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Jetstar Challenges Singapore Air on Budget Long-Haul

Jetstar Begins Budget Long-Haul Challenge
Jetstar also plans to add Singapore-Auckland flights in March and other long-haul destinations in the second half of next year, as it seeks to lure cost-conscious passengers from full-service carriers. Photographer: Carla Gottgens/Bloomberg

Dec. 16 (Bloomberg) -- Jetstar, the budget unit of Qantas Airways Ltd., makes its first Singapore-Melbourne flight today, marking the beginning of its challenge to Singapore Airlines Ltd. on long-haul routes.

The carrier sold 210 tickets for the 8:50 p.m. flight, including 24 in business class, Simone Pregellio, a spokeswoman, said today. The low-fare airline will operate the daily seven-hour flight using an Airbus SAS A330-200 that can carry as many as 303 passengers.

Jetstar may base as many as four A330s in Singapore by the end of next year, as it adds flights to Auckland in March and possibly services to north Asia and southern Europe later in 2011, Jetstar Asia Chief Executive Officer Chong Phit Lian said today. The carrier is touting fares 30 percent cheaper than rivals as it seeks to lure travelers from full-service carriers.

“Competition will increase and this will put some pressure on Singapore Air,” said Kelvin Lau, a Hong Kong-based analyst at Daiwa Institute of Research, who has an ‘outperform’ rating on Singapore Air. “There will always be people who will want the cheapest fares.”

Melbourne Fares

Jetstar offers one-way flights to Melbourne from S$428 ($327), including taxes and surcharges, it said in its e-mail. The carrier’s passengers have to pay an extra S$20 if they want to take check-in baggage, according to its website.

Singapore Air is running a promotion on its website offering return flights to Melbourne from S$818, including baggage, taxes and surcharges. Passengers buying these tickets have to travel this month and return in late January.

Singapore Air, which operates 21 weekly return flights between the city-state and Melbourne, welcomes and advocates competition, Nicholas Ionides, a spokesman, said in an e-mail reply to Bloomberg questions.

Jetstar and AirAsia X Sdn. are adding budget long-haul services in Asia as rising wages stoke travel. The move is a break from the traditional low-cost model, pursued by Southwest Airlines Co. and Ryanair Holdings Plc, which focuses only on short-haul flights of less than five hours.

AirAsia X, partly owned by AirAsia Bhd. and Richard Branson’s Virgin Group Ltd., plans to about triple its fleet over the next six years. The carrier flies to London, Australia and Japan from its Kuala Lumpur hub.

Jetstar expects to receive Boeing Co. 787s from mid-2012, David Hall, the head of its Australia and New Zealand operations, said today.

Tiger Airways

Singapore Air’s budget affiliate Tiger Airways Holdings Ltd. said it had no plans to begin offering long-haul services or a business class because of the extra cost such a move would cause.

“Tiger Airways will stick to our successful model of keeping things simple,” the carrier said in an e-mail. “The most cost-effective way to grow is by replicating profitable short-haul, single-class flights across the fast-growing Asia-Pacific region.”

Budget carriers including Jetstar, AirAsia and Tiger Airways are winning market share in Asia as they add capacity. Such carriers accounted for about 22 percent of passengers in the first 10 months of the year at Singapore’s Changi airport, according to operator Changi Airport Group. That compares with 12 percent in 2008 and 8 percent in 2006, airport data show.

“Asia-Pacific’s low-cost carriers are continuing to grow and take share away,” Derek Sadubin, chief operating officer at Centre for Asia-Pacific Aviation, said in a Bloomberg TV interview. “That’s really causing the incumbent or full-service airlines to really consider their positioning.”

ANA, Thai Airways

All Nippon Airways Co., Japan’s largest listed carrier, is working on plans to form a budget unit with a Hong Kong investor, it said in September. Thai Airways International Pcl is teaming up with Tiger Airways to form a budget carrier in Bangkok.

AirAsia, Southeast Asia’s largest discount carrier, said last month third-quarter net income more than doubled as passenger traffic rebounded with the region’s economy. Tiger Airways posted a profit in the three months ended in September after it flew 25 percent more passengers than a year earlier.

Rising travel and economic growth may help Asia-Pacific airlines post combined profits of $7.7 billion this year, the highest tally for any region, according to the International Air Transport Association. The region is home to more than half the world’s population.

To contact the reporter on this story: Chan Sue Ling in Singapore slchan@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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