Qantas keeps faith in Jetstar’s Asian affiliates

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Qantas still sees strong upside potential from its investments in Jetstar affiliate carriers in Asia, but it is not looking to make any further investments over the next few years.

“In the world’s fastest growing aviation market, this is a major long-term opportunity that we continue to believe in,” said chief executive Alan Joyce while announcing the airline’s full-year result.

Qantas has nonetheless said that there will be no new Jetstar ventures as the group focuses on it’s A$2 billion ($1.9 billion) transformation programme, which will run through to fiscal 2016.

For the year ended 30 June, the Jetstar group reported an underlying earnings before interest and tax loss of A$116 million, compared to positive EBIT of A$138 million the year prior. Qantas says that though Jetstar’s domestic business remained profitable, it was impacted by the rapid expansion of Jetstar Japan, in which it holds a 33% voting share.

“Jetstar Japan is making rapid progress,” says Joyce. “It now consists of nearly 60% of the low-cost market in Japan. We've seen significant improvement in yield and we expect that performance to significantly improve over the next year.”

Singapore-based Jetstar Asia, in which it holds a 49% stake, reported an A$40 million loss, driven by “dramatic yield decline” across the southeast Asia market driven by strong capacity growth in the market.

Joyce says that Jetstar Asia is now “seeing alleviation of that capacity situation”, and expects the unit’s profitability to improve going forward.

Asked about Jetstar Hong Kong, which is still awaiting a ruling on its application for an air operator’s certificate, Joyce affirmed that it has no plans to exit its 33% stake in the venture.

“We are committed to that business and [chair Pansy Ho] is leading the charge at getting the approvals and she continues to be optimistic about getting there,” he says.

Qantas did not disclose any financial information about Vietnam-based carrier Jetstar Pacific, but noted that it had completed the transition to an all- Airbus A320 fleet which had helped to bring down its controllable unit costs by 2%.