Australia’s Qantas QAN.AX said on Wednesday it will close Jetstar Asia, the group’s Singapore-based budget airline, as it reels with rising supplier costs, higher airport fees and intensifying competition among low-cost carriers.
The move will free A$500 million ($326.40 million) in capital for the flag carrier to invest in its fleet renewal plans.
Qantas said that 13 Jetstar Asia Airbus A320 aircraft will be progressively redirected to Australia and New Zealand.
Jetstar Asia continues to be negatively affected by rising supplier costs, high fees at airports and rising competition in the region, fundamentally challenging its ability to deliver returns comparable to the stronger performing core markets in the group.
Group CEO Vanessa Hudson said the company has seen some supplier costs rise by up to 200%, materially changing its cost base.
“We are currently undertaking the most ambitious fleet renewal program in our history, with almost 200 firm aircraft orders and hundreds of millions of dollars being invested into our existing fleet,” Hudson added.
The low-cost unit has faced intensifying competition from Southeast Asian budget carriers, including Capital A’s AirAsia and Singapore Airlines’ Scoot.
Qantas launched Jetstar Asia over two decades ago, in a bid to capitalize on the growing demand for low-cost air travel in the continent.
Jetstar Asia is currently expected to post an underlying EBIT loss of A$35 million in the current financial year.
The airline will cease operating on July 31 and will continue flights for the next seven weeks.
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