Jetstar Asia focuses on profitability and underserved markets, avoiding strategic expansion

Singapore-based Jetstar Asia has no plans to resume capacity or fleet expansion despite the rapid growth of LCC rival Scoot, its CEO Barathan Pasupathi has confirmed.


Summary:

  • Jetstar Asia’s share of LCC capacity in Singapore has declined significantly over the last years and will decline further as it continues to take a pause from expansion;
  • It has nine routes from Singapore that are not served by other LCCs and is keen to continue launching unique destinations;
  • Jetstar Asia has been reducing capacity or pulling out entirely in markets that are highly competitive and unprofitable.

Jetstar Asia has maintained a fleet of 18 A320s since 2014. Its ASKs have declined by nearly 10% since reaching a peak of 8.6 billion in 2015 although passenger numbers have increased by around 10% due to higher load factors, improved aircraft utilisation and shorter average stage lengths.

CHART – Jetstar Asia ASKs and year over year growth since 2010Source: CAPA – Centre for Aviation and company reports

The airline has continued to expand its network, launching eight new destinations since 4Q2015 (Clark, Da Nang, Palembang, Pekanbaru, Clark, Hat Yai, Okinawa and Sanya). It also has increased capacity to some existing destinations – most recently Darwin and Okinawa. However, it has suspended several destinations (including Perth earlier this year) and has reduced capacity to several existing destinations.

It has chosen a conservative approach to growth and has been focusing on profitability rather than strategic expansion. As a result, Jetstar Group’s share of LCC capacity in Singapore has declined from over 27% in 2010 to less than 20% currently (includes Australia-based Jetstar Airways, which also cut capacity to Singapore in recent years). Back in 2010 the Jetstar Group had as much capacity in Singapore as Scoot predecessor Tigerair.

See related report from CAPA – Centre for Aviation:Singapore LCCs: Scoot’s fast growth, Jetstar Asia slows

Jetstar Asia CEO Barathan Pasupathi recently told CAPA TV the airline plans to maintain its conservative approach to expansion and is not concerned about its market share. “We are very disciplined,” he said.

“Growth is just not about taking on new aircraft and growing ASKs. It’s about having a mature model where you service the customers with the best on-time performance and reliability, the best customer experience and have a fantastic safety record. If you look at the whole ecosystem of what we do we have been phenomenal and successful in terms of how we do it,” he added.

Scoot now has more than twice as many nonstop destinations from Singapore as Jetstar (62 versus 26) and this gap will widen further as Scoot recently announced plans to expand its Singapore network by 12 destinations by the end of 2020. However, Jetstar Asia still has nine destinations which are not served by Scoot.

All nine of these routes do not currently have any LCC competition and are not among the basket of new routes recently announced by Scoot. These nine routes are: Singapore to Da Nang, Darwin, Jieyang, Medan, Okinawa, Phnom Penh, Sanya, Siem Reap and Yangon.

Jetstar Asia has succeeded in finding niche underserved markets which would likely not be viable without feed from its 32 interline and codeshare partners. Jetstar Asia continues to look for potential new markets that are similarly undeserved but is also not reluctant to exit any new destination that fails to become profitable.

“We are very focused on where we start and how the route performs and very nimble in how we move capacity,” Mr Pasupathi said. “[In new markets] we need to see a run rate of operations.”

Jetstar Asia also has showed that it is not reluctant to exit markets it has served for several years and reduce capacity on highly competitive trunk routes.  “We are very focused in terms of performance in the markets we operate to. In any markets we choose we choose the right aircraft, the right capacities for the markets and the right type of model for those markets. Over the years though we have been very clear and transparent in terms of coming out of markets that are not performing and we have added markets we are successful in,” Mr Pasupathi said.

“We are very focused in terms of staying in markets where we perform, finding new original markets where we can good get a good return from our shareholders and growing markets where frequencies require growth,” he added.

HEAR MORE from Jetstar Asia’s CEO, Barathan Pasupathi, in this in exclusive CAPA TV interview filmed on the sidelines of the CAPA Asia Aviation Summit in Singapore in early Nov-2018.