Qantas has confirmed that it will inject another $60 million into Jetstar Japan as it faces the impact of a weak yen making fuel more expensive and delays to establishing a second base in the country.
Following speculation about the need for further funding, Qantas said today that both it and Japan Airlines – the two largest shareholders – would make a combined injection of 11 billion yen ($120 million).
It will result in Qantas and Japan Airlines both boosting their stakes in Jetstar Japan from 41.7 per cent to 45.7 per cent.
But the budget airline’s two smaller shareholders – Mitsubishi and Century Tokyo Leasing – will have their stakes drop from 8.3 per cent to 4.3 per cent each because they are not participating in the share placement.
Qantas said the equity injection would ‘‘support Jetstar Japan’s future fleet and infrastructure growth, enabling the carrier to capitalise on the significant potential of the low cost carrier market in the world’s third largest economy’’.
However, the budget airline is facing the challenge of a weaker yen making jet fuel – one of its biggest costs – more expensive and hold ups to establishing a second base at Kansai International Airport near Osaka.
Qantas has previously committed just over ¥5 billion to Jetstar Japan.
Since it began flying in July last year, Jetstar Japan has become the largest budget airline in Japan with a fleet of 18 A320 aircraft fying to nine domestic destinations.
The airline intends to eventually boost its fleet to 24 planes.
The cost of entering the Japanese market has weighed on the financial performance of Jetstar, which booked $50 million in start-up losses from Jetstar Japan and Jetstar Hong Kong in the year to June.
Macquarie Equities has estimated that Jetstar Japan is losing about $50 million a year as it competes against Peach and AirAsia Japan, which is about to be rebranded Vanilla Air.
Malaysian budget airline AirAsia decided several months ago to pull out of the airline joint venture in Japan.