Jetstar increases competition at Changi Airport

BUDGET carrier Jetstar Airways looks set to increase its presence at Changi Airport. There is market speculation that it will be appointed Singapore’s third ground handling agent – besides Singapore Airport Terminal Services (Sats) and Changi International Airport Services (Cias) – replacing Swissport, which closed shop on April 1 last year, barely four years after it started.

Already Jetstar has announced it will be flying direct daily services between Singapore and Melbourne from December and between Singapore and Auckland from March next year. Jetstar chief executive officer Bruce Buchanan said this would build “a solid foundation for future growth beyond Singapore to North Asia and Europe.”

Jetstar is eyeing other long-haul destinations such as Beijing, Shanghai, Tokyo, Rome and Amsterdam, operating through Singapore.

Some observers think Singapore Airlines (SIA) will feel the heat of the competition from Jetstar. But competition is no stranger to SIA wherever it flies. Priding itself as a full-service network airline with premium product and service offerings, SIA believes it caters to a different market. Nonetheless, SIA said it welcomed the competition from Jetstar.

Some other observers think Jetstar’s long-haul venture would backfire on parent Qantas instead if their products were not sufficiently differentiated. Jetstar would grow at the expense of Qantas.

While SIA is unlikely to feel much of a pinch from Jetstar’s network expansion through Singapore, Sats will suffer a significant loss of its market share if Jetstar becomes its rival on ground.

Sats will lose the business of not only Jetstar (including its offshoot Jetstar Airways Asia) but also Qantas, which is its biggest client after SIA. This is to be expected, in the same way that Sats lost the clientele of Emirates Airlines when owner Dnata of the United Arab Emirates flag carrier acquired Cias in 2004.

Other potential risks to not only Sats but also Cias will depend on Jetstar’s ability to penetrate the markets held by them.

This should augur well for Changi, whose authorities have reiterated that the objective of introducing a third handling agent is to increase competition and provide airlines with more choice.

However, if Swissport with its global reputation as one of the best in its field had failed, could Jetstar with limited experience succeed?

While Swissport’s entry into Singapore might have been ill-timed considering how the global economy would soon nosedive, the Swiss company was not blessed with adequate local or regional pedigree advantages.

Swissport did not have a sustainable base that Jetstar enjoys in itself as a growing carrier and in Qantas with its high frequency through Singapore. The familial support provided by Swiss International Air Lines (which had ceased flying to Singapore) to Swissport did not have the volume that Qantas would bring to Jetstar – in the same way that Sats used to enjoy the support of erstwhile parent SIA and continues to benefit from its volume of business.

What Jetstar lacks in experience may be made up by Qantas’ expertise in ground handling. Jetstar may also be able to leverage on Qantas’ network connections in much the same way that Sats has benefited from its relationship with SIA. The Swiss national flag carrier does not enjoy the same standing that Qantas and SIA enjoy as major airlines in the region and as key players flying the kangaroo route. Opportunities for reciprocity are therefore limited.

In as much as Swissport might have learnt too late from its failure at Changi, the Changi Airport Group (CAG), which manages the airport, too would have become wiser from its appointment of Swissport.

Jetstar’s growing business through Singapore and its Qantas connection make it a suitable candidate for sustainable operations, even if it means self-handling for a start. CAG cannot allow a repeat failure by a third ground handling appointee since it is convinced this is in the best interest of Changi as a regional hub.

 Cost is an important consideration, especially when Changi wants to attract more of the growing regional budget airline business, whose growth has been phenomenal as full-service airlines suffered the lashings of the global recession. That alone may justify the appointment of a low-cost operator which is able to offer a budget-type ground handling package beyond just operating out of a budget terminal that even some full-service airlines may be enticed to consider.

Statistics released by CAG showed healthy traffic growth for Changi – 33 million passenger movements, which is an increase of almost 22 per cent in May over the same month last year, much of the growth attributed to budget carriers. The time may be right to pursue an old dream.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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