Delving deeper into Jetstar’s long haul narrowbody operation with A321neoLR

Jetstar’s acquisition of A321neoLRs for long haul narrowbody operations will enable the LCC to compete better in the growing Bali-Australia market and frees up limited widebody capacity for new long-haul routes.


Summary

  • Qantas has announced a commitment for 18 A321neoLRs, which will be delivered to LCC subsidiary Jetstar in 2020 to 2022;
  • The 232-seat A321neoLRs will replace 335-seat 787-8s on six hour routes to Bali, freeing up the equivalent of four 787-8s for expansion in other long-haul markets;
  • The A321neoLR will enable Jetstar to lower unit costs and compete more effectively against the Lion Group, which plans to use A321neoLRs to serve several Australia-Bali routes;
  • Some of the A321neoLR fleet will also be used to replace 180-seat A320ceos on shorter domestic and international routes.

On 22-Feb-2018, Qantas announced the conversion of 18 A321neo orders to A321neoLR, a new long-range version which will enter service in 2019. Qantas initially confirmed in 2014 orders for 99 A320neos and in 2016 converted 45 of the orders to larger A321neos.

The group initially planned to start taking A320neo family aircraft in 2016 but deliveries have been pushed back multiple times since the initial order and are now are slated to begin in 2020. Most of the 99 aircraft will be used for replacement but with flexibility to pursue some growth depending on market conditions.

Airbus launched the A321neoLR programme in early 2015 but it took three years for Qantas to commit to the new type. Competition likely swayed Qantas to finally make the plunge.

Blue Swan and CAPA have highlighted in several previous reports the potential role of the A321neoLR on six to seven hour routes from Australia. In an analysis report earlier this month, CAPA pointed out how Lion Group subsidiary Batik Air’s plans for deploying 212 two-class A321neoLRs on several Bali-Australia routes from 2019 will “shake up the Australia-Bali market.”

CAPA concluded in the report and a similar report that was published in Blue Swan: “The Garuda, Qantas and Virgin Australia groups may need to make strategic adjustments in order to compete effectively against Batik A321neoLRs.”

See related reports:

Jetstar currently operates 335-seat two class 787-8s on three Bali routes – from Melbourne, Sydney and Brisbane. Jetstar uses 180-seat A320ceos on shorter routes to Bali from Adelaide, Cairns, Darwin, Perth and Townsville (although Townsville is being suspended next month).

The A321neoLR will have significantly lower unit costs compared to the 787-8, enabling Jetstar to better compete against Batik and other airlines. Jetstar will configure its A321neoLR fleet with 232 seats.

Equally importantly, the A321neoLR frees up 787-8s for longer routes to Asia. Jetstar was a pioneer in the long-haul low cost segment but has not expanded its long-haul operation for several years due to fleet limitations. Its 11 787-8s were used primarily to replace its original fleet of A330-300s, which were used to launch long haul operations in 2006.

Jetstar now uses its 787-8s to operate 15 long haul routes to Asia and Hawaii. The three Bali routes are its thickest routes and account for more than one-third of its total long-haul seat capacity.

Jetstar also operates the 787s on a small number of domestic flights which are used reposition the aircraft for international services. Jetstar operates 787s from five gateways – Brisbane, Cairns, Gold Coast, Melbourne and Sydney.

As the Bali flights transition to A321neoLRs, the equivalent of approximately four 787s will be freed up for new long-haul routes to Asia and/or more frequencies on existing routes. Jetstar currently serves China, Japan, Thailand, Singapore and Vietnam – as well as Hawaii, its only destination outside Asia Pacific.

At least six of the 18 A321neoLRs will be required to replace the four 787-8s now used for Bali as Jetstar will need to boost frequencies in order to maintain overall capacity. For example, Jetstar now has two daily flights on Melbourne-Bali but will need three daily flights to maintain current capacity. Jetstar now has one daily flight on Brisbane-Bali and Sydney-Bali but will need 10 weekly A321neoLR frequencies to maintain capacity – and an increase to double daily is possible as demand will grow over the next two years (by the time A321neoLR operations begin).

Jetstar will be able to use the other 12 A321neoLRs to replace A320ceos on some of its longer existing narrowbody routes such as Perth-Bali. While the A320ceo is capable of operating routes of up five hours, the A321neoLR (and A320neo) is more efficient and the fuel savings competed with the A320ceo are more pronounced on longer routes.

Jetstar will have to wait until 2020 to take delivery of A321neoLRs – and resume long haul growth after several years of virtually no growth. Unfortunately, it’s slow decision in committing to the new type mean Jetstar lost a window to get the aircraft in 2019. However, the important thing is Jetstar has recognised the value of new generation long haul narrowbody operations; waiting the one extra year is not significant in the bigger strategic picture.