Qantas poised to inject millions into Jetstar Japan
October 29, 2013 - 12:23PM
Qantas is said to be on the cusp of pouring more money into Jetstar Japan as it seeks to secure its position in the domestic Japanese market against other newcomers.
Japanese newspaper Nikkei has reported that Jetstar Japan will raise 11 billion yen ($118 million) next month from Qantas and Japan Airlines, which each have stakes of 33.3 per cent.
It is not known whether Jetstar Japan's other shareholders, Mitsubishi and Century Tokyo Leasing Corporation, will participate in the private placement. They both have takes of 16.7 per cent in the budget airline.
Comment was being sought from Qantas this morning on the expected cash injection.
Since it began flying in July last year, Jetstar Japan has become the largest budget airline in Japan with a fleet of 17 A320 aircraft. Low-cost airlines are a new phenomena in the Asian nation.
But the cost of entering the Japanese market has weighed on the financial performance of Melbourne-based Jetstar, which booked $50 million in start-up losses from Jetstar Japan and Jetstar Hong Kong in the year to June.
The airline did not split out the losses when its parent, Qantas, reported its full-year results in August.
Japan Airlines has conceded that Jetstar Japan has experienced growing pains since launching domestic flights.
JAL chairman Masaru Onishi said in June that turning Jetstar Japan into a profitable business would depend to a large extent on the timing of a start to short-haul flying to destinations in China, Korea and Taiwan.
He expected Jetstar Japan to begin international flying within the next two years.
Macquarie Equities has estimated that Jetstar Japan is losing about $50 million a year as it competes against Peach and AirAsia Japan, which will be rebranded Vanilla Air next month.
Malaysian budget airline AirAsia decided several months ago to pull out of the airline joint venture in Japan.
After initially relying on selling tickets via the internet, the budget airlines are looking to boost ways of encouraging consumers to fly with them in a market where people tend to book through travel agents.