Wirraway
25th Apr 2006, 20:08
Wed "Melbourne Age"
Qantas' Jetstar Asia headache dogs Dixon
April 26, 2006
The budget airline is not proving the winner its part-owner had hoped, writes Eric Ellis.
MADAME Chong Phit Lian, Geoff Dixon's new right-hand steward of Qantas' Big Asian Adventure, Jetstar Asia, used to run Singapore's mint.
Unfortunately for Dixon and Qantas shareholders, that's probably the last time Madame Chong was awash with cash. The struggling budget airline, 45 per cent owned by Qantas, is proving anything but a licence to print money.
Take the midday flights this correspondent took last week, a shuttle return from Singapore to Jakarta. This should be one of Jetstar Asia's better-patronised routes; Singaporeans are investing heavily in President Yudhoyono's economically rekindled Indonesia, and the favour is returned by Indonesians indulging in power retail therapy in Singapore's gleaming malls. Flights between the two are usually packed.
But not this week. Just 10 of 100-odd seats were occupied on the run down, and no more than a third coming back. The fare was $200 — Singapore Airlines' fares are about double — so it can't have been the price. Some passengers paid just $50 one-way. "How do they survive?" rhetorically inquired one passenger of her husband, as she surveyed Dixon's row on row of empty seats.
Great question, and one that dogs Dixon and his fellow Jetstar Asia shareholders, including the Singapore Government's Temasek Holdings, owner of Qantas' great regional rival Singapore Airlines. The $S60 million ($A50.7 million) injected when Dixon merged Jetstar Asia with Temasek's other Singapore-based start-up Valuair in July has just about run out. Singapore's mostly good-news-only paper, the Straits Times was uncharacteristically muscular when it described Jetstar Asia as facing a cash crunch. Jetstar-Valuair has had five CEOs in two years, and the latest — Madame Chong — has no aviation experience.
Dixon clearly has a problem that tests his corporate and political skills. It's all a long way from the launch in October 2004, when he boasted: "I don't know where the other (low-cost) airlines will end up. But I can tell you that Jetstar Asia will still be around in three or four years. I often think it's best to wait to see how everybody else destroys themselves, and then you come in and maybe pick up some of the pieces. We intend to be profitable in year one."
That hasn't happened and as fuel prices head north, there will be more pain for Qantas. A further complication is that Dixon's Jetstar Asia partner Temasek has a jumble of Singapore-based aviation interests: Singapore Airlines, Tiger Airways, SilkAir — all Jetstar Asia competitors.
Singapore Airlines recently boasted that its revenue and passenger loads had never been higher than over the past nine months, that is since Jetstar Asia merged with Valuair.
It's in stark contrast to the thumping success story next door in Malaysia, Air Asia. Launched in 2002, this genuine budget airline — a Kuala Lumpur-Bali fare is $30 — has rattled the Government-owned incumbent Malaysian Airlines' cage so hard, it has become Malaysia's leading airline. Last month it acquired 99 of Malaysian Airline's 118 domestic routes.
Dixon can only drool at the rapid rise of Air Asia; profitable from day one, a $400 million IPO in 2004, and two profitable subsidiaries, in Thailand and Indonesia.
Air Asia is adding routes almost daily; Jetstar Asia is scaling back, planning to drop routes. Madame Chong reckons she needs another $S36 million to see the airline through the crunch. But what she really needs is genuine entrepreneurship of the kind displayed by Air Asia, which has perfectly caught the middle-class Asian travel boom.
Perhaps the two saving graces for an envious Dixon are that Air Asia is allowed only one flight from Singapore — to Bangkok — and that its CEO Tony Fernandes, like Dixon's Madame Chong, has never worked in aviation. Fernandes, 42, was a music industry executiveand a big fan of Richard Branson.
Still, there's hope for Jetstar Asia. It recently became something of a cousin to Air Asia, when Temasek inherited a shareholding in
Fernandes' Bangkok-based Air Asia Thailand. While Fernandes once told me he saw Singapore as a rival, Temasek and Dixon would do well to listen and learn from their new family member.
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Qantas' Jetstar Asia headache dogs Dixon
April 26, 2006
The budget airline is not proving the winner its part-owner had hoped, writes Eric Ellis.
MADAME Chong Phit Lian, Geoff Dixon's new right-hand steward of Qantas' Big Asian Adventure, Jetstar Asia, used to run Singapore's mint.
Unfortunately for Dixon and Qantas shareholders, that's probably the last time Madame Chong was awash with cash. The struggling budget airline, 45 per cent owned by Qantas, is proving anything but a licence to print money.
Take the midday flights this correspondent took last week, a shuttle return from Singapore to Jakarta. This should be one of Jetstar Asia's better-patronised routes; Singaporeans are investing heavily in President Yudhoyono's economically rekindled Indonesia, and the favour is returned by Indonesians indulging in power retail therapy in Singapore's gleaming malls. Flights between the two are usually packed.
But not this week. Just 10 of 100-odd seats were occupied on the run down, and no more than a third coming back. The fare was $200 — Singapore Airlines' fares are about double — so it can't have been the price. Some passengers paid just $50 one-way. "How do they survive?" rhetorically inquired one passenger of her husband, as she surveyed Dixon's row on row of empty seats.
Great question, and one that dogs Dixon and his fellow Jetstar Asia shareholders, including the Singapore Government's Temasek Holdings, owner of Qantas' great regional rival Singapore Airlines. The $S60 million ($A50.7 million) injected when Dixon merged Jetstar Asia with Temasek's other Singapore-based start-up Valuair in July has just about run out. Singapore's mostly good-news-only paper, the Straits Times was uncharacteristically muscular when it described Jetstar Asia as facing a cash crunch. Jetstar-Valuair has had five CEOs in two years, and the latest — Madame Chong — has no aviation experience.
Dixon clearly has a problem that tests his corporate and political skills. It's all a long way from the launch in October 2004, when he boasted: "I don't know where the other (low-cost) airlines will end up. But I can tell you that Jetstar Asia will still be around in three or four years. I often think it's best to wait to see how everybody else destroys themselves, and then you come in and maybe pick up some of the pieces. We intend to be profitable in year one."
That hasn't happened and as fuel prices head north, there will be more pain for Qantas. A further complication is that Dixon's Jetstar Asia partner Temasek has a jumble of Singapore-based aviation interests: Singapore Airlines, Tiger Airways, SilkAir — all Jetstar Asia competitors.
Singapore Airlines recently boasted that its revenue and passenger loads had never been higher than over the past nine months, that is since Jetstar Asia merged with Valuair.
It's in stark contrast to the thumping success story next door in Malaysia, Air Asia. Launched in 2002, this genuine budget airline — a Kuala Lumpur-Bali fare is $30 — has rattled the Government-owned incumbent Malaysian Airlines' cage so hard, it has become Malaysia's leading airline. Last month it acquired 99 of Malaysian Airline's 118 domestic routes.
Dixon can only drool at the rapid rise of Air Asia; profitable from day one, a $400 million IPO in 2004, and two profitable subsidiaries, in Thailand and Indonesia.
Air Asia is adding routes almost daily; Jetstar Asia is scaling back, planning to drop routes. Madame Chong reckons she needs another $S36 million to see the airline through the crunch. But what she really needs is genuine entrepreneurship of the kind displayed by Air Asia, which has perfectly caught the middle-class Asian travel boom.
Perhaps the two saving graces for an envious Dixon are that Air Asia is allowed only one flight from Singapore — to Bangkok — and that its CEO Tony Fernandes, like Dixon's Madame Chong, has never worked in aviation. Fernandes, 42, was a music industry executiveand a big fan of Richard Branson.
Still, there's hope for Jetstar Asia. It recently became something of a cousin to Air Asia, when Temasek inherited a shareholding in
Fernandes' Bangkok-based Air Asia Thailand. While Fernandes once told me he saw Singapore as a rival, Temasek and Dixon would do well to listen and learn from their new family member.
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