Executives say the “unsustainable” rising costs from Singapore’s Changi Airport are partly blamed on the closure of the low-cost subsidiary of Qantas Limited Asia.
The decision to close operations and cut 500 jobs was due to the loss of the Jetstar brand’s Singapore-based branch, which only made profits in six of 21 years. Higher airport Changi’s fees were imposed for the launch of a $3 billion Singapore dollar ($2.3 billion) facility upgrade on April 1.
Jetstar CEO Stephanie Tully told reporters at a briefing Wednesday that there have been a rise in costs in the “whole ecosystem we operate.” “Airport fees are part of that. It has an impact on the business.”
In a statement earlier Wednesday, Qantas said Jetstar Asia will cease operations on July 31, allowing Qantas to release up to $500 million in Australian dollars ($327 million) to fund the group’s fleet renewal plan. 13 Jetstar Asia Airbus SE A320 aircraft will be redeployed to Australia and New Zealand, creating 100 local jobs.
Qantas CEO Vanessa Hudson is prioritizing the group’s cash cow, the Australian domestic network, as she picks on assets to pay for the largest airline orders in the airline’s history. Qantas has company orders for nearly 200 new aircraft.
Qantas’ statement said that in the face of Qantas’ operating losses, 49% of the Australian star’s holdings of Jetstar Asia is expected to pay $35 million for operating losses this fiscal year. The closure will result in a one-time $175 million AUD.
Jetstar Asia will also leave Singapore Airlines’ airlines as the only operator in the city-state, although there are still many competing foreign airlines – some of whom are quarreling with Jetstar Asia on their routes.
Changi said that while Jetstar Asia’s decision to withdraw from Singapore was “disappointed”, it respected the company’s business considerations.
“Our direct priority is to ensure passengers are well supported and minimize disruptions during the transition period,” the airport group told Bloomberg in an emailed statement.
Changi said it will work with airline partners to restore connectivity on four routes exclusively operated by Jetstar Asia (Broome, Indonesia’s Labuan Bajo, Japan’s Okinawa and China’s Wuxi).
Singapore trade union head Ng Chee Meng wrote on FacebookpostalIt is exploring the opportunity of Singapore Airlines Group to bring affected Jetstar Assia employees into the right role.
Jetstar Asia was launched in 2004 and grew into the third largest airline operating in Changi, according to data from aviation data company Cirium.
As of June, Jetstar Asia sold nearly 31,000 seats a week, or less than 4% of the total seats available in Changi. Only 16 Asian routes will be affected by Jetstar’s closure. Australia-based Jetstar Airways and Jetstar Japan’s services entering Asia have not changed.
Jetstar Asia will gradually reduce flights as planned by the last day of its operation on July 31.
This story was originally fortune.com
