, which it has responded to by increasing its involvement in short-haul LCC affiliate Nok Air and launching new hybrid carrier Thai Smile. AirAsia X will bring new LCC competition to some of Thai’s strongest medium-haul markets, particularly Australia, Korea and Japan.
Thai Airways has been studying potential long-haul low-cost options and the launch of an AirAsia X affiliate in Thailand, which will likely commence services within the next year, adds urgency. Thai Airways has already been slightly impacted by Asia’s two other long-haul LCCs, Jetstar and Scoot, but having to compete with a local long-haul LCC represents a much bigger challenge.
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