Read below: I've commented on this before and still believe PE will own DJ in the next 6 months. My bet is that Toll will be involved but VBA will not be a listed company next year. So, for those that think they want to apply to VA and then turn there noses up; go right ahead. Even better book your discounted fare OS now and apply somewhere else beacuse unless your gamefully employed here seats will be filled with or without you.
OOB
Gamefully & Happily employed in the best place in the world - OZ.
3:21 PM Nov 16, 2007
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Alan Kohler
A nation of city-hoppers
A week before Tiger Airways’ first Australian flight takes off at Tullamarine the aviation industry is abuzz with talk that David Bonderman’s Texas Pacific Group (TPG) may be looking at taking a major stake in Virgin Blue.
TPG was one of the key players in the Airline Partners Australia bid for Qantas earlier this year and it is thought that having failed to buy Qantas, Bonderman is thinking about attacking it.
Whether or not Toll Holdings’ Paul Little decides to sell Toll’s 63 per cent or to raise new equity and dilute, the future of Virgin Blue is one of the many things in play in Australian aviation at the moment.
Tiger’s first flight next week – plus Qantas’s massive increase in capacity announced this week, aimed mainly at its discount subsidiary Jetstar – are pointers to the arrival in Australia of the low-cost revolution that has transformed air travel elsewhere in the world, especially in Europe.
And ironically the long-standing discount airline, Virgin Blue, has been chasing Qantas upmarket, just as the Singapore Airlines’ offshoot Tiger Airways prepares to put five planes into the air with maximum fares below $100 and some at $9.95.
Aviation industry sources now expect any recapitalisation of Virgin Blue, possibly involving David Bonderman and TPG, to fund a very serious attack by Virgin on Qantas’s business travel franchise, accompanied by the launch of a new low-cost carrier by the Toll subsidiary – emulating the Qantas/Jetstar business model.
The Australian tourism business is in a state of high excitement about arrival next week of Tiger.
In Europe the low-cost revolution led by Ryanair has produced 20 per cent per annum growth in air travel. People are heading from London to Paris for dinner and to Madrid for the weekend. The new habit is to look on the internet for the best air ticket deals and go wherever they take you. Zagreb? Sounds great – let's go.
As a result Ryanair is now ranked the number one international airline, carrying 40,532 passengers in 2006 according to IATA, with further growth this year having extended its lead.
If the experience of Europe and Asia is any guide, the amount of air travel in Australia is about to explode.
Tigers’ chief Tony Davis says he expects to lift its capacity quickly from five aircraft to 30. At the same time, Jetstar’s capacity is being increased dramatically as a result of this week’s announcement from Qantas, and Virgin Blue is almost certain to be recapitalised and linked with a major long-haul airline.
In addition AirAsia, the discount carrier operating out of Kuala Lumpur’s low cost carrier terminal is proposing to fly into Melbourne’s Avalon airport next year. It is currently flying into the Gold Coast three times a week.
AirAsia has said it expects to fly A320s between Avalon and KL for $350 one-way, or $700 return. With Jetstar and Tiger also offering cheap Asian tickets, the economics of flying to Asia are also about to be transformed.
A few challenges arise from this. Although a big increase in capital city tourism will be great for the shops and restaurants in those places, regional tourism is in trouble. If it costs as much to fly from Sydney to Melbourne as it does to drive to the NSW south coast or Byron Bay, then more people might do that instead.
And Australia’s airports will have to lift their game – fast. Tiger will be using Melbourne’s Terminal 3, which is a shed off to the side of Terminal 2, first used by Virgin Blue and Compass.
It will do for a while, but the future of air travel is low cost, so Melbourne Airport will need to deal properly with the low cost carriers and their growing legions of customers.
And as for Sydney – Tiger is flying to Newcastle, not Sydney, which is too expensive. It’s great for Newcastle and people living in the Hunter Valley and the NSW north coast – but really, it’s not good enough.