View Full Version : Virgin ups challenge to JetStar

4th Dec 2003, 21:50
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.


Beer Can Dreaming
5th Dec 2003, 05:33
Quote: "Virgin Blue also remains unconvinced JetStar will be able to match its low operating costs."

What a load of codswallop that comment is.
From a bean-counters viewpoint this is irrelevant because it is extra competition to VB and erodes their bottom dollar.

Whether or not it can match their supposed low operating costs which are rising all the time makes no difference if it is taking pax away from them and can run at some sort of reasonable profit.

5th Dec 2003, 06:12
Does this mean that QF are going to go and whinge to the ACCC the way DJ did when QF increased Brisbane services? Virgin management are a bunch of fuc&ing hypocritical, weasley tossers! :{

The Virgin Rooter

Going Boeing
5th Dec 2003, 07:58
However, some analysts have questioned whether the airline can operate without eating into its own customer base.

Every press article has words to that effect - Are they really that dumb? It's obvious to everyone in the industry that Geoff Dixon is planning to replace the entire domestic operation with Jetstar - still have dominant market share but with higher yield (at the expence of staff salaries). The writer even said it himself as evidenced by the quote below but he couldn't see the implications.

Qantas chief executive Geoff Dixon said this week the new airline would compete head to head with mainline Qantas, even on major trunk routes.

Sheep Guts
5th Dec 2003, 08:56
Did QANTAS consult its share holders about this venture?

That 100 Million in Capitol start up is straight from the QANTAS coffers or other investors?

Its alot of money to waist if it falls on its arse. They could have consulted me first. ;) as a share holder.

I better sell my shares when I can still get a 737 differences course with them, not when there enough to buy a Ten Speed Racer. Which wont be too long around the corner.:yuk:

Quote: "Virgin Blue also remains unconvinced JetStar will be able to match its low operating costs."

Well Beer CAN DREAMING that is the underlying question, what is the operating cost per hour of Virgins Operation?

If Jet Star knew theyd have a head start indeed. I wonder if theyll get the Flight Attendants to clean up the Aircraft after each sector, like VB do ?


time will tell

5th Dec 2003, 10:22


Virgin Blue has soared to new on-time performance* (OTP) heights with the latest figures revealing that 90% of the low fare carrier’s flights departed as scheduled.

The figure exceeds Virgin Blue’s previous OTP record of 89% and highlights the airline as a world leader in on-time performance.

Today’s announcement is in keeping with Virgin Blue’s promise made back in October to publish it OTP statistics for better or worse. While Qantas is yet to respond to Virgin Blue’s challenge to do the same, Virgin Blue will continue to provide full transparency to the travelling public for the first time in aviation history.

Virgin Blue, Chief Executive, Brett Godfrey, said, “November’s achievement of reaching 90% OTP sets the benchmark, not just here in Australia, but globally.

While we are still waiting for Qantas to publish its performance results, we know Virgin Blue surpasses the market leaders in both the US and Europe.”

Brett Godfrey continued, “It’s a tribute to the nearly 3000 dedicated staff who work so hard every day to get people away on time. Our team should be proud of what they have achieved but I know they won’t be resting on their laurels and we hope to do even better in the months to come.”

Virgin Blue recently conducted a survey of thousands of business travellers who fly more than 12 times a year which revealed that aside from safety, OTP far exceeded in-flight meals and frequent flyer points as their priority.

The efficiency and reliability of the airline’s modern fleet of high-tech 737 aircraft also plays a key role in the airline’s strong on-time performance.

Virgin Blue is working closely with the Department of Transport and Regional Services to develop an equitable set of long-term standards for measuring route-by-route OTP in Australia.

At Virgin Blue we measure our on-time performance as all flights that depart within 14 minutes and 59 seconds of their stated departure time. We make no exception for bad weather, air traffic control, delays from suppliers, unscheduled maintenance, consequence of previous delays or anything else for that matter - for us, on-time means on-time… no exceptions. All figures are based on pilot logbooks and are internally audited.


Going Boeing
5th Dec 2003, 10:44
Most airlines work on a late departure means off Blocks 1 min after schedule (some use 3 mins) - 15 mins is too large a figure and it ends up as just another bucket of spin from that little whinger Brett Godfrey.

5th Dec 2003, 11:09
All figures are based on pilot logbooks



Pole Vaulter
5th Dec 2003, 11:42
Exactly. No ACARS that would tell the real story not the made up prattle by BG. Anything over 3 mins is considered a delay by a real airline. Then again what else would you expect from this mob.

5th Dec 2003, 13:06
Asia Pulse
Friday December 5, 4:34 PM AEDT

QANTAS Shares Rise on Announcement of Budget Carrier Jetstar

SYDNEY, Dec 5 Asia Pulse - Amid the hype surrounding the release of the brand and livery of its new low cost carrier, JetStar, Qantas shares jumped two per cent on Wednesday alone, finishing the week comfortably in positive territory.

The flying public is also set to benefit from the week's developments, with a barrage of cheap domestic fares likely to hit the market before JetStar takes to the skies in May next year.

Qantas chief executive Geoff Dixon also gave his most upbeat commentary since the SARS pandemic hit Asia earlier this year, forecasting a record profit for the airline's domestic operations and talking up its international division.

Flights to Hong Kong will move beyond their pre-SARS levels by next April, while low cost international subsidiary Australian Airlines will soon add Darwin as its 12th destination in a growing network.

But analysts remain concerned over Mr Dixon's assertion that JetStar will run with a cheaper cost base than that of competitor Virgin Blue and won't cannibalise its existing mainline operations in any meaningful way.

Airlines such as British Airways and Dutch carrier KLM have failed in the past to make money from their own low cost carriers, amid strong pressure from several discount airlines in the European market.

Regardless, Qantas will press on with its JetStar plans, announcing it had placed an order for $A1.6 billion ($US1.17 billion) worth of Airbus A320s to take on the growing success of Virgin Blue.

The move represents one of the biggest risks ever undertaken by the Flying Kangaroo.

Qantas aims to control pricing at both ends of the market, with JetStar doing away with complimentary food on flights, designated seating and priority baggage.

Chief executive Alan Joyce said JetStar aimed to gather more than 70 per cent of its bookings online, with tickets set to go on sale in February next year.

"The launch of JetStar may well become one of the most important events in the airline's 82-year history," Citigroup analyst Jason Smith said this week.

"Either way, whether JetStar is an unmitigated disaster or a major success for Qantas - we believe the latter - the launch of JetStar does not appear to be good news for Virgin Blue's prospects."

Richard Branson's upstart airline has cornered 28 per cent of the domestic market over the past three years and may be worth as much as A$2.3 billion when it floats on the share market on Monday.

Mr Smith says the aim of JetStar is simple, to profitably offer the lowest airfares on new and existing leisure routes where Qantas cannot, and to do so by offering the lowest airline cost base in Australia.

To do this, JetStar must take advantage of lower wages for pilots, more seats per plane, faster turnaround times and better fuel efficiency.

JetStar aims to use the structure of Impulse Airlines - acquired by Qantas in 2001 - which as Mr Dixon put it this week, has since been in mothballs waiting for a rainy day.

The low cost carrier will at first use Impulse's fleet of Boeing 717s before taking delivery in June of the first of 23 new Airbus A320s.

"JetStar's cost base, when you take in the efficiency of the aircraft, the current Impulse deal, the product innovations they have, will without a doubt be lower than Virgin's," Mr Dixon said.

But Shaw Stockbroking research director Scott Marshall believes it is still uncertain whether the Impulse model will prove cheaper than that of Virgin Blue.

"In this competitive environment, it would be difficult for Qantas to have a substantially cheaper price than what Virgin Blue could offer," Mr Marshall said.

Virgin Blue Head of Commercial Operations David Huttner is more emphatic, saying the airline remains "quite confident" it would continue to have the lowest cost structure in the country.

He also said Virgin Blue was well prepared for a price war.

"We've got enough cash to run this airline for six months, which actually makes us more viable than Qantas - its cash wouldn't last anywhere near that time," he said.

"So we believe we can outlast - especially after the upcoming float - any attempt by Qantas to engage in anti-competitive behaviour."

Cost base aside, the other major concern of aviation analysts remains the issue of cannibalisation.

Credit Suisse First Boston analyst Greg Ward believes JetStar's route network and fare structure, to be released in January, remain the critical component needed to assess the new strategy.

"We believe there remains a healthy dose of scepticism in the market regarding Qantas management's ability to successfully manage the co-existence of a (low cost airline) ... without cannibalising the margins of the premium carrier," Mr Ward said.

While analysts expect Qantas will not introduce JetStar services in peak times on its major business routes, risks nonetheless remain.

The new airline could also lead to industrial strife, with Qantas' mainline enterprise bargaining agreements to be cast aside in preference to the one controlling Impulse's 600-strong workforce.

While JetStar will employ about 1,400 new workers - 1,000 of them in its home state of Victoria - the prospect of an all-Airbus fleet has also raised concerns that maintenance contracts might soon head offshore.



Sperm Bank
5th Dec 2003, 14:29
Some of you would be experts don't know much about on time statistics do you? The IATA standard for on time is within 15 minutes of scheduled departure. Most Airlines around the world use this criteria. JAL use 30 mins and there may be others. You can rant and rave all you want, it's irrelevant. The stats are on the board and more importantly they are official. If you knew anything about ACARS you would know that those figures can be fudged simply by releasing the park brake. There is always the possibilty for pilot's to fudge figures, for a minute or so here and there , but not 15 mins. Suggest you find some other dead horse to flog!

Patriot One
5th Dec 2003, 16:42
....and the truth is all that matters is how big your mouth is and how arrogantly you can state "we're the best". All airlines are the same, its just that VB tells bigger lies than most. "Why" I hear you ask? Because they know nothing about the reality of the industry.

Jet Star will have only one result - it will seriously damage both airlines. The only reason people travel on VB is a) for the experience and once tried never forgotten, and b) because of the general perception that they are cheaper. They have only gained b) because of Godfrey's big mouth. Now QF has an Oirishman with a big mouth and the public will be educated into believing that Jet Star has the cheaper fares.....

It's all just a matter of spin.

Either way Godfrey's comment has a strange irony "..aside from safety..". People may like the fares and the OTP. And they'll try VB for both reasons. But those will all be over-ridden by their concerns of safety. And let's face it - flight attendants hired for their looks inspire many feelings, but none of safety, particularly when the aircraft pa system is used for childish pranks.

Love 'em or hate 'em, QF inspires safety. Jet Star will appear to be the best of both worlds.

5th Dec 2003, 17:09
What tosser would say they are second best. You need a lesson in marketing.

Next Generation
5th Dec 2003, 19:31
Patriot One

and b) because of the general perception that they are cheaper. They have only gained b) because of Godfrey's big mouth.

You have a very short-term memory.

I can remember when it was cheaper to fly from Brisbane to Sydney via NZ because QANTAS and ANSETT price fixing kept Australian domestic air fares so high.

Do you seriously think QANTAS would be offering cheaper fares if VB wasn't on the scene?

Just ask the folks from Mount Isa how cheap QANTAS is !!!!

6th Dec 2003, 05:45
NG -
Did the folks of Mt Isa support VirginBlue when they entered the BNE-ISA market?

bitter balance
6th Dec 2003, 19:00
Ditzy, how much did VB support Isa? Redeyes were never going to be popular. The Isa experiment had more to do with Qld politics than business. Remember the Qld govt were pushing for VB to buy Flt West at the time and VB couldn't run faster from that deal!! Who said they weren't smart business people.

6th Dec 2003, 19:15
Bitter - Isa was a midday flight....only did it once before it fell over...the loads were terrible

Buster Hyman
6th Dec 2003, 20:14
"If they want any market share, they are going to have to earn it, just the way we did."

Rats! Another airline must be about to collapse then.:(

bitter balance
6th Dec 2003, 20:34
DH driver - my memory's worse than I thought!

7th Dec 2003, 00:09
don't worry Balance - I reckon senile decay has already kicked in with me!