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Qantas Airways (ASX: QAN) is closing down its Jetstar Asia division, scrapping 16 inter-Asian routes serviced by the carrier as the losses mount for the business amid a surge in costs and regional competition.
The national carrier says the closure of its Singapore-based low-cost subsidiary comes in the wake of increased challenges for the business in recent years including rising supplier costs and high airport fees.
However, Qantas notes that a clean exit of the business will lead to the recycling of up to $500 million in capital and support its fleet renewal plan.
Qantas says Jetstar Asia’s performance deteriorated in the second half of FY25 with the division expected to post an underlying EBIT loss of $25 million for the year.
While the closure will affect 16 intra-Asia routes and affect up to 500 jobs, Qantas says there will be no changes to Jetstar Airways and Jetstar Japan services from Australia into Asia.
Qantas has emphasised that the closure of Jetstar Asia will neither impact Jetstar Airways’ domestic and international operations in Australia and New Zealand, nor Jetstar Japan’s operations as the low-cost carrier will continue service key routes from Australia to Singapore, Thailand, Indonesia, Vietnam, Japan and South Korea.
Jetstar’s inter-Asian flights will continue for the next seven weeks as the schedule is progressively reduced with the final flight planned on 31 July 2025.
Ultimately, the move will lead Qantas to redeploy 13 Jetstar Asia Airbus A320 aircraft to Australia and New Zealand which the group says will bring more low fares to Jetstar’s schedule and “more local jobs”.
"Jetstar Asia has been a pioneering force in the Asian aviation market for more than 20 years, making air travel accessible to millions of customers across Southeast Asia,” says Qantas Group CEO Vanessa Hudson.
“We are incredibly proud of the Jetstar Asia team and the work they have done to deliver low fares, strong operational performance and exceptional customer service. This is a very tough day for them.
“Despite their best efforts, we have seen some of Jetstar Asia’s supplier costs increase by up to 200 per cent, which has materially changed its cost base.”
Qantas says the cost increases have diminished the low-cost airline’s ability to deliver returns “comparable to the stronger performing core markets in the group”.
The closure of Jetstar Asia is expected to deliver a $35 million hit to Qantas’ underlying earnings before interest and tax.
This will include one-off redundancy and restructuring costs as well as non-cash expenses including asset write-downs due to changes in the group’s fleet structure.
Qantas estimates the combined impact to be about $175 million with a third to be recorded in FY25 and the remainder in FY26.
Jetstar Asia customers with bookings on cancelled flights will be offered full refunds, with Qantas planning to “reaccommodate customers onto other airlines where possible”.
Qantas says it is also working to find job opportunities for affected employees across the group and with other airlines in the region.
The airline says the closure of Jetstar Asia will unlock up to $500 million in fleet capital which will be recycled into the group’s core businesses.
Jetstar Asia has 13 mid-life A320 aircraft that will be redeployed to core markets in Australia and New Zealand, replacing leased aircraft in some instances and estimated to create more than 100 local jobs.
Qantas expects to take control of its first Airbus A321XLR later this month and the first A350-1000ULR in 2026 as part of its Project Sunrise fleet renewal program.
“We are currently undertaking the most ambitious fleet renewal program in our history, with almost 200 firm aircraft orders and hundreds of millions of dollars being invested into our existing fleet,” says Hudson.
“We're making disciplined decisions which recycle capital across our business and prioritise it to stronger performing segments as well as strategic growth initiatives like Project Sunrise.”
Meanwhile, in a business update to shareholders, Qantas says that domestic capacity growth across the group during the second half of FY25 is lower than previous guidance, largely due to the disruptions caused by Cyclone Alfred in March. Qantas expects this to have a $30 million impact on earnings.
International capacity for the half is expected to grow by 9 per cent, which is 3 per cent down on previous forecasts, with the drop blamed on industrial action related to the group’s Finnair wet lease.
However, Qantas says it continues to see strong demand across domestic and international routes. The group expects unit revenue and capital expenditure to be in line with previous guidance.
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