Singapore-based LCC Jetstar Asia will continue to operate its fleet of A320ceos rather than take in new aircraft as it looks to tap transfer passengers from parent Qantas Group while extending its network beyond Southeast Asia.

While LCC competitors such as AirAsia, Lion Air and Vietjet Air have placed large narrowbody orders, Jetstar Asia said it is taking a more disciplined approach with its fleet, with new aircraft going to its sister companies instead.

“The return of invested capital on the aircraft has to be greater than the working average cost of capital within the group, and on that basis, our capital discipline envelope warrants that we need the aircraft to perform before we add them,” Jetstar Asia CEO Barathan Pasupathi said, adding that any new aircraft would go to fast-growing markets that need them. 

Australia-based Jetstar Airways has 109 Airbus A321neo-family aircraft on order, including 36 A321XLRs, and Jetstar Japan will receive three A321LRs from 2020.

Qantas said Jetstar Asia has experienced some “headwinds.” Traffic, measured in RPKs, was down 1.5% year-over-year in fiscal 2019, while passenger number decreased 0.2%.

Pasupathi said one cost pressure is airport taxes, which he said have doubled. While two-thirds of the carrier’s fares are below $100, airport taxes constitute 42% of the ticket price. The aviation community, he said, should inform airports about the effects of steep taxes on LCCs, which account for about 30% of traffic.

However, transfer taxes are still relatively low in Singapore, and Jetstar Asia is benefiting from the return of Qantas to Singapore from Dubai as a transit hub for its route between the UK and Australia. Since the return of Qantas’ A380, transfer numbers have increased 45%-50%. Seeing a demand from Australia, Jetstar Asia is studying Sri Lanka’s Colombo as a possible new destination.

Pasupathi said the airline is pleased with its current short- and medium-haul network, such as Okinawa and, more recently, a new destination to Hefei, China. The 3X-weekly service to Hefei, which began Nov. 28, is the only service between the two cities. 

Pasupathi said such routes are usually “red-eyes,” enabling Jetstar to increase aircraft utilization. Jetstar Asia is also considering introducing inflight entertainment for such longer routes.

Having already taken steps to reduce Hong Kong frequencies about a year ago, keeping only its morning flight, Jetstar is relatively unaffected by the protests in the region. Load factor on the service remains above 85%, partially benefiting from the spillover effect of capacity reductions from other airlines in the route.

Chen Chuanren,