Qantas dips into pocket to shore up Jetstar Japan

Qantas is said to be on the cusp of pouring tens of millions of dollars into Jetstar Japan as it seeks to secure its position in the domestic Japanese market against other newcomers.

Qantas is said to be on the cusp of pouring tens of millions of dollars into Jetstar Japan as it seeks to secure its position in the domestic Japanese market against other newcomers.

Japanese financial newspaper Nikkei has reported Jetstar Japan will raise 11 billion yen ($118 million) next month from Qantas and Japan Airlines, which each have stakes of 33.3 per cent. Qantas has previously committed just over 5 billion yen to Jetstar Japan.

Jetstar Japan's two other shareholders, Mitsubishi and Century Tokyo Leasing Corporation, are not expected to participate in the private share placement. They both have stakes of 16.7 per cent.

Since it began flying in July last year, Jetstar Japan has become the largest budget airline in Japan with a fleet of 17 A320 aircraft. But the cost of entering the market has weighed on the financial performance of Jetstar, which booked $50 million in losses from Jetstar Japan and Jetstar Hong Kong in the year to June.

Qantas declined to comment on the latest speculation, but said it was "committed to the long-term success" of Jetstar Japan.

Macquarie Equities analyst Russell Shaw said a capital injection would be needed either because Jetstar Japan's losses were greater than expected or it planned to accelerate its market growth.

Either way, Jetstar Japan faced substantial start-up costs given it was entering a market where low-cost airlines were a new phenomenon. But Mr Shaw emphasised there were substantial rewards for Jetstar Japan's shareholders in the longer term if they could crack the market.

"[Qantas and Japan Airlines] are both long-term investors. It is going to weigh on the [Qantas] group's performance for the next two years," he said. "It will take some time to bed down the model."

Jetstar Japan has aimed to break even within three years of launching services.

Japan Airlines has conceded Jetstar Japan has experienced growing pains since launching domestic flights, pointing out in June that turning it into a profitable business will depend to a large extent on the timing of a start to short-haul flying to destinations in China, Korea and Taiwan. The budget airline has targeted launching international flights within two years.

Jetstar was one of three budget airlines including Peach and AirAsia Japan, which started domestic services in Japan within six months of each other last year.

Malaysian budget airline AirAsia decided to pull out of its joint venture in Japan, which will result in the rebranding of AirAsia Japan as Vanilla Air.

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