Jetstar Asia profit hit by fuel bills, 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 that the airline is still struggling to post strong results eight years after it was established in the city-state.
The documents reveal that Jetstar Asia posted a profit of $S4.37 million ($3.36 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 from the Singapore Airlines-backed Tiger Airways and Scoot.
Revenue from passengers and cargo rose 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 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 and long-time Qantas associate, has the remainder.
The Singapore airline has been Qantas' 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.
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.
Frequently Asked Questions about this Article…
Jetstar Asia's profit fell about 80% to S$4.37 million (US$3.36m) for the year to June, down from S$22.47 million a year earlier. The article attributes the sharp fall mainly to a much bigger fuel bill and tough competition, alongside higher aircraft operating costs as the fleet grew.
Jetstar Asia's fuel bill rose to S$214 million from S$128 million in the prior year. The airline's fleet increased by four A320s to 16 during the year, which the company said partly explains the higher fuel bill.
Yes. Revenue from passengers and cargo rose 48% to S$473 million for the year, and other income—largely from sub‑leasing aircraft—also increased slightly to almost S$44 million, even as the bottom line was hit by higher costs.
Jetstar Asia has faced strong competition from regional low‑cost carriers such as Malaysia's AirAsia and Singapore Airlines‑backed rivals Tiger Airways and Scoot. According to the article, this competitive pressure has made it harder for Jetstar Asia to post stronger profits.
Qantas holds a 49% stake in Jetstar Asia's holding company, Newstar Investments; Singapore businessman Dennis Choo owns the remainder. When Qantas released its annual results, it did not disclose Jetstar Asia's bottom‑line performance, instead highlighting capacity growth (a 38% boost) and unit cost improvements.
Yes. The latest accounts showed accumulated losses of S$67 million as at June 30, and liabilities exceeded assets by S$9 million. However, the company prepared its accounts on a going‑concern basis, noting Newstar Investments had undertaken to provide continuing financial support.
Jetstar Pacific (Vietnam) has not turned a profit since Qantas bought a stake in 2007 and is considering launching its first international routes from Vietnam this year. Jetstar also began a joint venture in Japan last year and hopes to launch a budget offshoot in Hong Kong by mid‑year, pending regulatory approval. These moves reflect the group's ongoing expansion in Asia.
Based on the article, investors should monitor fuel costs and their impact on margins, how competition from AirAsia, Tiger Airways and Scoot affects yields, the effects of fleet expansion on operating costs, any changes in accumulated losses or balance‑sheet strength, and the level of continued financial support from Newstar Investments and Qantas. Also watch developments from the group's regional affiliates and any regulatory approvals for planned expansions.
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