The early emphasis on the Jetstar 787-8s will be to open routes to cities in Europe from its offshore operational hub in Singapore.
This is part of a double goal strategy by owner Qantas, to shift jobs and costs offshore, and solve the ‘end of the line’ dilemma by using Singapore to fly the jets to Australia and NZ as well as onwards to cities where Qantas has failed in the past, including Rome, Athens, Amsterdam and Manchester.
These operations are also seen as critical to winning back market share from other carriers with lower cost in-between hubs, including Singapore Airlines, Thai International and Emirates.
It raises the question as to how much this strategy will siphon Qantas group profits into offshore partners, since in Singapore for example, any registration of the 787s as Singaporean jets will require under current rules, a true Singaporean ownership entity in which 51% of the business is Singaporean owned.
However the answer to that question may be that it will cost nothing, in that Singapore based Jetstar Asia is 51% owned by a Singaporean entity that need not be fully Singapore financed. Or it may be that Singapore plays hard ball, and decides any 51% local equity must be real rather than apparent. It is a tricky question.
Over the top of this is the cross subsidisation of a Singaporean base by Jetstar by Australia, as the fleet, if it is left on the Australian register and flown under the terms of an Australian AOC, is subject to the regulatory oversight of CASA as well as its Singaporean counterpart.
In short, there are some important issues that will need to be determined in a concrete way before the ambitions for a large offshoring of Qantas activity can be achieved, in contravention of the purpose and intent of the Qantas Sale Act, by a subsidiary that didn’t exist when it was drafted late in 1992.
The language of the Qantas ASX statement is interesting in its references to early deliveries. The 787 was originally due to be delivered to Jetstar from August 2008, meaning it will be almost four years late.
It is clear too that everything depends on the jet performing as originally promised.