BUSINESS BATTLE: Jetstar New Zealand boss Grant Kerr said the low-cost carrier has grown the domestic market since arriving five years ago, but needs to try harder to gain business passengers. - LAWRENCE SMITH/Fairfax NZ
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Jetstar has failed to lure domestic business travellers away from rival Air New Zealand, but the budget airline says it remains committed to the market.
A search of online fares available over three weeks between Auckland, Wellington and Christchurch during the morning and evening peak business commuter hours found Jetstar consistently struggling to sell seats for more than $100 one way, while Air New Zealand could command as much as $340 one way.
Jetstar's New Zealand head Grant Kerr said despite the airline not commanding similar premiums to Air New Zealand, Jetstar was in the domestic market for the long haul.
Jetstar's domestic and trans-Tasman operations would also be shielded from Qantas' A$2 billion cost-cutting drive, including the loss of 5000 jobs over the next three years, Kerr said.
"The bosses in Aussie are very comfortable. They've seen our improvement over the past five years and are happy where we are financially." Jetstar New Zealand's financial figures were hidden among the annual returns of parent Qantas. Kerr would not say if the airline had broken even after five years competing in the domestic market. Kerr said the difference between what Jetstar and Air New Zealand could charge on the similarly scheduled flights came down to perception and branding, something he admits the airline could improve on.
"They [business commuters] are still reluctant to fly with us and we need them to have confidence with our on-time performance," Kerr said.
Peter Harbison at Sydney-based aviation industry think-tank CAPA said Jetstar contributes only 15.4 per cent of total domestic capacity compared to Air New Zealand's 84.4 per cent across a much broader network of 26 destinations.
But Kerr said its share of capacity on the routes it flies between Auckland, Wellington, Christchurch, Dunedin and Queenstown has grown to 24 per cent. Business passengers accounted for just one in five passenger on those services.
In a bid to make itself more appealing to the lucrative business market Jetstar added the Qantas Frequent Flyer programme, retimed its schedule to offer more flights during the 6am to 9am and 4pm to 7pm peak times and improved its on-time performance from 85 per cent, to 90 per cent between March 2013 and March 2014.
The airline advertised its improved record in a billboard campaign, but Fortis Travel managing director Blair Huston said it would not win business travellers from Air New Zealand.
"You can put as many billboards up as you like, but when you have a five-year history of leaving people stranded … it's very difficult for customers to change their behaviour," Huston said.
On-time performance issues were top of Huston's five reasons why his business clients still snub the low-cost carrier, even when both airlines offer only economy class domestically.
Other turn-offs were Jetstar's limited domestic network, Qantas' lack of direct long-haul services from New Zealand, the appeal of Air New Zealand's Airpoints loyalty programme and Koru lounges and the Jetstar booking software being incompatible with some agency software. Jetstar and Qantas also did not pay commissions to travel agents.
Huston said Jetstar could not escape its legacy as a no-frills airline.
"Business travellers may harp on to us about wanting to cut costs, but when we offer them another carrier, Jetstar, for 50 or 60 per cent cheaper, the vast majority of them still won't take it." Often business travellers would rather travel off peak on Air New Zealand than choose Jetstar.
APX chief executive Andrew Dale said Jetstar has failed to capitalise on the growing trend in businesses adopting a "best fare of the day" policy for corporate travel, which make up two-thirds of his company's bookings.
Best fare of the day policies are an alternative to a company choosing one airline for all travel and reaping loyalty benefits.
"Jetstar, by its very nature would be cheaper most of the time [with a best fare of the day policy], but still it is not getting its fair share of the business travel market," Dale said.
Managers and executives could easily find wriggle room in their company's travel policies to suit their airline preference, Dale said, such as insisting on appointment times to complement flights with their preferred airline.
Dale said despite Jetstar's improved on-time performance, the difference in size of fleet and domestic networks between it and Air New Zealand meant it will remain largely on the back-foot in the business market.
Sunday Star Times
Interesting read.
In 2008 Qantas made 1 billion profit. Jetstar had around 20 aircraft, Qantas flew all over the globe. Since then Jetstar have expanded to over 100 aircraft, therein lies the problem. Yes there has been a huge influx of foreign carriers, but you don't fix it with a unknown pipe dream, you spend the money on your current product to make it impossible for competitors to thrive. That's exactly what Air New Zealand have done here.
Qantas needs a change of direction at the top. Unfortunately, the management at Qantas strongly believe you can operate a low cost carrier in unison to your full cost carrier. It has been a total failure, no full cost/low cost airline has ever worked before, and is certainly never going to work here. You simply cannot expect your premium passenger to board a low cost carrier which has replaced your premium service. It's time to fall on his sword and except it was a gamble that just didn't pay off, lesson learnt, move on and rebuild with a new strategy before it's too late.