Jetstar Asia shut down by Qantas with 500 jobs to go

Qantas will close its low-cost carrier Jetstar Asia by the end of July, saying rising costs, increased competition and high airport fees eroded the regional airline’s profits.

The Singapore-based airline’s performance had deteriorated since the start of the year to a point where it is expected to weigh down Qantas’ result with a $25 million underlying loss this financial year, Qantas said in a statement to the ASX on Wednesday morning.

It said the closure would eliminate 500 jobs in the region.

Its troubles compound a disappointing outcome from Qantas’ core domestic and international operations in the June half. In a trading update, the airline warned capacity growth in its domestic network was lower than expected, largely due to Cyclone Alfred, which affected flights over large parts of Queensland and wiped out $30 million in earnings. International flight capacity growth will also fall short of previous forecast, due to a strike at Qantas’ partner airline Finnair, the statement said.

Demand across its domestic and international operations remained strong, however, Qantas said.

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Jetstar Asia will run its flights across Asia for the next seven weeks on a progressively reduced schedule before its final grounding on July 31. Its thirteen A320 planes will be redeployed to Australia and New Zealand to support Qantas’ fleet renewal and replace leased planes on Jetstar’s domestic routes.

“This is a very tough day,” said Qantas boss Vanessa Hudson in the statement.

“Despite their best efforts, we have seen some of Jetstar Asia’s supplier costs increase by up to 200 per cent, which has materially changed its cost base.”