Background: Jetstar Airways is the resident budget airline of Australia. It was created by Qantas in 2003 to  compete in the budget stakes against Virgin Blue (now known as Virgin Australia). In 2004, Qantas also launched Jetstar Asia, which is based in Singapore and flies all around South East Asia. Up until now they’ve been competing with other budget airlines in Asia including Scoot, AirAsia and VietJet.

What happened: In the post-COVID world, Jetstar Asia’s costs have spiked nearly 200%. And at the same time, intense competition in Asia has kept flight prices down. In fact, in the 20 years since it launched, Jetstar Asia has only turned a profit 6 times. This financial year alone, Jetstar Asia is reported to lose another $35 million dollars.

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What else: These dire numbers can’t be good for shareholder confidence. So now, Qantas’ CEO is finally making the call to shut down Jetstar Asia for good. Qantas reckons this will unlock $500 million in capital that can be re-invested in the local business.

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What's the key learning?

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💡Just like sports, businesses usually have a home ground advantage when they operate in their domestic market. So while it's tempting for Aussie companies to expand into international waters, it's not always an easy market to crack.

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💡Jetstar Asia was a foreign company competing against budget airlines that were operating on their own turf. This means Scoot and AirAsia had the upper hand because they understood the local culture and regulations in Asia, while also managing to have lower labour costs. This made it possible for them to operate their services on razor thin margins.

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💡This isn’t the first time an Aussie business has gone knocking on Asia’s door. Remember ANZ's grand plans for 20% of its revenue to come from the Asia Pacific, Europe and America? It didn't last long. In fact, by 2016, ANZ announced a major sell down of its retail banks in Asia because the returns didn’t quite match their expectations.