Virgin ups challenge to JetStar
Fri "The Australian"
Virgin ups challenge to JetStar
By Steve Creedy
December 05, 2003
Virgin Blue has risen to the challenge of would-be competitor JetStar with a raft of new services and cheap introductory fares to business and leisure destinations.
The services are scheduled to start before or about the time Qantas launches its low-cost offshoot next May.
They include a 40 per cent increase in year-round direct services to the Gold Coast with a new non-stop service from Perth starting on March 29.
There will be a new daily Sydney-Townsville service and an extra daily return service between Brisbane and Townsville.
There will also be three new flights a week between Melbourne and Darwin, a new daily Brisbane-Newcastle service and a 50 per cent increase in the frequency of flights between Cairns and Sydney, Melbourne and Brisbane.
The airline has started selling the new routes with special launch fares, such as a $99 one-way Sydney-Townsville special.
Virgin executives believe the moves will counter criticism that Virgin is concentrating on yields rather than low fares and growth.
They say it also throws out a challenge to JetStar.
"The recent announcements will ensure that we're not leaving any easy picking for Qantas's sudden discovery of the public's demand for low fares," said Virgin spokesman David Huttner. "If they want any market share, they are going to have to earn it, just the way we did.
"The announcements also reaffirm to everybody which airline is a true believer in low fares as opposed to a sudden convert."
JetStar has yet to reveal its fare and route structures but this week confirmed it would buy up to 23 Airbus A320 aircraft for its no-frills operation.
The new leisure airline will be unionised and will use Impulse Airlines and its 14 Boeing 717s as a launch vehicle, quickly adding the first 177-seat A320s.
Executives will spend about $100 million setting up the new airline and vow to undercut Virgin Blue's costs and fares.
The carrier is expected to run at a small loss in the first year and will follow a strict low-cost model, with its own reservation system, an emphasis on internet sales and streamlined check-in and baggage handling facilities.
Qantas chief executive Geoff Dixon said this week the new airline would compete head to head with mainline Qantas, even on major trunk routes.
Mr Dixon maintains the low-cost carrier will not cannibalise other operations and said mainline Qantas had no plan to reduce staff or services.
Instead, he says, the airline's low fares will help the domestic market grow by up to 20 per cent.
However, some analysts have questioned whether the airline can operate without eating into its own customer base.
Virgin Blue also remains unconvinced JetStar will be able to match its low operating costs.
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