Jetstar to Enter Tasman Dogfight

Article Title: "Jetstar to enter Tasman dogfight"

Source: The Australian

Date: 3rd August 2005

Author: Steve Creedy

OVERVIEW

The article by Creedy looks at the newly announced expansion of Jetstar Airline services from its current domestic Australian flight service to its penetration of the trans-Tasman market. Jetstar's original purpose was to provide Qantas (Same Ownership) a cost-effective alternative for the provision of domestic flights around Australia while also giving customers a cheaper and somewhat "no frills" option when flying locally. The article outlines the considerations and specifications that Qantas and thus Jetstar have undertaken in order to accomplish its "first foray overseas" as part of its "segmentation strategy". Jetstar's expansive venture is then obviously significant and relevant to the study of international business's (any business transaction which involves a cross-border commercial transaction) and the goals and barriers achieved and endured.

WHY THE ARTICLE IS SIGNIFICANT TO IB

Subsidies

The article suggests that Qantas may draw upon subsidy advantages granted by the Australian government through the all-economy "Australian Airlines" subsidiary in order to help the expansion of Jetstar on "low-yielding routes". The government's efforts to promote international trade and investment as well as Qantas's new enterprise agreements with Australian flight attendants will allow Jetstar's "Cairns-based subsidiary to use new aircrafts, hire foreign crews and fly further". This permits Jetstar to hurdle non-tariff legal barriers to international expansion such as the labour laws that would otherwise prohibit Jetstar to hire overseas employees or undertake lengthy flights. The efficient use and exploitation of provided subsidies by Qantas and Jetstar are evidently significant in the study of international business's as they try to overcome barriers to overseas markets.

Trade Agreements

Although the impacts of globalisation, the emergence of strategic alliances between firms and the establishment of bilateral trade agreements between nations are not explicitly mentioned in Creedy's article, they are the unspoken givens of a business report in contemporary times. The article places emphasis on Jetstar's expansion to New Zealand, a venture only made easier through the improved relations (especially within trading) between Australia and New Zealand. Their Closer Economic Relations (CER) trade agreement together allows for the liberalisation of trade through reduced tariffs, reduced quantitative restrictions on exports and free migration of labour. Such an agreement "was aimed not only at expanding trade but also strengthening and fostering links and cooperation in fields as diverse as investment, marketing, the movement of people, tourism and transport" (Mahoney, Trigg,