Qantas shedding Jetstar Asia to protect lead in core domestic Australian market

Move a bid to become more profitable by shifting aircraft and capital home: Analysts

- Jonathan Pearlman

SYDNEY - National carrier Qantas promotes itself with the proudly patriotic slogan "Spirit of Australia" — and its decision to close its Singapore-based subsidiary Jetstar Asia was widely seen as a shrewd move to return to the comfort of its highly profitable domestic market.

Analysts saw the move as a bid to shift aircraft and capital from the competitive low-cost market in South-east Asia to the Australian market, where Qantas' only serious competitor is Virgin Australia.

The Australian domestic market is particularly lucrative now that other rivals such as Rex and Bonza have struggled or collapsed, noted Professor Rico Merkert, an international transport expert from the University of Sydney.

"The Australian market is very profitable. Qantas was probably thinking about how it can benefit more from the high demand and quite nice yields at the moment."

Meanwhile, Qantas has reaped growing domestic profits as the airline and Virgin were both more "disciplined" and abandoned their all-out war over capacity and prices, he told The Straits Times.

"Closing Jetstar Asia is a sensible decision that will help Jetstar to become more profitable," he said. Jetstar is Qantas' low-cost domestic subsidiary.

Qantas said its domestic profit margin was 17 per cent at its half-yearly results in February, compared with 8 per cent for international and freight.

Its move is seen as an attempt to refocus on Australia, as Virgin Australia relists as a public company on June 24, five years after it was taken over by Bain Capital.