Start of Asian routes key to Jetstar Japan turnaround
Part-owner Japan Airlines conceded Jetstar Japan had experienced growing pains since launching domestic flights last July.
Qantas executives would not reveal when Jetstar Japan would start flying on international short-haul routes but Japan Airlines put it at one to two years away.
Japan Airlines chairman Masaru Onishi said turning Jetstar Japan into a profitable business would depend to a large extent on the timing of a start to short-haul flying to destinations in China, Korea and Taiwan.
"Right now they are in a situation of learning how to know the Japanese market - still they are having some difficulties," he said on the sidelines of an annual meeting of the International Air Transport Association in Cape Town.
"Maybe they can make a good performance in international short haul. Now they are in the stage of preparation for doing that."
Macquarie Equities estimates Jetstar Japan is losing about $50 million a year as it competes against Peach and AirAsia Japan. Jetstar Japan has grown quicker, and is now about twice the size of AirAsia Japan.
After initially relying on selling tickets via the internet, the airlines are looking to boost ways of encouraging consumers to fly with them in a market where people tend to book through travel agents.
Mr Onishi said Jetstar Japan had been able to win passengers in the high season but in the low season it was "difficult to get passengers by the web or direct sales". "Right now they are making contracts with travel agents and this year they could get a better score," he said.
Qantas chief executive Alan Joyce said the budget airline was still on track to become profitable within three years of its launch. Qantas is also waiting longer than expected for regulatory approval to launch Jetstar Hong Kong, a joint venture with China Eastern.
"We believe we have a solid case that is no different from what our competitors are operating up there," Mr Joyce said at the conference in Cape Town. "People really want this because the fares in Hong Kong are too high."
A new government in Hong Kong has made slight changes in the past month to what it deems a local airline. It has meant Jetstar Hong Kong has had to make changes to its application for regulatory approval, which should be resubmitted to authorities by the end of the month. Mr Joyce said Jetstar Hong Kong would gain a local investor but declined to say who it was likely to be.
Hong Kong's Cathay Pacific said it was not surprised by the time it was taking Jetstar to gain regulatory approval. "Any airline can't go anywhere and just say I would like to set up here - that is not how international aviation works," Cathay Pacific chief executive John Slosar said. "They will have some hoops to get over - it is up to the government to decide whether they will get over them or not."
Frequently Asked Questions about this Article…
Japan Airlines, a cornerstone shareholder, says Jetstar Japan aims to begin short‑haul international flights to destinations such as China, Korea and Taiwan within one to two years. Qantas executives have not given a specific date, but the start of these Asian routes is viewed as crucial to the airline’s turnaround.
No — Jetstar Japan is currently unprofitable. Macquarie Equities estimates losses of about US$50 million a year, but Qantas’ CEO says the budget carrier is still on track to become profitable within three years of its launch, provided international expansion and other plans go to schedule.
Jetstar Japan competes primarily with other Japanese low‑cost carriers such as Peach and AirAsia Japan. The article notes Jetstar Japan has grown faster and is now roughly twice the size of AirAsia Japan.
The airline initially relied on internet ticket sales but found many Japanese customers still book through travel agents. Jetstar Japan has struggled to fill planes in the low season via web or direct sales, so signing contracts with travel agents is a key part of boosting year‑round demand.
Jetstar Hong Kong, a planned joint venture between Qantas and China Eastern, has been delayed by regulatory approval. Hong Kong’s new local‑airline rules required changes to the application, which should be resubmitted by the end of the month; the venture will include a local investor, though that party has not been named.
Macquarie Equities estimates Jetstar Japan is losing about US$50 million a year. The losses stem from rapid growth, tough competition from Peach and AirAsia Japan, and the challenge of learning the Japanese market and building distribution beyond online sales.
Qantas executives express confidence: CEO Alan Joyce says they have a solid case for Jetstar Hong Kong and believe consumers want lower fares. However, Qantas is also facing longer‑than‑expected regulatory timelines and must secure local partners before launch.
Cathay Pacific says it is not surprised by the regulatory delays and emphasizes that setting up a new airline requires meeting government rules. Its view is that Jetstar will need to clear regulatory ‘hoops’ before it can fully operate in places like Hong Kong.
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