Australia, New Zealand & the Pacific Airline and RPT Rumours & News in Australia, enZed and the Pacific

Future of Jetstar

Old 11th Apr 2020, 11:57
  #1 (permalink)  
Thread Starter
 
Join Date: Jul 2010
Location: Asia
Posts: 1,329
Future of Jetstar

Qantas are looking to exit from Jetstar Pacific in Vietnam. They are probably looking at a period of consolidation and belt tightening in preparation for the post COVID-19 era. Divesting themselves of loss making foreign ventures is likely to be high up on the agenda. Jetstar Asia in Singapore have suspended flights until 19 May and might not be too far behind. What is Jetstar Australia's place likely to be, as mainline will certainly make sure they are looked after first ? With Virgin likely to be a shadow of their former size if they survive at all, and excess capacity from reduced international flying, JQ might be inline for restructuring.

A future JQ could be an important part of QF, catering to a new era of very budget minded passengers and also keeping any new airlines from being too profitable. It could also much less important with the competition crippled and reduced mainline international flying leaving spare capacity. If Virgin go under and there is no replacement it may have to be spun off to prevent QF having a monopoly.

In any scenario if anything is losing money, be it routes, bases or subsidiaries it will be on the chopping block.

https://vietnaminsider.vn/will-jetst...ffload-shares/
krismiler is offline  
Old 11th Apr 2020, 12:38
  #2 (permalink)  
 
Join Date: Nov 2018
Location: Maningrida
Posts: 38
If Virgin fall over (unfortunately, looking possible), I can see a period with Qantas holding a monopoly until the end of COVID.

Thereafter, I can imagine the space being filled with a foreign-backed carrier. I believe revenues on tickets are relatively much higher in Australia than Asian and may other parts of the world.

I would think Singapore Airlines will also be hit hard by COVID. Speculating that they donít have their own Ďdomesticí market (ie closed borders affect them as a small island nation). They might be looked to invest in a market that does and can operate within its own borders. Singaporeans are indeed astute businessmen. I heard they just raised some capital. Whether thatís to find heir fight or else, we can only take blind guesses. Maybe both?

Whatever carrier fills the space of Virgin, you can be sure it will be a lean and mean operation. Any previous non-profitable routes cut, rock-bottom contracts with suppliers and workforce. (Not to mention also assisted/facilitated entry by Aus Govt). What specific section of the market will they aim for? We will have to wait and see.

The dual-brand strategy might yet be needed to fend off the new entrant. Time will tell.

Regardless, I do hope that all find their way back to flying one way or another.

To my colleagues over fence who fly for VA, please take care and look after one another. We are all going to be affected by this and stand with you. If anyone is in a spot of bother, please reach out to your friends in industry. Families donít understand the pressures we work with. Remember that youíre their hero; whether you drive a haul truck or Airbus truck, they donít care. (Your perception they do is all in your mind).

Good luck to all. Merry Easter....
dontgive2FACs is offline  
Old 11th Apr 2020, 13:04
  #3 (permalink)  
 
Join Date: Jun 2006
Location: Brisbane
Posts: 216
The way I see it, Jetstar serves 3 purposes for the Qantas Group:

1. To operate routes at a lower cost base than mainline to destinations where mainline’s higher cost base cannot achieve a worthwhile return.

2. To make business difficult for any other competing low-cost operators (or indeed medium-cost carriers such as VA, which has sadly had an identity problem ever since JB took over).

3. To provide a point of significant differentiation from the full-service mainline product.

It does not exist to directly add a significant profit to the bottom line, although it’s nice when it does. The bottom line is improved merely by it’s existence and it’s negative effect on competition.

No matter what anyone might like to think, this strategy has been enormously successful for the Qantas Group. It has kept VA struggling and has successfully neutered any new or potential entrants to the market. Of course I am talking about JQ domestic here, the JQ 787 operation is a different animal, and no-one has ever worked out why that still exists.

Selling JQ would completely go against the entire philosophy.

Being forced by the ACCC to split off JQ (in the event of a failure of VA), whilst not impossible in the current environment (nothing is!), would be extremely unlikely in my opinion. QF would easily be able to argue that the two airlines are complementary, and there is plenty of room for a new entrant once the market picks up.

In fact, many would argue that if JQ was spun off, it could struggle to even survive. Its critical mass could make it possible, but QF has bigger pockets, and if QF decided that the company they were forced to sell is now the enemy (which it would be), they could go on the offensive against it! And probably succeed. Network would pick up a whole bunch of cheap A320’s and crew overnight, and suddenly we’re back where we started, only worse.

Furthermore, Government leaders have already suggested that should VA fail, they would assist a new start-up to prevent an ongoing monopoly (whatever that means). Will it be Richard Branson’s Virgin MkII, Strategic MkII, SilkAus, LionAus, AirNZAus, RyanAus? Who knows. Maybe SouthWestAus, that could be nice. Or Alliance might just decide to fill in the gap, that could be nice, too.

Please let me end by saying that I desperately hope that VA makes it. I really feel for my VA colleagues going through this, I think about it several times per day.

Last edited by Derfred; 11th Apr 2020 at 13:58.
Derfred is offline  
Old 11th Apr 2020, 13:16
  #4 (permalink)  
 
Join Date: Aug 2004
Location: moon
Posts: 0
Qantas will use the pandemic to exit all Jetstar Asian brands. They were never a profitable proposition. Renewed nationalism will destroy them anyway.
Sunfish is offline  
Old 11th Apr 2020, 13:30
  #5 (permalink)  
 
Join Date: Sep 2019
Location: Qld
Posts: 120
A "AirNzAus" or a "SilkAus" are extremely unlikely. Both owners of those brands got bailed out by their governments, and Silk is being absorbed into their mainline SQ brand.
Also to add both companies' previous attempts in the Australian market had ended in dismal failures.

SIA (Singapore Government) or Air NZ (NZ Government/NZ Investors) aren't that stupid to have a 4th attempt (or 3rd attempt in NZ's case) at the Australian market.

Especially when pointing out the incompetence both SIA and Air NZ had when they had full 100% control on one of their Australian attempts (For SIA that was Tiger Airway AU and Air NZ that was Ansett), and yet still couldn't get that attempt right due to a mixture of incompetence and egos.
DanV2 is offline  
Old 11th Apr 2020, 13:35
  #6 (permalink)  
 
Join Date: Sep 2019
Location: Qld
Posts: 120
Getting back on topic re Jetstar. The companies QF owns less than 49% of, I can see them exiting (Jetstar Pacific, Jetstar Japan, etc). As for Jetstar NZ, there's also a good chance of JQ exiting that and transferring those aircraft back to Australian Domestic/Trans-Tasman runs. JQ has already exited regional NZ operations and transferred those aircraft back to QFLink.

Assuming that SIA doesn't have a 4th attempt at the Australian domestic market, I could see QF exiting 3K (Jetstar Asia) being a possibility by selling their 49% stake to another company.

Either way, JQi in Australia is a good chance of being decimated if not folded up entirely. A post COVID-19 JQ-i could have their international flying reduced to just Trans-Tasman, Fiji and Bali "bogan-bus" flying with A320neos and A321LRs, whilst exiting long-haul completely with the 788 fleet transferred to QF mainline.
DanV2 is offline  
Old 11th Apr 2020, 14:27
  #7 (permalink)  
Thread Starter
 
Join Date: Jul 2010
Location: Asia
Posts: 1,329
Some very well thought out scenarios posted above, my take is fairly similar.

1. If Virgin are resurrected into a chopped down operation then JQ can be pulled back as well. Keep it for flying bogans to the Gold Coast and other routes which can't support mainline. No need to use it on major city pairs to undermine the competition anymore. Use COVID-19 as the perfect excuse to abandon the pan Asian strategy which wasn't working anyway. Lose most of the international routes especially the B787 ones, possibly retain AKL and DPS flights with inconvenient times so as not to pull pax away from mainline. Keep enough aircraft as a deterrent to anyone who may consider going head to head with QF again in the future.

2. If Virgin go under and another operator steps in then close the loss making entities as described above, but retain a larger domestic network to keep the new entrant in check.

3. If Virgin go under and no one else steps in, then a permanent monopoly won't be allowed. The ACCC will want competition and the government won't want the QF unions to have them by the short and curlies like the MUA do on the waterfront. In this case they can structure JQ so as to sell it for a decent price whilst making sure it can't compete too aggressively with it's former parent.

Funnily enough, Qantas seem to come out ahead whatever happens.
krismiler is offline  
Old 11th Apr 2020, 15:09
  #8 (permalink)  
 
Join Date: Jan 2014
Location: Melbourne
Age: 65
Posts: 2
Jetstar was started up because QF had to respond to Virgin undercutting them on price because of a lower cost base. Simple solution was to subsidise JQ to beat Virgin at their own game. Secondarily JQ could replace mainline QF operations where there was little demand for business class. QF has been ruthless in managing yield and put the screws on Virgin. Borghetti responded by trying to compete for the premium market and bingo, cost went through the roof and we are now where we are. That means that QF will keep JQ , keep its cost base as low as possible and make sure nobody is stupid enough to try and replace Virgin when it fails.
George Glass is offline  
Old 11th Apr 2020, 16:19
  #9 (permalink)  
 
Join Date: Mar 2007
Location: australia
Age: 71
Posts: 907
Post Covid , assuming Virgin folds , with a subsequent Qantas monopoly, divesting Jetstar might be a Government mandated necessity?
Jetsarts lower cost base may very well be non existent come a depressionary post Covid induced rejig of the way things were ?
Qantas May very well end up 1/2 the size it was if the economic reset is anywhere near as bad as what some pundits are predicting !
Sorry but which business entity would have more chance of survival , particularly with a global meltdown ?
Alan’s , johnny come lately folly , or a 100 year stalwart ?

Last edited by blow.n.gasket; 11th Apr 2020 at 16:29.
blow.n.gasket is offline  
Old 11th Apr 2020, 16:20
  #10 (permalink)  

Evertonian
 
Join Date: May 2000
Location: #3117# Ppruner of the Year Nominee 2005
Posts: 11,173
As I posted on another thread, JQ to take the lions share of Domestic & QF going back to mainly INTL flying. My 2c.
Buster Hyman is online now  
Old 11th Apr 2020, 16:42
  #11 (permalink)  
 
Join Date: Jun 2006
Location: Brisbane
Posts: 216
Kris,

I think you are close to the money with points 1 and 2.

I can’t see point 3 happening. This is still a free market economy. The ACCC don’t just get to walk in to a business and break it up because they “want competition”, and especially not just because the competition went bankrupt.

The ACCC is quite happy with monopolies all over the country.

If there is a temporary airline monopoly I’m sure the Govt will take steps to temper the gouging, but a monopoly won’t last.

In fact, during the recovery, and I don’t think any of us can predict exactly how the recovery will take place, even with only one airline, I don’t predict too much gouging. Look at it this way, you have an airline in a slowly recovering economy with too many aircraft, and too many employees. What would you do? Raise prices? I don’t think so. I think you would offer bargain basement prices to get all the employees and aircraft working again, boost the economic outlook, and do everything you can to persuade the travelling public that flying is suddenly cool again. After all, you know you won’t get back in the black until all those planes are back in the air and full of punters.

It will be down the track, once the economy is back on track and the load factors are sustainable that the gouging becomes a potential problem. And don’t forget, the airline that survived this will have burned billions in cash getting through it. The economy is going to have to pay for this little social experiment one way or another. Expecting slightly higher taxes for the next decade or two? Or course! Higher airfares? Maybe! Is that unreasonable?

But as for competition? Something will emerge. Airline Entrepreneurs can’t help themselves, especially when a State Government is getting toey for a bit of investment. And they will be. But they won’t be interested until they have someone to undercut! And there won’t be any potential to undercut until the planes are full again. Don’t forget, the LCC model relies on full aircraft.
Derfred is offline  
Old 11th Apr 2020, 17:10
  #12 (permalink)  
Thread Starter
 
Join Date: Jul 2010
Location: Asia
Posts: 1,329
JQ is a very useful and proven weapon to retain against anyone trying to go into Qantas's 2/3 of the market, however if no one steps up into the remaining 1/3 within a year or two of a Virgin collapse they may not be able to keep it. In this scenario a Scoot take over of JQ may not be as far out of the field as it first seems.

SIA should come through this but its primary market of premium passengers won't. Those suites and lie flat business class seats will be mostly empty and the economy seats heavily discounted so they need to look for a growth area. Tiger Airways Australia was a debacle, going up against three much larger and well entrenched opponents with a handful of aircraft managed from a portacabin in the car park wasn't going to work anyway. When you add in someone at the top who thought he could play fast and loose with the rules it would never succeed.

The Chinese have a culture of not repeating failure and in a vastly different environment it could be 4th time lucky. Few entities will have any spare cash going and even fewer will be keen to risk it on an airline. Singapore Incorporated should have something left in the kitty and might consider the risk acceptable this time based on:

1. No competition, 2/3 for QF and 1/3 for Scoot, each respects the others market. QF set the fare and Scoot go in 15% under ie too much for the bogans to trade up and not worth it for the top end to trade down. Why have a price war when they can both make more money without one ? This time no one is out to destroy them, peaceful coexistence in a comfortable duopoly. If Virgin had gone along with this strategy instead of starting price and capacity wars they wouldn't be where they are today, going for the corporate market was unforgivable.
2. The operation is already up and running at a decent size with CASA approved people and structures in place. No year long ramp up.
3. Same aircraft as used by Scoot already.
4. AirAsia, Cebu Pacific, the Indonesian, Chinese,Vietnamese and Indian low costs all have a large home market and operate domestic flights. Scoot have a small home market (relatively wealthy though) and no domestic flights. Australia would give them that and fit well into the overall network.
5. SIA could stress the benefits to Australia of maintaining competition on the domestic front and providing connections to the all important Asian markets. There are strong ties between Australia and Singapore already, if a local entity can't take over JQ then Singapore is the next best thing.



krismiler is offline  
Old 11th Apr 2020, 17:45
  #13 (permalink)  
 
Join Date: Jun 2006
Location: Brisbane
Posts: 216
Originally Posted by Buster Hyman View Post
As I posted on another thread, JQ to take the lions share of Domestic & QF going back to mainly INTL flying. My 2c.
Really?

In the short term I predict almost the opposite.

In the early stages of the recovery, I predict very little JQ domestic, and QF INTL flying will remain at the skeleton freight/govt subsidised level.

Do you think JQ will pick up because Jack and Shazza missed out on their Easter Gold Coast apartment booking, and they might get to re-use their credit in September? Do you think the $89 credit that Jetstar is withholding from Jack and Shazza is going to hold up the business so they can shut down QF mainline?

QF domestic wiill increase in accordance with demand based on relaxations to business travel, not leisure. That is why JQ will not recover as quickly as QF domestic. Look, I think both will recover equally in the end, really, but I think business will lead the charge.

For example, I predict that one of the first relaxations will be that for example a Mining Engineering Consultant from Melbourne will be allowed to finally visit their minesite project in QLD that they were supposed to inspect 2 weeks ago until they suddenly weren’t allowed to. These jobs aren’t going away, they are building up while the poor sods in charge of serious jobs they are responsible for are supposedly working from home. With every day, these companies are losing more millions, and they won’t tolerate it for long. These will be the first people to be “relaxed” in a gradual wind-down of Covid-19 protection measures, and they are the high-value clients of Qantas domestic. Not Jetstar, sorry. They pay $500 for a ticket, not $50.

I suggest that the pent-up demand in business travel required by those who actually have and would need to travel to get this economy happening again will surprise even Qantas. There is only so much you can do on Skype when you have a multi-million dollar project happening in another state, which is only stalled on the basis of the whim of a government official, and could be revoked next week, next month, 3 months, next year, who knows?

Last edited by Derfred; 11th Apr 2020 at 18:22.
Derfred is offline  
Old 11th Apr 2020, 18:17
  #14 (permalink)  
 
Join Date: Jun 2006
Location: Brisbane
Posts: 216
Originally Posted by krismiler View Post
a Scoot take over of JQ may not be as far out of the field as it first seems.
Hi Kris,
Either Iím not understanding your posts or you are not understanding mine.

Youíve given many reasons why SQ might like to buy JQ from QF and re-brand it as Scoot.

But you havenít given a single reason why QF would want to sell it. Iíve given you many reasons why it wonít be for sale. Iíve also given my reasons for why I donít believe there will be a forced sale.

I donít speak for QF, but as far as I can predict, JQ is not for sale. So, whatís your point?
Derfred is offline  
Old 11th Apr 2020, 21:40
  #15 (permalink)  
 
Join Date: Nov 2006
Location: Auckland, New Zealand
Posts: 801
Originally Posted by blow.n.gasket View Post
Post Covid , assuming Virgin folds , with a subsequent Qantas monopoly, divesting Jetstar might be a Government mandated necessity?
And what if Qantas Group just tells the Government "If you want JQ as a separate entity you pay for it or we close it down."

Bearing in mind all the rumours on here in particular that JQ bills QF for a lot of it's outgoings such as fuel and maintenance, spinning JQ off could end in it's demise anyway
Chris2303 is offline  
Old 11th Apr 2020, 23:39
  #16 (permalink)  
 
Join Date: Dec 2013
Location: Weltschmerz-By-The-Sea, Queensland, Australia
Posts: 1,032
All of these scenarios imply that the business and political environment will be the same post-covid as before. We still don’t know anything about the recovery horizon yet. There are lots of hopeful stories about possible vaccines, possible treatments etc, but nothing that you can hang your hat on.

During the recovery there will be a glut of cheap airframes, and still cheapish fuel, but perhaps the revenue side of the equation will be diminished. I winder if there will be many backers left willing to invest in airlines when there will be many more obvious bargains to be had in other industries.

Here's a mostly rhetorical question: why would a government facing a crippling debt allow foreign airlines, or really any corporations, to operate carte blanche within its borders? Would it not make more sense to insist that employees and head offices are locally based and locally taxed? Or at least taxed on the portion of their assessed profits earned locally? Protectionism may be necessary for a decade or so to restore the world to an even keel. It seems from down here in the cheap seats that globalisation as a strategy is going to get some serious re-thinking.

I am (reluctantly) reading opinions in the conservative media suggesting that the economy (profits) are more important than the death toll. Apparently serious people in the UK and the US are advocating this, although mostly in media affiliated with the Murdoch press. Why do you think that the very wealthy are afraid of pandemics? Its because afterward the door will be wide open for a new politics that focuses more on the commonwealth than the very few very wealthy. That is how revolutions happen, and apple carts get upset. We seem to be a long way from that today, but who knows where this road ends?



Australopithecus is offline  
Old 12th Apr 2020, 00:02
  #17 (permalink)  
 
Join Date: Aug 2018
Location: Melbourne
Posts: 348
Originally Posted by Derfred View Post
Really?

In the short term I predict almost the opposite.

In the early stages of the recovery, I predict very little JQ domestic, and QF INTL flying will remain at the skeleton freight/govt subsidised level.

Do you think JQ will pick up because Jack and Shazza missed out on their Easter Gold Coast apartment booking, and they might get to re-use their credit in September? Do you think the $89 credit that Jetstar is withholding from Jack and Shazza is going to hold up the business so they can shut down QF mainline?

QF domestic wiill increase in accordance with demand based on relaxations to business travel, not leisure. That is why JQ will not recover as quickly as QF domestic.
I think youíll find that businesses who have been using Skype/zoom meetings for 6,12,18 months (however long this crisis lasts) will begin to wonder why theyíre spending the time and money to send people around the country for business meetings. Thatís the feedback from my friends in the corporate world. It obviously wonít disappear entirely but a percentage of that traffic may not exist in the post COVID 19 world.

However Shazza still canít skype in that holiday to the Gold Coast. If restrictions are lifted in time for schoolies or the Christmas school holidays, I think youíll find there will be plenty of leisure demand.
ECAMACTIONSCOMPLETE is offline  
Old 12th Apr 2020, 01:27
  #18 (permalink)  
 
Join Date: Aug 2004
Location: USA/EU
Posts: 114
Originally Posted by Derfred View Post

For example, I predict that one of the first relaxations will be that for example a Mining Engineering Consultant from Melbourne will be allowed to finally visit their minesite project in QLD that they were supposed to inspect 2 weeks ago until they suddenly weren’t allowed to. These jobs aren’t going away, they are building up while the poor sods in charge of serious jobs they are responsible for are supposedly working from home. With every day, these companies are losing more millions, and they won’t tolerate it for long. These will be the first people to be “relaxed” in a gradual wind-down of Covid-19 protection measures, and they are the high-value clients of Qantas domestic. Not Jetstar, sorry. They pay $500 for a ticket, not $50.

I suggest that the pent-up demand in business travel required by those who actually have and would need to travel to get this economy happening again will surprise even Qantas. There is only so much you can do on Skype when you have a multi-million dollar project happening in another state, which is only stalled on the basis of the whim of a government official, and could be revoked next week, next month, 3 months, next year, who knows?
and here is where I think you are wrong. Many companies will find video conferencing works pretty well nowadays. For those who do need face time after months and months of bleeding money they will absolutely spend 50 over 500 bucks to get from A to B if offered by a LCC instead of QF. In good times LCCs fly a lot of people who normally don’t fly much. In bad times they fly people who want to scale down / start watching their bottom line more. Business and leisure wise.


v1r8 is offline  
Old 12th Apr 2020, 01:30
  #19 (permalink)  
 
Join Date: Jan 2006
Location: Australia
Posts: 319
Jetstar, Qantas and Virgin will be smaller for quite a while. It’s not rocket science! Who else are going to lose their job? Seriously bad situation.

Its hard to know if the speculation on here is delusional or hopeful? Probably both.
crosscutter is offline  
Old 12th Apr 2020, 01:40
  #20 (permalink)  
Thread Starter
 
Join Date: Jul 2010
Location: Asia
Posts: 1,329
But you haven’t given a single reason why QF would want to sell it.
QF won’t want to sell JQ, it gives them a bigger market share, enables them to run routes which mainline can’t make a profit on and enables them to undermine the competition on price whilst they maintain fare levels, it’s brilliant. Whilst the actual numbers might show a loss, the overall contribution to the big picture is huge. Full service airlines running low cost subsidiaries doesn’t usually work too well but it certainly has here.

If Virgin go under, maintaining air services will be the priority rather than competition and having QF/JQ as the only airline might be acceptable for a couple of years but ultimately there will have to be an independent alternative or the government may require JQ to be sold off.

A QF monopoly may be acceptable with price controls and full regulation regarding routes and schedules but that’s the last thing they want. There needs to be an Australian version of Southwest Air or easyJet rather than another full service airline trying to go head on at QF. There is an acceptable degree of competition and both companies can make money.
krismiler is offline  

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information -

Copyright © 2021 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.