Air Asia And Jetstar Form New Alliance

The Kuala-Lumpur based Air Asia and Australian Jetstar low-cost carriers have announced a new Alliance in Sydney that is primarily targeted at specifying the new generation of single aisle aircraft as well as joint procurement of these planes.

The new alliance is bringing together the two leading, lowest-cost low-cost carriers of the Asia/Pacific region, and this alliance can reduce their cost levels even more by sharing expertise and procurement procedures.

The 3 alliances among traditional airlines (oneworld, Sky Team, Star Alliance) are primarily focusing on commercial agreements and passenger benefits such as loyalty programs. The same idea was launched in the first “low-cost alliance” between JetBlue and Aer Lingus who linked their booking engines, started code-sharing on some routes and are offering through check-in of luggage for each other’s flights for example.

The idea here on the other hand is that this new alliance is not (yet) about commercial partnerships and not about bringing additional revenue to each other by “sharing” passengers, but about actually cutting costs together by sharing some operational functions. The most interesting part is that these two airlines have explicitly formed this alliance partially to create “a joint specification for the next generation of narrowbody aircraft” and to look into a joint procurement of these jointly specified aircraft. While traditional airlines only seem to be talking about the importance of new, fuel efficient and environmentally friendly single-aisle aircraft and are looking for the aircraft manufacturers to come up with something out-of-the-blue, these two low-cost airlines are taking proactive steps – they want to make sure that the new airplane types which will be around for the next 40-50 years are designed and created in a way to fulfill their own requirements! They will not just jump on the bandwagon when the planes are around, but will actually be driving it!

And they are not talking in the air, as their combined fleets with orders and options add up to nearly 400 planes (currently operating 131) – making them a very powerful player to define the replacements of the Airbus A320 and (or) the Boeing 737 airplane families.

Alan Joyce, the CEO of Jetstar parent Qantas Group said: “Just as both carriers have pioneered the development of the low-cost, long-haul airline model, today’s announcement … establishes a new model for achieving reduced costs and increased efficiency. This partnership will ensure that both airlines can capitalize on these growth opportunities“.

Principal terms of the agreement cover:

• future fleet specification,
• airport passenger and ramp services at airports where both carriers operate to,
• joint fuel purchasing,
• shared aircraft parts and pooling,
• procurement of engineering and
• maintenance supplies/services and
• reciprocal arrangements to mitigate possible operational disruption across both networks.

Reportedly the next step for the partners would be to look at joint venture on routes and other commercial activities including joint procurement of hotel inventory for holiday packages.

Air Asia 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 …This is what enables us to provide the low, low fares that our guests have enjoyed, and will continue to enjoy.”

Peter Harbison, Chairman of the Centre for Asia Pacific Aviation said the agreement could be the start of something bigger, with codesharing and equity exchanges at a later stage: “This is all about ‘let’s live together before we get married’“. Fernandes added that “This will be an exclusive partnership between both airlines. It’s difficult to have two husbands.”

We are happy to see such an innovative, but very logical initiative from two airlines in such harsh economic situation. This is really pointing forward to a future that other alliances (even the ones already established) should follow immediately. The big three alliances all have their leading, ruling large airline members, who believe they have the large enough economies of scale and do not need their (smaller) partners in such joint procurement actions – even though they should… Let’s see how this works out, we can only wish Air Asia and Jetstar a huge success and a great future of this new, cost-cutting based alliance!

by balint01