Joyce has admitted Jetstar Longhaul Asia loses money. Jetstar Australia Longhaul? Who knows?
Qantas chief Alan Joyce sets Asian expansion hopes on Jetstar HK joint venture
BY: MICHAEL SAINSBURY AND STEVE CREEDY From: The Australian June 12, 2012 12:00AM
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QANTAS chief Alan Joyce says the China market is a huge opportunity for the company as it builds up its Jetstar Hong Kong joint venture with China Eastern as part of a plan to become the dominant low-cost carrier in Asia.
Mr Joyce said Jetstar had more planes after seven years than European low-cost pioneer Ryanair did at the same stage in its development, and aimed to be as big as his old employer in coming years.
He admitted the Singapore-based Jetstar Asia venture would lose money this year on long-haul routes but said revenue was coming more quickly than expected into its low-cost Japanese start-up.
Jetstar has committed $64 million to the Japanese operation it owns with Oneworld partner Japan Airlines and Mitsubishi.
"We have a smaller shareholding (33 per cent) because of the law," Mr Joyce said. "Revenue is coming in sooner than expected."
But the huge opportunities in Asia lay in China, already the world's second-biggest airline market and set to rival the US in the next decade.
"We believe there are three big markets in China: premium, low-cost, cargo," Mr Joyce said. "For premium we need to turn around Qantas International before we can grow it again. We made a commitment to shareholders we won't put more capital or aircraft into it until it gets to break even and is returning costs over the next three years."
Meanwhile, Qantas's operations to mainland China are limited to just one flight daily from Sydney to Shanghai and the more profitable three cargo flights from Australia to China and then the US and back to Australia.
"We're looking at enhancing (code-sharing) further and working a lot closer with China Eastern," Mr Joyce said.
In the interim, Jetstar is committing $99m in capital to its 50-50 Jetstar Hong Kong venture with China Eastern.
Qantas is optimistic that a new Hong Kong government, a reconfiguration of government departments and review of aviation regulation will work in its favour.
It hopes that will clear the way for approvals for the airline to progress more quickly and says it has been getting strong local support.
Mr Joyce said the biggest resistance was coming from the pilot union, which was paying a consultant to lobby against the move. He said the airline had gone through regulatory approval processes several times and had a team that was dedicated to the process.
It had teamed up with local partners because they knew the local market and Jetstar had taken a comprehensive view of getting as many stakeholders behind it as it could.
"We're optimistic, so we're still on plan for the middle of next year," he said.
Both China Eastern and Jetstar have started allocating people to the project and the airline is already looking at issues such as aircraft allocation, AOC requirements and recruitment.
There was also a commercial team looking at routes and Mr Joyce said the airline could also allocate its Jetstar Japan start-up team to the project after the airline launched next month.