ASEAN open skies deal a threat to Jetstar

Southeast Asia’s open skies deal will add competitive pressure to Qantas’s budget offshoot Jetstar.

Jetstar claims rivals have benefited from the deal

Southeast Asia’s open skies deal will add competitive pressure to the fast-growing market, with ­implications for Qantas’s budget offshoot Jetstar.

In a recent submission on Jetstar’s pan-Asia strategy, the Department of Infrastructure and Regional Development says Australian-Asia aviation markets are “strongly competitive”, while the proposed Association of Southeast Asian Nations deal is likely to mean “ongoing pressure” in intra-Asian markets.

Qantas and Jetstar also claim Jetstar rivals based in the Asia-Pacific have received a “tailwind” from the deal, which aims to create a single aviation market among ASEAN members.

The comments are contained in submissions to the Australian Competition & Consumer Commission, which the two airlines have asked to renew approval of the joint-venture co-ordination agreements behind Jetstar’s pan-Asia strategy.

Qantas and Jetstar have told the ACCC that amid the ASEAN open skies deal, the ability of Jetstar-branded low-cost carriers to compete in the region will be eroded if the approval is not ­renewed. The ACCC will next month make a draft ruling on the application to allow continued co-ord­ination of certain matters between Qantas, Jetstar-branded carrier joint ventures based in Asia, and airline shareholders Vietnam Airlines and Japan Airlines. (Jetstar Pacific is owned by Vietnam Airlines and Qantas, while Japan Airlines is part of Jetstar Japan).

Jetstar-branded airlines based in Asia have 54 aircraft in the region, according to the Qantas annual report.

Jetstar group - Business and ownership

The ASEAN single aviation market is aimed at liberalising air travel between countries in the region and has been touted as spurring competition and pushing down ticket prices, though some countries have curbed access to particular airports.

AirAsia boss Tony Fernandes has advocated a truly single market. AirAsia has set up joint ventures in Vietnam and Japan.

Webber Quantitative Consulting managing director Tony Webber, Qantas Group chief economist between 2004 and 2011, said the impact of the ASEAN single aviation market on Australian carriers would depend on how much capacity was left in the bilateral air service agreements with those countries.

Pointing to carriers such as AirAsia and Singapore Airlines’ low-cost offshoot Scoot, he said many carriers in the region were “already growing very quickly”.

According to data from the Bureau of Infrastructure, Transport and Regional Economics, Jetstar carried 9.2 per cent of international passengers in and out of Australia in the year to July.