Jetstar Asia CEO Update

Transcript

Barathan Pasupathi:As you know, we are growing 3 new markets. We're keeping the same 18 aircraft units in the Jetstar Asia fleet. We look at our network as a portfolio and we move around our units where it's very profitable. Our studies have shown that Hat Yai, Okinawa, and Clark There's latent demand in the market. And let's take Okinawa first. Okinawa is not served by a scheduled airline in Singapore. You have seasonal charters by other carriers in Singapore, but no scheduled. So that worked out for us. We're working very closely with the Okinawa Prefecture and the airport in Okinawa, and we made this route profitable— possible and profitable from the start, as we start on the 17th of November. Yeah, with Hat Yai, you find that there's one other LCC operating to Hat Yai. Our studies have also shown that the market is underserved from Singapore. You've seen the market mix grow in Hat Yai predominantly while the other carrier has been servicing the grey population, we have been servicing the younger crowd. And also the timing and slots by operating our flights in the evening hours also catches the young professionals after office hours. Clark, again Manila is slot constrained and we are quite happy with the growth in Manila. However, we find that our customers travelling to Manila go beyond to the north. So we have done some surveys and customers have said that Clark would be another potential market for Jetstar and true enough the economics work out and so we start Clark on the 27th of November. Hat Yai and Clark may not be connecting markets but if you look at Okinawa, Okinawa has— we are the only first scheduled airline from Singapore to fly into Okinawa. From Indonesia, Australia, you don't have connections directly to Okinawa, so we believe that we can actually grow the connection— connecting market from Jakarta, Surabaya, and Medan into Okinawa via Changi Airport, so as Australia to Singapore as well. At Jetstar Asia, as I've mentioned upfront, we are very performance-centric and focused. Where we have been able to grow, I'll just give you some numbers. 3 years ago, we had 19 aircraft in the market. When yields fell in Southeast Asia, we took an aircraft off. But with 18 aircraft, we've delivered from 3.8 million customers to almost 4.2 million customers today. So we have delivered almost 400,000 customers with having one aircraft less in our fleet. How we've been able to do that? Our load factors have grown by 7 to 10% across markets, in different markets. We have done that We've also been able to use the aircraft quite wisely in certain markets. We have pulled back capacity in markets where it's not profitable, or not completely pulled out markets but reduced the frequencies. We have got great analytics now behind our data. We have got great PRM and yield management that is working out. So we look at the passenger yield, the ancillary mix in each of the markets, and so we choose that. And so these 3 markets we're starting out is by consolidating the network and taking off capacity in some of the markets. Jetstar is a mature LCC today. Jetstar Asia, our fleet is aged, 12 years old now. As you know, when it hits 12, you have to go into a heavy maintenance cycle. So at any point in time in each year, we have an aircraft in the hangar for 50 to 60 days going through heavy C-checks. We believe, well, the ASKs will come back up, In time, but over the next 12 months, at least the next 12 months, we are still under heavy maintenance cycle. Well, we grow ASKs by smartly putting the aircraft in markets where it's profitable. As far as fleet is concerned, we're not going to chase growth for the sake of chasing growth. If we can prove a very sizable and profitable operation that can be done in any network, we can pull an aircraft in. We have the flexibility in the wider Jetstar Group to do that. As far as I can see right now, you've heard the panel, Southeast Asia needs to see some level of rationalisation, rationalisation in Indonesia, rationalisation in Vietnam, and even in Singapore. Once that happens and slots open up, we will be in markets. If Bali turned around tomorrow and told us that we can have 3 additional slots into Bali, we will be there. We could bring an aircraft into Singapore. But we're not going to just add aircraft into markets. Look at what has happened in the last 5 years. We have now become the only LCC from Singapore to serve Cambodia and soon Myanmar. There's no other LCC from Singapore serving those markets. So we are very careful and very pragmatic on how we've done that, and true enough, results have shown that as well. All I can say at the moment is that we have maintained profitability in our business, and that is part of the wider Jetstar Group. You've seen Jetstar Group announce profitability to the tune of $425 million Australian dollars as a group. Jetstar Asia has remained profitable last year. Yes, there are still headwinds in the business. You've seen fuel last night went up to $64 Brent a barrel. We see— I talked on the panel about infrastructure costs. Airports which are growing are adding layers of taxes on customers and airlines. That is almost a third to 50% of narrow-body airfares. So we see those headwinds in the business. We are continuously reducing our costs in the business above and beyond inflation. We continue to do that while maintaining the yield margins. So we want to keep the margins in place, but it has to be seen. Coming back from the last 3 consecutive years of profitability, we see challenges in this coming year, but nothing has stopped us in the last 3 years of delivering profitability, and we will be focused on delivering that again this year. Thank you, Barathan.

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