Australia’s Qantas Qan.ax said on Wednesday it would close the group’s Singapore-based budget airline Jetstar Asia as it rose with rising supplier costs, rising airport fees and intensified competition among low-cost airlines.
The move will free up a $500 million ($326.4 million) amount of capital to allow the flag bearers to invest in their fleet renewal plans.
Qantas said 13 Jetstar Asian Airbus A320 aircraft will be gradually redirected to Australia and New Zealand.
Jetstar Asia continues to be negatively affected by rising supplier costs, high airport charges and rising competition in the region, fundamentally challenging its ability to provide comparable returns to the group’s strongest core market.
Group CEO Vanessa Hudson said the company has seen some suppliers’ costs rise by 200%, essentially changing its cost base.
“We are currently working on the most ambitious fleet renewal program in our history, with nearly 200 companies investing aircraft orders and hundreds of millions of dollars into our existing fleet,” Hudson added.
Low-cost troops face increased competition from Southeast Asian budget operators, including Capital A’s AirAsia and Singapore Airlines’ scooters.
Qantas launched Jetstar Asia two decades ago to capitalize on the growing demand for low-cost air travel across the continent.
Currently, Jetstar Asia will now release a $35 million base EBIT loss in this fiscal year.
The airline will cease operations on July 31 and will continue flights over the next seven weeks.
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