Qantas International (or any other full service, premium airline) cannot compete effectively against Scoot, Air Asia, Malindo, Norwegian or any of the multitude of International LCCs that have thrown their hat in this arena. The cost base is too high.
Not quite sure what 'cost base' you refer to make such an assertion.
Depending on data source fixed or sunk costs of airlines amount to 70-80% of total cost.
- Air frame cost* the same
- Fuel cost the same
- Air Nav charges the same
- Landing and terminal costs (same airport) very similar
There are small savings in crew costs (general) and the choice to lease air frames rather than bring them on balance sheet can change reporting metrics somewhat. IFRS 16 will change this accounting advantage many Low Fare Airlines enjoy*.
Flying 'point to point' rather than a 'hub' can save and likely that represents a difference in fixed cost, terminals, lounges and such are costly to run.
Low fare airlines have a role; they stimulate a demand elastic market segment. They by definition are low yielding, high load factor required businesses.
Their competition has these higher costs as they have built brand differentiation, but they also face less demand elasticity, particularly in the
product differentiated J class, where significant margin exists. . Less elasticity allows yield to be captured. As yield is far easier to build and maintain, add in a frequent flyer business and a hub and spoke network suddenly adds yield potential. This cannot be replicated by a basic low fare airline model. Do these businesses have brand value or are they merely 'cheapest on the day' models is an interesting question.
So the cost base is a
component of the discussion, it is not all of it.. Established airlines are well able through scale and brand value to 'compete'. They also can stimulate demand in the Y cabin, adding capacity and reducing the ability of the Low Fare Airlines to build any yield as flights move closer to the day of departure( by increasing price). Ask Mr O'Leary (Ryan Air) or Mr Fernandes (Air Asia) how this affects their ability to build yield and you may understand how Mr O'Leary can apparently suggest that use of the toilet will cost a pound: He struggles to build yield.
Control of the yield premium is something that means an airline can maximise the difference between wherever its cost base resides and the revenue it can generate for a seat sold. It is after all the gap between the revenue generated and the costs incurred that represents the operating profit. This margin is the important one. (Apologies to Herb Kelleher)
Qantas still need a new fleet.