Low-budget airline Jetstar signals big expansion

SINGAPORE (AFP) - – Qantas affiliate Jetstar on Thursday picked Singapore as its Asian hub and signed a 3.5-billion-dollar deal to use greener engines under an ambitious expansion into long-haul discount flights.

The Melbourne-based Jetstar Group, which launched operations in Australia in 2004, signed a three-year agreement with Singapore's Changi Airport Group to make the hub its main base in Asia for both short- and long-haul flights.

"The clear operational advantages of Singapore as a hub and primary access point into Asia are clear and can now be further built upon as a result of this agreement," Jetstar chief executive Bruce Buchanan said in a statement.

The Jetstar Group includes Jetstar in Australia as well as Singapore-based Jetstar Asia and Valuair.

The no-frills carrier also announced it had entered into a deal worth 3.5 billion US dollars with International Aero Engines (IAE) to supply low-emissions engines for a planned new fleet of 50 A320 aircraft.

It has options and purchase rights on up to 40 more of the planes.

The V2500 engine is made by the Swiss-based IAE consortium, of which Rolls-Royce is a major shareholder. The other partner firms are Pratt & Whitney, the Japanese Aero Engines Corporation and MTU Aero Engines.

Jetstar's Buchanan said the order showed the airline's "commitment to minimising our impact on the environment" with the V2500 proven to emit low emissions and less noise.

Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, said the move to Changi, one of the most popular transit hubs in Asia for flights from Europe and the United States, showed Jetstar's ambitions.

"Jetstar in 10 years' time will be an Asian carrier, not an Australian carrier, because the growth is in the Asian region," he told AFP.

The carrier has ordered six wide-body A330-200s for medium- and long-haul flights from Singapore to destinations in Asia and beyond, following delays in the delivery of the Boeing 787 Dreamliner, Buchanan noted.

Three of the six A330-200s will be delivered later this year and the rest in 2012, a Jetstar spokeswoman said.

Analysts expect Asia's low-cost airlines, which have weathered the global recession better than premium carriers, to reap the benefit as regional economies rebound.

At an industry conference in Singapore Thursday, executives pointed to Asia's relatively robust growth and size of its population, which is six times that of the European Union.

"My view is that the size of the travel market in this region is going to explode as the economies come back (to strong growth)," said Buchanan.

Asia's huge population offers enough room for both low-cost and traditional airlines to flourish, said Tony Davis, chief executive of Singapore budget carrier Tiger Airways.

"You have to think about the size of this market, it's three billion people," he said.

"Certainly, any scepticism about the (low-cost) model has been dismissed," Davis added.

But Harbison said Asia's airline industry must address such challenges as a shortage of pilots, and governments must speed up market liberalisation.

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