JetStar was set up and established by Qantas in 2003 as a low cost airline subsidiary.
The top executives at Qantas decided that if they wanted to reduce their costs and were to maintain the steady growth of the airline they would have to devise a plan to split the business of the company between Qantas and Jetstar. It was decided to house both the brands separately in two different stock market vehicles although there would be affiliation through common ownership by way of Qantas retaining a controlling stake in Jetstar. This way synergies could be achieved despite the radical move in the face of rising fuel prices and therefore the need for restructuring was felt necessary. It was also felt that cost-cutting was not the only solution for growth and separating Jetstar would equip the company with the required capital for further expansion into freight. The plan to transfer the low fare paying passengers to an airline that had a structure that was cheaper to operate, appeared to be the perfect solution to the prevailing problems. Qantas thus extended this model to its international operations. Jetstar flights began to be executed effectively in this regard and proved cheaper to operate to offshore destinations especially for budget travelers. Their advertising slogan “All day every day low fares” worked wonders and the passenger base increased considerably. In 2007 Jetstar was awarded the best “low cost carrier” status by Skytrax, which proved to be higly motivating for the airline. Jetstar flights did not provide free meals and frills that go with the other international flights. Hence the competition was in the favor of Jetstar and it had an edge over its competitors.
As a part of its Asia Pacific strategy Jetstar started a media campaign that provided passengers with the guarantee that it had the lowest fares amongst all low cost airlines. In the face of increasing competition in the Asia Pacific region, Jetstar guaranteed its passengers of its low priced tickets and even provided an offer of a voucher system that assured any passenger of being paid double the difference of any web fare discovered by him as being lower than Jetstar fares. An elaborate procedure has been outlined and provided by the airline to claim such payments. In October 2006 Jetstar became the first Australian airline that allowed its passengers to select their choice of seat at the time of booking, which certainly gave it an edge over other airlines. The process has also been started to acquire a fleet of 30 new Airbus 320s to meet the extra demand created by these campaigns for flights in the Asia Pacific region.
Jetstar does not currently have any flights operating to destinations in North America and Europe, although the management is all set to make a strategy to enter these segments in view of the excellent potential that low cost airlines have begun to offer. Since Vietnam forms a large segment for Jetstar in view of a large client base in that country, some barriers have arisen for the airline in terms of the competition arising from more and more airlines seeking licenses to operate out of Vietnam. Hence it is very important for Jetstar to become more efficient. A more pertinent hurdle is the big question whether the Vietnamese aviation infrastructure will be able to cope with the extra traffic emanating from the increased flights of Jetair especially in view of the domestic air-fare cap of US$ 103 fixed by the government. Jetstar has to be cautious of the fact of competition from other airlines and the strongholds of particular airlines at different locations, which will certainly be difficult to break. Jet star has to be alive to the threat of substitutes being offered to passengers in view of more and more airlines realizing the benefits of operating low cost flights as increasing number of passengers begin to opt for the extra savings emanating by opting for these flights. There are several airlines already operating in the Asia Pacific region such as Hongkong Express Airways, Nok Air, Tiger Airways, Cebu Pacific and Virgin Blue that offer varying choice of destinations and airfares that may prove to offer viable substitutes to Jetstar in the coming days. Jetstar is presently having a fleet of 37 aircrafts. Of these 29 are A 320s, 2 are A 321, and 6 A330s supplied by Airbus, while there are 15 Boeing 787 ordered and to be delivered shortly. The airline has also ordered 30 Airbus 320s to be supplied in phases. The passengers who travel by Jetstar are primarily businessmen who travel frequently within the Asia Pacific region and between locations in Australia seeking low air fares in view of the rising cost of traditional airline fares due to rising fuel costs. Airlines such as Jetstar are able to offer lower fares by excluding the extra frills such as transport, chauffer services, drinks and meals charges that greatly enhance the cost of the air ticket.
Bibliography
Elizabeth Knight, Qantas and Jetstar Don’t Mix, 2008. Web.
Flight Center Unbeatable, 2008. Web.
Jetstar Asia guarantees the lowest fares among all low-cost carriers, 2007.
World Airline Awards, 2008. Web.