View Full Version : Virgin Eyes Bigger Share Of Australian Aviation Market

27th Nov 2003, 18:44
Dow Jones
Thursday November 27

Virgin Eyes Bigger Share Of Australian Aviation Market

BRISBANE (Dow Jones)--The Australian aviation war is set to heat up after Virgin Blue said Thursday it will ramp up capacity from May next year, which will coincide with the proposed launch of rival Qantas Airways Ltd.'s low-cost carrier.

Virgin Blue, which is in the midst of raising more than A$500 million via an initial public offer, will increase the number of its daily flights from Cairns to Brisbane, Sydney and Melbourne by three to nine from early May.

This represents a frequency increase of 50% for the Cairns market, according to the Brisbane-based no-frills airline.

The move "follows strong support and rising demand for flights in and out of the popular destination..." Virgin Blue said in a statement.

The announcement comes a day after the nation's biggest airline, Qantas, revealed its low-cost carrier will be based in Melbourne and commence flying in May as previously planned.

The executive general manager of the yet-to-be named low-cost carrier, Alan Joyce, said at a briefing Wednesday that the airline will be the lowest-cost discount operator in Australia and will have the lowest airfares, posing a direct challenge to Virgin Blue.

Virgin Blue's retail offer is expected to close on Friday, with the institutional offer to open Dec. 3 and close two days later.

The group, which counts U.K. businessman Richard Branson and Australian transport group Patrick Corp. as its two biggest shareholders, will make its debut on the Australian Stock Exchange on Dec. 8.

At 0228 GMT, Qantas shares were down 4 cents, or 1.1%, to A$3.40.



Virgin Blue has announced it will continue to be the low fare leader with a greater than 40% increase in year round direct services to the Gold Coast including the launch of a first time ever direct West Coast - Gold Coast Service from 29 March next year - offering the only non-stop option between these two key tourism centres.

The new service will initially operate five days a week, but is expected to move to daily services, subject to demand.

The decision to launch the flight was based on the large number of Gold Coast and Northern New South Wales based travellers who currently drive to Brisbane or connect to Perth via Sydney, Melbourne or Adelaide to take advantage of Virgin Blue's low fares to the West Coast.

Maintaining Virgin Blue's new route announcement tradition, a special one-off fare of $149* one-way will be up for grabs from today until 31 December 2003 for travel between 29 March and 30 June 2004.

Mid-Week Mini-Fares will be $199*, while everyday low fares between the Gold Coast and Perth start from $249* one-way.

These fares make the Gold Coast significantly cheaper than Bali for the West Australian traveller.

The new flight is an exciting addition to Virgin Blue's fast growing Gold Coast and Perth schedules, addressing the needs of the tourism industry and business community as well as those who until recently simply couldn't afford to fly across the country to visit their loved ones.

This first-time-ever service continues Virgin Blue's tradition of 'hub-busting' to offer people affordable flights direct to their destinations.

The new flight from the Gold Coast to Perth will kick off at the same time as the airline adds two additional direct flights from Melbourne and an additional Sydney flight to its year-round schedule, adding a product that enhances tourism but also meets the needs of the steadily growing business traffic on these key routes.

Virgin Blue Head of Communications and Strategy, David Huttner said: "There are two kinds of airlines in this world, the type that raise prices when their flights are full, and the type that simply add more capacity and keep the fares affordable for all. Virgin Blue has spent the last three years proving that we are the low fare leader and today's announcement reaffirms that we will continue to be the people's champion, not just for the tourism industry but for anyone who wants to fly with the best service at the best prices."

As a consequence of these additional flights Virgin Blue will go from nine to 13 daily departures from the Gold Coast year-round, a 44% increase in their winter Gold Coast schedule reflecting the type of capacity levels that until now the airline has only offered during the peak season.

David Huttner added, "The Gold Coast and Northern New South Wales bookings have demonstrated that the type of capacity levels that have been offered in the peak season can be supported year round if the fares are attractive enough. We think it's time that the tourism industry stop thinking of the year in terms of peaks and troughs - that's why we are putting on peak level capacity year round."

He continued, "We have always promised to support the regions that support us and these additional services will provide Virgin Blue Guests with more flexibility and choice in terms of flight timings and low fare availability."

The Gold Coast has successfully increased its long-recognised desirability as an ideal "sun, surf' and sand" holiday for both domestic and international visitors.

At the same time, Virgin Blue has developed a loyal base of Gold Coast business travellers who regularly take advantage of affordable fares to fly on its daily direct flights to Sydney, Melbourne or Adelaide to go about their business and will shortly be able to add Perth to their list of destination options out of the Gold Coast.

Virgin Blue also operates the only non-stop flight between the Gold Coast and Canberra with a weekly Saturday service.

Virgin Blue's strong growth in both the leisure and business sectors has helped to account for the airline reaching a Total Domestic Market** share of 29% in the month of September according to the Department of Transport and Regional Services statistics (up from 28% in August as noted in Virgin Blue's prospectus, p.52).


27th Nov 2003, 19:38

Very interesting reading material, will all these airlines survive on the low cost sector?

27th Nov 2003, 19:39
This is a good move if it comes off. I remember someone on a flight deck about six years ago wondering why we didn't do it back then!! :eek:

27th Nov 2003, 22:22
When will DJ be increasing the number of flights to Darwin, Broome.

Is the CG runway long enough for a max weight departure to PH

Brisbane / Auckland ops start 29 Jan, when do Sydney / NZ ops start. I believe up to 6 weeks later than that.

What about Sydney / Broome, a likely direct flight in the near or distant future?? or Brisbane / Broome

How is the Adelaide / Broome flight doing as far as pax loads

Is the announced new schedule likely to increase the rate of pilot recruitment.

27th Nov 2003, 23:33
Fri "The Australian"

Virgin scoffs at cheap rival
By Steve Creedy
November 28, 2003

Virgin Blue has dismissed threats by the new Qantas low-cost domestic carrier to undercut it on costs and fares.

The Brisbane-based carrier underscored its determination to fight off the new competitor yesterday by announcing it would ramp up capacity to the Gold Coast and Cairns, likely routes for the Qantas carrier.

The new carrier's executive general manager, Alan Joyce, vowed on Wednesday to make the fledgling airline the nation's lowest cost operator. "We believe we can achieve that, and we will have the lowest fares," Mr Joyce said at a media conference to announce the airline would be based in Melbourne.

But Virgin Blue head of communications and strategy David Huttner said he doubted that Qantas would be able to replicate Virgin Blue's cost structure.

"As (British Airways chief executive) Rod Eddington pointed out, no major airline has ever succeeded in such a venture," Mr Huttner said.

He said Qantas was looking at aggressive European low-cost airline Ryanair as a model for its new offshoot.

That could prove a problem as the European carrier flew to secondary airports that did not exist in Australia and was not focused on customer service.

"We looked at the Ryanair model but one thing we identified is that while the Australian public wanted low fares they certainly had far greater service expectations than Ryanair was providing," he said.

"Virgin Blue also has world benchmark low costs, certainly lower than Ryanair that Qantas is trying so hard to emulate."

Virgin is also convinced Qantas is dribbling out announcements about the low-cost carrier in an attempt to destabilise its $500 million float. The float's retail offer closes today.

Mr Huttner said this week's announcement about the Melbourne headquarters appeared to be "a bit short of material".

The Qantas decision to base the airline in Melbourne is expected to be a boon to unemployed Ansett workers and could add 1000 direct and 3000 indirect jobs to the 6500 Qantas already provides in Victoria.

Qantas says that most of the jobs in the low-cost carrier will be new and employment will be on an open selection basis.

"We know that the Ansett skill base was extremely high and we believe that Ansett employees will be hired for the low-cost carrier," Mr Joyce said.

"The likelihood is there are going to be a number of jobs available in a whole series of operational areas - flight attendants, pilots, engineers - and the head office infrastructure will be based here."

Qantas expects to name the airline, as well as reveal its fleet and livery, next week.

However, sources have said that the leisure airline has opted for A320 aircraft.


28th Nov 2003, 08:30

It is interesting to see comments that other full service airlines have not managed to run a low cost carrier as well. Eg Rod Eddington's comments. And that QF will fail with this.

For a minute does anyone really think that is what is happening here. Dixon is taking a long term view here. He is going to use great aircraft A320 family, has a pool of great staff to choose from EX-AN, who are probably very keen to work in aviation again and or live back in OZ.
They are all going to be working on a low cost structure, I guess lots on contracts.
Dixon will then over time reduce mainline domestic service, and gradually increse the LCC.
It is a longer term view to reduce costs, and a way to break the back of high salaries being presently paid out.
Surely people can see that there is no way that Australia can cope with another 25-30 aircraft worth of capcity on the domestic market.

At the end of the day, there will only be two carriers in OZ, I really don't think Dixon thinks any differently. He is just incorporating the ways and ideas of the systems and structure of NJS and Qlink into main stream QF. It might not happen over night, but it will happen.

Chris Higgins
29th Nov 2003, 10:17
United had "Shuttle by United". USAir had "Metro jet". Continental had "Continental Lite". Delta now has "Song".

Unfortunately what these LCCs have in common is that financially they have all been a dismal failure.

Corporate philosophies and mindsets make there way from the boardroom all the way down to the garbage collector. Once that is in place and you introduce "B" or "C" scale compensation to people working for the same company, it all starts to cave in.

The Metro jet pilots at USAir actually used to call themselves "Ghetto jet". It was a soul destroying, financially burdensome way to run an "airline within an airline". It didn't work, plain and simple.

29th Nov 2003, 18:05
The BA venture Go seemed to avoid the cultural issues and act independently while still owned by BA (and made both BA and 3i a good profit after each sale). Eddington seems to be one of the biggest factors in its sale by BA (it was conceived by Bob Ayling and it was a good way to show he was different).

Sheep Guts
29th Nov 2003, 23:26
Chris Higgins,
Quite true and United havent learnt their lesson with Another Start up it launched last month called "TED". I really only think these LCCs are a success, unless they are totally autonomous rather than connected in some way to a Mainline Carrier.

Nothing to do with this thread ,but I believe Eddington's days are numbered at BA. If he cant turn around the Airline effectively, there might be premature retirement on the horizon.

He has allways had a reputataion of "slash and cut " type businessman. Just ask our collegaes at Cathay. I sense even his retirement of the Concorde sentimentally has struck the innner core of alll British aviation travelllers and enthusiasts.


30th Nov 2003, 01:09
Some LCC's within a mainline carrier have worked and some have not.

Song is in its infancy - it is too early to determine its success however it is being expanded by Delta so it cant be too bad.

It appears Impulse have succeeded for QF as Silkair have for SQ.

Snowflake is working for SAS and Zip is hanging in there for Air Canada.

BMI Baby is expanding for BMI and of course NZ has Freedom.

What about JALEx.

It is a brave man that states that these low cost carriers are "all a failure".

Sheep Guts
30th Nov 2003, 01:41
Well maybe I am braver than some, but your examples still sway towards my theory.

Impulse was aa Autonomous regional before it was swallowed up by QANTAS, wether it is doing well or not, is not prevelant in the Qantas Share Prices incidently of which I have some.

Song maybe in its infancy but its getting a hammering by JET BLUE and all it Pilots are on a Delta Payscale.

SilkAir , I admit I will have to research it sucess.
SASs Snowflake Ive never heard of them but Im sure thye are a success as is most Swedish Ventures.

Zip is hanging in there for Air Canada

Exactly it is just hanging in there against WestJet which was incidently heavily advised by Jet Blues CEO David Neeleman when he was a consultant.

BMI dont know, either JALex. And Freedom is about to get a kick in the "A" by Pacific Blue which will have a large source of start up Capital with the Virgin Blue Float.


The Enema Bandit
30th Nov 2003, 20:05
Hey Sheepy, I didn't think pilot pay was an issue. How come Southwest get paid real good then?

30th Nov 2003, 20:15
Silk Air:confused:

Won't they be parking airplanes soon due crew exodus?

If you screw guys long enough they vote with their feet. Silkair losing pilots to career airlines. i don't think they realise there is a shortage of Airbus pilots on the market either.

This is a new chapter in the low cost saga. The backend of the wage versus conditions curve has been found. Will they find qualified replacement crew?

Sheep Guts
2nd Dec 2003, 07:46
Really its horses fo courses and Gdnadenburg touched on it. Wages versus conditions. SouthWest and Jet Blue pay their Pilots well and can afford to but by gee they get their moneys worth out of them. In Songs case its Pilots are on the same scale as Mailine which will eventually cause a rift as the Song Guys get worked while the Delta Guys are protected and do Easier Rostering. You see the problem?

Jet Blue got around the issue by making Employees as important as Customers. They created an environment non-conducive to Unions. That is to say not needing unions because the employees were happy. Yoo have to concentrate on your employees but still be focussed on customer needs and expectations. David Neeleman is a pure genius in this field. And his resume shows it. SouthWest, WestJet,MorrisAir( Neelemans first start up and SouthWest only Corporate Takeover) , and of cousre Jet Blue, Started operations in 1999 with10 Aircraft they now have 44 and have just Ordered another 65 Airbus A320s.
Also they do turnarounds in 30 minutes :ok: