JETSTAR: More flights over Christmas period than pre-COVID-19

Bringing in some planes from its Asian affiliates, budget targeting Jetstar might flood the Australian market with capacity to deal with the pent up local demand, crush its re-born competitor Virgin Australia and overpower REX as it starts flying its capital city routes in March 2021.

Get ready for a domestic price and capacity war people!

Pent up demand – restricted destinations

Australians have been largely stuck at home, or at least restricted to their state for 9 months now. With most domestic borders open, but international borders still closed, demand for interstate travel is on its way to exploding – big time.

Virgin Australia is up and running, although a smaller, leaner operation, and REX is set to launch itself as a domestic carrier from 1 March 2021.

Qantas Group’s plan

The Qantas response is to increase frequency and capacity, largely using Jetstar with its lower cost base to spearhead the surge to dominate the domestic market.

Jetstar plans to schedule 10% more capacity in March 2021, than it did back in March 2019, pre-COVID.

The SMH is reporting that the Qantas Group’s current capacity is running at about 70% of pre-COVID, with Qantas a little lower, and Jetstar a little higher at 75%. Virgin is sitting on 60% of its January capacity, pre-administration and COVID-19.

Qantas can re-purpose Jetstar aircraft which would normally ply the Bali and New Zealand routes back into domestic operations. If they need even more capacity, either because of demand, or the opening of travel bubbles, say with New Zealand, they can call on subsidiary outfits in Japan (25 A320s) and Singapore (13 A320s) to supply aircraft normally used on these international routes.

That’s the way they will try and win any capacity war and beat the new player REX into submission. Things are all a bit more uncertain given the pandemic than they were back around 2015 when the two players Virgin and Qantas, essentially called the capacity war a tie and retreated from the battle.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

It will be interesting to see if Jetstar can plug the hole left by Tiger Air, while leading the capacity war against Virgin and Rex. Personally, I find that once you add up all the extra’s you need, price them and add them to the Jetstar base fare – what with points and status credits, you might as well fly Qantas

All the airlines are currently offering promotional discounts on fares, which might continue or increase depending on whether winning the capacity war is more important than repairing their balance sheets.

Given Qantas has deep pockets, Virgin has new capital and a streamlined operation, and REX has just signed for new funding, I would go for capacity war, once the initial excitement from Australians being able to travel again, subsides.