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Qantas is shutting down Jetstar Asia, its Singapore-based budget carrier, blaming rising operating costs and a crowded market.
The budget airline will cease operations on July 31 after more than two decades.
Jetstar Asia will continue flights until then on a “progressively reduced schedule,” Qantas said in a statement on Wednesday.
“Despite delivering exceptional customer service and operational reliability, Jetstar Asia has been impacted by rising supplier costs, high airport fees, and intensified competition in the region,” the Australian company said.
Jetstar Asia flies 16 routes from Singapore to destinations in Malaysia, Thailand, Indonesia, Japan, the Philippines, China, Sri Lanka, and Australia.
Jetstar operations in Australia, New Zealand and Japan will not be affected.
Customers booked on canceled flights will be offered full refunds, and Qantas will try to move them to other airlines where possible.
The shutdown will also result in the loss of more than 500 jobs in Singapore, a Jetstar Asia spokesperson told Business Insider.
Affected employees will be given redundancy benefits and assistance with finding roles within Qantas and other airlines.
Qantas added that 13 Jetstar Asia Airbus A320 aircraft will be progressively redirected to Australia and New Zealand.
Qantas did not immediately respond to a request for comment.
Competition among budget carriers in Southeast Asia was “brutal,” Alan Tan, a professor specializing in aviation law at the National University of Singapore’s Law School, told Business Insider.
“The departure is a great loss from the viewpoint of price and service competition for travellers,” he said.
Virgin Australia IPO
The closure comes on the same day that Virgin Australia announced its intention to list on the stock market in Sydney on June 24.
The shares will be priced at A$2.90, raising A$685 million and valuing the company at A$2.3 billion.
The IPO will allow some existing investors, including Bain Capital, Qatar Airways Group, and the Virgin Group, to realize part of their holdings.
Investors participating in the offer are expected to hold about 30% of shares on issue, with the remainder being held by existing investors.
Virgin carries about 20 million passengers a year on more than 100 aircraft. It operates 76 routes to 38 destinations across its domestic and short-haul international airline business.
From next week it will start long-haul international services between Australia and Doha in partnership with Qatar Airways, which has a 25% stake in Virgin.
Budget model is ‘dead’
United Airlines CEO Scott Kirby earlier this month criticized the budget airline model and called it “crappy.”
He told the “Future of Everything” event that the low-cost carrier model was “dead.”
“The model was screw the customer,” he said. “It was like trick people, get them to buy, and get them to come, and then charge them a whole bunch of fees that they aren’t expecting … disclosures buried in legalese,” he continued. “Their problem is they got big enough that they needed repeat customers. They don’t get them.”
His comments came the same day that United announced a new partnership with JetBlue, which some consider to be a budget carrier.
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