Jetstar Asia faces squeeze on profits

JETSTAR ASIA'S profit fell 80 per cent last financial year as the Singapore-based budget airline faced a bigger fuel bill and tough competition.

Despite Qantas touting Jetstar Asia as the "most profitable and best low-cost network based in Singapore", accounts recently lodged with Singaporean regulators show the airline is still struggling to post strong results eight years after it was established in Singapore.

The documents reveal Jetstar Asia posted a profit of $S4.37 million ($3.38 million) for the year to June, down from $S22.47 million a year earlier.

Jetstar Asia has faced tough competition from its main rival, Malaysian budget airline AirAsia, as well as the Singapore Airlines-backed Tiger Airways and Scoot.

Revenue from passengers and cargo rose by 48 per cent to $S473 million for the year, while other income derived primarily from sub-leasing planes increased slightly to almost $S44 million.

But Jetstar Asia's fuel bill rose to $S214 million, from $S128 million previously, while its aircraft operating costs also rose by 29 per cent. The airline's fleet increased by four A320s to 16 during the year, which partly explains the increase in its fuel bill.

Qantas did not disclose the bottom-line performance of Jetstar Asia when it released its annual results in August, instead highlighting a 38 per cent boost in the offshoot's capacity and improvement in unit costs.

The latest accounts show Jetstar Asia's accumulated losses stood at $S67 million as at June 30.

Although its liabilities exceeded its assets by $S9 million, Jetstar Asia said its accounts had been prepared on the basis of it as a going concern because its holding company, Newstar Investments, had "undertaken to provided continuing financial support".

Qantas has a 49 per cent stake in Jetstar Asia's holding company while Dennis Choo, a Singaporean businessman, has the remainder.

The Singapore airline has been Qantas's biggest investment in the low-cost aviation market in Asia.

Jetstar's other longest established affiliate, Jetstar Pacific, has not turned a profit since Qantas bought a cornerstone stake in it in 2007. Vietnam Airlines is the other shareholder.

Jetstar Pacific is considering launching its first international routes from Vietnam this year, including from Ho Chi Minh City to Jakarta via Singapore from as early as March.

Jetstar also began a joint venture in Japan last year, and hopes to begin a budget offshoot in Hong Kong by the middle of this year. The latter still requires regulatory approval.

In recent submissions to the Australian Competition and Consumer Commission, Qantas has emphasised an improved passenger feed from its proposed alliance partner Emirates is "expected to result in Jetstar Asia's services becoming more sustainable".

Over the coming weeks, Qantas will announce changes to its Asian network, including the re-timing of flights.

It has also told the regulator potential new routes for Qantas could include Australia-Dubai-Berlin.

But it has emphasised a new route to Berlin would depend on the delivery of longer-range Boeing 787-9 Dreamliners, the first of which Qantas will not receive until 2016.