Qantas says Japan, Singapore budget airline offshoots can fund their own growth

[SYDNEY] Qantas Airways Ltd's Jetstar-branded budget offshoots in Japan and Singapore are in a strong enough financial position to fund growth plans internally, the Australian airline's CEO said on Friday.

Jetstar Japan had previously required a number of sizeable capital injections from Qantas and joint venture partner Japan Airlines Co since its 2011 launch, most recently in 2015. That led some investors to question whether it was worth pursuing the business.

Jetstar Japan is the largest low-cost carrier in Japan, where it competes against ANA Holdings Inc's Vanilla Air and Peach units in the world's third-largest domestic aviation market.

Qantas Chief Executive Alan Joyce said Jetstar Japan was now in a strong enough financial position to fund planned growth in its fleet to 28 A320 aircraft from the current 20 over the next two years.

"There is this huge opportunity in Asia - Japan in particular," he said during an investor briefing.

"Japan and Singapore have been profitable for a period of time. The profits we are making there are funding their growth."

Qantas does not break out financial results for Jetstar's Asian units. Joyce declined to confirm whether those airlines were meeting Qantas' overall target of returns on invested capital of more than 10 per cent.

"We think there are huge opportunities and we want them to grow and take advantage of growth," he said.

The Australian carrier also owns a 30 per cent stake in the Jetstar Pacific joint venture with Vietnam Airlines, which plans to more than double its fleet to 30 aircraft by 2020 from the current 14.

Jetstar Group Chief Executive Jayne Hrdlicka said Vietnam was a promising market as a fast-growing economy, but trading conditions were currently tough.

"We are really happy with where each of the joint ventures are, with the possible exception of Vietnam because it is a market that has been flooded with capacity in the last 12 months," she said.

Qantas shares jumped as much as 2.3 per cent to the highest level in more than nine years on Friday. The airline on Thursday said it expected to report its second-best annual profit for the financial year ending June 30.

REUTERS