Australia's Qantas Airways has made a strategic decision that has shaken the regional aviation industry, officially announcing the closure of its Singapore-based subsidiary Jetstar Asia. The 20-year-old low-cost carrier's closure at the end of July is the inevitable result of many pressures, including rising supplier costs, expensive airport fees at Changi, and fierce competition in the Asian region.
The decision will directly impact 500 Jetstar Asia employees, who will face the risk of losing their jobs. At the same time, Jetstar Asia's fleet of 13 Airbus A320s will be transferred to Australia and New Zealand to serve other Qantas Group operations.
Jetstar Asia's spokesman said the airline's termination would affect 16 domestic routes in Asia.
Jetstar Asia’s departure reflects a growing reality in the Asian aviation industry. After a slowdown due to the Covid-19 pandemic, airlines, especially the big low-cost rivals such as Scoot (owned by Singapore Airlines), AirAsia (Malaysia) and VietJet Aviation (Vietnam), have been quick to recover and expand capacity. This has led to increased competition, pushing airfares down and putting great pressure on the profitability of airlines.
According to Reuters, in recent years Jetstar Asia has specialized in operating 16 domestic routes in Asia from Changi Airport, but has not been able to bring in profits equivalent to those in its core markets.
Against this backdrop, Jetstar Asia, which once operated 16 routes in Asia from its Changi hub, has faced growing challenges in recent years, unable to deliver returns in line with the higher-performing core markets within the Qantas Group.
Qantas Group CEO Vanessa Hudson has been candid about the root cause: "The cost situation has changed significantly, with some of Jetstar Asia's supplier costs increasing by up to 200%." This unusual spike has directly eroded the already thin profit margins of a low-cost airline. Specifically, Jetstar Asia is forecast to record a basic loss before interest and tax of up to $22.76 million in the financial year ending June 30.
Passengers who purchased tickets for cancelled Jetstar Asia flights will receive a full refund, or be transferred to other airlines if needed.
The closure of Jetstar Asia, while a difficult decision, is seen by Qantas as a necessary move to unlock value from its 13 aircraft, which will be reinvested in the group’s core operations, including replacing the costly leased aircraft used by Jetstar Airways in Australia for domestic flights.
The reason for the increased costs at Changi Airport is that from April 1, the airport authority applied a fee increase to fund a $2.3 billion facility upgrade.
Jetstar Asia will gradually reduce its flight frequency before officially ceasing operations on July 31. To ensure the interests of passengers, the airline has committed to fully refunding customers whose flights have been cancelled and will arrange flights with other airlines where possible. For affected employees, Qantas will provide severance pay and support in finding jobs within the Qantas Group or with other airlines, demonstrating corporate social responsibility.
Regarding Jetstar Asia's announcement of closure, Changi Airport representatives said they were disappointed with the airline's decision to withdraw from Singapore, but respected the airline's commercial considerations.
Qantas also reassured that the closure of Jetstar Asia will not impact the international operations of the group's two remaining low-cost carriers, Jetstar Airways (Australia) and Jetstar Japan (Japan). This shows that Qantas is focusing resources on core and more efficient markets to ensure sustainable growth in the future. The event of Jetstar Asia ceasing flights is a profound reminder of the volatility and harshness of the aviation industry, where only the most cost-optimized and adaptable airlines can survive and thrive.
