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Jetstar cutting costs

Budget airline Jetstar will cut 93 jobs and reduce operations in Darwin as part of ongoing cost-cutting measures at parent company Qantas (ASX: QAN). Jetstar will transfer its three A320 aircraft based in the city to Adelaide and cut back on flights to the top end in line with recent efforts to redeploy aircraft to more profitable routes.

Jetstar Asia, Qantas’ Singapore-based joint venture with a group called Westbrook Investments, will take over some of Jetstar’s flights from Darwin. These will include four weekly flights from Darwin to Manila and Tokyo, and two flights between Darwin and Singapore. Jetstar’s flights between Darwin and Denpasar, and Darwin and Brisbane, will be reduced from eight to seven, and nine to seven respectively.

Overall, the Jetstar group will reduce flights from Darwin from 54 per week to 49. The move is part of a huge cost cutting initiative announced by Qantas last week when it unveiled an expected $300 million loss for FY13-14.

The 93 jobs will include Darwin-based pilots and cabin crew that previously serviced the three aircraft, however it is understood that some of the 120 new jobs in Adelaide will be offered to the staff.

The announcement was great news for South Australia. Jetstar will base four aircraft in Adelaide from next year, three from Darwin and one from Melbourne, which is expected to add an extra flight daily between Adelaide and Sydney, and Adelaide and Melbourne.

Foolish takeaway

The airline has blamed the move on increased competition on the international routes from rival budget airlines AirAsia X and SilkAir. Qantas (and Jetstar) has seen increased capacity on the majority of international and domestic routes, resulting in lower yields and tighter margins. It has been known for some time that the Darwin-based flights were among the lowest-margin flights operated by the airline.

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Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned.

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