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Sep 1, 2011

Jetstar’s China future as read between the lines

A notable feature of an address given by the group CEO of Jetstar, Bruce Buchanan, to a Sydney luncheon today was what it left out. There was no material reference at all to Malaysia

A notable feature of an address given by the group CEO of Jetstar, Bruce Buchanan, to a Sydney luncheon today was what it left out.

There was no material reference at all to Malaysia, Kuala Lumpur, or AirAsia, with which Jetstar declared it was in a world first low cost carrier alliance back in January 2010.

Since then the only experience Jetstar and AirAsia seemed to share was being done over the Communist government of Vietnam, after AirAsia tried to set up a joint venture that would compete with the troubled  Jetstar Pacific franchise.

But the inclusion in the address that has attracted news reports this afternoon is a reference Buchanan made under the heading “The China Opportunity” in which he says:

Jetstar is always evaluating further possible new ventures and growth opportunities in Asia.

We have considerable resources dedicated to a roll out plan of new ventures and growth opportunities.

We know we can garner considerable advantage in a leadership position to develop new markets in Asia if we act quickly.

As many are aware, to do business in China you must first commit significant time and resources to build relationships. Every market we work in Asia has a different culture and our approach must be tailored to succeed.

This could be read as adding weight to recent Hong Kong press reports that Jetstar was considering a franchise based in the Special Administrative Region, where its natural ally or enemy, as the case might be, would be Hong Kong Express, which like Hong Kong Airlines, is almost half owned by China’s HNA group, whose flag ship carrier Hainan Airlines also flies between Sydney and Shenzhen, which is separated from Hong Kong by a muddy river, and a barrier of biometric thumb print readers used to complete border protocols for the work force that uses the metro trip that connects them from their beds in China to their jobs in the SAR.

Buchanan makes specific reference to Shenzhen in his address in the context of what China means for Australian inbound tourism as well as Jetstar’s intention to raise awareness of its brand in the Pearl River delta and beyond, something it has already done with rapid success in Japan even before last week’s announcement of a Jetstar Japan franchise.

Estimates suggest that Australia will welcome one million Chinese visitors a year by the middle of the decade. Recent figures given by Melbourne and Sydney airports show how the surge has already begun.

What we are seeing is how the desire to travel and enjoy much broader lifestyles starts to grow once salaries rise into middle class incomes.

In China alone, more than 200 cities are expected to have a new class of middle income earners within the coming decades.

For instance, you can clearly see the changing face of Shenzhen over 21 odd years. Little wonder that our own sights are firmly focused on building brand awareness among the populous of our biggest Asian neighbour.

Coincidentally, Plane Talking’s attention has been recently drawn by several contacts in Asia to Hainan Airlines strong desire to join the Oneworld alliance, something that would not be welcomed by Cathay Pacific which has been a long term member as well.

Is this significant? Well, it is if Jetstar is to partner in China and Hong Kong with Hainan group carriers, but in the never simple world of commerce in China, this raises the obstacle to Hainan and Jetstar leveraging the advantages of Qantas being in Oneworld if Cathay Pacific objects to this.

It is also worth noting that speculation about who does what to whom in China business opportunities can run far ahead of the dragons that will quickly destroy the unwary or ill-prepared, which is why everything Jetstar does in Asia will start with building a partnership.

The Hainan group of airlines is not just of potential interest to a Jetstar franchise, but the Qantas plan for an Asia based premium carrier using A320s, wherever they might be based.

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3 thoughts on “Jetstar’s China future as read between the lines

  1. TN Kangaroo (Blue Tail)

    Ben, the fun in Asia has begun…

    All Nippon Airways (ANA) officially applied Wednesday to Japan’s Legal Affairs Bureau to establish its planned joint venture LCC with AirAsia to be called AirAsia Japan. The LCC plans to operate both domestic and international flights. ANA said it will apply for an Air Operator’s Certificate for AirAsia Japan “with the aim of beginning low-cost operations from August next year.” The carrier will be based at Tokyo Narita. ANA said it will initially invest ¥10 million in the JV, with its total investment eventually rising to ¥5 billion ($65.1 million), giving it a 51% stake.

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