Flying Cheaply Down Under: The Turbulent History of Qantas’ Budget Airline Jetstar
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Spreading Wings Across Australia
When Jetstar first spread its wings across Australia in 2004, it brought low-cost domestic air travel to the masses. As a wholly-owned subsidiary of Australia's flag carrier Qantas, Jetstar was launched as a budget brand designed to take on upstart competitor Virgin Australia. In the early 2000s, Virgin Blue was eating into Qantas' domestic market share by undercutting fares. Jetstar allowed Qantas to compete on price without diluting its premium brand.
The concept was for Jetstar to tap into the growing ranks of leisure travelers who were more concerned about cheap fares than creature comforts. While Qantas pampered business travelers in spacious seats and airport lounges, Jetstar crammed budget-conscious vacationers into densely configured cabins, charged for amenities like checked bags and in-flight snacks, and flew to secondary airports.
Jetstar took to the skies with just two aircraft operating only between Melbourne and Sydney. But it swiftly expanded, opening new bases in Brisbane, Perth and Adelaide. By 2007 it was flying to 14 destinations across Australia with a fleet of 18 Airbus A320s. Unlike Qantas, which operated a mixed fleet of Boeing and Airbus aircraft, Jetstar standardized on the A320 family to streamline maintenance and training.
The brand also lowered operating costs by hiring younger, lower paid crew willing to work contract or part-time. While Qantas crew enjoyed generous salaries and benefits befitting a full-service legacy airline, Jetstar crew earnings were closer to minimum wage.
Jetstar's low fares stimulated new demand, allowing it to grow rapidly during its early years. Australians enthusiastically embraced the concept of no-frills air travel. While Qantas struggled to fill seats following 9/11's crippling impact on the airline industry, Jetstar flights were packed. Its swelling passenger volumes allowed it to spread costs over a wider base and maintain cheap ticket prices.
By 2010 Jetstar had bases across Australia and a fleet of 42 aircraft. It carried over 12 million passengers annually and captured nearly 30 percent of the domestic market. Australians joked that Jetstar had become the nation's unofficial flag carrier given its extensive domestic network and familiarity amongst the traveling public.
What else is in this post?
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Spreading Wings Across Australia
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Cutting Costs While Cutting Corners
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Turbulence Hits Tarmac Troubles
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Pilots Push Back on Pay and Conditions
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Regional Routes Face Rough Landings
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Taking Off Towards New Horizons
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Asian Adventures Bring Growing Pains
- Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Clear Skies Ahead or More Turbulence?
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Cutting Costs While Cutting Corners
Jetstar’s low-cost model was dependent on slashing expenses wherever possible. While this allowed the airline to offer cheap fares that stimulated new travel demand amongst budget-conscious Australians, it came at a price.
In its drive to cut costs, Jetstar made compromises on customer service and labor standards. Many passengers complained about being nickeled and dimed for basic amenities. Food and beverages had to be purchased onboard flights, though prices were inflated compared to stores on the ground. Seat assignments also came with fees, unless customers paid more for “Jetstar Plus” fares.
Jetstar crammed more seats onto its aircraft by reducing seat pitch, the distance between rows. Its A320s were fitted with 180 seats, compared to 144 on Qantas configured planes. Legroom suffered as a result. Jetstar’s dense cabins left little space to stretch out on flights, earning it the nickname “SardineStar” amongst detractors.
High passenger loads combined with limited toilets and narrow aisles also increased queues and congestion onboard. Turnaround times were shortened to 25 minutes to maximize aircraft utilization, leaving little room for error. Flight delays and cancellations jumped as Jetstar planes crisscrossed Australia.
Jetstar outsourced ground handling and maintenance to trim expenses. But this took a toll on service standards. Baggage was frequently mishandled and misrouted due to ground staff errors. The airline’s chronically late arrivals also inconvenienced passengers making connections on Qantas.
For cabin crew, Jetstar’s cost cutting resulted in tough working conditions. They labored under intense schedules, flying up to 90 hours a month, while earning far less than Qantas counterparts. Many were stuck on casual contracts without paid vacations or sick leave benefits.
Attempts to negotiate improved wages and conditions were stonewalled by management. The Transport Workers Union accused Jetstar of intimidation tactics and threats to curb union membership and activism. Stoppages and strikes resulted as crew fought for better treatment.
Jetstar pushed legal boundaries in pursuit of lower operating expenses. It underwent court challenges over alleged misuse of contractor agreements. Meanwhile, infrastructure strains emerged as its growth outpaced airport investments.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Turbulence Hits Tarmac Troubles
Jetstar’s rapid expansion across Australia put strains on infrastructure that would lead to major tarmac troubles in the coming years. The budget airline’s fleet outgrew gates and maintenance hangars at airports accustomed to serving just Qantas mainline aircraft.
At Melbourne Airport, Jetstar’s home base, its growing fleet overloaded maintenance facilities. There were too few hangars to shelter aircraft from the elements during servicing. Long queues resulted, disrupting flight schedules. Engineers lacked specialized support equipment needed for A320 maintenance, having previously focused just on Boeing models. This contributed to an alarming increase in Jetstar’s engineering defect rate.
Ramp congestion emerged as a problem in Melbourne and other airports as Jetstar crammed more flights into peak periods. With passenger volumes swelling, ground crews struggled to rotate aircraft quickly enough to keep to the schedule. Baggage and catering trucks jostled with Jetstar planes on crowded tarmacs.
Turnaround times slowed, causing knock-on delays across Jetstar’s densely interconnected network. Flight cancellations jumped as aircraft and crew fell out of position. During one month in late 2007, over 20 percent of Jetstar’s Melbourne flights were over 30 minutes late.
Passengers bore the brunt of these disruptions. Those missing onward connections faced prolonged waits with little accommodation or compensation from the budget carrier. Disabled passengers and parents traveling with infants were left stranded due to limited wheelchair ramps and aerobridges.
Jetstar’s tribulations illustrated how breakneck expansion could outpace infrastructure. As an executive familiar with the growing pains remarked, “we underestimated the complexity of running two airlines with different business models at scale in parallel at the same airports.”
Qantas pitched in funds to help upgrade facilities, building new maintenance hangars tailored for Jetstar’s A320s. But lasting solutions required coordinated investments between airports, government regulators, and airlines. Jetstar’s low fares depended on lean operations and minimizing costs. Charging passengers more to fund infrastructure was anathema to its business model.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Pilots Push Back on Pay and Conditions
Jetstar’s rapid expansion was enabled by a low-cost carrier model that placed intense pressure on pilots. While their Qantas counterparts enjoyed generous salaries and benefits, Jetstar pilots faced grueling schedules, demanding operational conditions and relatively poor compensation.
As the budget airline added aircraft and routes, pilot strain increased. Jetstar pilots were rostered close to flight duty limits, flying up to 90 hours a month. Fatigue risks grew as rest periods between shifts were reduced to the minimum required. Disruptions that extended pilots’ workdays were common as delays rippled across the congested network.
Jetstar expected pilots to be “can-do” operators, willing to accept challenges like short runways and high-density airspace. Rapid turnarounds left little margin in schedules. “We had to fly planes through thunderstorms to keep to 25 minute ground times – it was a crazy operation,” recalled one pilot. This pressure-cooker environment tested even experienced aviators.
Despite their crucial frontline role, Jetstar’s pilots felt undervalued. Wages stalled as the airline expanded. Most Jetstar pilots earned around half or less of what their counterparts flying identical aircraft for Qantas were paid. One first officer reported making just A$27 per hour after several years with Jetstar - barely above minimum wage. Allowances for being called in on days off were eliminated to control costs.
Missing out on profit-sharing bonuses while working alongside far better compensated Qantas pilots bred resentment. “We generated big revenues for Qantas but never shared in the success,” said a captain who flew over 5,000 hours for Jetstar.
Pilots pushed back by unionizing under the Australian Federation of Air Pilots. Seeking improved wages and working conditions, they threatened strikes that could cripple Jetstar’s schedules. A deal was struck in 2007, awarding pilots an immediate 18 percent pay rise and improved allowances.
But Jetstar continued taking a hard line on pilot pay and productivity. In 2011, management demanded concessions that would allow 70-hour work months and further restrict pay increases. Pilots refused, instead voting to strike over the Christmas travel peak. At the 11th hour, Jetstar secured a court ruling to halt the industrial action.
The pay dispute dragged on until early 2013, when pilots finally ratified a new work agreement awarding annual raises and more bonus opportunities. However, pay parity remained distant. One pilot commented: "we do the same job as Qantas pilots, we fly exactly the same planes, but we get paid half as much."
With aviators already in short supply, Jetstar’s penny pinching approach to pilot compensation hindered recruitment and retention. The grueling workload and lack of career advancement prospects wore down morale. Many sought jobs at Qantas or competitors paying higher wages.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Regional Routes Face Rough Landings
Jetstar’s push into regional routes brought new connectivity, but also service disruptions that eroded public trust. The budget carrier expanded beyond major cities in 2009, launching flights between Melbourne and Tasmania. Smaller Embraer 190 jets joined the fleet to access shorter runways in regional Australia. More niche routes were opened as Jetstar sought new markets.
However, technical issues with the Embraers emerged, causing rampant flight cancellations. The new aircraft type had far higher mechanical defect rates than Jetstar’s A320s. Parts shortages due to supply chain problems exacerbated matters. At one point in 2011, only four of Jetstar’s 11 Embraers were airworthy.
Passengers bore the brunt of constant regional flight delays and cancellations. Disruptions left Tasmanian travelers stranded for days trying to return home from Melbourne. Jetstar’s social media feeds filled with complaints. But the contract of carriage allowed the airline to provide minimal compensation for delays or aircraft swaps.
People in small towns dependent on new regional routes felt betrayed as promised services proved unreliable. Local chambers of commerce criticized Jetstar for lack of transparency and contingency planning to minimize disruptions. A Tasmanian Minister lodged a formal complaint and threatened to sue over continual cancellations.
The debacle highlighted difficulties adapting the low-cost model to regional operations. Route launches were announced before infrastructure preparations were complete. There were too few Embraers and backup aircraft in place. And support staff lacked experience maintaining an aircraft type new to Australia.
Strained community relations took years to rebuild as regional service settled. Jetstar ultimately extended Embraer maintenance contracts with Qantas to improve reliability. Crew bases were established in local communities to decrease cancellations from crew shortages.
But lasting success in regional markets required commitment beyond the major cities. As one Tasmanian consumer advocate put it: “Regional travelers felt like second-class citizens, but quality service should not depend on where someone lives.” Jetstar learned its lesson and now works more closely with communities before launching regional routes.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Taking Off Towards New Horizons
Jetstar looked beyond Australian skies for new opportunities to expand its low-cost model. The airline launched international services starting in 2006, connecting major Australian cities to tourist destinations across Asia. While this opened new horizons, overseas growth also brought stiff competition and political turbulence.
Taking the budget carrier concept abroad was a bold, high-risk move. Many competitors had stumbled trying to translate lean, domestic operations onto global networks. But Jetstar saw a major gap in the Asia-Pacific market. Legacy airlines like Qantas charged exorbitant fares on popular leisure routes. Budget rivals lacked wide Australian feeder networks. By leveraging its strong domestic footprint, Jetstar hoped to draw traffic through its international gateways.
Jetstar’s inaugural international flights connected Melbourne and Sydney to Christchurch, New Zealand. The trans-Tasman hop was low-hanging fruit given cultural ties and tourism between the neighboing countries. Jetstar swiftly expanded to other vacation hotspots like Hawaii, Bali, Thailand and Japan. Longer routes to China, Vietnam and Honolulu were later added as fleet range increased.
Undercutting competitor fares stimulated new travel demand and boosted load factors. Aussies enthusiastically embraced Jetstar’s low fares for quick Asian getaways. By 2010, over 3 million passengers flew annually on its international network spanning 14 destinations. Jetstar also developed organic Australian traffic by launching domestic connections to its international gateways.
Overseas expansion supported wider growth for the Qantas Group. Jetstar’s regional subsidiaries mirrored the model in New Zealand and Singapore. These partnerships provided feed traffic and connected the networks. A low-cost long-haul carrier, Jetstar Airways, was established in Singapore to take the fight to Scoot and AirAsia X. Joint-ventures in Vietnam and Japan leveraged local market expertise.
Yet turbulence inevitably accompanied new horizons. Bigger competitors reacted strongly to Jetstar’s international foray. Qantas faced accusations it was using profits to subsidize its low-cost rival. Incumbents matched Jetstar’s fares and ramped up capacity in retaliation. This pressure squeezed margins and exacerbated losses on some routes.
Expanding abroad also brought greater regulatory oversight. Jetstar underwent criticism for displacing local carriers on international routes. Authorities threatened to limit flight allocations at Australian airports to create space for smaller airlines. Overseas partnerships sparked ownership concerns that took legal wrangling to resolve.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Asian Adventures Bring Growing Pains
Jetstar’s expansion into Asia brought stiff competition that squeezed margins, exacerbated losses, and limited growth opportunities. The budget carrier faced accusations it was displacing local airlines that lacked its cost advantages. Regulators threatened to curb Jetstar’s access if it suppressed fares and took traffic from smaller rivals. Overseas partnerships also sparked complex ownership concerns.
In Japan, Jetstar’s launch sparked a brutal fare war with All Nippon Airways. The Japanese giant slashed prices and dumped substantial capacity on routes from Tokyo to the Gold Coast, Cairns, and Honolulu. Jetstar’s loads suffered as travelers snatched up cheaper fares on ANA. Despite traffic gains, price dilution saw Jetstar bleeding cash on its new Japan routes.
Singapore authorities threatened to limit the airline’s access after it announced flights to Bangkok and Manila. Incumbent low-cost carrier Tiger Airways argued Jetstar would draw connecting traffic from Singapore at the expense of local operators. “Regulators worried we would swamp smaller airlines,” said one planning executive. “We had to tread carefully in foreign markets unfamiliar with our model.”
VietJet, Vietnam’s feisty budget carrier, lobbied against Jetstar’s application to launch Ho Chi Minh City services from Australia. As a Qantas subsidiary tapping into the Vietnamese domestic market through a local partner, ownership rules required regulatory approval. Jetstar ultimately compromised by reducing its planned flight frequencies.
Partnerships in Japan and Vietnam also added complexity. Tokyo bureaucrats scrutinized Jetstar Japan’s ownership split between Qantas, Japan Airlines, and Mitsubishi Corp. Creative corporate structures were devised to satisfy foreign ownership restrictions. Similar concerns arose over the Vietnam joint venture until a local shareholder bought equity.
Navigating overseas growth pains took deft diplomacy. Jetstar pitched itself as enabling new travel options through lower fares rather than taking from incumbents. Willingness to compromise on route access eased some regulatory concerns. Partnerships with respected local brands lent credibility in foreign markets skeptical of Australian intruders.
Flying Cheaply Down Under: The Turbulent History of Qantas' Budget Airline Jetstar - Clear Skies Ahead or More Turbulence?
After almost two decades in Australian skies, Jetstar now finds itself at an inflection point. The Qantas subsidiary remains Australia's leading low cost carrier. However, it faces critical strategic choices that will determine if clear skies or more turbulence lie ahead.
Jetstar's core domestic market has matured. Annual growth is constrained to around 3% as demand from cost-conscious leisure travelers nears saturation. Attempts to penetrate corporate travel have achieved limited success. Qantas still commands over 80% of Australia's high-yield business travel segment. Meanwhile, Virgin Australia poses a vigorous competitive challenge across both leisure and corporate travel.
With slowing growth on home turf, Jetstar is pursuing international expansion to Asia and beyond. The launch of Jetstar Japan was a milestone, proving the model could be exported successfully. But partnerships in Vietnam and Thailand have struggled to gain traction. Long haul low cost offshoot Jetstar Airways posts losses despite Singapore's ideal geographic position. Intense competition across the region limits growth.
Rising fuel prices have squeezed Jetstar's margins. As a budget carrier, its ability to raise fares is constrained. Qantas faces structural cost pressures too, but premium demand gives it pricing power. Jetstar's cost base remains lean, but years of inflation have pushed expenses upwards. Attempts to tap ancillary revenue streams can only go so far before alienating customers.
Brand perceptions present another challenge. While Australians have enthusiastically embraced the 'Jetstar Experience' domestically, translating that reputation abroad is difficult. In Asia, Jetstar lacks the recognition and trust built over decades by global brands like Qantas. This makes competing with local low cost airlines tougher.
Within Australia, customer satisfaction remains inconsistent. Jetstar's domestic on time performance lags key competitors. Congestion arising from huge growth strains airport infrastructure at its bases. Social media amplifies every delay, cancellation or mishandled bag. Efforts to improve regional and holiday flight reliability have shown promise.
Looking ahead, Qantas faces critical choices on Jetstar's strategic direction. Some analysts argue doubling down on international expansion despite past stumbles. Others advocate defending the lucrative domestic stronghold from an invigorated Virgin Australia. Seeking efficiencies through deeper integration with Qantas is another option.
The months ahead will be telling. With its first A320neos arriving, Jetstar must decide whether to grow or optimize its existing fleet. New destinations in Indochina and Oceania offer potential, but also risks. Partnerships could support growth, however past joint ventures have posed challenges. Following Qantas' lead and pivoting towards premium markets runs counter to Jetstar's DNA.