Jetstar, Tiger draw battlelines in Sydney and Singapore

“A unified and simpler shareholder structure and vision for Jetstar Asia and Valuair provides certainty for these airlines and greater commercial and operational alignment, achieving new synergies across the airlines,” said Qantas CEO Alan Joyce.

Under the new arrangement, Qantas will gain a friendly majority shareholder in Choo Teck Wong, who has been a general sales agent for Qantas in a number of Asian countries for over 20 years. This will likely allow it to be more influential over the Singaporean carrier as it pushes to expand the Jetstar brand in Asia, in association with its Vietnamese affiliate Jetstar Pacific.

It also ends the uneasy and often adversarial relationship with Orangestar’s second biggest shareholder Temasek Holdings. The state owned investment company is also the second biggest shareholder in Jetstar’s rival Tiger Airways, and is also the largest shareholder in Singapore Airlines, ensuring that the two companies were often at loggerheads as to how to manage Jetstar Asia.

Only a day later, Tiger Airways bared its teeth, announcing its fist foray into the ‘golden triangle’, with up to four daily services between Melbourne and Sydney from July 3. Lead in fares start from $68 one way, just below Jetstar’s lowest fare on its Avalon-Sydney route.
“Melbourne-Sydney is one of the most popular routes in both Australia and indeed the whole world,” said Tiger Australia managing director Shelley Roberts. “With Tiger Airways new flight route, more people than ever will be able to travel between the two destinations more often and for the first time at consistently low fares. This is particularly pleasing at a time when some other airlines are cutting schedules and in comparison, Tiger Airways is adding to its network.”

It is understood that with Virgin Blue announcing its recent reduction in flights for the Northern Summer scheduling period, space at Sydney’s Terminal 2 has opened up for Tiger to start the services. It is also understood that the airline and airport were able to reach a satisfactory agreement on airport charges – something Tiger had previously cited as the reason it hadn’t entered the market.

That move marks Tiger’s first serious push into the Sydney market after its failed attempt to convince Sydneysiders to fly out of Newcastle. It is also expected that in time the airline will announce more routes out of Sydney, most likely connecting to existing Tiger cities such as the Gold Coast, Sunshine Coast and Adelaide.

Interestingly, the Tiger decision could lead Qantas to respond by bringing Jetstar onto what was a once fiercely protected route for the mainline carrier. Jetstar is most likely to move across a number of its Avalon-Sydney services to operate from Tullamarine, as it has done to compete with Tiger’s flights to Perth and Adelaide. However, it will need to be careful in how it chooses to respond, as adding more capacity to the market would only lead to a fare war, eroding yields at both carriers.

Whether by coincidence or not, the two announcements appear to be signs of a renewed battle between Tiger – and Temasek and Singapore Airlines as its largest shareholders – and Qantas, primarily through its Jetstar subsidiary.

For Tiger, a key will be expanding in the Australian market at a time when air travel is continuing to grow, especially in the budget end of the market which the airline sees as its niche. Conversely, for Jetstar, the act of gaining greater control over its Singaporean affiliate will place it well to create a true pan-Asian presence once the open skies agreement between ASEAN countries is implemented.

A recent sign of this market commitment is Jetstar’s announcement that it will extend its flights from Perth to Jakarta and Denpasar through to Singapore from July. This will give the Australian carrier access to the Indonesia-Singapore market, which has been the domain of Valuair for a number of years. Indeed, it may have been this act which convinced Temasek and the other Jetstar Asia shareholders (two independent Singaporean businessmen) to cash out their shares.

While other legacy airlines are facing falls in passenger numbers – such as the 20 per cent drop Singapore Airlines recorded in February – the battle between the two low cost carriers looks only set to increase, bringing benefits for both domestic and international travellers.