Jetstar and AirAsia get together to form LFA alliance

Jetstar and AirAsia have announced that they are to form a new alliance to reduce costs, pool expertise and ultimately result in cheaper fares for both carriers.

Key to the agreement is a proposed joint specification for the next generation of narrowbody aircraft, that will best meet the needs of the low-fare customer of the future. Both airline groups will also investigate opportunities for the joint procurement of aircraft.

Qantas Airways CEO Alan Joyce, Jetstar CEO Bruce Buchanan and AirAsia Group CEO Tony Fernandes finalised the agreement in Sydney.

Joyce said the historic non-equity alliance would give Jetstar and AirAsia a natural advantage in one of the world’s most competitive aviation markets. “Jetstar and AirAsia offer unmatched reach in the Asia Pacific region, with more routes and lower fares than their main competitors, and this new alliance will enable them to maximise that scale,” he remarked.

“Just as both carriers have pioneered the development of the low-cost, long-haul airline model, today’s announcement breaks the mould of traditional airline alliances and establishes a new model for achieving reduced costs and increased efficiency.”

The agreement includes the development of co-operation in areas such as:
• future fleet specification – both carriers will investigate opportunities for joint procurement of the next generation of narrowbody aircraft. A collective goal is to achieve cost reductions in terms of order volume and influencing design specification to deliver more efficient, low-cost operations;
• airport passenger and ramp handling services – developing co-operative arrangements for the provision of passenger and ground handling in Australia and within Asia at overlapping airports by making best use of scale;
• shared aircraft parts and ‘pooling’ – pooling inventory arrangements for aircraft components and spare parts;
• procurement – joint procurement, with a focus on engineering and maintenance supplies and services, with Jetstar maintaining its existing use of and commitment to Australian facilities; and
• passenger disruption arrangements – reciprocal arrangements for passenger management (i.e. support for passenger disruptions and recovery onto the other airline’s service) across both the AirAsia and Jetstar flying networks.

Jetstar CEO, Bruce Buchanan, said the co-operative approach was a result of the two organisations’ strong focus on costs. “Jetstar and AirAsia are passionate about offering consistently low fares,” he commented. “Year on year, Jetstar is reducing its controllable costs by up to five per cent annually. This agreement will enable a further step-change in our cost position and ensure sustainable low fares. In coming years Jetstar and AirAsia want to work with manufacturers on the next generation aircraft to ensure it best meets our business requirements.”

AirAsia Group CEO Tony Fernandes hailed the agreement as another step in the airline’s strategy to maintain its global leadership as the lowest-cost airline operator. “AirAsia strongly believes the strategic tie-up will help the airline maintain its position as the lowest-cost airline in the world despite rising costs associated with the fledgling global economic recovery,” he noted. “It is key for us to keep our costs as low as possible. This is what enables us to provide the low, low fares that our guests have enjoyed, and will continue to enjoy.”

Fernandes said a common aircraft type specification in terms of the next generation narrow body offering should be proactively pursued by both airlines because of the many efficiencies it would bring. “With joint purchasing power it means that we can potentially work with airline manufacturers on the right configuration and design of an aircraft specifically for AirAsia and that best suits our operational needs for the future,” he added.

“A strategic arrangement with Jetstar focussed on investigation of operational synergies is a logical development for us. AirAsia and Jetstar share the same philosophy of low-cost, low-fares and high quality customer service,” Fernandes continued. “There is clear sense in finding the right cost solution for a range of airline and associated services which support AirAsia’s expanding route network.”

Photo shows Jetstar CEO Bruce Buchanan (3rd from left), AirAsia Group CEO Tony Fernandes (centre) and Qantas Airways CEO Alan Joyce (3rd from right) celebrating the alliance, flanked by AirAsia and Jetstar flight attendants and in front of the Sydney Harbour Bridge.