Qantas Group Ltd. will close its budget airline in Southeast Asia as rising costs and intense competition force the Australian carrier to focus on more profitable routes.
The decision to shut down Jetstar Asia Pte comes after years of struggling with low fares from rivals such as Capital A Bhd.’s AirAsia X Bhd. and Singapore Airlines Ltd.’s Scoot Pte Ltd., which have been competing with the airline since their launch more than two decades ago.
Reasons for Closure
- Jetstar Asia has been operating at a loss for several years.
- The carrier had about 1,000 employees in Singapore before it was put up for sale last year amid a broader review of Qantas’s international operations.
- Vanessa Hudson, Qantas Group CEO, stated, “Unfortunately, we have made the difficult decision that it is no longer viable for us to continue operating Jetstar Asia.”
- The airline is undertaking its most ambitious fleet renewal program in history, which includes almost 200 firm aircraft orders and hundreds of millions of dollars being invested into existing fleets.
Contributing Factors
The closure results from a combination of factors, including:
- Supplier costs that have increased by up to 200%.
- Higher fuel prices due to fuel hedging contracts entered into when oil was trading at $40 per barrel, compared to current levels above $80 per barrel.
Jetstar operates flights out of Australia but also has bases in Japan, Vietnam, and Thailand through partnerships or wholly-owned subsidiaries. It plans to maintain these operations outside Southeast Asia while continuing its domestic business within Australia.
Impact on Staff
Hudson mentioned that there would be some redundancies among staff who work on international routes but did not provide further details on how many jobs would be cut or where they would be located.
Market Reaction
Qantas shares rose 3% Tuesday morning after news broke about the closure plan during an investor presentation by Hudson ahead of an annual meeting later this week.
Industry Reactions
- Hudson declined to comment on whether any other airlines could potentially take over Jetstar’s slots or assets once they are sold off following shutdowns planned for mid-2025 until mid-2026 across all markets except Japan, where flights will cease from March next year due to regulatory conditions.
- Capital A Chief Executive Tony Fernandes welcomed Qantas’s decision, stating that low-cost carriers couldn’t compete against larger airlines like Singapore Airlines’ Scoot, which he described as having “massive scale” advantages.
- Singapore Airlines Chief Executive Goh Choon Phong declined to comment on potential interest in buying out Jetstar assets following their shutdown.
This decision marks a significant shift in Qantas’s strategy as it navigates a challenging competitive landscape in the airline industry.
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