Deep Dive Podcast: Jetstar Asia closure - Are the days of cheap fares over?
Jetstar Asia will cease operations on Jul 31, a move unsurprising to experts because the low-cost carrier was struggling to turn a profit in a tough aviation market.
Otelli Edwards speaks to Shukor Yusof from aviation consultancy Endau Analytics and Dr Nitin Pangarkar from NUS Business School to find out what the future holds.
Here is an excerpt from the conversation:
Otelli Edwards, host:
I believe Changi Airport is aiming to expand its network to over 200 cities by the mid-2030s. But airlines will need to pay about 40 per cent more to land and park at Changi over time. To some extent, that's going to affect Changi's competitiveness as an aviation hub, don't you think?
Dr Nitin Pangarkar, NUS Business School:
It will, but it's a question of who they are competing against, right? They cannot compete on cost versus, say, Bangkok or Kuala Lumpur. Probably, they are targeting the Dohas and the Dubais and so on. Basically, their basis of comparison is that.
When I arrived in Singapore 30 years ago, I must say that based on my impressions as a traveller, Changi seemed a lot more functional than luxurious.
Otelli:
Without the waterfalls and all the wonderful features.
Dr Nitin:
Yeah, without the waterfalls, without Jewel. There were only Terminals 1 and 2. (Terminal 2) was the new terminal at that time.
I think Changi has taken a bit of a shift towards luxury. And when you do that, your costs go up. Singapore has also become more affluent. So everything is more expensive.
Singapore is going to be a high-cost place compared to say, KL or Bangkok or some similar regional hub.
Otelli:
It's a bit worrisome for a large group of people who are used to S$100 and under sort of flight tickets, right? I guess to a certain extent, that is not practical, because then how does Jetstar for instance, make money?
Does that also mean those days are over, that we shouldn't be expecting to pay such low prices?
Shukor Yusof, Endau Analytics:
They are over, a long time ago, post-COVID. I can confirm it's over. It's only low cost in name, but in reality, it's pretty much high fares. You have ancillary fees, you have a lot of other payments that you are going to be making.
Otelli:
So you think it has narrowed the gap (between) what you're paying for these so called low-cost carriers versus the legacy airlines?
Shukor:
Very much. So what we're seeing now is the legacy airlines, the flag carriers, are in fact becoming low-cost or budget airlines, if you look at Malaysia Airlines, Thai Airways, or Philippine Airlines. So those days when you could fly for a plate of chicken rice for example. For S$10 at the hawker centre, you could fly to Bangkok, you could fly to Jakarta. I've done that before ... at the forefront of when all these budget airlines were coming into the business.
But now it's very different. It's more competitive. Previously, AirAsia had the first-mover advantage. They were the only ones running around and then subsequently, all the neighbours next to Singapore got very excited and they came up with their own low-cost carriers.
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