Budget carriers Jetstar Airways, AirAsia set up joint venture

Wednesday, January 6, 2010, 13:10 by Jose Philip

Jetstar Airways, the a low-cost airline based in Australia, and a subsidiary of Australia’s flag-carrier airline Qantas Airways, has set up a joint venture with AirAsia, the budget airline based in Malaysia.

According to the alliance, a statement from Jetstar Airways said, Jetstar Airways and AirAsia will seek opportunities to buy jointly the next-generation of narrow-body aircraft, cooperate in the handling of passengers in Asia and Australia, pool aircraft components and spare parts, and jointly buy engineering and maintenance supplies and services.

The joint venture will help cut costs, pool expertise and obtain cheaper fares, Jetstar Airways added.

The pact does not, however, involve any equity purchases by either airline.

Jetstar Airways, headquartered in Melbourne, Victoria, Australia, and AirAsia, based in Sepang, Malaysia, are the two biggest budget carriers in the Asia-Pacific region.

AirAsia, which operates scheduled domestic and international flights, is also the largest low-cost airline in Asia.

Alan Joyce, CEO of Qantas Airways, said in a statement that both Jetstar Airways and AirAsia also will work together regarding aircraft needs in future, which would include joint procurement and design specifications.

The partnership, according to Alan Joyce, will enable both carriers to cash in on the growth opportunities in the Asia-Pacific region.

He added that the aviation market in Asia is growing, besides proving its resilience over the last 12 months amidst tough operating conditions, and the passenger numbers have been forecast to increase considerably in the region.

Qantas Airways, the biggest airline in Asia, plans to spend Australian $4.4 billion (US $4 billion) over the next 2 years to buys new planes as well as to prop up margins, Alan Joyce said.

Bruce Buchanan, chief executive of Jetstar Airways, told a news conference that savings in costs are crucial to Jetstar’s business model – that is, to be able to offer lower fares and thus encouraging more people to travel.

He said there are “natural synergies” between Jetstar Airways and AirAsia since both operate the same type of planes to similar airports, besides having closely similar business models.

Buchanan told reporters that there will not be any job cuts on the part of Jetstar Airways following the setting up of the joint venture, adding, it is unlikely that AirAsia will do away with any jobs.

According to aviation analysts, airlines in the Asia region are looking to reduce costs amidst growing competition to attract budget-conscious travellers of Asia. Over 20 low-cost airlines have started operations in the Asia region since 2005.

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