The low-cost subsidiary will cease operations on July 31 as part of a “strategic restructure”, Qantas group chief executive Vanessa Hudson said.

Qantas is “incredibly proud” of the Jetstar Asia team, Hudson said in a statement.

“This is a very tough day for them. Despite their best efforts, we have seen some of Jetstar Asia’s supplier costs increase by up to 200%, which has materially changed its cost base.”

Passengers with cancelled flights on the Singapore-based regional carrier – which flies to 16 Asian destinations – will be offered refunds, Qantas said.

Jetstar Asia was expected to make an underlying loss of A$35 million (US$23 million) this financial year prior to the closure decision, according to Qantas, which owns 49% of the carrier.

The Asian regional carrier’s 500 staff will be laid off and receive redundancy benefits as well as help finding new jobs, the Australian group said.

Jetstar Asia’s 13 A320 aircraft will be progressively redeployed to Australia and New Zealand, Qantas said, creating more than 100 local jobs.

Shutting the carrier would deliver up to A$500 million (US$326 million) for Qantas to support the group’s fleet renewal programme, it said.

Qantas said the decision to shutter Jetstar Asia was taken together with the offshoot’s 51% shareholder, Westbrook Investments.