Jetstar Asia: A Low-Cost Airline in Trouble
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Case Code: BSTR234 Case Length: 14 Pages Period: 2004-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.400 Organization: Jetstar Asia Airways Pte Ltd. Industry: Aviation Countries: Singapore Themes: Business Model, Regulatory Environment , Mergers, Subsidiaries |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
The early 2000s saw an increase in the popularity of LCCs in Asia. During this period, many Asian countries were liberalizing their economies and opening up their airline industries to the private sector. Many Asian LCCs like Air Deccan (India) and AirAsia (Malaysia) had become popular by offering low air fares, which made air travel affordable to a large number of people. Rising income levels in Asia also played a part in their growth. The success of these LCCs in attracting passengers led to a low-cost revolution in Asia as the region saw the launch of many new LCCs during the period.
Until the early 2000s, the airline industry in Singapore was dominated by Singapore Airlines (SIA) and its subsidiary Silk Air, which catered to regional routes. The government of Singapore (GoS) implemented an open skies policy in 2003, paving the way for the 'low-cost revolution' in the country's airline industry. In 2004, three LCCs - Tiger Airways, Valuair, and Jetstar Asia - began operations in Singapore. Jetstar Asia began its operations on December 13, 2004, with daily services between Singapore and Hong Kong. It was established jointly by Qantas and Temasek Holdings (Temasek), a government-owned investment company in Singapore. While Qantas was the largest shareholder with a 49 percent stake, Temasek held a 19 percent stake in the airline. Tony Chew (Chew) and Fong Fui Wong (Wong), two well-known businessmen in Singapore, owned the remaining shares in the airline with stakes of 22 percent and 10 percent respectively.
Qantas
Qantas was established as Queensland and Northern Territorial Aerial Services Ltd. (QNTAS) on November 16, 1920, in Queensland, Australia, to provide airmail services. By the early 1930s, QNTAS had begun offering airmail services from Australia to the UK. Later in 1934, QNTAS together with Imperial Airways of the UK set up an airline company called Qantas Empire Airways Ltd (QEA). In addition to regional services, QEA also offered air passenger services from Australia to the UK. QEA's operations were adversely affected by World War II and the company's financial condition weakened. After the war, QEA was taken over by the Australian government. It was later renamed Qantas Airways in 1967. Over the years, Qantas launched services between several destinations around the world and established itself as the leading airline company in Australia....
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