Jetstar losing money on regional NZ services

Jetstar losing money on regional NZ services, watching market 'closely'

By Pattrick Smellie

Aug. 22 (BusinessDesk) - Budget carrier Jetstar is "loss-making" on its regional services in New Zealand and "market conditions are being monitored closely," parent company Qantas told investors today.

Regional flights are defined on the Jetstar NZ website as services to Napier, Nelson, New Plymouth and Palmerston North, raising the spectre of service cuts to regional centres of a similar kind to those that have landed national carrier Air New Zealand in political hot water in the past.

The Qantas results, released to the Australian Stock Exchange this morning, offer no other detail on New Zealand services.

Air NZ, which claims around 80 percent of the domestic travel market, has in the past suggested that Jetstar - which also services the main centres and Queenstown as well as flying the Tasman - makes no money in New Zealand.

The Qantas group result bore similarities to the earnings announced earlier today by Air NZ, in that both airlines saw profits dented by a combination of higher jet fuel costs and softening demand for both domestic and international travel.

However, Qantas's net profit of A$1.3 billion in the year to June 30 was down just 6 percent on the previous financial year, compared with a 31 percent drop in Air NZ's earnings to NZ$270 million.

Qantas reported an 18.4 percent return on investment capital, while Air NZ's slumped to 10.2 percent, from 14.5 percent a year earlier. The New Zealand national carrier defined that result - the lowest ROIC in the past six years - as "sub-optimal" against a benchmark target of 15 percent.

Qantas also announced a share buyback scheme and that it was involved in trials for non-stop services to both London and New York from Sydney.

(BusinessDesk)

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