Wirraway
10th Mar 2004, 22:23
Thurs "The Australian"
Jetstar hunger for routes feeds Qantas
By Steve Creedy
March 11, 2004
JETSTAR could add almost $70 million to Qantas's bottom line in the 2005 financial year by cannibalising its parent's unprofitable routes, Commsec analysts have predicted.
Commsec believes Jetstar's recently released flight schedule confirms the view the low-cost carrier will avoid high-volume routes connecting capital cities.
Jetstar is due to launch on May 25 using ex-Impulse Airlines Boeing 717s on a network servicing Brisbane, Sydney and Melbourne as well as 10 east-coast leisure destinations.
The start-up announced last month that its Sydney and Brisbane services would fly into Melbourne's Avalon Airport, 19km north of Geelong, instead of Tullamarine.
Commsec said this would prevent high-yield corporate passengers switching to cheaper flights.
"The real benefit of Jetstar is that it will allow Qantas to replace full-service flights on breakeven route with low-cost flights that are far more profitable," a note said.
"If Qantas can shift breakeven customers, to Jetstar flights, worth about $670 million in annual revenue, it will earn an (earnings before interest, tax, depreciation and amortisation) margin that is 10 per cent better than those customers would have generated on full-service flights.
"By cannibalising Qantas's unprofitable domestic routes, Jetstar can add EBITDA of $67 million to FY05 Qantas group earnings."
The note predicted an after-tax net profit of $639 million for the current financial year, rising to $697 million in 2004-2005.
It said Qantas's successful domestic cost-cutting campaign gave credibility to claims Jetstar's unit costs were lower than Virgin's.
Even if this were not the case, Qantas was certain to have a competitive product for the price sensitive leisure market.
The Commsec prediction came as Virgin Blue sister company, Pacific Blue, yesterday began services from Wellington and Christchurch to Sydney.
Virgin Blue has applied to the International Air Services Commission for capacity allocated on the Fiji, New Caledonia and Vanuatu routes to be transferred to New Zealand-based Pacific Blue.
Pacific Blue operates flights from Brisbane and Melbourne to Christchurch and expects to launch other South Pacific flights later this year.
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Jetstar hunger for routes feeds Qantas
By Steve Creedy
March 11, 2004
JETSTAR could add almost $70 million to Qantas's bottom line in the 2005 financial year by cannibalising its parent's unprofitable routes, Commsec analysts have predicted.
Commsec believes Jetstar's recently released flight schedule confirms the view the low-cost carrier will avoid high-volume routes connecting capital cities.
Jetstar is due to launch on May 25 using ex-Impulse Airlines Boeing 717s on a network servicing Brisbane, Sydney and Melbourne as well as 10 east-coast leisure destinations.
The start-up announced last month that its Sydney and Brisbane services would fly into Melbourne's Avalon Airport, 19km north of Geelong, instead of Tullamarine.
Commsec said this would prevent high-yield corporate passengers switching to cheaper flights.
"The real benefit of Jetstar is that it will allow Qantas to replace full-service flights on breakeven route with low-cost flights that are far more profitable," a note said.
"If Qantas can shift breakeven customers, to Jetstar flights, worth about $670 million in annual revenue, it will earn an (earnings before interest, tax, depreciation and amortisation) margin that is 10 per cent better than those customers would have generated on full-service flights.
"By cannibalising Qantas's unprofitable domestic routes, Jetstar can add EBITDA of $67 million to FY05 Qantas group earnings."
The note predicted an after-tax net profit of $639 million for the current financial year, rising to $697 million in 2004-2005.
It said Qantas's successful domestic cost-cutting campaign gave credibility to claims Jetstar's unit costs were lower than Virgin's.
Even if this were not the case, Qantas was certain to have a competitive product for the price sensitive leisure market.
The Commsec prediction came as Virgin Blue sister company, Pacific Blue, yesterday began services from Wellington and Christchurch to Sydney.
Virgin Blue has applied to the International Air Services Commission for capacity allocated on the Fiji, New Caledonia and Vanuatu routes to be transferred to New Zealand-based Pacific Blue.
Pacific Blue operates flights from Brisbane and Melbourne to Christchurch and expects to launch other South Pacific flights later this year.
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