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
"We're very confident about the timing of the launch of this airline. I don't know where other airlines will end up but I can assure you Jetstar Asia will be around in four years' time and will be profitable, so Temasek and our other investors can be confident."
- Geoff Dixon, CEO of Qantas Airways Ltd., in 2004.
"2005 has generally not been great to LCCs in the region. While they have continued to increase market share, they have suffered from a weak industry environment marked by high jet fuel prices, industry over-capacity, and pressure on pricing."
- Shukor Yusof, aviation analyst at Standard & Poor's, Southeast Asia, in February 2006.
Introduction
Jetstar Asia Airways Pte Ltd. (Jetstar Asia) was launched in December 2004 by Qantas Airways Ltd. (Qantas), a major Australian airline, and a few investors in Singapore. At the time of its launch, Jetstar Asia announced that it intended to establish itself as one of the leading low-cost airlines in the Southeast Asian Region (SEA). However, far from achieving this objective, the airline ran into trouble within the first few months of its operation itself. While other low cost carriers (LCCs) like Tiger Airways3 were gaining popularity in the region, Jetstar Asia struggled to make a mark. In mid-2005, Jetstar Asia merged with Valuair, another Singapore-based LCC, with a view to strengthening its operations by gaining new routes.
However, even this failed to bring any significant benefits to the airline. By the end of 2005, Jetstar Asia had cut its fleet size, dropped some routes, and was struggling to improve its weak financial position. .....
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