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Business Times
9 hours ago
- Business
- Business Times
Jetstar Asia's demise shows that Singapore could do more to attract and keep airlines at Changi
JETSTAR Asia's departure shows that Singapore cannot take its competitiveness as an air hub for granted – and suggests that it can do more to attract and retain airlines. On Wednesday (Jun 11), Jetstar Group announced that its Singapore-based low cost carrier (LCC) Jetstar Asia (JSA) will cease operations this Jul 31. Changi's high airport fees were one reason cited, along with increased supplier costs and regional competition. With the loss of JSA, the only remaining Singapore-based carriers are those of the Singapore Airlines Group: Singapore Airlines, Scoot and Singapore Airlines Cargo. As at the first week of June, JSA operates around 180 weekly services at Changi. This is about 5 per cent of total weekly passenger services, and forms about 3 per cent of passenger traffic, said the Civil Aviation Authority of Singapore (CAAS). While Singapore Airlines Group is ramping up flights to cover JSA's exit, Changi may also need to reassess its strategy. JSA's withdrawal brings the spotlight back to the fact that while Singapore is a leading regional air hub, it is also expensive compared to its rivals. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Star struck Started in 2004, JSA is owned by Singapore-based holding company Westbrook Investment (51 per cent) and Australia's Qantas group (49 per cent). Temasek previously held as much as 33.5 per cent, but divested in 2009. JSA is expected to post a loss of S$35 million in underlying earnings before interest and taxes in the financial year ending Jun 30. Jetstar did not specify how airport fees affected its bottom line, but aviation industry observers told The Business Times that these were likely an important reason for the closure. To use airports, airlines pay passenger fees – added to ticket prices – as well as landing, parking and aerobridge (LPA) charges. Such fees go towards the operation, maintenance and expansion of airport infrastructure. Singapore's airport passenger fees are higher than many of its regional rivals, and set to keep rising. CAAS and airport operator Changi Airport Group (CAG) announced fee hikes for both passengers and airlines over the next five years. Currently, a passenger departing Changi pays S$65.20. This will rise to S$79.20 in 2030. This is several times what a passenger pays in nearby rivals: 700 baht (S$27.64) in Bangkok, 25,000 won (S$23.58) in Seoul, and up to 70 ringgit (S$22) in Kuala Lumpur. Regionally, Hong Kong's fees are closest to Singapore's, at HK$355 (S$57.98). Last year, JSA chief executive officer John Simeone told the media that Singapore was becoming a 'very expensive' location to operate from, whether in terms of airport, operating or ground service charges. In response to media queries, CAG said that airport fees are applied equally to all carriers and constitute a small component of airlines' total operating cost. But industry observers noted that higher passenger fees hit LCCs harder than full-service or legacy carriers. As LCCs have lower ticket prices, airport fees represent a large share of the total. LCCs may also incur higher fees due to their point-to-point service model of flying directly between destinations. This means passengers pay airport departure fees rather than the transit fees of S$12 in Changi. Passengers on legacy carriers may pay the lower transit fee, due to these airlines' hub-and-spoke approach of flying into a major hub and having passengers take onward connecting flights. Higher supplier costs may also contribute to making Changi pricier than its rivals. Qantas group CEO Vanessa Hudson said that JSA has seen some 'supplier costs increase by up to 200 per cent'. These include suppliers that provide supporting services to aircraft, such catering and baggage handling. In Singapore, these suppliers face rising wage pressures, compliance cost and renewed investment in facilities and sustainability infrastructure, said Awad Khireldin, assistant professor of the aviation management degree programme at the Singapore Institute of Technology. To cope with their own costs, suppliers have been charging airlines more. Generating lift CAG said it has been working with airlines, including JSA, to enhance productivity and cost-efficiency. But wider efforts to draw airlines here may be needed. Singapore has ambitious plans to scale Changi's operations further, with Terminal 5 in the mid-2030s. Changi's passenger air traffic reached an all-time high of 68.4 million for the year ended March 2025, with its maximum capacity being around 90 million now. T5 will expand capacity to around 140 million. Yet, growth may be difficult if LCCs avoid the Republic because of high costs. While Apac is predicted to lead global aviation's growth in the coming years, airlines have thin margins. The International Air Transport Association projects that Asia-Pacific airlines' net profit margin per passenger will be just 1.9 per cent, or US$2.60, in 2025. Airlines may not choose Singapore if the cost base is not controlled, and instead head to where they can preserve profits. Granted, CAAS is taking steps to ease the fee hike, such as a 50 per cent LPA fee rebate to airlines from April to September. But perhaps it could go beyond short-term relief, and instead give long-term incentives to airlines that base themselves or increase the scale of their operations in Singapore. Asked if airlines receive benefits to base themselves here, CAAS director for air transport Sidney Koh replied only that Singapore-based airlines enjoy air traffic rights in Singapore's Air Services Agreements with other countries, which can be used to operate flights to those countries. Here, the aviation sector could apply lessons from the maritime industry. Under existing schemes, maritime and shipping companies receive tax breaks and harbour fee rebates, among other things, if they establish operations and register ships here. Changi could explore similar measures and scale them by the size of airline operations. After all, while passenger fees are needed to fund infrastructure improvements, it is counterproductive if they themselves limit passenger numbers. To be fair, fees were only one factor in JSA's descent. Other crucial factors were a lack of scale and the inability or unwillingness to quickly expand due to aircraft shortages. But as competition grows, airlines will be eager for any edge they can get – such as receiving benefits to operate in one of the most strategic, well-run air hubs in the region.
The Star
2 days ago
- Business
- The Star
Jetstar Asia to cease operations from July 31, over 500 employees in Singapore affected
SINGAPORE: Singapore-based low-cost airline Jetstar Asia will cease operations on July 31 as part of a 'strategic restructure' by its parent company, Australian flag carrier Qantas. More than 500 employees in Singapore will be laid off due to the closure, with the airline assuring that it will offer a range of support, including retrenchment benefits and employment opportunities, either within the Qantas Group or elsewhere. Jetstar Asia said in a statement on June 11 that it will continue to operate flights out of Singapore for the next seven weeks with a progressively reduced schedule until its final day of operations on July 31. Qantas said 16 intra-Asia routes will be impacted by the closure of Jetstar Asia, with no changes to Jetstar Airways (JQ) and Jetstar Japan (GK) services into Asia. Jetstar Airways' international services in and out of Australia will also remain unchanged. Jetstar Asia customers with bookings that are impacted by the announcement will be contacted directly, with the option of a full cash refund or an alternative flight where possible. The carrier, which operates out of Changi Airport Terminal 4, has set up a dedicated webpage with information for its customers, and its Travel Alert page will be regularly updated with the latest advice. Jetstar Asia said the decision to cease operations comes amid escalating supplier costs, airport fees and aviation charges in recent years, as well as growing capacity and competition in the region. The budget carrier is expected to post a loss of A$35 million (S$29.3 million) before interest and taxes this financial year, prior to the decision to shut down. Qantas chief Vanessa Hudson said some supplier costs have risen by up to 200 per cent. Jetstar Asia foresees the rising costs to continue in the future, putting 'unsustainable pressure' on the airline's ability to offer low fares, which it said is fundamental to its business model. Jetstar Asia chief executive John Simeone said: 'Unfortunately, despite our best efforts, the market conditions have ultimately impacted our ability to continue to offer the everyday low fares that are our DNA.' The Singapore Manual & Mercantile Workers' Union (SMMWU) said it has worked closely with Jetstar Asia's management to ensure affected workers receive fair compensation. SMMWU secretary-general Andy Lim said the union will support employees by providing job placement assistance and career advisory services across various industries, and financial aid, where necessary. Changi Airport Group (CAG) said it is disappointed by Jetstar Asia's decision to exit the Singapore market, but respects the carrier's commercial considerations. 'Our immediate priority is to ensure passengers are well-supported and to minimise disruption during the transition period,' the airport operator said in a statement. Jetstar Asia operates about 180 weekly services at the airport, and carried about 2.3 million passengers in 2024, accounting for about 3 per cent of Changi's total traffic. Of the 16 routes affected by Jetstar Asia's closure, 12 are served by 18 other airlines offering more than 1,000 weekly services, CAG said. 'We will monitor the routes affected by Jetstar Asia's exit, and where additional capacity is needed, we will actively engage other airlines to fill the gap,' it added. CAG will also work to restore connectivity to the four destinations served exclusively by the budget carrier from Changi. They are Broome in Australia, Labuan Bajo in Indonesia, Okinawa in Japan and Wuxi in China. 'CAG values its partnership with the Qantas Group and will continue to collaborate with Qantas and Jetstar Airways to support their growth and presence at Changi Airport,' it added. The Qantas Group will provide support for Jetstar Asia to continue to meet its obligations while operations wind down. 'Jetstar Asia has been part of the Jetstar family for more than 20 years and this is an incredibly difficult and sad day for our people, our customers and the entire Jetstar Group,' said Jetstar Group chief executive Stephanie Tully. Following the airline's closure, its 13 aircraft will be progressively redeployed across the Qantas Group to support fleet renewal and growth in the Australia and New Zealand businesses in line with underlying demand. - The Straits Times/ANN
Yahoo
27-03-2025
- Yahoo
Lizard people: Singapore airline opens new route to Komodo dragons
Getting a close look at the world's biggest lizard has been made easier with the launching of a first direct flight from Singapore to the gateway airport to Komodo, the Indonesian island where the fearsome eponymous carnivores live. Budget carrier JetStar Asia's first flight from the city-state's airport, one of the biggest and busiest in the world, lifted off on March 20 for Labuan Bajo on Flores, an Indonesian island sitting about halfway between Bali and Indonesia's neighbour East Timor. The Singapore-based airline is operating return flights twice a week, on Thursdays and Sundays, promising what it said would be "an affordable option for travellers looking to explore the island of Flores, the gateway to Komodo National Park and one of Indonesia's most picturesque coastal regions." "With this direct flight, we are optimistic about increased tourism and economic opportunities for the local community, particularly in the hospitality and business sectors," said Fransiskus Teguh, the acting president director of the Labuan Bajo Flores Tourism Authority (BPOLBF). The route means a "convenient travel option for those looking to explore more of Indonesia," according to JetStat Asia chief executive John Simeone. The opening of the route follows AirAsia last year starting direct flights from Kuala Lumpur, Malaysia's biggest city, to Labuan Bajo. With around three-quarter of the country's foreign visitor arrivals landing at Bali or Jakarta, and Indonesia's government has been encouraging airlines to open new routes connecting cities across the archipelago to each other and to major airports abroad to encourage more visitors. Etihad earlier this month launched a direct route from Abu Dhabi to Medan, a city in the north of Sumatra and a gateway to Toba, the world's biggest volcanic lake. A so-called supervolcano, Toba's crater is 50 kilometres by 15, the legacy of an eruption so colossal it likely caused several years of worldwide winter. The addition of the JetStar Labuan Bajo route means there are direct flights from Changi Airport in Singapore to 13 cities in Indonesia, a 13,000-island archipelago that spans a distance exceeding the width of Canada. But for visitors to Komodo, a word of caution: the lizards are capable of killing an adult buffalo or wild boar with to their powerful bacteria-laden jaws and razor-sharp teeth, and larger specimens have been captured on video swallowing monkeys, goats and deer whole.
