Jetstar Essay

Jetstar should not expand its low cost business model to serve international destinations besides the one already being served. The reason lies in the company’s strategic positioning of being a low cost, no-frills carrier serving a price sensitive market and providing these services consistently. The company’s key distinguishable value drivers and the activities are also tailored around the low-cost business model. These low cost practices included automated ticketing, point-to-point service, short hauls, meals on charge, plying on non-overlapping routes (from the parent airline), between mid sized cities and using secondary airports to reduce operational costs. Its low fare price structure attracts price-sensitive customers including families

As a full-service airline, Qantas has identified and configured its niche consumers “willingness-to-pay” and focused all its strategic activities around it. The company’s business model as a full-service airline offering a large number of benefits in terms of flexibility to travel large number of destinations, connectivity to different hubs at major international airports, flying long distances, different travel class of “comfort’ including Business and First amongst others.
The operational effectiveness of Jetstar versus its parent airline, Qantas is also a major hindrance. Besides the cannibalization fear, the fact that the airlines industry is very high on competitiveness, with other players on the international scene having the infrastructure (more number of planes) and financial prowess to effectively counter the launch of a smaller player like JetStar, should also be considered. Jetstar would need to invest heavily in infrastructure and advertising. The other critical issue which could be a cause of failure in the international routes is “straddling”. Given the fact that the airline industry entry barriers are quite low for existing players, bigger airlines could easily copy the “Jetstar business model” and Jetstar would have to accordingly adapt its strategy through non profitable “positioning trade-offs” which could hurt its profitability in the long