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Based in Singapore, Jetstar Asia is a low cost airline. Using the Qantas Group's Jetstar brand, Jetstar Asia has a network of services within Asia using A320 aircraft. Jetstar Asia/Valuair is 51% held by Westbrook Investments Pte Ltd (Westbrook) and 49% by Qantas.
Location of Jetstar Asia main hub (Singapore Changi Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Jetstar Asia 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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Singapore Changi Airport and CAAS are trying to promote new long-haul flights and more transit traffic in response to a significant slowdown in passenger growth. Singapore is eager to drum up new sources of traffic or growth as it invests significantly in airport expansion which will prove to be overly ambitious if growth cannot be restored.
Incentivising transit traffic is logical as a growth in transit numbers, long a staple under Singapore’s hub strategy, could help offset a recent drop in inbound visitor numbers. Following Kuala Lumpur's example, Singapore will probably need to focus on enhancing LCC transit traffic, an increasingly important segment which Changi has barely scratched.
Long-haul transit traffic growth will be much harder to achieve, even with incentives. Changi’s biggest growth opportunities are likely on medium-haul routes and connections within Asia-Pacific.
SilkAir is joining Singapore’s main LCC groups in slowing down expansion in response to overcapacity in Singapore’s short-haul market. SilkAir capacity growth has been in the low single digits in recent months and will likely stay at modest levels as it accelerates the retirement of A320s.
The full service regional subsidiary of Singapore Airlines, SilkAir has expanded rapidly over the past several years despite intensifying competition with LCCs. SilkAir has doubled in size since 2007 and has consistently outperformed Singapore’s two short-haul LCCs, Tigerair and Jetstar Asia, in the process securing valuable slots at Changi Airport for the group.
SilkAir has been planning to maintain annual double digit capacity growth, driven by the introduction of new 737-800s. But a slowdown is sensible given the current overcapacity situation in the Singapore short-haul market, which has led to a steep drop in profits at SilkAir as well as at LCC competitors.
Singapore has seen traffic growth slow significantly over the last year driven by challenges in its previously booming short-haul market. Total passenger traffic at Singapore Changi grew by only 5% in 2013, ending a three-year run of double digit growth, and is on pace to grow by less than 2% in 2014.
Profitability in the Singapore market meanwhile has tumbled driven by losses at Singapore’s three LCCs – Tigerair Singapore, Jetstar Asia and Scoot. Singapore Airlines regional subsidiary SilkAir also has seen profits slide as it has been impacted by the overcapacity and intense competition in Singapore’s short-haul market.
Tigerair, Jetstar Asia and SilkAir have all responded by halting or slowing down expansion. Singapore’s LCC penetration rate has started to slip, ending a decade of steady gains.
Southeast Asian airlines have faced extremely challenging market conditions in 2014, resulting in an alarming amount of red ink. Of the 17 airlines in Southeast Asia that report earnings only four posted operating profits in 1H2014 compared to 12 in 1H2013.
Among the nearly 50 airlines based in Southeast Asia, excluding small regional and charter operators, approximately 80% were not profitable in 1H2014. Losses are likely to continue through at least 3Q2014 but there are indications market conditions will start to improve by 4Q2014 or 1H2015.
Several Southeast Asian airlines have responded to overcapacity by and cutting capacity or slowing their expansion. Markets that have seen political and economic instability are also starting to stabilise.
Okinawa Naha Airport expects further rapid international growth as it begins to tap into the Southeast Asian market. Okinawa has seen a surge in international traffic, driven by new flights within North Asia, and is optimistic a new charter route to Singapore (operated by Jetstar Asia and SilkAir) will be upgraded to become its first scheduled service to Southeast Asia.
International passenger traffic at Okinawa Naha Airport has nearly tripled since 2011. A new international terminal which opened in Feb-2014 is already approaching capacity but plans are in the works for expansion.
For now the growth is being driven by inbound visitor traffic as Okinawa emerges as a popular tourist attraction. But Okinawa also has a potential role as a LCC transit airport, particularly after a second runway opens and further terminal expansion is pursued. Peach Aviation envisioned an Okinawa hub for Southeast Asian flights but requires a new low-cost terminal.
Jakarta-Singapore capacity has quickly dropped by over 20%, led by adjustments at LCC groups Tigerair and AirAsia. The declines reverse capacity increases from 2013, when a breakthrough in the Indonesia-Singapore bilateral led to a surge in capacity.
Jakarta-Singapore is the second largest international city pair route in the world but supply in late 2013 and 1H2014 far exceeded demand. As a result it emerged as one of the most obvious examples of overcapacity in the Southeast Asian market.
Airlines were overly ambitious and aggressive in applying for and using newly available traffic rights. Recent adjustments have brought much needed rationality to the market but capacity could start being added back, again putting pressure on yields and load factors.