Writing was on the wall for loss-making Jetstar Asia, say analysts

SINGAPORE – Even before the sudden announcement on June 11 that Jetstar Asia would cease operations on July 31 after more than 20 years of flying, the writing was on the wall for the low-cost airline.

The Singapore-based carrier was already struggling to make consistent profits before Covid-19 brought aviation to a standstill, and it was in the black for only six years in all the time it had been in operation.

Faced with rising costs and intense competition as it tried to claw its way back post-pandemic,

the airline’s eventual closure

was unfortunate but unsurprising, industry analysts told The Straits Times.

“The airline never got its mojo back,” said Professor Alan Tan, who specialises in aviation law and politics at the National University of Singapore.

While rivals like Singapore Airlines’ budget arm Scoot ramped up flights and destinations, Jetstar Asia made a slow recovery.

The airline today operates a fleet of 13 aircraft, down from 18 before the pandemic. It also does not fly to India and has only a single flight to China – both major aviation markets, Prof Tan noted.

“The problem of Jetstar Asia’s lack of scale is all too apparent,” he said.

Mr Alan Lim, a director at Alton Aviation Consultancy, noted that Jetstar Asia’s capacity and traffic in 2024 was nearly half of the levels recorded before the pandemic.

About four million passengers flew into or out of Singapore on the airline in 2019; in 2024, this figure fell to about 2.3 million.

Analysts also said the airline’s move from Changi Airport Terminal 1 to Terminal 4 in March 2023, which Jetstar Asia had initially resisted, did not help its cause.

“That probably exacerbated the issues that they already faced to begin with, as they lost the seamless connectivity that they had with parent airline Qantas,” said Mr Shukor Yusof, founder of aviation consultancy Endau Analytics.

“Covid-19 changed everything, and the suffering became more acute,” he added.

Mr Linus Benjamin Bauer, founder and managing director of aviation consultancy BAA & Partners, said Jetstar Asia “lacked the scale, local dominance and margin buffers of stronger low-cost carriers like Scoot or AirAsia” in the face of an increasingly crowded low-cost carrier market in Asia creating price pressure on established carriers.

Assistant Professor Awad Khireldin, who teaches aviation management at the Singapore Institute of Technology (SIT), said Jetstar Asia’s closure seemed to be a calculated move, with Qantas focusing on more profitable ventures elsewhere.

Rising costs

Qantas and Jetstar Asia had cited “unsustainable” costs as a major factor behind the latter’s closure, as it impacted the airline’s ability to offer low fares – a key part of its business model.

At a briefing on June 11, Jetstar Group chief executive Stephanie Tully said cost increases have been seen across the “whole ecosystem”, Bloomberg reported. “The airport fees are a part of that. That has had an impact on the business,” she told reporters.

Airline and passenger fees at Changi Airport, where Jetstar Asia is based, were hiked in April, and they will be raised further until 2030 to fund a $3 billion upgrade of the airport’s existing terminals.

However, in response to Bloomberg’s report, airport operator Changi Airport Group (CAG) said these airport charges are applied equally to all carriers and constitute a small component of airlines’ total operating cost.

Despite the fee hikes, CAG said it has been working proactively with airlines, including Jetstar Asia, to enhance productivity and cost-efficiency.

The operator also pointed to joint marketing efforts with Jetstar Asia over the years to stimulate demand, and said it has worked with the carrier to identify new route opportunities.

But some analysts such as SIT’s Prof Awad said Jetstar Asia’s complaints about rising costs are valid.

He noted that costs in Singapore – from fuel to airport handling and security – have risen sharply, and have doubled in some cases.

“Given the scale of these hikes, other airlines at Changi Airport could be affected too. This raises valid questions about whether Changi Airport should reconsider its current fee structure,” he added.

Mr Mayur Patel, head of Asia at aviation data consultancy OAG Aviation, noted that AirAsia had also cited similar issues of high landing fees and passenger charges as the reason for cutting capacity on some of its routes out of Singapore, for instance to Bangkok and Phuket.

Effects on Changi?

Analysts said Jetstar Asia’s exit will leave a void at Changi Airport, particularly at T4, where it is the anchor operator.

This means a reshuffling of carriers within the airport could be on the cards, and other low-cost or regional carriers could potentially be moved in to ensure T4 remains operationally viable.

Jetstar Asia’s closure will also dent Changi Airport’s connectivity, at a time when the air hub is looking to grow its number of air links, from more than 170 cities today to more than 200 in the mid-2030s.

This is especially given the amount of transit traffic that Jetstar Asia facilitates, via its interline and codeshare agreements with more than 40 carriers, including Emirates and KLM.

Noting that Jetstar Asia’s routes today make up 5 per cent of the flights at Changi Airport, Mr Patel said replacing this will take time, especially in the current environment, where planes and crew are hard to come by.

But he believes this also presents an opportunity for other carriers to expand and take over Jetstar Asia’s landing and take-off slots, especially those during morning and evening peak hours, which are coveted and hard to secure.

Prof Awad had a similar view, noting that Scoot, and foreign budget carriers like AirAsia and VietJet, could step in.

CAG said the take-off and landing slots that are returned by Jetstar Asia will go back to the pool for reallocation.

“The slots will be allocated to support Singapore air hub’s connectivity, while taking into account Changi Airport’s capacity considerations, as well as in accordance with the Worldwide Airport Slot Guidelines,” it added.

With Jetstar Asia’s closure, Singapore Airlines Group’s two carriers will be the only ones left that are based in the city-state.

But analysts generally agreed that there is sufficient competition from foreign airlines to keep the national carrier on its toes.

Still, NUS’ Prof Tan said there will likely be a net reduction in competition, which will affect pricing and service frequency.

Prof Awad said the absence of a third home-grown carrier also reduces market diversity, which may prompt the Civil Aviation Authority of Singapore to consider granting a new airline licence, if a credible applicant emerges.

The future of low-cost carriers

The International Air Transport Association’s Sheldon Hee said Jetstar Asia’s closure highlights the challenging nature of the airline industry.

The regional vice-president for Asia-Pacific at the global trade body representing 350 airlines noted that the net profit margin for Asia-Pacific carriers is expected to be 1.9 per cent in 2025 – a “very thin buffer”, he added.

“With margins this low, any cost increase can impact an airline’s viability,” Mr Hee said.

Mr Bauer expects more market exits or strategic retrenchments, especially in fragmented, over-served low-cost markets like South-east Asia. “Carriers without scale, strong backing or network differentiation are most at risk,” he said.

But Jetstar Asia’s exit does not mean that Singapore is not a viable market for budget airlines, said Alton Aviation’s Mr Lim. While Singapore is a high-cost market, there is a strong level of demand here compared with elsewhere in the region, he noted.

NUS’ Prof Tan agreed that there is still demand for budget flights. He added: “I am confident that the leading foreign low-cost carriers like AirAsia, Cebu Pacific and VietJet will continue their operations here, but increasing costs may mean that cheap fares on some routes can no longer be taken for granted.”