Ready, Steady, Go?

Could it be that slow and steady rather than rapid expansion is the key to making money in the Asia Pacific’s highly competitive budget airline market? The rule seems to have worked for Qantas’s Jetstar family and for what many observers describe as India’s most successful carrier.

Asia’s low-cost carriers have gone through some turbulent times in recent years, with decent profits hard to come by. Tough pricing competition has pushed yields down as some of the no-frills players continued to import huge numbers of new single-aisle aircraft, throwing them onto already crowded routes and into congested airports.

Yet in the midst of this, as Qantas chief executive Alan Joyce reported the group’s biggest ever profits in a financial year – a record $1. 53 billion before tax, up 57 per cent – there was another extremely significant disclosure. The Jetstar group of airlines – comprising Jetstar Australia and New Zealand, Singapore-based Jetstar Asia, Jetstar Pacific in Vietnam and Jetstar Japan – reported underlying profits of $262 million, up $181 million from the same period a year earlier. It was a record result for the low-cost airline group (Qantas doesn’t break out the results of the separate Jetstar airlines) and the third biggest contribution to underlying earnings, behind Qantas Domestic and International.