Start of Asian routes key to Jetstar Japan turnaround

Jetstar Japan will begin flying international routes within the next one to two years, in a move one of its cornerstone shareholders believes will be crucial to making the new budget airline profitable.

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."