By: Ven Sreenivasan
(SINGAPORE) In what some industry insiders might interpret as a case of sibling rivalry, Singapore-based Jetstar Asia and its much bigger Melbourne-based sister Jetstar Australia have parted ways.
The split comes barely a year after the two Qantas-controlled budget carriers embarked on an ambitious and extensive commercial arrangement which saw them sharing a common website, embarking on joint commercial operations, fare-fixing, purchasing, call-centre coordination, joint marketing and offering travellers almost seamless interline connectivity across carriers from both airlines.
The first indication that the partnership could be unravelling emerged late last year when Jetstar pulled out of its wet-lease arrangement with its Singaporean sister, under which the latter provided jets and crew for its Singapore-Darwin-Cairns service. And earlier this year, Jetstar Australia started operating its own planes on the Darwin-Cairns route.
Both carriers were guarded in their response when asked why the break-up occurred.
'They (Jetstar Asia) are a Singapore-owned entity, and for local reasons, they have decided to be more independent in their operations,' was the response of Jetstar Australia's spokesman Simon Westway. 'But we will continue to work together in some areas, such as sharing the brand, its website, and also ensuring consistency of the product.'
Jetstar Asia's CEO Chong Phit Lian said the split reflected growing confidence within her group in its own ability to manage its own operations.
'Our intention has always been to think global, but act local,' she said. 'This move essentially reflects the confidence we have in our own talent and ability. It also gives us better cost advantage. Still, we will continue working with Jetstar Australia in many areas, including maintaining a common website.'
But the Australian entity will take back its Navatair distribution system, leaving Jetstar Asia to set up its own localised version. Jetstar Australia has also taken back three A320s originally headed for the Singapore fleet, but which were leased to Atlas airlines in Turkey over two years ago. This leaves Jetstar Asia with seven planes which serve 14 regional routes.
Also, Jetstar Asia's codeshare with Vietnam-based Jetstar Pacific Airlines has ended. Jetstar Australia bought an 18 per cent stake in the Vietnamese domestic budget carrier last year, and will control about 30 per cent by 2001.
Some industry insiders who are close to both sides say the parting of ways resulted from differences in strategies, operational priorities and visions.
For example, Jetstar Australia is said to have had reservations about the Singapore unit's decision to go ahead with bulk ticketing arrangements with the now defunct Hong Kong-based long haul carrier, Oasis.
Meanwhile, Jetstar Australia, with its fleet of 20 A320s and half a dozen A330-220s, has a vast network spanning Australasia, and recently launched long range flights to South-east Asia, Japan and Hawaii.
Jetstar Asia had a couple of turbulent years after taking to the skies in 2004, but in recent years has seen an improvement in operations under the leadership of Ms Chong. She recently told BT that her airline could chalk up its first set of profits this year.
Despite the split, parent Qantas still owns Jetstar Australia and controls the Singapore budget carrier group through its 49 per cent stake in Orangestar. And Jetstar Australia's chief executive Alan Joyce remains on the board of Jetstar Asia's holding company, Orangestar.
Qantas and its budget offshoots embarked on the commercial arrangement almost two years ago, soon after it bought up failing privately owned discount carrier Valuair, then merged it with the then-struggling Jetstar Asia under the Orangestar banner. The exercise also saw a huge capital injection of some $36 million into the group by its two controlling shareholders - Qantas and the Temasek group.
This came after the two Singapore-based budget carriers burnt some $100 million in their first few years of operations and saw three changes in CEOs in as many years.
But the 'merger' drew howls of protest from competitors like Singapore's Tiger Airways, which claimed it was anti-competitive.
Still, the move was approved by both the Australian Competition and Consumer Commission (ACCC) in 2006, and the Competition Commission of Singapore last year.
This article was first published in The Business Times on June 18, 2008.