The Qantas and AirAsia groups have announced an alliance between AirAsia and Jetstar aimed at reducing fleet acquisition, operating, fuel and spare parts costs for both low cost airlines.
The announcement, made in Sydney by Qantas CEO Alan Joyce, AirAsia CEO Tony Fernandes, and Jetstar CEO Bruce Buchanan on January 6, aims to pool the resources of Jetstar and AirAsia to better define future fleet requirements as well as to give both airlines greater buying power with airliner manufacturers, spare parts suppliers, and fuel providers.
“Jetstar and AirAsia offer unmatched reach in the Asia Pacific region, with more routes and lower fares than their main competitors, and this new alliance will enable them to maximise that scale,” Alan Joyce said in a statement. “Just as both carriers have pioneered the development of the low cost, long haul airline model, today’s announcement breaks the mould of traditional airline alliances and establishes a new model for achieving reduced costs and increased efficiency.”
The move is the first such airline alliance between low cost airlines. Indeed, it appears to come closer to some of the original cost saving ideas of an airline alliance than those currently employed by the larger global airline groups.
“It’s the first time two low cost carriers have been able to form an alliance and we think that’s an important first step, very important first step in what can be something much bigger going forward,” said Buchanan. “We have identified, in this initial list, many hundreds of millions of dollars worth of cost-saving opportunities. We think that’s an exciting opportunity for us as we launch this partnership going forward.”
“I think the most significant thing of what we’re doing today is to show that low cost carriers can work together, and I think that was the myth that it couldn’t be done,” added Fernandes. “But it is fantastic because the cultures are very similar… and we’ve been able to build something that I think is very unique. So I think this is a huge step forward for the aviation industry in Asia.”
One of the key motives for the move was so that the alliance would have a bigger say in helping to define replacements for the A320 Family and 737NG range of narrowbody airliners. “Aircraft is the number one thing that drives our cost structure, so getting that right and getting potentially the next generation of aircraft even more suited for this region,” Fernandes explained. “That’s really where we think the two of us getting together can really put pressure on the manufacturer to design an aircraft that’s best suited for this region, is where the opportunity come from mainly.”
Other savings across both airlines will come from shared passenger and airside aircraft handling facilities and services at common ports such as the Gold Coast, shared aircraft spare parts inventory pooling, joint procurement of engineering and maintenance services, and reciprocal arrangements for passenger disruption management at common ports.
Both Joyce and Fernandes were quick to point out that this was a non-equity alliance and that there had been no discussions about future equity tie ups, but both also agreed it opened up the possibility of future joint-ventures in other areas. “This is the foundation for bigger things in the future,” Joyce said.