Asian low-cost carrier Jetstar Airways has announced it will close its Singapore – Auckland flight from July 21, 2014 because the service is not performing as the carrier would have liked and it believes its capacity could be better deployed on other routes. The budget carrier launched the route in March 2011 on a daily basis but suggestions the route was not performing as anticipated became clear last year as the carrier reduced the frequency to three times weekly “to better serve demand”.

Jetstar Airways has been competing directly with Singapore Airlines (SIA) on the route, and with the latter offering three times the capacity being provided by the budget carrier, it has found it hard to compete with the full-service operator. Its decision to close the route has also been likely influenced by the expected tie-up between SIA and Air New Zealand (NZ), which will see them boost their existing capacity between New Zealand and Singapore by up to 30 per cent.

Under the terms of the agreement, Air NZ will take over the operation of five of SIA’s existing flights on the Auckland – Singapore, adding two more weekly rotations and boosting the frequency to a daily schedule. This route will be served using a newly refitted Boeing 777-200ER and will mark Air NZ’s first flights on the route since its suspended its previous link in 2006. SIA will deploy the A380 on a daily rotation, progressively replacing an existing daily service with the smaller Boeing 777-300ER (initially on a seasonal basis).

Jetstar has not been specific on the reasoning for the route closure and in a statement to The HUB said: "Route reviews take into consideration a number of factors including past performance and future potential." However, officials at Auckland Airport reinforced that concerns it raised earlier this year that the Air NZ – SIA partnership would have on competition between New Zealand and Singapore.

“Today’s announcement confirms the concerns we expressed to New Zealand’s Minister of Transport that the proposed alliance between Singapore Airlines and Air New Zealand could have detrimental impacts on the growth and promotion of competition in international air services,” said

“Today’s announcement confirms the concerns we expressed to New Zealand’s Minister of Transport that the proposed alliance between Singapore Airlines and Air New Zealand could have detrimental impacts on the growth and promotion of competition in international air services,” said Glenn Wedlock, general manager aeronautical commercial, Auckland Airport. “We are disappointed Jetstar has decided to remove almost 100,000 low fare seats from the market and reduce the travel choices of 85,000 passengers every year.”

“The cost of this announcement to the New Zealand tourism industry is over $70 million every year, so it’s important we secure capacity in wider Asian markets to replace this loss. Auckland Airport is actively working on replacing this value. This decision from Jetstar is a reminder of the importance of the airport continuously marketing Auckland as a destination to other airlines,” he added.

In our analysis below we look at O&D demand between Auckland and Singapore and how the market was stimulated following Jetstar Airways’ arrival in 2011. It also shows that the LCC's arrival on the market impacted SIA's own operations with traffic levels on the Singaporean carrier falling by around a fifth between 2010 and 2011, although these figure rebounded in 2013.