[SINGAPORE] News of the impending shutdown of Jetstar Asia, with the loss of more than 500 jobs, has sent shockwaves through the aviation sector.
Comments on social media site Reddit lamented the budget carrier’s closure as it was the only airline that plied between Singapore and the holiday destinations of Okinawa in Japan, Wuxi in China, Labuan Bajo in Indonesia and Broome in Australia.
On Wednesday (Jun 11) the Qantas unit announced its closure and said that its last day of operations would be Jul 31.
Budget flights have become a staple of the travel industry, accounting for one-third of the 49.8 million passengers who passed through Changi Airport in the first nine months of 2024.
As the low-cost carrier scene continues to battle stiff competition, rising fuel costs, price wars and the entry of new players, The Business Times takes a look back at the Singapore budget carrier landscape.
Early 2000s: Budget airlines take off
Budget airlines made their appearance in the Singapore aviation sector in the early 2000s, bringing cheap fares and new destinations to an emerging class of cost-conscious travellers.
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With their trademark low fees and no-frills offerings, they revolutionised travel and made flying – once considered a luxury – much more affordable and accessible.
South-east Asia underwent a budget travel boom after Malaysia’s Tony Fernandes pioneered the low-cost carrier model in the region with AirAsia in 2002.
Singapore’s first low-cost carrier Valuair took flight in May 2004, ferrying 162 passengers on its maiden trip from Changi Airport to Bangkok.
The privately owned startup was co-founded by former SIA deputy chairman Lim Chin Beng, alongside other investors.
With fares at a fraction of those offered by full-service airlines – up to 40 to 50 per cent lower – it became a competitor to SIA’s now-defunct subsidiary SilkAir, which plied regional routes.
That same year, SIA Group launched Tiger Airways with state investor Temasek, while the founders of Irish budget carrier Ryanair and Australia’s flag carrier Qantas established Jetstar Asia.
The year 2005 proved to be a rocky one for low-cost carriers as fuel costs rose and full-service carriers slashed prices to never-seen-before levels to compete with and undercut their budget rivals.
Governments in the region, such as Indonesia, also shut their doors to foreign budget carriers. This left Singapore-based airlines with only a few crowded regional routes to compete in.
That year, Jetstar Asia and Valuair merged under the holding company Orangestar, with both retaining their original names. Amid challenging conditions, the two carriers struggled to make money.
Still, there was no stopping travellers’ wanderlust. In 2007, Jetstar Asia and Tiger Airways featured on a list of Changi Airport’s top 10 carriers by passenger numbers.
In January 2010, Tiger Airways listed on the mainboard of the Singapore Exchange (SGX).
Entrances and exits: Players scoot in and out
Over the years, Singapore’s budget carrier market expanded by 21 per cent from 2004 to 2024, outpacing that of full-service airlines, which grew 1.4 per cent, according to Alton Aviation Consultancy.
The number of budget flights from Changi Airport also soared with the expansion of low-cost airlines.
From just 1,705 flights in 2004, the number of budget flights from the airport climbed to 16,798 in 2009 and hit a peak in 2018 with 64,618 flights to more than 100 cities.
But as air fares and earnings fell, carriers scaled back on operations, causing a string of consolidations and exits.
Indonesian budget airline Tigerair Mandala ceased operations in 2014, when its shareholders pulled the plug on funding. Tiger Airways owned a 35.8 per cent stake in the loss-making carrier, which had contributed to it racking up hefty losses for the financial year ended March 2014.
During this time, SIA launched a new and second low-cost carrier, Scoot, in 2012, in response to growing competition with brands such as Jetstar and AirAsia. It made its inaugural voyage to Sydney in June that year.
Scoot was meant to capture the medium- and long-haul market, while Tiger Airways would focus on short-haul flights.
Tiger Airways, which had been renamed Tigerair, struggled with consecutive full-year operating losses for FY2014 and FY2015.
The airline began to scale back its regional ambitions amid fierce competition, exiting the markets of Australia, Indonesia, the Philippines and Taiwan. Eventually, SIA took it private in 2016.
Tigerair was then folded into Scoot in 2017 as SIA consolidated its two budget carriers under the holding company Budget Aviation Holdings, to operate them under the Scoot brand, which fared better in market perception on issues such as comfort, safety and service quality.
The merger also aimed to boost cooperation between the two carriers and cut costs.
Meanwhile, Jetstar Asia enjoyed growth in the early part of the 2010s, as higher passenger numbers and an expanded regional network brought its earnings to S$18 million for the financial year ended June 2011.
However, its growth slowed near the end of the decade.
As at 2018, its share of Singapore’s low-cost carrier market shrank to less than 20 per cent from over a quarter in 2010, a Centre for Aviation report showed. By then, its rival carrier Scoot had grown rapidly.
Pandemic turbulence and recovery
Covid-19 dealt the aviation sector a heavy blow with the curbs on travel. The inevitable result was that Changi Airport’s budget flight numbers dived and remained below 50,000 for 2020, 2021 and 2022.
In 2020, Jetstar Asia grounded its entire fleet, retired five aircraft and trimmed 26 per cent of its headcount or 180 staff.
Scoot suspended most of its flights and pivoted to chartering cargo as its parent company SIA Group cut some 4,300 positions across its airlines
By 2024, as the pandemic eased and travel recovered – with Changi Airport’s budget airline passenger traffic reaching 101.6 per cent of 2019 levels between January and September of 2024 – low-cost carrier operators were poised to resume growth.
Scoot added new destinations to its network, ramped up flights and expanded its fleet.
In comparison, Jetstar’s recovery was slower. Analysts observed that its 2024 capacity and traffic was only around half of pre-pandemic levels.
Meanwhile, despite a surge in “revenge travel”, low-cost carriers continued facing headwinds. These included stiff regional competition, volatile fuel prices and geopolitical tensions.
Challenges such as supply chain snags also delayed new plane deliveries and grounded existing ones, while sustainable aviation fuel mandates pushed costs up.
Airlines cited rising costs – including the fees charged by Changi Airport – as a challenge to operating in Singapore.
The Republic in November 2024 had announced airport fee hikes to fund upgrades to Changi Airport.
The move was lamented by Jetstar Asia’s chief executive John Simeone, who said it could affect the airline’s ability to sell tickets under S$100 – which comprised around two-thirds of the carrier’s flights as at December 2024.
Jetstar Asia grounded
When Jetstar Asia announced its exit – citing cost pressures as threatening its ability to offer the low fares that are key to its business – passengers and staff were shocked, but industry experts said the move was unsurprising, albeit unfortunate.
They pointed to how the Singapore-based carrier had struggled to turn a profit even before the pandemic, and was in the black for only six years in more than two decades of operations.
Jetstar Asia lacked the scale, local dominance and margin buffers of its stronger rivals, analysts said.
Moreover, its 2023 shift to Terminal 4 from Terminal 1, where its parent Qantas operates, severed the seamless connectivity between the two airlines and lengthened connecting times, which likely worsened its problems, analysts added.
However Qantas itself has displayed a respectable performance.
Qantas Airways in February announced an underlying profit before tax of A$1.39 billion (S$1.17 billion) for its first half ended December. It also declared its first special dividend in more than two decades and its first final dividend since September 2019.
What does Jetstar’s departure mean?
Jetstar’s exit leaves Scoot the sole Singapore-based budget carrier and closes a chapter on the once high-flying budget carrier scene.
As Changi Airport Group works with other carriers to plug connectivity gaps in the dust of Jetstar Asia’s departure, one thing is for certain: There will always be a demand for budget travel – but whether it is a profitable business remains to be seen.
