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Jetstar footprint to grow with existing franchises

written by australianaviation.com.au | August 20, 2015

Qantas and Jetstar are again putting fresh equity into Jetstar Japan. (Rob Finlayson)

Although new Jetstar franchises in Asia have been ruled out for now, Qantas chief executive Alan Joyce says there is still plenty of growth planned for Qantas’s low-cost arm.

Like the rest of the Qantas Group, Jetstar posted a return to profitability in 2014/15, reporting underlying earnings before interest and tax (EBIT) of $230 million for the 12 months to June 30 2015, a healthy improvement on the $116 million underlying EBIT loss in the prior corresponding period.

Revenue across the Jetstar group, which comprises Jetstar Australia and New Zealand, Singapore-based Jetstar Asia, Jetstar Japan and Jetstar Pacific in Vietnam, rose 7.5 per cent to $3.464 billion, Qantas said in its full year results presentation released on Thursday.

Although Qantas did not break out the detailed financial performance of each franchise, the company did say Jetstar’s domestic New Zealand operations were profitable “for the first time” since domestic flights started there in 2009, while yields, or average airfares per passenger, grew in Australia.

Meanwhile, losses among the three Asia-based carriers halved in 2014/15 compared with the prior year, Qantas said, with Jetstar Asia returning to profitability as capacity growth returned to more normal levels in Singapore and Jetstar Pacific posting positive underling EBIT in the second half of 2014/15.


And although Jetstar Japan was still losing money, Qantas said Jetstar Japan had “significantly improved” its performance in the past year.

“We won’t be starting any new ventures until we’ve gotten all the Jetstar operations to where we want them,” Qantas Group chief executive Alan Joyce told reporters in Sydney on Thursday.

“Jetstar overall is performing exceptionally well, it has got lots of growth.

“Don’t assume there is no growth planned for Jetstar, there is a lot of growth planned for Jetstar but it has to be profitable growth and we have to consolidate the opportunities that we have.”

On Thursday, Qantas and Japan Airlines said they were each tipping in up to A$55 million as an equity injection to Jetstar Japan to support the airline as it expanded via new international routes and grew its domestic network.

It is the third time the two airlines, who each own one-third of Jetstar Japan, have provided additional funds to the airline, which currently operates 20 Airbus A320s. The most recent recapitalisation took place in April 2014, while the first occasion was in 2013.

Mitsubishi Corporation and Century Tokyo Leasing Corporation are Jetstar Japan’s two other shareholders, each with a 16.7 per cent stake

Qantas said it had written off its stake in the proposed Jetstar Hong Kong, which failed to win an operating licence from the territory’s Air Transport Licensing Authority (ATLA), resulting in a $21 million impact on the books.

Joyce said Qantas would make no further investment in Jetstar Hong Kong, and although a final decision to wind up the carrier rests with the Jetstar Hong Kong board, that seems a formality as the board of fellow Jetstar Hong Kong shareholder China Eastern has already approved a proposal to cut its ties with the proposed low-cost airline.

Earlier in the month Jetstar group chief executive Jayne Hrdlicka said the Jetstar Hong Kong board was currently looking all available options in response to the ATLA’s decision.

“The Jetstar Hong Kong board has not made any decision on what it will do,” Hrdlicka told delegates at the CAPA – Centre for Aviation Australia Pacific Aviation Summit in Sydney on August 5.

“It has a number of different options and it is going through those options as you would imagine quite diligently.

“We have got I think until the third week in September to decide what we want to do and the board will make its announcement once the decision has been made.”

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