Jetstar and AirAsia to Reduce Costs Through Alliance

Jetstar and AirAsia are, subject to regulatory approval, to form a new alliance that they say will help to reduce costs, pool expertise and ultimately result in cheaper fares for both carriers.

Key to the agreement is a proposed joint specification for the next generation of narrow body aircraft, that will best meet the needs of the low fare customer of the future. Both airline groups will also investigate opportunities for the joint procurement of aircraft.

Qantas Airways Chief Executive Officer Alan Joyce, Jetstar Chief Executive Officer Bruce Buchanan and AirAsia Group Chief Executive Officer Datuk Seri Tony Fernandes finalised the agreement in Sydney today.

The agreement includes the development of cooperation in areas such as:

• Future fleet specification – both carriers will investigate opportunities for joint procurement of the next generation of narrow body aircraft. A collective goal is to achieve cost reductions in terms of order volume and influencing design specification to deliver more efficient, low cost operations;

• Airport passenger and ramp handling services – developing cooperative arrangements for the provision of passenger and ground handling in Australia and within Asia at overlapping airports by leveraging scale;

• Shared aircraft parts and ‘pooling’ – pooling inventory arrangements for aircraft components and spare parts;

• Procurement – Joint procurement, with a focus on engineering and maintenance supplies and services, with Jetstar maintaining its existing use of and commitment to Australian facilities; and

• Passenger disruption arrangements – reciprocal arrangements for passenger management (i.e. support for passenger disruptions and recovery onto the other airline’s service) across both the AirAsia and Jetstar flying networks.

 “Jetstar and AirAsia are passionate about offering consistently low fares,” said Jetstar Chief Executive Officer, Mr Bruce Buchanan. “Year on year, Jetstar is reducing its controllable costs by up to 5% annually. This agreement will enable a further step-change in our cost position and ensure sustainable low fares .... In coming years Jetstar and AirAsia want to work with manufacturers on the next generation aircraft to ensure it best meets our business requirements.”

AirAsia Group CEO Datuk Seri Tony Fernandes hailed the agreement as another step in the airline’s strategy to maintain its global leadership as the lowest-cost airline operator.

“AirAsia strongly believes the strategic tie-up will help the airline maintain its position as the lowest-cost airline in the world despite rising costs associated with the fledgling global economic recovery,” Mr Fernandes said. “It is key for us to keep our costs as low as possible. This is what enables us to provide the low, low fares that our guests have enjoyed, and will continue to enjoy.”

Mr Fernandes said a common aircraft type specification in terms of the next generation narrow body offering should be proactively pursued by both airlines because of the many efficiencies it would bring.

“With joint purchasing power it means that we can potentially work with airline manufacturers on the right configuration and design of an aircraft specifically for AirAsia and that best suits our operational needs for the future,” Mr Fernandes said. “A strategic arrangement with Jetstar focussed on investigation of operational synergies is a logical development for us. AirAsia and Jetstar share the same philosophy of low cost, low fares and high quality customer service.”

Jetstar and AirAsia jointly earned nearly A$3 billion in revenues in the 2009 financial year.

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