http://www.theaustralian.com.au/bus...es-tiger-airways/story-e6frg95x-1225816666578
Jetstar alliance with AirAsia challenges Singapore Airlines, Tiger Airways
UPDATE: Bill Lindsay
From: Dow Jones Newswires
January 06, 2010 3:59PM
JETSTAR, the cut-price carrier under the wings of Qantas, and Malaysian discount airline AirAsia today said they had formed an alliance aimed at cutting costs and pooling their expertise, putting pressure on the SIA-backed Tiger Airways as it begins briefing investors on its listing planned for later this month.
The non-equity alliance between Asia-Pacific's two largest discount carriers by revenue, which already co-operate in some operational areas, comes after more than a year of talks and will potentially be expanded to incorporate aircraft procurement and revenue sharing deals, the two airlines said.
The agreement is an "important first step", Jetstar chief executive Bruce Buchanan said at a media conference, and could result in costs savings "in the hundreds of millions of dollars" that would be "phased in over many years".
The airlines plan to co-operate on passenger and ground handling at the Australian and Asian airports they both serve, to pool their inventories of aircraft components and spare parts, and work toward joint procurement of engineering and maintenance supplies and services.
They also aim to use their combined scale to help influence the design of the next generation of narrow-body aircraft from both major manufacturers Boeing and Airbus, and secure more purchasing power via joint procurement orders.
With its initial focus on cost reductions, Qantas chief executive Alan Joyce said that no major regulatory approvals were expected to be required by the alliance, but if it was expanded to include revenue measures such as code-sharing and joint ventures on flights, it would be subject to more rigorous regulatory scrutiny.
"The aviation market in Asia is a growth market and has proven resilient over the past 12 months, despite the tough operating environment, with significant growth in passenger numbers forecast in the region," Mr Joyce said in a joint statement.
"This partnership will ensure that both airlines can capitalise on these growth opportunities," giving them a "natural advantage" to keep their fares lower than that of their main competitors, he said.
Through its domestic and international discount networks, and its stakes in Singapore-based Jetstar Asia and Vietnam-based Jetstar Pacific airlines, Jetstar operates about 1900 weekly flights to more than 50 destinations in Australia, New Zealand and the Asia-Pacific.
Kuala Lumpur-based AirAsia is the Asia-Pacific region's largest low-cost carrier, with more than 400 daily flights to over 60 Malaysian and international destinations; AirAsia also has hubs also in Thailand and Indonesia.
AirAsia’s affiliate long-haul carrier, AirAsiaX, serves destinations more than four hours flight away, including cities in Australia, the UK and China.
Almost exclusively, both Jetstar and AirAsia operate Airbus A320 aircraft that carry about 180 passengers on short-haul flights, while using the nearly twice as large A330 aircraft on long-haul flights.
News of the agreement came as Tiger Airways, 49 per cent of which is owned by Singapore Airlines (SIA), began an investor roadshow to gauge demand for its planned Singapore listing on January 22.
Tiger has priced its initial public offering between $S1.35 and $S1.65 a share, hoping to raise up to $S273 million ($214m).
The airline plans to use the proceeds to help fund the quadrupling of its fleet of 17 Airbus A320 aircraft by December 2015 and potentially establish a new airline, or fourth operating base. Tiger operates flights to 33 destinations across 11 countries and also operates domestic routes in Australia out of bases in Melbourne and Adelaide.
This afternoon, Qantas shares were flat at $2.96 after an earlier rise to $3.01 on news of the alliance.
IG Markets analyst Ben Potter said the tie-up is a positive development for both carriers and shows both management teams are "thinking outside the box" to ensure they remain leaders in the region.
"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," Mr Potter said in a client note.
"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," he said.
AirAsia chief executive Tony Fernandes said common aircraft specifications for the next generation narrow-body planes would be pursued by both airlines because of the many efficiencies it would bring.
Mr Fernandes told the media conference that the higher utilisation rate of their aircraft fleet by discount carriers compared with full service airlines, and the stresses this caused to different parts of the plane such as the hydraulics system, were among the issues that could be addressed.
Additional reporting by Lyndal McFarland
Jetstar alliance with AirAsia challenges Singapore Airlines, Tiger Airways
UPDATE: Bill Lindsay
From: Dow Jones Newswires
January 06, 2010 3:59PM
JETSTAR, the cut-price carrier under the wings of Qantas, and Malaysian discount airline AirAsia today said they had formed an alliance aimed at cutting costs and pooling their expertise, putting pressure on the SIA-backed Tiger Airways as it begins briefing investors on its listing planned for later this month.
The non-equity alliance between Asia-Pacific's two largest discount carriers by revenue, which already co-operate in some operational areas, comes after more than a year of talks and will potentially be expanded to incorporate aircraft procurement and revenue sharing deals, the two airlines said.
The agreement is an "important first step", Jetstar chief executive Bruce Buchanan said at a media conference, and could result in costs savings "in the hundreds of millions of dollars" that would be "phased in over many years".
The airlines plan to co-operate on passenger and ground handling at the Australian and Asian airports they both serve, to pool their inventories of aircraft components and spare parts, and work toward joint procurement of engineering and maintenance supplies and services.
They also aim to use their combined scale to help influence the design of the next generation of narrow-body aircraft from both major manufacturers Boeing and Airbus, and secure more purchasing power via joint procurement orders.
With its initial focus on cost reductions, Qantas chief executive Alan Joyce said that no major regulatory approvals were expected to be required by the alliance, but if it was expanded to include revenue measures such as code-sharing and joint ventures on flights, it would be subject to more rigorous regulatory scrutiny.
"The aviation market in Asia is a growth market and has proven resilient over the past 12 months, despite the tough operating environment, with significant growth in passenger numbers forecast in the region," Mr Joyce said in a joint statement.
"This partnership will ensure that both airlines can capitalise on these growth opportunities," giving them a "natural advantage" to keep their fares lower than that of their main competitors, he said.
Through its domestic and international discount networks, and its stakes in Singapore-based Jetstar Asia and Vietnam-based Jetstar Pacific airlines, Jetstar operates about 1900 weekly flights to more than 50 destinations in Australia, New Zealand and the Asia-Pacific.
Kuala Lumpur-based AirAsia is the Asia-Pacific region's largest low-cost carrier, with more than 400 daily flights to over 60 Malaysian and international destinations; AirAsia also has hubs also in Thailand and Indonesia.
AirAsia’s affiliate long-haul carrier, AirAsiaX, serves destinations more than four hours flight away, including cities in Australia, the UK and China.
Almost exclusively, both Jetstar and AirAsia operate Airbus A320 aircraft that carry about 180 passengers on short-haul flights, while using the nearly twice as large A330 aircraft on long-haul flights.
News of the agreement came as Tiger Airways, 49 per cent of which is owned by Singapore Airlines (SIA), began an investor roadshow to gauge demand for its planned Singapore listing on January 22.
Tiger has priced its initial public offering between $S1.35 and $S1.65 a share, hoping to raise up to $S273 million ($214m).
The airline plans to use the proceeds to help fund the quadrupling of its fleet of 17 Airbus A320 aircraft by December 2015 and potentially establish a new airline, or fourth operating base. Tiger operates flights to 33 destinations across 11 countries and also operates domestic routes in Australia out of bases in Melbourne and Adelaide.
This afternoon, Qantas shares were flat at $2.96 after an earlier rise to $3.01 on news of the alliance.
IG Markets analyst Ben Potter said the tie-up is a positive development for both carriers and shows both management teams are "thinking outside the box" to ensure they remain leaders in the region.
"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," Mr Potter said in a client note.
"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," he said.
AirAsia chief executive Tony Fernandes said common aircraft specifications for the next generation narrow-body planes would be pursued by both airlines because of the many efficiencies it would bring.
Mr Fernandes told the media conference that the higher utilisation rate of their aircraft fleet by discount carriers compared with full service airlines, and the stresses this caused to different parts of the plane such as the hydraulics system, were among the issues that could be addressed.
Additional reporting by Lyndal McFarland
