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  • What if AirAsia and Jetstar built up in Japan?
    Posted by Bradley Perrett 2:54 AM on Jan 11, 2010

    While no one can predict how far AirAsia and Jetstar will go in working together, one of the most intriguing possibilities is that they could become a strong international carrier in countries where they're not based.

    The idea, suggested by Peter Harbison at the Center for Asia Pacific Aviation in Sydney, is based on AirAsia and Jetstar (and Tiger Airways) being multinational airline groups. Using companies with majority local ownership but the same brand, AirAsia is based in Malaysia but has an affiliate in Thailand, another in Indonesia and might soon have yet another in South Korea. Similarly, Jetstar is a local in Australia, Singapore and Vietnam (though the the Vietnamese affiliate has run into legal trouble with the government there).

    An airline with multiple nationalities can at least partly get around some of the classic problems in competing abroad: with only a few direct routes on offer from a foreign country, an airline usually lacks economies of scale in marketing and airport operations.

    But notice that AirAsia already offers direct flights from Singapore to 14 destinations in Malaysia, Thailand and Indonesia, even though AirAsia is a foreign airline in Singapore. It can do that because it has three home countries.

    A combination of AirAsia and Jetstar could offer direct flights to six countries.

    Their most attractive target would probably be Japan. How uncomfortable it would be for Japan Airlines and All Nippon if a foreign-branded airline largely beyond the control of the Japanese government began to pour into Japanese airports, offering direct flights to Australia, Indonesia, Thailand, Malaysia, Singapore and Vietnam -- with more on the way, as new branches are added to the franchise network.

    The same maneuver could be done in China or indeed anywhere within A330 or 787 range of the AirAsia and Jetstar home bases.

    Adding bases has been a slow process for the franchising Asia-Pacific budget carriers (because of nationalism and protectionism). That makes cooperation between AirAsia and Jetstar all the more valuable. They have complementary sets of home bases, with no overlaps.

    The key problem with this idea is that AirAsia and Jetstar would have to use a single brand to fully exploit economies of scale in marketing. It would be a big move for Jetstar's owner, Qantas, to rebrand its budget airline family as AirAsia. And AirAsia would never give up its current name, which is close to perfect for its market.

    And then there is the difficulty that AirAsia and Jetstar do not offer the same product. In long-haul operations, for example, AirAsia squeezes economy passengers into nine-abreast seating in A330s; Jetstar uses the normal eight abreast arrangement.

    Tags: tw99, AirAsia, Jetstar, Tiger, budget

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