Jetstar Asia Maintains Conservative Approach Towards Growth

Transcript

Barathan Pasupathi:We're very pleased in terms of how successful we've been to Okinawa, which is one of the new destinations, and Clark in Philippines. And what we have done this year is following on from the success of launching those flights to those destinations, we've increased frequencies. Clark, which was 3 times a week has now gone to daily, and we've even extended some of those frequencies from Clark to Osaka. Okinawa, which was 3 times a week, has gone to 4. We've also similarly done that to Darwin as well. In Darwin, in the low seasons, we used to have 4 frequencies a week out of Singapore, but we've taken up to 5. We've been successful in doing this with the integrated collaboration we have with Changi Airport, the airports in those destinations, and tourism bodies. As I shared at the conference, the Jetstar Group is huge. Today, the whole group flies from Dunedin to Tokyo. It has got 85 services, 70 emerging destinations from Rarotonga to Zhengzhou, and we are moving almost 35 million customers on 5,000 flights a week across the network. For Jetstar Asia, we're very, very focused in terms of performance and the market we operate with. In any markets we choose, we choose the right aircraft, the right capacity in the markets, and with the right type of model in those markets. If you've seen over the years, though we have been very clear and transparent in terms of markets we've come out with which are not performing, we have added markets which we're successful in. I'll give you a good case. I've just come out from Medan in Indonesia. We have been there for 11 years. almost a 12th next year, a dozen years. And you find operators who have come in and out of Medan, a full-service carrier and a low-cost carrier, but we have stayed in those markets. So we're very focused in terms of staying on markets we perform, finding new original markets where we can get a good return for our shareholders, and growing markets where our frequencies require growth. We started a couple of new destinations Just slightly over a year ago, you got Haji in Thailand, you got Palembang, you get Pekanbaru, but and Medan more than eleven years ago, and Okinawa and Darwin we talked about. But we're very focused on where we start and how the route performs, and very nimble in terms of how we move capacity. These markets are new, and we need to really see a runway of operations in those markets. Obviously, we started those markets with. Collaboration from the airports at both ends. Now let's take Medan for example. The way we have made Medan successful is it is not an origin and destination market. Carriers that have operated from Indonesia to Singapore on an O&D basis have not really made it work, but we take customers from Medan beyond our network, and the partnerships and collaborations we have with 32 interline and codeshare partners have allowed us to not only cement the performance of the route, but enable it over time. I'm successful if you're speaking this same time next year, we may have actually grown our network in Medan. And we have been speaking to tourism stakeholders. We work very closely with Persona Indonesia. They're very big in terms of creating the next 9, 10 new Balis across Indonesia. You know it as well. And we will see how the market grows. Today, customers are going to Lake Toba Actually do use Jetstar Asia service. They get into Medan, they look at the sights and sounds, surrounds around Medan, and then they do a 3-4 hour drive on a new expressway, which is hassle-free to get to Lake Toba. So we are actually servicing the market but indirectly. Once the market organically grows in terms of demand and there is the right number of hotel accommodations in Medan of certain relative standards the customers are looking for, That could be potential down the road. We are very disciplined. As I said, growth is just not about taking on new aircraft, growing ASKs. It's about having a mature model where you service the customers with the best on-time performance and reliability, the best customer experience, and have a fantastic safety record. I think if you look at the whole ecosystem of what we do, we have been phenomenal and successful in terms of how we do it. If you look at the age and stage of the Jetstar Asia aircraft, our average age of the aircraft is coming into 8 years. And where you have actually seen ASKs drop off is we follow a high standard maintenance schedule that is required of airline operators everywhere in the world, including Singapore. And as our aircraft, the earlier batch of aircraft hit 12 years old, we have to put them into C-checks. And so you just, you'll see the so-called eventual dip in ASKs, but that will come online once the aircraft are all finished, the overhaul programmes. We are very cognizant of the neo debate, the fuel efficiency debates on engines, new engine types on aircraft. But I think you're also aware of some operators having engine types that are facing some issues in the market. Our A320 Classics are workhorses. Our utilisations are very high, almost up to 12 hours a day on each of the aircraft, which is pretty much there. And if you look at the kind of efficiency we have with the mix of the Classics and the Sharklets we have, and the so-called discipline we have in terms of the fuel usage program with single-engine taxi-in and taxi-outs, and what we do around the fuel savings program on our lower seat cost projects across the networks and hubs. We are very happy with the way the aircraft are performing. Yes, the new aircraft may have additional 6 seats. We have got a batch of A321LRs that's coming to the Jetstar Group, and these aircraft have seats up to 230 aircraft and can go a different range. The Jetstar Group is very progressive and forward-thinking in terms of taking the right aircraft in the market to meet the right demand for those markets and the right capacity. So we will do the necessary steps to accommodate that level of growth the market requires. But for now, in Singapore, we are happy with the way the aircraft are performing and how we are servicing those markets with the aircraft. I think we are cognizant of that as a group, and we are also aware it is not just a slot issue in terms of having a bigger capacity in the aircraft. Certain markets will be better served with a better unit cost of operating those markets, which will make it even more affordable for customers in those markets. And the A321s will come to our group. And at some stage you'll see the A321s across the network in the whole Jetstar group. But from Singapore's point of view, given the growth we have actually seen year on year on competitors flying in and out of Singapore, we choose to be very pragmatic and very disciplined. And with that lens, We are quite fundamentally happy with the performance of A320s in our set markets. The A321s is something that we are watching, and as the market develops and as slot situation eases or gets congested with runway 2 being shut down and runway 3 being opened up and 3-runway operations being opened up, we will see how the models are. The Jetstar Group has been pretty much at the leading edge and in terms— and also the first ones off to jumpstart the long-haul low-cost model. As a group, we have got 131 aircraft. We have 11 787s. We fly the widebody aircraft in markets that make the best returns for the aircraft. Scoot has got a different game plan. We don't want to comment on what they're doing. But if you just look back at history, prior to consolidation of Scoot, Tigerair lost maybe more than $1 billion in the whole history of the airline. And with the so-called irrational growth that preceded that until Scoot came on board and the merger took place. In Jetstar, we have been very disciplined and been very transparent to the market and community that we will only grow incremental capacity when the market requires it. We are happy in terms of how the performance has been in the market we are serving. We talk about secondary markets today and we look at some of the markets we serve. They are unserved. Okinawa is a good serve. Underserved. Da Nang, Clark is another good example. And we approach the market with that view and then we supplement the traffic through our codeshare and interline partners. It's a different model. You've heard the commentators comment today The Jetstar Group doesn't only just work with the Jetstar Group, while other airlines work within the group. The Jetstar Group works beyond Jetstar Group, includes the Qantas Group, includes another 32 or more codeshare and interline partners. With that kind of growth we are seeing through passenger numbers through our network, we are very happy with what we are doing, and we are not going to comment on what the competitors are doing. We're not chasing market, we're performing in the markets that we fly in. Look, it's actually a compliment to hear that others are following what Jetstar started from the beginning. But if you've seen that the market also has seen a consolidation of brands, has seen a consolidation of metal types, when you see the market facing cyclical challenges, airlines which are very pragmatic and disciplined will go the long run, the long haul in this game, and we want to do that. We have to be very disciplined because we have— we are responsible to not only our customers and our people, but to our shareholders as well. And as I said, we are happy and performing in the kind of niche model we have, and the way we cooperate with our partners, and the way we selectively grow in a disciplined manner. What is the future of Jetstar Asia?

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