Jetstar will base A330s (above, seen in Sydney) in Singapore for long-haul operations to Europe and other points in Asia. On Thursday Jetstar announced Singapore would be its main Asian hub. At a general level, this means Singapore and Kuala Lumpur (home to AirAsia X), separated by a mere 185 miles, will be the hotbed of long-haul LCC flights. For Jetstar, its announcement means it will bump up its Jetstar Asia subsidiary based in Asia. More importantly, it will mean Jetstar will base A330s there for service to Europe and Asia.
Selecting SIN
The decision was not much of a surprise (and I'm self-conscious that's the second time in one week I've said that). Singapore had long been the favourite option. Jetstar Asia is already based there and Qantas has extensive operations in Singapore (including for servicing A330s), so there are economies of scale in Singapore.
The wild card was basing Jetstar's European operations in Vietnam, where Jetstar has another affiliate, Jetstar Pacific. The possibility was always murky, though. Vietnam does not have an as robust business environment, evidenced by recent incidents involving Vietnamese regulators--branding, fuel hedging, safety--which surely sealed any small chance Vietnam had.
Also news is that Jetstar is again applying for Singapore-Tokyo rights (last time it was Haneda, this time it's Narita). But make no mistake: Europe is where Jetstar wants to go.
Eyes on Europe
Parent and full-service airline Qantas had to withdraw from cities like Rome, Athens, and Paris. While current passengers could connect at London or Frankfurt (Qantas's only two European destinations), that adds a stop and cost.
Qantas also has had to contend with Asian carriers (Singapore, Thai, etc.) and Middle Eastern carriers (Emirates, and more recently Etihad and Qatar) biting into its turf by offering one-stop services from Australia to Europe.
Enter 787 delay, enter AirAsia X
Boeing's 787 was supposed to fix that. In 2008 Jetstar would have received some of the first 787s and would offer one-stop service to more leisure destinations in Europe. Delays pushed Jetstar's 787 delivery back to mid-2010, and then carrier delayed delivery until 2013. In the meantime, AirAsia X has snuck into what should have been Jetstar's turf: flights connecting Australia and Europe.
London is AirAsia X's only European destination, although it is flirting with serving Paris.
AirAsia X is relying on A350 XWBs for its European expansion, save for any A340s it can acquire at good rates and start services now (as it did for its London route). The A350 XWBs will be delivered starting in 2016, so unless AirAsia X acquires more A340s (crystal ball prediction: they will), we won't see AirAsia X and Jetstar compete in Europe in the near future.
The two brand strategy
That, of course, is assuming Jetstar stays away from London. Jetstar is part of the Qantas Group's two brand strategy. In theory, Qantas and Jetstar should serve their own distinct markets and not cannibalize each other. But that theoretical dichromatic split isn't clear-cut in reality.
On major domestic trunk routes like Melbourne to Sydney and Adelaide, Jetstar flew from Melbourne's Avalon airport, smaller and much further away from the CBD than Tullamarine, where Qantas flew from. But once ultra-LCC Tiger Airways started flying from Melbourne Tullamarine to Sydney and Adelaide, Jetstar had to move some of its flights to Tullamarine, thus competing head-on with Qantas.
Could competition eventually force Jetstar to compete with Qantas in Europe? If AirAsia X, Emirates, and other carriers offer passengers a better deal and Qantas is going to lose them, would it not be better to give those passengers a third option in Jetstar?
Ultimately any head-on competition will come down to if Jetstar can sustain enough leisure passengers on its flights without poaching Qantas passengers.
One notion to ponder is if AirAsia X does not aggressively expand in Europe and Jetstar does, could Jetstar usurp AirAsia X's gains?
Now Jetstar has A330s on the way and we know they will base them in Singapore. Jetstar has said it expects its first Euroepan destinations to be Athens or Rome, but the expansion decisions after that will be closely watched for how Jetstar maintains the two brand strategy.
And in the back of my mind are thoughts on how AirAsia X, and any new long-haul LCC, could shake-up Jetstar's overdue European expansion.
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