Jetstar enrages agent at take-off (Robert Gottliebsen)
Wed "The Australian"
Jetstar Enrages Agent at take-off
May 26, 2004
ROBERT GOTTLIEBSEN
FLIGHT Centre chief Graham Turner has fired his first shot across the bow of Qantas chief Geoff Dixon's infant discount airliner Jetstar.
Jetstar is refusing to give significant commissions to travel agents, leaving Flight Centre, along with other travel agents, both angry and frightened by the move.
So Turner arranged with Google to have the first Jetstar search result to be connected directly to his Flight Centre internet site. As soon as you clicked through to Turner's counterfeit Jetstar, you were awash with offers from Virgin and Qantas.
In tiny print you were told that to make a Jetstar booking it was necessary to call into an agent's office.
Given that there is little commission for the agent, my guess is you would not be encouraged to make the Jetstar booking.
Mike Hatton, chief executive of the travel agents body AFTA, says that if Jetstar is allowed to get away with the "zero commission" policy, other companies will follow its lead.
Dixon probably agrees with him, and thinks that if Jetstar can bypass the agents and win, then perhaps in time Qantas can do the same thing.
It won't be easy for Jetstar.
The travel agents in Australia have an extensive customer database and closer contact with customers than the airlines.
When Virgin launched in Australia, it recognised this and gave a 5 per cent base commission plus negotiated payments for substantial support. Virgin ignored the "no commission" trends in Europe and the US.
On Jetstar's opening day yesterday, Turner's counterfeit Jetstar connection to Flight Centre had disappeared from Google and the first Jetstar search result went through to the company. But Turner had made his point.
Almost certainly Virgin CEO Brett Godfrey will use Jetstar's token commissions policy to increase his market share gains. He will be pointing out to agents that Jetstar is really Qantas, which is being two-faced, so it makes more sense to promote Virgin.
And to give key agents more incentive to book Virgin, he will probably structure agent commissions to help those who reward Virgin.
I encountered Turner's counterfeit Jetstar when I went to book a weekend Jetstar flight from Brisbane to Melbourne's Avalon airport.
The person travelling wanted to go south of Geelong, which is much closer to Avalon than Tullamarine airport.
The price quoted for that flight was $95, but via the Flight Centre site I found that Virgin was offering a flight at the same time and at the same cost, but arriving at Tullamarine.
Equal pricing represents a big challenge to the infant Jetstar -- its costs are fractionally above Virgin, so the larger discount airline is able to match Jetstar prices and not suffer. Accordingly, travel agents can white ant the Jetstar airline and funnel more people into Virgin.
Godfrey has made it clear he wants to use his 20-25 per cent cost advantage over Qantas to become Australia's largest domestic airline.
The equivalent Qantas fare from Brisbane to Tullamarine early on a Saturday morning was $145 -- 50 per cent more than Virgin.
That's a big difference and represents a clear danger to Qantas in off-peak and week-end travel.
Meanwhile Virgin is expanding rapidly into the regional and holiday routes that Jetstar is servicing.
And Godfrey knows he has the full backing of Turner and his large community of agents, many of whom have signs outside their store saying they can help travellers chose between Qantas, Virgin and Jetstar.
Not many Flight Centre customers will walk out choosing Jetstar.
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