It is astonishing that the momentous announcement that Jetstar made yesterday about becoming Singapore’s first long-haul, low-cost carrier struggled to get little more than cut-and-paste reporting in this morning’s general media.

It brings into much sharper focus an inevitability that many observers, frequent flyers and analysts keep denying, that of large jets, including A380s in Jetstar colours taking over most of the Qantas operation within the next 10 years.

And doing it from Asia, with formerly Australian jobs going to Asia, in jets depreciated under the more advantageous investment rules of Asia in general and Singapore in particular.

Think about a 700-passenger A380, one with a small Star Class or premium economy cabin, and everything else comprising a discount economy or modular economy fare competitive with the products on offer from the likes of Emirates, a long-haul Tiger, and Air AsiaX, assuming the last named masters the imperative of not flying too close to sea level while trying to squeeze into inappropriate wide body airports like that at the Gold Coast in foggy weather.

Jetstar is shifting offshore the Qantas investment into new routes, and its plans to carry out its long-stated intention to reclaim old routes to Europe that it abandoned because they were unprofitable in the legacy multi-class format of Qantas.

Qantas has spoken of “re-taking” Rome, Athens, Amsterdam and Manchester for starters.

Two enhanced range Airbus A330-200s mightn’t seem much, but they are all Jetstar can get its hands on in the aftermath of the 787 delivery debacle, which leaves it awaiting a much-delayed stretched version of the Dreamliner, which may not even offer the range of the older but improved Airbus design for some years to come.

It intends to get more A330s, which are now the most commonly used medium distance new wide-body jets in the Asia-Pacific.

The Jetstar assault on the legacy labour and productivity practices of Qantas within Australia is a hollowing out process now spreading to setting up a long-haul Jetstar hub at Changi Airport, which is also the home base of its Jetstar Asia single-aisle A320 operation, which is 49% Qantas owned but predominantly Qantas financed.

In the wider picture, demand is retreating from luxury business- and first-class products to discount and premium economy.

For slow learners, this is where all of the Qantas group growth In revenue and profits has been made in recent years. The paradigm of ultra low-cost fares and luxury business-class fares squeezing the middle-range fares has shifted to the mass-marketed discount fares and fuller service economy fares squeezing the life out of the top tier products the prime users, big corporate accounts are ditching in favour of cheaper fares.

This is something Virgin Blue realised when it embarked on its “new world carrier” product evolution a few years ago.

Jetstar as a Qantas subsidiary doesn’t face all of the Qantas Sale Act restrictions on foreign equity, or Australian domiciled control.

It can be sold abroad into Jetstar franchises, presumably with more success than has been the case with Jetstar Pacific in Vietnam, which is another rather ugly story festering away in the background. In Jetstar Qantas has a true, cross-border franchising strategy that makes a nonsense of the legislative restrictions on Qantas equity and business conduct in the longer run, since nothing in the Qantas Sale Act prevents it from making as much money as possible from offshore investments.

All of which means far more is riding on the wings of two Airbus widebodies in 2010 than appears in a press release regurgitated in the papers.

The president of the Australian and International Pilots Association, Captain Barry Jackson, says his immediate concern is for the loss of pilots and engineering jobs from Australia to Singapore, now and as the momentum of long-haul Jetstar flights grows.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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