Jetstar operations in Asia improve despite fall in earnings

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Qantas's budget carrier group Jetstar is seeing improvements in its Vietnamese and Singaporean operations despite a fall in earnings for the first half of its financial year.

In reporting the Qantas group's financial results, the Jetstar group of airlines recorded a 13% fall in underlying earnings before interest and tax (EBIT) to A$128 million for the six months ended 31 December 2012. Revenue across the carriers increased by 12% to A$1.75 billion.

Qantas did not provide a breakdown for the financial results of each of its franchises.

Qantas attributed the fall in earnings across the Jetstar group to domestic market conditions in Australia, as competitors Virgin Australia and Tiger Airways added capacity, and start-up costs from Jetstar Japan and Jetstar Hong Kong.

While Jetstar's operations in Australia were affected by the increase in capacity, it still managed to deliver a 2% decrease in controllable unit costs.

Qantas group chief executive Alan Joyce says that Singapore-based Jetstar Asia "continued to grow with a significant improvement in profitability", and recorded 19% passenger growth and a 2% increase in yield.

On its Vietnamese joint venture, Jetstar Pacific, Joyce says that the carrier "is improving its performance", particularly as it transitioned to an all-Airbus A320 fleet during the six-month period.

In a presentation to investors, Qantas says that Jetstar Pacific is also planning to launch international services in the second half of the financial year.

Jetstar Japan, which started operations in July last year, has carried more than 600,000 passengers, giving it a 17% share of the domestic market.

Joyce was also upbeat about the prospects for Jetstar Hong Kong, its joint venture with China Eastern Airlines, which is expected to launch in mid-2013.

"We do not take the outcome for granted, but we believe there is a compelling argument for a new low-cost airline in a market where both demand and air fares are currently high," says Joyce.