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Low operating costs, efficient aircraft use and packing in passengers key to cheap flights

Singapore's latest entrant in the low-cost airline sector, Jetstar Asia, says it is not concerned about a looming fare war on the Hong Kong-Singapore route, despite increasingly competitive pricing by  airlines already flying between the two cities.

Jetstar, which is 49 per cent owned by Australia's Qantas Airways, yesterday launched  services to Hong Kong, which will be augmented in the coming weeks with flights  from Singapore to Taipei, Pattaya, Surabaya, Shanghai and Manila.

It is the third  airline to appear in Singapore this year, following the launches of privately owned Valuair and Tiger Airways, which is controlled by Singapore Airlines (SIA).

Jetstar's strategy to capture a share of the Hong Kong-Singapore market seems largely based on  offering lower fares than Cathay Pacific Airways, SIA and Valuair.

It can do this with a combination of lower operating costs, more efficient aircraft use,  and packing as many passengers as possible into each flight.

Jetstar operates four Airbus Industrie A320 aircraft, each with 180 seats in a  single-class configuration.

The Airbus website suggests that the A320 can accommodate 164 passengers if each is given a 65cm  seat pitch, the legroom typically offered by airlines in economy class.

Jetstar is offering an entry-level return fare of $419, although most of its seats  are likely to sell at an average of $649. Full-fare tickets that allow passengers to freely change their departure dates without penalty were being offered on Jetstar's website for $1,549.

These prices represent a significant discount to the cheapest available economy-class fares -   in the region of $2,800 - between Hong Kong and Singapore just a year ago, when Cathay and SIA dominated the route.

When Valuair launched flights last spring at a $1,300 flat fare, Cathay and SIA responded  with promotional tickets priced at less than  $1,000, and now $847.

Since then, Valuair has abandoned its flat-fare approach and is  offering a price of $888 return for bookings made at least 30 days before departure and $1,250 for a full-fare ticket.

Jetstar chief operating officer Con Korfiatis said the carrier was not worried about a fare war because it would be able to offer low fares indefinitely on its low cost-base.

'With our superior cost-base, we can offer low fares over the long term,' Mr Korfiatis said.

He said all  Jetstar  fares were low while Cathay and SIA offered  limited numbers of seats at the lowest promotional prices.

However, SIA and Cathay are able to supplement their income from the lowest-priced fares with first and business class passengers as well as cargo.

The two carriers also operate  wide-body jetliners on the route, such as the Boeing 747 and 777 aircraft, each with about 300 economy class seats.

Besides Qantas, Jetstar's shareholders also include Temasek Holdings, with a 19 per cent stake.

Mr Korfiatis told reporters that the company  expected to expand its route network to include more destinations in the mainland, as well as Vietnam, Thailand and Indonesia.



Fare war looms as Jetstar Asia flies cut-price from Singapore