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29 November 2023

Jetstar, AirAsia form 'world first' budget airline alliance

Jetstar and AirAsia unveiled plans on Wednesday to slash costs and ticket prices by pooling some resources, taking the first step in an alliance that could transform the Asian budget market.

Jetstar chief executive Bruce Buchanan said the non-equity arrangement, which he described as a world first between low-cost airlines, was expected to save hundreds of millions of dollars in costs.

"By getting together and focusing on areas where we can actually reduce costs we think it's a really exciting opportunity," Buchanan told reporters, calling the deal an "important first step".

"We have identified... many hundreds of millions of dollars of cost saving opportunities, and we think that is an exciting opportunity for us as we launch this partnership going forward."

Jetstar, a subsidiary of Australian flag-carrier Qantas, will share parts and ground and passenger handling services with Malaysia's AirAsia, which is Asia's biggest budget airline.

They will also investigate jointly procuring new aircraft, cooperate on buying engineering and maintenance supplies and will carry each other's passengers stranded by breakdowns and other disruptions.

Qantas chief Alan Joyce said the deal would give both airlines an edge in the competitive Asian market.

"Jetstar and AirAsia offer unmatched reach in the Asia-Pacific region, with more routes and lower fares than their main competitors, and this new alliance will enable them to maximise that scale," he said.

Jetstar, operating 60 aircraft, is the world's largest long-haul budget carrier, while AirAsia leads the Asian low-cost market with 85 planes servicing more than 60 destinations.

Analysts said the two were moving to dominate the growing Asian budget sector and were likely to announce further joint ventures.

"Certainly the teaming of two of Asia's leading low-cost carriers suggests that there will be some move to really dominate this region over the longer term," Derek Sadubin, chief operating officer of the Centre for Asia Pacific Aviation, told AFP.

"We expect that the agreement could flourish over time to include revenue-generating agreements and potential joint ventures in a range of other areas."

IG Markets analyst Ben Potter said Jetstar and AirAsia were "thinking outside the box" to stay ahead of the competition.

"In an extremely competitive environment where airlines have been under constant pressures from a number of different forces, this world first alliance is very positive indeed," he said.

"The Asia-Pacific region is one of the biggest growth markets in aviation, so any ways to further reduce costs and offer more competitive fares will benefit both shareholders and customers."

Qantas shares rose 1.4 per cent to $3 Australian (US2.70) shortly after the announcement.


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