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Jetstar Asia to spread its wings

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Ngariman

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Feb 7, 2006
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April 07, 2006
QANTAS remains intent on replicating its Jetstar Asia joint venture in other Asian countries, despite problems that have prompted its Singaporean investment to reduce aircraft numbers and raise more money.
The Australian carrier is not elaborating on reports that Jetstar Asia, of which it owns 44.5 per cent, is cutting its fleet of eight A320s to six, and that parent company Orangestar will seek a $S36 million ($30.7 million) cash injection by selling 144 million shares.

The move comes after losses of $27.4 million in the six months to December 31 and was said to be due to a lack of viable routes, and competition from new entrants.

But Qantas chief financial officer Peter Gregg still believes the Asian joint venture is an essential part of the flying kangaroo's wider strategy to boost its presence in Asia.

While conceding that business in Singapore was tough and "not getting any easier", Mr Gregg said Qantas was actively looking to start up similar partnerships.

"We're looking at other destinations to start up similar ventures in Asia and it's no secret we've been to Indonesia," he said. "And I've had people up in the Philippines and in Thailand."

Mr Gregg said Indonesia's Adam Air was still "very much" a potential partner and Qantas had been in discussions with other carriers in the country in the past two weeks.

"It is still very interesting and we'll come down to a preferred partner in the foreseeable future," he said, without specifying a time frame. "We've got a little more work to do."

Asked whether this meant Qantas would definitely take an Indonesian partner, Mr Gregg said: "I can't say that we will. I can say we remain convinced that we should.

"We've got to be able to justify that type of investment but it's a very attractive market - 250 million people - that is starting to develop and it is a natural aviation market because of the range of islands in the archipelago."

Qantas is looking at buying into value-based airlines but does not rule out teaming up with a full-service carrier if the business case stands up.

Its goal is to link the Asian joint ventures with Qantas mainline and Jetstar International in an attempt to overcome the advantages enjoyed by mid-point carriers such as Singapore Airlines.

Jetstar International's initial route structure is likely to link in closely with the destinations serviced by Jetstar Asia.

Mr Gregg pointed to Singapore Airlines - with 90 services a week into Australia and 55 to India, compared to Qantas's three weekly services to India - as an example of the problems the carrier had to address.

He said the airline had already strengthened its domestic base and had now embarked on the next phase of launching its low-cost international airline.

Linking Jetstar International flights with those operated by Jetstar Asia and overlaying the mainline operations on top of that would give Qantas a much bigger regional presence.

"And if we can then take the concept that we've established in Singapore and place this in other markets in Asia, then that actually strengthens the feed, not only within the Asian operations but in and out of the Qantas and Jetstar operations that fly to those destinations," he said.

"That's the theory behind it and that's what we're going to go out and pursue, where we can get decent economics."
 
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