Jetstar success leads to New Zealand domestic expansion. New Zealanders in for more fare wars

Qantas’ LCC subsidiary is rampant these days. After announcing a highly successful year’s results (to 30-Jun-2009), Jetstar has announced that it will rapidly expand its New Zealand presence, moving more A320s into the domestic market.

For the airline’s system in 2008/09, Jetstar, including all of its Australian international and southeast Asian operations, the carrier showed an improved EBIT of AUD107 million and a profit before tax of AUD137 million, up 18% on the previous year. In revenue terms, it is now the biggest LCC in the region.

Despite a recent troubled beginning in the domestic market, the LCC sees a profitable future in New Zealand, both across the Tasman and domestically. The carrier currently operates 42 weekly trans-Tasman services and, since starting on 10-Jun-2009, 84 weekly return services on five domestic New Zealand routes, between Auckland, Christchurch, Wellington and Queenstown.

It gained almost instant profitability. According to CEO, Bruce Buchanan, for the “operational month of July 2009 Jetstar achieved an underlying positive PBT (excluding start-up costs) for its domestic New Zealand business”, with a load factor of over 80% in Jul-2009.

Jetstar is, as a result “actively” pursuing “future growth options with receptive airport partners in New Zealand”, preparing to put the all-jet carrier’s A320s up against Air New Zealand’s ATRs on the home carrier’s highly successful regional routes, according to Mr Buchanan.

Virgin Blue’s offshore arm, Pacific Blue, is also now well-established domestically in New Zealand’s domestic market, covering most of Jetstar’s routes, but additionally making Dunedin its home, both for domestic and trans-Tasman services. As Jetstar expands, it will inevitably tread on toes, in the process providing a welcome boost to some smaller airports, as well as ensuring that the low fare battle will intensify.

Jetstar earned its parent a profit before tax of AUD137 million for the recent financial year. This compares with Air New Zealand’s interim profit, to 31-Dec-2008, of NZ14 million. The flag carrier has stated it will announce its 2008/09 results on 27-Aug-2009. Virgin Blue meanwhile is due to report tomorrow, 20-Aug-2009.

See related article: Jetstar and FFP save Qantas mainline as operating losses touch AUD30 million a month

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