Jetstar lands Beijing rights, eyes Europe

JETSTAR is expected to begin flights to Beijing after finally gaining airport landing slots but will have to wait longer before it can fly onwards to Europe because it lacks the necessary traffic rights.

By InvestSMART · 13 Jul 2011

By InvestSMART ·
13 Jul 2011

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The expansion of Jetstar's footprint in Asia comes as speculation grows about the loss-making routes its parent, Qantas, will cut as part of a review of its international operations.

Analysts believe the routes most likely to be ditched include those to Buenos Aires and Bangkok.

Qantas flies to Europe via Singapore and Bangkok, and it is likely Jetstar will take over services to the Thai capital because the Asian nation is a popular destination for leisure travellers.

The chief executive of Jetstar, Bruce Buchanan, is due to make a "significant announcement" in Beijing today about the no-frills airline's pan-Asian network.

It was unclear yesterday whether Jetstar would be offering direct flights between Australia and Beijing or its Singapore affiliate, Jetstar Asia, widening its reach into the fast-growing Chinese market. The chief executive of Jetstar Asia, Chong Phit Lian, is also due in Beijing for the "network announcement".

A Jetstar spokeswoman declined to comment further.

Jetstar does not offer direct flights between Australia and China but Jetstar Asia has services from its Singapore base to multiple destinations on the Chinese mainland including Shanghai and Guilin.

The budget airline has been seeking landing slots in Beijing for the past three years.

In March, the Australian and Chinese governments agreed to increase the cap on the number of seats on flights between the two countries. Chinese airlines have increased flights to Australia over the past year.

Qantas has previously expressed interest in building a base in China as part of a launch pad for flights by itself or Jetstar to Europe, despite a choppy history in the country. The group does have the necessary air rights from Chinese authorities to fly to Europe but it is yet to gain approval from European regulators.

Qantas operates six flights a week between Sydney and China's business capital, Shanghai. The airline does not fly to Beijing, which is regarded as more of a leisure destination.

Qantas shares experienced their biggest fall in four months yesterday, closing down 9.5? at $1.84, as pilot strike action looms and investors consider it likely that Tiger Airways will remain operating in Australia.

Virgin Australia fell almost 9 per cent, or 3?, to 31?.

Analysts attributed the fall in airline stocks to a market-wide sell-off rather than the impact of a carbon tax on domestic jet fuel. "It was pretty much as we thought," CBA Equities analyst Matt Crowe said of the tax.

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Frequently Asked Questions about this Article…

Is Jetstar starting flights to Beijing and when will they begin?

According to the article, Jetstar is expected to begin flights to Beijing after finally gaining airport landing slots. A "significant announcement" about the no-frills carrier's pan-Asian network was due to be made in Beijing by chief executive Bruce Buchanan.

Will Jetstar be able to fly from Beijing onwards to Europe?

The article says Jetstar will have to wait longer before it can fly onwards to Europe because it lacks the necessary traffic rights. While Qantas has air rights from Chinese authorities to fly to Europe, Jetstar has not secured those rights and European regulator approval is still pending for the group.

Could Jetstar take over some of Qantas’s international routes?

Analysts in the article speculated that as Qantas reviews its international operations it may cut loss-making routes, with Buenos Aires and Bangkok among the routes most likely to be ditched. The article suggests Jetstar is likely to take over services to Bangkok because Thailand is a popular leisure destination.

How does Jetstar Asia fit into Jetstar’s China expansion plans?

The article notes it was unclear whether Jetstar would offer direct flights between Australia and Beijing or use its Singapore affiliate, Jetstar Asia, to widen reach into China. Jetstar Asia already operates from Singapore to multiple Chinese mainland destinations including Shanghai and Guilin.

Why are landing slots and traffic rights important for investors watching airline expansion?

Landing slots determine whether an airline can operate at busy airports like Beijing, and traffic rights govern international routings (for example, flying on from China to Europe). The article highlights Jetstar had been seeking Beijing landing slots for three years and lacks traffic rights to continue to Europe—factors that directly affect route expansion and potential revenue.

What recent regulatory changes are affecting flights between Australia and China?

The article reports that in March the Australian and Chinese governments agreed to increase the cap on the number of seats on flights between the two countries, and Chinese airlines have increased flights to Australia over the past year—both developments that change capacity and competition on Australia–China routes.

How did the market react to the news about Qantas and airline sector developments?

The article states Qantas shares experienced their biggest fall in four months, closing down 9.5% at $1.84 amid looming pilot strike action and investor concerns about competition (including Tiger Airways). Virgin Australia shares also fell (reported as almost 9%). Analysts attributed the falls to a market-wide sell-off rather than the impact of a carbon tax on domestic jet fuel.

What should everyday investors watch for next regarding Jetstar and Qantas developments?

Investors should watch for Jetstar's official Beijing network announcement from CEO Bruce Buchanan and any clarification on whether flights will be direct from Australia or via Jetstar Asia. Also monitor Qantas's international review outcomes (possible route cuts to Buenos Aires or Bangkok), regulatory approvals for China–Europe rights, and any updates on pilot industrial action—each could affect airline capacity, competition and share prices.