Jetstar, a low-cost offshoot of Qantas, has launched not only itself but a new business model, offering acceptable levels of comfort at prices far below those of rival business classes. Now, the airline plans to expand its fledgling international presence into the US and has its sights set on Europe.
On the afternoon of Friday 29 December 2006, 280 Hawaii-bound passengers had their holidays interrupted by an aircraft malfunction at Melbourne’s Tullamarine airport. Although their Airbus A330 was in the air early the next morning, the hold-up was anything but routine for its owner, the low-cost Australian airline Jetstar.
Launched in 2004 as an offshoot of Australian national carrier Qantas, the late-December delay of Jetstar’s inaugural Melbourne to Honolulu flight was a rare dose of bad luck for an airline that – so far – seems to have luck along on every ride.
Jetstar’s push into the US market is merely the most ambitious component of an expansion plan that is taking the carrier well beyond its Antipodean origins and far into the lucrative Asian and trans-Pacific arenas. Much like its better-known parent, Jetstar offers a multi-class, amenities-rich, wide-bodied flight experience. Yet in sharp contrast to Qantas, Jetstar is offering these premiums without compromising its commitment to value. With flights from Melbourne to Hawaii from just AUD$259 (€155) each way, Jetstar marks the arrival of international long-haul travel for the budget-conscious masses.
Jetstar is building a brand that incorporates the pricing structure of traditional low-cost carriers while distancing itself from their low-service (or no-service) reputations. The airline succeeded in the former almost from launch, deploying an all-economy fleet of 14 Boeing 717s to serve an intra-Australian network with fares up to two-thirds below those of Qantas. Taking a cue from Europe’s EasyJet and Ryanair, Jetstar embraced second-tier airports and offered little in-flight entertainment. There was no frequent-flier programme and no assigned seating. To avoid cannibalising Qantas, Jetstar focused on destinations undeservedly neglected by its parent, while skipping many of the carrier’s cash cows entirely, such as its lucrative Sydney-Brisbane route.
This model may have helped secure market share, but it did little to differentiate Jetstar from the competition, namely Virgin Blue (co-owned by Richard Branson). Nor did it position the airline for growth beyond Australia. So by late 2005, Jetstar shifted into expansion mode, trading those slim 717s for 23 roomier Airbus A320s, awarding Qantas miles on select fares, introducing assigned seating and publicly setting its sights on long-haul destinations within 10 hours’ flying time of its Australian home base. First came Bangkok last November, followed by Phuket, Ho Chi Minh City, Bali and then Honolulu. By late summer this year Jetstar will add Kuala Lumpur, Osaka and Nagoya flights, for a total of 18 international routes from Melbourne, Sydney, Brisbane and Cairns. And while not yet confirmed, additional US – and even European routes – are the airline’s obvious next move.
Although Jetstar isn’t the first low-cost carrier to expand beyond its home shores, it is the first airline to develop an entirely new service class and fleet around its long-haul operations. StarClass launched in tandem with Jetstar’s Bangkok debut on one of the airline’s four (of an eventual six) wide-bodied A330 aeroplanes. Now available on all long-haul Jetstar flights, StarClass offers clubby leather seating, laptop power-points, video consoles, complete meals – and, on the ground, priority check-in, lounge access and increased baggage allowance. StarClass is certainly a far cry from Qantas’s flagship first and business classes, but at just a third more than economy fares, it ensures Jetstar’s appeal to travellers unwilling to settle for its buy-as-you-fly economy cabin.
With over 1,000 weekly domestic flights and a fledgling foreign network in place, can Jetstar’s upstart ambitions scale skywards into a viable, impactful – and truly global – market presence? The airline is clearly confident it can, judging by its current order for a dozen 313-seat Boeing 787 Dreamliners slated for delivery in late 2008. As is the consortium of international equity funds hoping to purchase Jetstar’s parent Qantas, which has declared a commitment to maintaining its low-cost model as part of a proposed €7bn deal.
“Jetstar is a core component of what makes Qantas so attractive as a group of companies,” observes Henry Harteveldt, travel analyst at Forrester Research. “Indeed, Qantas’s new owners could easily spin Jetstar back into the market as its own separate entity.”
Started: 25 May 2004
The fleet: Airbus A320-200s and A330-200s
On order: From late 2008, Boeing 787-800s will be added to the fleet. Jetstar will be the first Australian airline to take delivery
Short haul: 17 Australian destinations
Long haul: Currently 10 destinations, including Tapei, Bangalore, Singapore and Phnom Penh