Australian airline, Qantas Airways, to pump more funds into Jetstar Japan

According to The Australian Financial Review today, Qantas Airways is poised to inject another ¥2 billion ($21 million) into the loss-making Jetstar Japan joint venture in 2015 as it looks to build a large, low-cost carrier business in Asia.

Qantas and partner Japan Airlines (JAL) agreed in November 2014 on an ¥11 billion cash injection in two tranches for an expansion of Jetstar Japan's domestic and international operations, with the first tranche accounting for ¥7 billion, but at the time it did not reveal when the second tranche would be released.

A Jetstar spokesman said Qantas would make the second tranche of the equity investment in 2015. A JAL spokesman said the timing of the Japanese carrier's release of the second tranche would be decided according to Jetstar Japan's management plan and cash condition.

The JAL spokesman said the Japanese carrier would continue to provide "necessary support" for the budget airline to have a stable business operation.

"Regarding the low-cost carrier business model, we consider it will take several years to take root in Japan," the JAL spokesman said.

Jetstar Japan lost ¥11.1 billion in the last financial year, when it faced delays opening a second base in Osaka, but Qantas said in the first half this year it reported an unknown but lesser loss than the same half the previous year despite a weaker Japanese yen and aggressive competitor pricing.

Jetstar Japan has 20 aircraft and a 60 per cent share of the growing low-cost carrier market in Japan. In the first half, its yields, or returns from fares, rose by 11 per cent. JAL said in the first three quarters of the financial year Jetstar Japan's load factor had averaged 75 per cent. However, that is relatively low for a low-cost carrier reliant on cheap fares. Jetstar in Australia, which is a profitable business, had an average load factor of 82.9 per cent over the same period.

Jetstar Japan, however, is viewed by Jetstar Group chief executive Jayne Hrdlicka as the Asian vehicle with the most long-term growth potential because of the huge size of the Japanese market.

Ref: http://www.afr.com/business/transport/aviation/qantas-to-pump-more-funds-into-jetstar-japan-20150628-ghy64i