Jetstar feels pain as $A soars
A report in The Herald Sun says that Australia’s soaring dollar is hurting Qantas offshoot Jetstar on its all-important Japanese routes, slashing income in local currency terms as the yen loses ground.
Jetstar CEO Alan Joyce told BusinessDaily this was the main reason the airline had decided to put the first of its new fuel-efficient Boeing 787s, launched yesterday in Seattle, on the Sydney-Osaka service next year.
“Our sales are locked into the yen and when we convert the cash back into the Aussie dollar we take a hit,” Mr Joyce said.
Despite a loss of $3 million for each point the yen retreated, he said Jetstar still generated a small profit on Japanese routes, unlike the losses parent company Qantas incurred.
A drop in the number of Japanese passengers means Jetstar’s seating capacity has also been affected.
To be profitable, flights on the Japanese route need to be at least 70% full, and preferably 75%, but recently they have been down around 65%.
The Australian dollar has risen to a 16-year high against the yen on speculation strengthening global growth will give investors confidence to buy higher-yielding currencies with funds borrowed in Japanm, the so called carry trades.
When Jetstar formed its business plan to operate on the route the exchange rate was 85 to the dollar, but yesterday it hit 106, the highest since October 1991.
Mr Joyce said Jetstar hoped to stimulate interest on the Japanese route by offering special $580 return fares out of Australia.
Asked if Jetstar might replace Qantas services to Japan, Mr Joyce replied: “Not at the moment, we have got all six long-haul aircraft committed and there is no flexibility to do that.”
He also said Jetstar wanted to enter new markets, including South Korea, Taiwan and southern Europe, where Jetstar hopes to fly from early 2009.
Report by The Mole
John Alwyn-Jones
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