Jetstar expands Southeast Asia services as low-cost competition in the region intensifies
Qantas low-cost unit Jetstar is focusing on expansion of its medium-haul international network as it copes with Boeing 787 delivery delays and faces growing competition from Asian rivals.
Jetstar chief executive Alan Joyce says the carrier will be adding services this year to Singapore and Indonesia using its fleet of Airbus A320s. Jetstar had been intending to add more long-haul services to Asia in the second half of this year but has had to shift its strategy due to delays with the 787 flight test programme.
Jetstar was supposed to receive the first of at least 15 787s in August but now anticipates it will receive the first aircraft in May 2009. It plans to use 787s for services from Australia to Europe via a new Asian base. Jetstar already flies to Indonesia, Japan, Malaysia, Thailand and Vietnam with its fleet of six Airbus A330s.
Fifth freedoms
Joyce says Bangkok, Ho Chi Minh, Hong Kong, Kuala Lumpur and Singapore are in the running to be the 787 base, with availability of fifth freedom rights an important factor. "There are a lot of fifth freedom rights out of Singapore and Bangkok but some [of the rights] are not so ideal," he says.
Another key consideration for Jetstar is slot availability and the commercial deal the airport is willing to offer. "Kuala Lumpur is working on a very aggressive bid," Joyce says.
If it chooses Ho Chi Minh, Jetstar could link up with Pacific Airlines. Qantas acquired a 19% stake in Pacific last year and Jetstar is now helping turn it into a low-cost operator as part of a plan that will eventually see Pacific re-branded as Jetstar. If Singapore is chosen for the new base Jetstar could link up with Jetstar Asia, which is 45% owned by Qantas.
Jetstar's further expansion in Asia comes as several Asian low-cost carriers expand into existing Jetstar markets. Tiger Airways Australia and AirAsia X launched services late last year and a third, Lion Air Indonesia, plans to launch later this year.
The three carriers are following different strategies. Singapore's Tiger exploited Australia's liberal entry rules to launch a domestic airline while Malaysia's AirAsia X only operates into Australia as a foreign carrier. Indonesia's Lion Air plans to create an Australian airline designated by Australia for outbound flights but it also may serve domestic routes.
All three carriers pose new competitive threats to Jetstar and, like Jetstar, are attracted by the traffic potential between Australia and Southeast Asia. Tiger Australia is now competing fiercely against Jetstar in several domestic markets and in the Singapore-Darwin market. Competition between the two will increase further with Jetstar adding a second daily flight in April from Darwin to Singapore, and launching Perth-Singapore flights later this year.
AirAsia X is now competing against Jetstar on long-haul routes between Australia and Malaysia. Jetstar launched A330 Sydney-Kuala Lumpur flights last year while AirAsia X now serves Australia's Gold Coast from Kuala Lumpur. AirAsia X plans to add at least one Australian city every year, starting with Melbourne.
Lion Air Australia will initially compete against Jetstar between Australia and Indonesia. Jetstar already operates A330s to Bali from Melbourne and Sydney. Joyce says later this year Jetstar will begin using its A320s to serve Bali and Jakarta from other Australian points. He says Jetstar will have the first mover advantage over Lion Air Australia, which is 51% owned by Brisbane-based SkyAirWorld, because it has a more established brand in Australia and a better reputation.
Jetstar now operates about 25 A320s but has almost 70 more on order, which Joyce says will allow it to grow internationally despite the 787 delays. It is employing what Joyce calls its "short-haul Perth and Darwin strategy". On Asia's doorstep, these two cities give Jetstar A320 access to Southeast Asia. Joyce predicts Jetstar will eventually base five A320s in Darwin and 25 in Perth.
Joyce says Jetstar also plans to use its A320s to launch services later this year to the South Pacific from a not yet selected base in eastern Australia. This will put Jetstar, which serves New Zealand but none of the Pacific islands, in competition with Pacific Blue.
Source: Airline Business
