Qantas stumps up $60m to help Jetstar Japan fly higher
Following speculation this week about the need for further funding, Qantas said it and Japan Airlines would inject ¥11 billion ($120 million) between them into Jetstar Japan. It will result in both airlines increasing their stakes from 41.7 to 45.7 per cent. Their voting rights remain unchanged.
The two smaller shareholders - Mitsubishi and Century Tokyo Leasing - will have their stakes in the budget airline drop from 8.3 to 4.3 per cent as they are not participating in the placement.
Qantas said the equity injection would support growth in Jetstar Japan's fleet and infrastructure, helping it to take advantage of the "significant potential" for budget airlines in Japan.
The latest injection takes Qantas' investments in Jetstar offshoots in Asia - including those in Vietnam and Singapore - to about $277 million, according to Macquarie Equities.
The Macquarie analysts said the funding for Jetstar Japan suggested its start-up losses were higher than the original business case for the airline had allowed. They have estimated Jetstar Japan is losing about $50 million a year.
Jetstar was one of three budget airlines that started domestic services in Japan within six months of each other last year.
Jetstar Japan has also been hit with a higher fuel bill due to the yen depreciating against the US dollar. Airlines buy jet fuel in US dollars.
The airline's plans to establish a base at Kansai International Airport near Osaka have also been delayed by months, casting doubt over its plans to expand its network as quickly as it had wanted.
Since it began flying in July last year, Jetstar Japan has become the largest budget airline in Japan, with a fleet of 18 A320s flying to nine domestic destinations.
It intends to boost its fleet to 24 planes and aims to break even within the next two years.
Frequently Asked Questions about this Article…
Qantas is investing $60 million into Jetstar Japan to help the budget airline manage increased fuel costs due to a weaker yen and to support its growth plans, including fleet expansion and infrastructure development.
The new investment will increase both Qantas and Japan Airlines' stakes in Jetstar Japan from 41.7% to 45.7%, while their voting rights will remain unchanged.
The weaker yen has increased Jetstar Japan's fuel bill because airlines purchase jet fuel in US dollars, making it more expensive when the yen depreciates.
Jetstar Japan plans to expand its fleet from 18 to 24 planes and aims to establish a new base at Kansai International Airport near Osaka, although this has been delayed.
Since its launch in July last year, Jetstar Japan has become the largest budget airline in Japan, operating a fleet of 18 A320s across nine domestic destinations.
Jetstar Japan is facing challenges such as higher fuel costs due to the yen's depreciation and delays in establishing a new base, which affects its expansion plans.
Jetstar Japan is currently losing about $50 million a year, but it aims to break even within the next two years with the help of the new investment.
The investment in Jetstar Japan is part of Qantas' broader strategy to support its Jetstar offshoots in Asia, with total investments reaching approximately $277 million, including ventures in Vietnam and Singapore.
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