Bye Bye Qantas Hello Jetstar
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That's the problem Cessnapete.
AJ's LCC mentality of more fares for less isn't covering our wages or other operating expenses.
Or, in the case of JQ HGK bleeding red ink when AJ thought he could go in and exploit these markets whilst the Asia carriers were napping.
AJ's LCC mentality of more fares for less isn't covering our wages or other operating expenses.
Or, in the case of JQ HGK bleeding red ink when AJ thought he could go in and exploit these markets whilst the Asia carriers were napping.
Viginexcess
Thanks for your long and detailed reply. All sounds quite feasible to me.
Just curious, with the threat to QF international pretty much looking after itself now, what do you think Virgin's plans for Tiger might be. With the heavy losses it is still sustaining, do you think Borghetti actually needs Tiger in the fight against the QF group. Do you think there is a 4 year, 5 year, 6 year plan? Does Virgin need to get Tiger into profitability. If they do, what happens if they can't, do they cut it loose as a failed plan?
It seemed a big call to buy into Tiger, so if it is in fact the end of QF as we know it and the rise of JQ, will Virgin need the two tiered strategy any more?
Crystal ball stuff I know, but it all makes for a good book in 30 years time. Perhaps you and Sunfish can shed some thoughts on how TT will fit into the fight.
Trev
PS - sure I got 23% for economics, but it was actually a deliberate strategy. my teacher was deputy principal as well as the mayor of Wagga, so his attendance in class was as rare as a speed bump in Dubai. So since I knew economics would be my lowest score of the 6, and as only 5 count, I decided to focus no time on it at all. So economics classes saw me just teaching myself the history of Australian Bushranging. So as I say, I'm not that dumb, am I NiceAuster??!!
Thanks for your long and detailed reply. All sounds quite feasible to me.
Just curious, with the threat to QF international pretty much looking after itself now, what do you think Virgin's plans for Tiger might be. With the heavy losses it is still sustaining, do you think Borghetti actually needs Tiger in the fight against the QF group. Do you think there is a 4 year, 5 year, 6 year plan? Does Virgin need to get Tiger into profitability. If they do, what happens if they can't, do they cut it loose as a failed plan?
It seemed a big call to buy into Tiger, so if it is in fact the end of QF as we know it and the rise of JQ, will Virgin need the two tiered strategy any more?
Crystal ball stuff I know, but it all makes for a good book in 30 years time. Perhaps you and Sunfish can shed some thoughts on how TT will fit into the fight.
Trev
PS - sure I got 23% for economics, but it was actually a deliberate strategy. my teacher was deputy principal as well as the mayor of Wagga, so his attendance in class was as rare as a speed bump in Dubai. So since I knew economics would be my lowest score of the 6, and as only 5 count, I decided to focus no time on it at all. So economics classes saw me just teaching myself the history of Australian Bushranging. So as I say, I'm not that dumb, am I NiceAuster??!!
So since I knew economics would be my lowest score of the 6, and as only 5 count, I decided to focus no time on it at all.
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Just to set the ledger straight,
PornStar wasn't a well planned & thought out "pincer move", but a hurriedly arranged and amateurish Media announcement the day before Spirit Airlines were to have their Media announcement & launch at Avalon.
The purchase of Nopulse also, was in the fear that Ansett might have got their hands on it.
Happy Landings
PornStar wasn't a well planned & thought out "pincer move", but a hurriedly arranged and amateurish Media announcement the day before Spirit Airlines were to have their Media announcement & launch at Avalon.
The purchase of Nopulse also, was in the fear that Ansett might have got their hands on it.
Happy Landings
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PornStar wasn't a well planned & thought out "pincer move"
Originally Posted by 6th Aug 2004
And right now Dixon is enjoying putting Godfrey into his pincer, using his better oil price hedging policies, and the combination of Jetstar at the bottom and Qantas at the top to squeeze Virgin profits.
G'day Trev
Not an expert on the Tiger thing, but my guess is that it was a deal done as part of Singapore jumping on the Virgin share register. I suspect that in return for taking that steaming dog turd off their hands, JB managed to get a reasonable commitment to provide support in the form of debt or cash if needed to ensure that Alan was left in no doubt as to the depth of capital available to Virgin should it be needed.
I think it is also probably a hedge against J*. I believe that we are still a fair way away from seeing what the final model will be for the two majors. Given the way that carriers use differential pricing to fill aircraft, it is not beyond the realms of possibility that the pure LCC's will get squeezed out of the market in Australia, as it is possible for a major carrier to price accordingly to attract all but the bottom feeders in regard to price.
That will require Qantas to fix its cost base though, and that's by no means a given, although I think the domestic business is in much better shape than International.
If there is room for the LCC's after Qantas and Virgin sort their product out then Tiger will fill that role for Virgin and effectively become Virgins J*.
I think the big question is still whether Qantas will persist with two brands or gradually bring it back under one in the long term. In my view the two brands are now becoming a bit silly, whereby J* is seen as an inferior product. They need to get rid of the cheap and nasty bit, bring it back under the Qantas brand, but still price similar to J*. That would be a formidable product.
With regard to Tiger, I understand the strategy was to expand, but I suspect that JB has bitten off a bit more than he can chew with all the acquisitions. VARA seem to be a problem from a regulatory point of view. If memory serves, there was much fanfare around the growth plans for VARA when Virgin bought it, but precious little seems to have happened. Might have something to do with a few dodgy approaches and a bent aircraft in Albury methinks.
I suspect Tiger will tick away in the background ready to respond to any attack at that end of the market from a Qantas related product.
I think it is also probably a hedge against J*. I believe that we are still a fair way away from seeing what the final model will be for the two majors. Given the way that carriers use differential pricing to fill aircraft, it is not beyond the realms of possibility that the pure LCC's will get squeezed out of the market in Australia, as it is possible for a major carrier to price accordingly to attract all but the bottom feeders in regard to price.
That will require Qantas to fix its cost base though, and that's by no means a given, although I think the domestic business is in much better shape than International.
If there is room for the LCC's after Qantas and Virgin sort their product out then Tiger will fill that role for Virgin and effectively become Virgins J*.
I think the big question is still whether Qantas will persist with two brands or gradually bring it back under one in the long term. In my view the two brands are now becoming a bit silly, whereby J* is seen as an inferior product. They need to get rid of the cheap and nasty bit, bring it back under the Qantas brand, but still price similar to J*. That would be a formidable product.
With regard to Tiger, I understand the strategy was to expand, but I suspect that JB has bitten off a bit more than he can chew with all the acquisitions. VARA seem to be a problem from a regulatory point of view. If memory serves, there was much fanfare around the growth plans for VARA when Virgin bought it, but precious little seems to have happened. Might have something to do with a few dodgy approaches and a bent aircraft in Albury methinks.
I suspect Tiger will tick away in the background ready to respond to any attack at that end of the market from a Qantas related product.
Loss leaders...
The common wisdom is that the LCC off-shoots bleed the parent carriers in a variety of ways: directly, by in-house accounting hijinks; indirectly, by stealing passengers at an uneconomic fare; and in the never discussed derivative mode whereby a passenger wronged by (say) Jetstar abandons the entire Qantas group.
I suspect that there will always be a place for a LCC or two in Australia, but the total market demand feels like it might need just over half of its current supply.
As has been illustrated before, the LCCs in Australia are actually only relatively lower cost. Since the ONLY avenue for savings is in employee wages and efficiencies, the lower boundary for their cost bases are only marginally cheaper than their legacy parents. Of course since all of human nature is aspirational, time tends to erode any low wage benefit that start-ups enjoy.
The included lie in the term "Low Cost Carrier" is the promise that the ticket cost will be lower. Unbundling the fare to separately charge for its components was a nifty trick on the unsuspecting played by a cynical cadre of consultants 10 years ago. The bulk of the market is wise to that old trick by now, and hates us for it. There are enough apocryphal stories around about intentionally cold cabins to spike blanket rentals to make us all look like RRRRs holes.
So what's next in the MBa bag of tricks? There are no secondary airports in this region to make that model work, employee T & Cs only drift upwards, passengers are more savy regarding the total cost of the ticket. I expect that Tiger will fold...it is the only rational move left to JB. I also suspect that JQ will shrink for the simply expedient reason that the Qantas group is too large, and redundancies in JQ will cost lots less than at Qantas. That calculus is tainted, I admit, by a naive expectation that fiduciary responsibilities will outweigh emotional attachments on the part of the board and its Oberststurnfühers in the executive ranks.
I suspect that there will always be a place for a LCC or two in Australia, but the total market demand feels like it might need just over half of its current supply.
As has been illustrated before, the LCCs in Australia are actually only relatively lower cost. Since the ONLY avenue for savings is in employee wages and efficiencies, the lower boundary for their cost bases are only marginally cheaper than their legacy parents. Of course since all of human nature is aspirational, time tends to erode any low wage benefit that start-ups enjoy.
The included lie in the term "Low Cost Carrier" is the promise that the ticket cost will be lower. Unbundling the fare to separately charge for its components was a nifty trick on the unsuspecting played by a cynical cadre of consultants 10 years ago. The bulk of the market is wise to that old trick by now, and hates us for it. There are enough apocryphal stories around about intentionally cold cabins to spike blanket rentals to make us all look like RRRRs holes.
So what's next in the MBa bag of tricks? There are no secondary airports in this region to make that model work, employee T & Cs only drift upwards, passengers are more savy regarding the total cost of the ticket. I expect that Tiger will fold...it is the only rational move left to JB. I also suspect that JQ will shrink for the simply expedient reason that the Qantas group is too large, and redundancies in JQ will cost lots less than at Qantas. That calculus is tainted, I admit, by a naive expectation that fiduciary responsibilities will outweigh emotional attachments on the part of the board and its Oberststurnfühers in the executive ranks.
