Qantas Airways announced on Wednesday that it is closing its Singapore-based low-cost subsidiary Jetstar Asia, citing soaring costs, high airport charges and fierce regional competition. The shutdown, scheduled for July 31, will result in up to 500 layoffs.

The fleet of 13 Airbus A320s will be redeployed to Australia and New Zealand, where the airline wants to strengthen its capacity and replace leased or aging aircraft. Six aircraft will join Jetstar Airways' Australian domestic operations, four will be used to renew the fleet used by Qantas for routes to mining areas, two will support growth in Australia, and one aircraft will be assigned to New Zealand.

Jetstar Asia, established 20 years ago, operated 16 intra-Asia routes from Singapore's Changi Airport. But according to Qantas, the subsidiary never achieved the levels of profitability seen in other key markets for the group. In 20 years, it has only been profitable six times and is expected to post an underlying operating loss of A$35m (US$22.76m) for the year ended June 30.

"Over the past two years, Jetstar Asia has been particularly affected by a sharp rise in fixed costs," said Jetstar Group CEO Stephanie Tully. She cites double-digit increases in fuel, airport charges, ground handling and security.

Changi Airport, the world's fourth-busiest airport in terms of international traffic, has begun a series of fare increases that will continue until 2030. In March 2023, Jetstar Asia was forced to move its operations from Terminal 1 to Terminal 4, the only terminal not served by the airport's internal rail network, a move the airline had criticized.

Jetstar Asia accounted for around 3% of Changi's passenger traffic last year. The airport, which expressed its disappointment, has said it intends to fill the capacity gap, particularly on four routes not currently served by other carriers.

Refocusing on Australia and New Zealand

Qantas' other low-cost subsidiaries, Jetstar Airways (Australia) and Jetstar Japan, are not affected by the closure. The group plans to reinvest up to A$500m from the divestment of Jetstar Asia's assets, mainly its fleet, and to save on aircraft leasing costs.

Qantas has stated that the closure of Jetstar Asia will result in a one-time financial impact of approximately AUD175m spread over two financial years.

Passengers on canceled flights will be offered a full refund or transfer to other airlines. At the same time, the group says it is seeing robust demand in its domestic and international markets.

Social support in Singapore

Affected employees in Singapore will receive severance pay and support in finding employment within the Qantas Group or other airlines. The National Trades Union Congress (NTUC), the country's main trade union, confirmed that it had been informed of the closure in advance and is working with Singapore Airlines, the civil aviation authority and Changi Airport to facilitate retraining.

The closure of Jetstar Asia illustrates the ongoing challenges facing the airline industry in a post-pandemic environment marked by intense price competition. Regional players such as Scoot (Singapore Airlines), AirAsia (Malaysia) and VietJet (Vietnam) have quickly rebuilt their capacity, putting pressure on prices and margins for low-cost carriers operating out of Singapore.