Fleet and capacity trends underline Qantas Group’s Jetstar growth push
Although the Qantas Group has experienced robust international capacity growth overall, it is one of multiple Asia Pacific airlines that are channelling more expansion to their low cost units than to the full service legacy brands.
As one of the region's pioneers in the multi-model approach, Qantas has long benefitted from its flexibility to allocate investment and capacity growth among its subsidiaries, depending on prevailing markets and economic conditions.
Other notable examples of Asia Pacific airlines that are placing increasing emphasis on LCC units in the post-pandemic environment include Cathay Pacific and the Japanese majors, All Nippon Airways and Japan Airlines.
During its latest earnings presentation, the Qantas Group reported slightly stronger international capacity growth for Jetstar Airways than for Qantas Airways for the six months through 30-Jun-2024 (its fiscal second half).
Data from CAPA - Centre for Aviation and OAG show that this trend has continued, with a more recent snapshot showing Jetstar with significantly higher international growth than Qantas versus both last year 2023 and 2019.
Qantas predicts a larger increase for the LCC in the current fiscal year, with Jetstar international again expanding more quickly than its full service sibling.
Meanwhile, aircraft delivery forecasts reinforce the Jetstar growth trend.
- Jetstar Airways’ weekly international seats are up by 23.5% versus last year, and nearly 28% versus the pre-pandemic level.
- In contrast, Qantas weekly international seats are up 10% compared to last year, and down slightly from 2019.
- Full-year FY2025 forecast shows a 24% international ASK growth for Jetstar, versus 10% for Qantas.
- Jetstar’s international revenue has also been increasing at a much faster rate, year-on-year.
- Jetstar has the edge in FY2024 and FY2025 deliveries, although Qantas will receive more in FY2026.
The higher Jetstar international growth rate has become more evident, and looks set to accelerate further
Jetstar's international capacity, as measured in ASKs, was up by 29% in the second half of FY2024 (1-Jan-2024 to 30-Jun-2024), according to the group's financial statements. This is not including Singapore-based Jetstar Asia, which Qantas partly owns.
In comparison, Qantas international capacity grew 23% year-on-year for the second half.
The difference was actually much greater in the domestic sector, where Jetstar had 15% more ASKs for the second half, versus a 2% drop for Qantas.
In the first half of the fiscal year, Jetstar's international ASKs were up 41% year-on-year, while Qantas' were up 39%. The most recent numbers show a wider difference.
The chart below, using data from CAPA - Centre for Aviation and OAG, shows that Jetstar's international weekly seats were up by 23.5% year-on-year for the week of 2-Sep-2024.
The increase was 27.8% versus the same week in 2019.
Jetstar Airways international capacity, as measured in weekly seats, from 2019
For Qantas, the next chart shows that weekly seat numbers were up by 10% year-on-year for the week of 2-Sep-2024, whereas they were down by 2.6% versus the same week in 2019.
Qantas international capacity, as measured in weekly seats, from 2019
The Qantas Group also intends to grow capacity more quickly for Jetstar in its full FY2025, which began on 1-Jul-2024.
In its latest outlook, the group estimates that Jetstar's international ASKs (not including Jetstar Asia) will be up 24% year-on-year for FY2025.
For the Qantas full service unit there will be a 10% increase in international ASKs for the same period.
Jetstar receives most new aircraft deliveries within group in FY2024 and FY2025
The Jetstar growth is being supported by new aircraft deliveries.
Qantas Group received 11 new aircraft in FY2024, of which three were A321 freighters. The majority of the passenger aircraft (five of the eight) were longer-range A321LRs for Jetstar.
Jetstar now has 15 A321LRs, about half of which were allocated for replacement and half for growth.
For FY2025 the group is expecting 20 deliveries: thirteen of these will be A321LRs or A320neos for Jetstar, and seven Airbus narrowbodies for Qantas or QantasLink.
The emphasis is expected to shift more towards Qantas and QantasLink in FY2026. In that year the group is scheduled to receive 24 aircraft, with four Airbus narrowbodies for Jetstar, seven for Qantas, 11 for QantasLink, and two freighters.
These numbers do not include wet-leased or used aircraft being added or subtracted from the fleet.
Qantas estimates that each of Jetstar's A321LRs that replace an older Airbus narrowbody results in about AUD7 million in incremental EBIT per aircraft.
The arrival of more A321LRs has also enabled Jetstar to switch some of its Boeing 787 widebodies to other routes.
Qantas Group scheduled aircraft deliveries, FY24 to FY26
Jetstar's growth is being matched by robust financial performance
Jetstar's international growth has helped boost this unit's financial performance.
The Jetstar Group's underlying EBIT for FY2024 was AUD497 million (USD334 million) - a record result for that segment.
Jetstar's Australia-based international operations accounted for AUD201 million of that total - up AUD35 million from the previous year.
Jetstar's trailing six-week average for international revenue was up 30% year-on-year for the week ending 24-Aug-2024, according to the group's financial report.
For Qantas, the six-week trailing average for international was up by 7%.
Jetstar adds to the group's versatility - and fleet moves mean more versatility within Jetstar itself
The oft-repeated benefit of having a multi-model business is that airline groups can match LCCs to predominantly leisure routes, and full service carriers to routes with more premium traffic.
This is certainly true for the Qantas Group, which is seeing plenty of opportunities to deploy more Jetstar aircraft internationally.
It also reflects the fact that the mainly medium haul and short haul Asia Pacific markets where Jetstar flies are performing strongly, particularly compared with the North American routes which are operated by Qantas.
Asia Pacific markets typically have greater competition from other LCCs, so Jetstar would be more competitive in these than the full service carrier.
Macroeconomic factors play a role too. As Qantas has acknowledged, increased cost-of-living helps drive LCC demand.
Of course, many Jetstar routes are also served by Qantas. This allows the group to target both ends of market demand, as many other multi-model airline groups have found.
Cathay Pacific was a notable hold-out for many years, attempting to target both ends of the market with its full service model. But it eventually changed tack and purchased LCC HK Express, which has been growing far faster than the parent since the COVID-19 pandemic.
Having both an LCC and FSC within the same group can also offer advantages over the hybrid model
Jetstar benefits from having a mix of narrowbodies and widebody aircraft, giving it greater versatility in terms of range and aircraft gauge than LCCs with only narrowbodies.
LCCs operating only widebodies have been tried, but except in certain cases it has become apparent that widebody LCC operations work best when paired with a short haul narrowbody network.
The arrival of the A321LRs has amplified Jetstar's versatility, providing another size option on longer routes, and they can also boost the shorter-haul network. And eventually the A321XLRs will introduce yet another network option.
Qantas has made a point of previously saying that its large Airbus narrowbody backlog gives it a group-wide pool of aircraft to draw from. It appears likely that fleet growth will continue to skew more towards Jetstar in the long term.
It is also worth noting that, despite the controversies that embroiled the end of his tenure, former Qantas CEO Alan Joyce's legacy includes fine-tuning a successful multi-model approach, and setting up a solid fleet growth plan for the group.