Jetstar will remain profitable
Jetstar CEO Alan Joyce says that he is confident that Jetstar will remain profitable and grow market share when Tiger Airways begins Australian domestic services later this year.
Speaking at Australian Tourism Exchange in Brisbane he said that airline was committed to grow by 40% over the next 18 months and during an interview with ABC, he said the potential for the Jetstar brand was “wide-ranging in and out of Australia, domestically in Australia, in New Zealand and intra-Asia”.
He also confirmed the airline was seeking additional partners and subsidiaries to expand its intra-Asia network, adding, “The split of the market share is roughly 50% cent Qantas and 15% Jetstar.”
“We’re taking on nine aircraft over the next 18 months and we’ll be growing by up to 40% and there is incentive to grow both groups because both are producing good returns and both are targeted at very different markets”.
Following Qantas’s statement to maintain 65% of the market and Tiger Airway’s looming Australian domestic services, Mr Joyce has fought back against speculation that with the increase of seats there will be less domestic profits for the airline, saying, “Our cost base will be below Tiger’s when they come into this market and we’ll have the scale advantage over Tiger as they’ll be starting with five aircraft initially.”
“The only areas they potentially could get cost advantage over the Jetstar business model is on product differentials, which will obviously have a negative impact on revenue.”
However, Peter Harbison, Centre for Asia Pacific Aviation claims Tiger’s arrival into the market will displace the current domestic aviation model, saying, “There’s room for three carriers in this market. Is there going to be a profitable future domestically? Certainly not as profitable as it’s been,” he said.
Report by The Mole on location at ATE 2007
John Alwyn-Jones
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