This year's Operations award goes to a wholly owned subsidiary of another airline, thus recognising the subsidiary's achievements apart from those of its parent. This is the first time an award in any of the six categories has gone to such a carrier since the event's inception in 2002.
The winner, Australia's Jetstar, has executed the low-cost airline model by the book under the watchful eye of parent Qantas Airways. And not only has it rapidly ramped up its domestic operations, in the past year it has taken the significant step of introducing international services with widebody jets.
Where many others failed, Jetstar has succeeded as a so-called "baby" low-cost carrier owned by a legacy airline. Mimicry is the strongest form of praise as other airlines now study how Jetstar has sustained a healthy balance between its independence from and synergies with Qantas.
Since its 2004 launch, Jetstar has done what Qantas needed. Its traffic has soared from 320,000 passengers to 5.8 million in 2006. Year-end results, due to be issued in August, are expected to show that Jetstar's revenue has grown to A$400 million ($338 million), with net earnings topping A$50 million. This has not come at its parent's expense, but has added value to the Qantas group. Jetstar has also stopped Virgin Blue's market share surge within Australia, and now claims 15% of this market.
Operationally and strategically Jetstar's role started to change in late 2005 when it launched its first international service across the Tasman Sea to New Zealand. Since then it has taken over all Qantas services to Christchurch and offers more seats between Christchurch and Australia than any other airline. Qantas lost more than A$10 million a year on the Melbourne-Christchurch route, but it is now one of Jetstar's most profitable services.
It did not take Qantas long to realise that this success might be repeated in other overseas markets where Qantas either struggled or had withdrawn because margins were too low. The first experiment was with Australian Airlines, a Qantas subsidiary formed to take over low-yield routes to Asia. But Jetstar's lower costs and better network enabled it to replace Australian, and even launch its own overseas routes. "It is taking the low-cost model successfully into longer sectors and the longer haul," said a judge. By the end of this year, Jetstar will serve seven Asian cities plus Honolulu. Alan Joyce, Jetstar's chief executive, says: "Jetstar has grown over threefold since it started flying three years ago."
This expansion from a domestic low-cost carrier to a long-haul low-cost carrier, turning unprofitable Qantas routes into profitable Jetstar routes, has been one of aviation's success stories. The story is ongoing as Jetstar plans next year to transition from Airbus A330s to Boeing 787s. Some day routes to Europe and North America could be on the cards as well.
The lesser-known part of this story is how Jetstar has adapted to this change. For example, Jetstar today assigns seats on domestic flights, unheard of two years ago, because it needs this to interface with its overseas flights.
Source: Airline Business
