Qantas set to inject millions in Jetstar Japan
Japanese financial newspaper Nikkei has reported Jetstar Japan will raise 11 billion yen ($117 million) next month from Qantas and Japan Airlines, which each have stakes of 33.3 per cent.
Qantas has previously committed about 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 country's largest budget airline 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 because either Jetstar Japan's losses were greater than expected or because 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 that Jetstar Japan has experienced growing pains since launching domestic flights, pointing out in June that turning it into a profitable business would depend largely on the timing of a start to short-haul flying to destinations in China, Korea and Taiwan. The budget airline has targeted international flying within the next two years.
Jetstar was one of three budget airlines, including Peach and AirAsia Japan, which started domestic flying in Japan within six months of each other last year.
Malaysian budget airline AirAsia decided several months ago to pull out of its airline joint venture in Japan, which will result in the rebranding of AirAsia Japan as Vanilla Air.
Frequently Asked Questions about this Article…
Qantas is investing millions in Jetstar Japan to secure its position in the domestic Japanese market and to support the airline's growth amidst competition from other budget airlines.
Jetstar Japan is raising 11 billion yen (approximately $117 million) from Qantas and Japan Airlines, both of which hold a 33.3% stake in the airline.
Since its launch, Jetstar Japan has faced significant start-up costs and financial losses, partly due to entering a market where low-cost airlines are a new phenomenon.
Analysts believe that despite initial losses, there are substantial long-term rewards for Jetstar Japan's shareholders if the airline can successfully establish itself in the market.
Jetstar Japan currently operates a fleet of 17 A320 aircraft, making it the largest budget airline in Japan.
Jetstar Japan plans to start short-haul flights to destinations in China, Korea, and Taiwan within the next two years as part of its international expansion strategy.
The competitive landscape has intensified with the entry of three budget airlines, including Jetstar, Peach, and AirAsia Japan, all starting domestic flights within six months of each other.
Jetstar Japan aims to break even within three years of launching its services, despite the initial financial challenges.