Jetstar Asia: A Low-Cost Airline in Trouble


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BSTR234 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Business Model | Regulatory Environment |  Mergers | Subsidiaries
Case Length : 14 Pages
Period : 2004-2006
Organization : Jetstar Asia Airways Pte Ltd.
Pub Date : 2006
Teaching Note : Available
Countries : Singapore
Industry : Aviation

Abstract:

Jetstar Asia Pte Ltd. was a low cost carrier (LCC) operating in the Southeast Asian region. This case discusses the operations of Jetstar Asia, and the various problems the airline faced since its inception in December 2004.

Although Jetstar Asia was positioned as a LCC, it did not operate on a completely no frills model, and consequently, its fares were higher than those of other LCCs operating in the region, notably Tiger Airways. In addition to this, the regulatory environment in the Southeast Asian region also hampered the airline's growth. As a result, Jetstar Asia was unable to get a foothold in the Southeast Asian air travel market, and posted losses from its inception.

The case then talks about the measures taken by Jetstar Asia to improve its position, such as the merger with Valuair (another LCC in Singapore). It also draws a comparison between the business models of Jetstar Asia and the only other Singapore-based LCC, Tiger Airways. The case concludes with discussion of the measures undertaken by Qantas, a leading Australian airline and the majority shareholder in Jetstar Asia, in order to improve the condition of the airline.

Issues:

» To study the business model adopted by a struggling Southeast Asian low cost carrier (LCC)
» To understand the importance of choosing the right business model, especially in the context of LCCs
» To understand the impact of the regulatory environment on the Southeast Asian aviation industry
» To understand the role of mergers in the aviation industry, and to analyze whether a merger between two struggling airlines is a good idea
» To study the trend of full service carriers setting up low cost subsidiaries, and to examine the likelihood of these subsidiaries becoming successful

Contents:

  Page No.
Introduction 1
Background Note 2
Jetstar Asia's Business Model 4
Jetstar Asia's Problems 6
The Merger with Valuair 7
Jetstar Asia Vs. Competition 9
Outlook 10
Exhibits  

Keywords:

Jetstar Asia Airways Pte Ltd, Qantas Airways Ltd., Southeast Asia, Airline Industry, Low cost carriers, Tiger Airways, Singapore, Singapore Airlines, Temasek Holdings, Valuair, Merger, Competition, Low fares, Budget airline, Business model

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