View Full Version : Qantas baby flies into cloud

6th Dec 2003, 00:23
Sat "Australian Financial Review"

Qantas baby flies into cloud
Dec 06
Ben Sandilands

Virgin Blue was this week quick to seize on a perceived glaring weakness in Qantas's plans for its low fare Jetstar airline.

It announced 50 new leisure flights a week on routes such as Perth to the Gold Coast, where Jetstar's initial fleet of 14 ex-Impulse 717s can't fly either non-stop or at a profit.

Because Jetstar will only have three of the 23 Airbus A320s it has ordered in service in its early months it won't be able to respond in volume to the efficiencies of a Virgin Blue fleet of 44 jets that could grow to 50 in the near term.

This slow and inefficient start-up phase of Jetstar had Peter Harbison, managing director of the Centre for Asia Pacific Aviation, calling it "a sheep in wolf's clothing".

However, that changes by mid 2006, when Jetstar should have the upper hand in efficient jets with an all-Airbus fleet able to better fly any route open to the Virgin Blue or Qantas Boeings.

And that raises the question Qantas has tried to deflect. Will Jetstar, under chief executive Alan Joyce, with its superior efficiency, cannibalise the main brand, causing it to turn over all domestic services to a low fare operation?

Qantas chief executive Geoff Dixon says his airline won't allow that to happen "intentionally". But it is already happening through the inroads made by Virgin Blue on the Sydney-Melbourne and Sydney-Brisbane and transcontinental routes.

This year, Qantas deployed four wide-bodied Airbuses with international entertainment and cuisine on the Perth routes to curb Virgin Blue's transcontinental expansion. It failed. Virgin Blue trebled its services and saw off the big jets, which are being sent overseas.

And in the US and Europe, where quality has been trashed by the established carriers to cope with the lower costs of the likes of Ryanair or JetBlue, there are no investment grade returns from any of the traditional carriers.

Virgin Blue realised four months ago its future competitor would not be the Qantas it knew but a Qantas turned into a lower-cost carrier. In August, after Dixon said a low-cost airline was under consideration, Virgin Blue's management assumed it was certain to happen, and muchsooner than it wouldlike.

A managers meeting was told that Qantas would either transform itself into a value-based domestic airline or wither.

This is a more extreme position than that taken by financial analysts after the announcement of the Jetstar name and fleet, and Qantas's assurances that it would not destroy its parent the way Go set about ripping the heart out of its British Airways parent until it was sold.

But Virgin Blue is driven by a cult-like belief in the invincibility of the low-cost air transport model shared by its peers JetBlue, Southwest, Ryanair and easyJet, as well as most of the investment analysts on Wall Street and in the City in London.

Despite the distraction of a float that was then being finalised (and lists for the first time on Monday), the basic assumption at Virgin Blue HQ was that to gain critical mass Qantas would transfer all of the 717 fleet that came from the Impulse Airways takeover into the new entity.

While the Impulse jet is flawed, the labour and productivity arrangements are cheaper than those pervading mainline Qantas.

Harbison and the overseas analysts who disagree so notably with their Australian counterparts maintain that the dual fleet composition of Jetstar breaches the fundamental rule that low-cost carriers need to be single type airlines.

Jetstar is adding 10 seats to the 717s to lift their capacity to 125 passengers, which means an awkward trade off between extra available revenue and reduced efficiency in a short range jet that struggles in hot and humid conditions and is almost useless for transcontinental and medium range tropical routes.

The A320s will have 177 seats, and require renegotiation of the current Impulse EBA which, like the Virgin Blue agreement, granted a lower pay scale for single type jet operations. (Qantas mainline attendants have to qualify for about six different cabin configurations, each with unique emergency procedures.)

A deal agreed to by the 717 pilots covered by their current Impulse arrangements says they will not take industrial action during negotiations over the Airbus pay scales and that the outcome will not be higher than the rates for Virgin Blue pilots.

Virgin Blue's multi-skilled EBAs mean that baggage handlers also check-in passengers, and terminal staff also qualify to fly as cabin attendants on mixed shifts, and people take turns helping out in call centres.

These "concessions" given by the unions to Virgin Blue in 2000 have been the target of complaints by Qantas management ever since.

The Jetstar experience, with the tightest seating yet flown in an Australian jet, could become compulsory for Qantas passengers to Tasmania when it starts up in May.

Every jet flight to the state by Qantaslink is flown in the 717s being turned into Jetstars. Adelaide could become a Monday-Friday Qantas mainline city at peak hours only, with most flights becoming Jetstars on the weekends.

But it is what happens on the prime inter-city routes of the Sydney-Melbourne-Brisbane triangle that will determine the fate of the higher-fare, higher-cost and two-class Qantas domestic airline.

Dixon says Jetstar will fly those routes only off peak. But going by US and European experience, they will inevitably destroy the integrity of the half-hourly Qantas Cityflyer service.

Pulling only a few hundred value-conscious frequent-flyer passengers a day into Jetstar, or having them defect to Virgin Blue, will see something like "Cityflyer-by-Jetstar" turning up in the timetables in a flash.

American tour wholesalers and retailers have pointed to the certainty of a prolonged fare war between Qantas, Jetstar and Virgin Blue.

They were told point blank by Virgin Blue that it would be cutting its margins right back to drive up the volume of cheap air fare sales.


6th Dec 2003, 05:36
Great article. I don't agree with what Qantas is doing to Tassie by turning it's back on the MANY corporate customers that fly us now. Qantas needs to either fly in the 734s or keep the 717s on the route but less frequently. Qantas can't just shut out it's corporate pax and top level frequent flyers to save a buck. I hope it blows up in their faces!

Same could be said for pax on ROK and MKY routes. The arvo flights from MKY and ROK to BNE are filled exclusively by corporate and business pax. I can't imagine a DH8 being too popular with these people and a 734 is far too big. The new NJS jets (if they are coming) are a couple of years off. Will be interesting to see what QF do - if anything.

I thought the max pax allowed in a 717 was 123 as certified by Boeing? 125 will be interesting. I knew the great seat pitch on the 717 wouldn't last.

I dunno why QF can't have the 717 operating off peak ADL flights and ROK, MKY and Tassie flights (alongside Jetstar) with an 8/100 configuration. QF needs full service Y class on these routes. Even OOL flights seem to have many business pax in the AM (OOL-SYD) and PM (SYD-OOL). Like I said I would be happy to see QF learn from it's mistakes.

On the FA side of things I am hoping for flexible work arrangements over a pay increase. I would rather have "Pick Up and Release" AND "Preferential Bidding" over a pay increase. I think many fellow FAs would agree.

I am concerned over the new CCOM allowing for 3 cabin crew operation with less than 108 pax. As someone who operated the first 3 FA flight that is something we need to put a stop to. That is where are conditions will deteriorate. Not to mention that Virgin FAs vacuum floors and 'dress' the loos and help customer service staff on Reserve duties. We need to protect ourselves from the above moreso than asking for a little more $$.

Virgin FAs voted for $$ over better conditions in their last EBA and look at the recent burn out rate. Speak for itself.

P.S. Who will employ us? Impulse, Airconnex or Jetstar. Management tell us that Impulse no longer exists but that's what the boarding passes say and that is who my pay slip is from. At least I still getting one I suppose.

6th Dec 2003, 06:18
Rubbish article.
My first post but when you read rubbish like that you have to say something. The Boeing 717 is flawed only in his mind or wishing. The 717 will fly all day Melbourne to Hobart with a full load and make more money than a Virgin 737 with a full load doing the same.
The 717 is not designed to do long flights, its a short haul aircraft. Two hour flights are its max. They should learn a thing or two about the Boeing 717 before they write about it. It also costs half that of a 737 or A320
I wouldn't buy shares in Virgin because with Jetstar and Qantas combined 2004 and 2005 will be a bad year for them. FACT

6th Dec 2003, 06:32
Golow, comparing the operating costs of one 717 with one 737 and your conclusions are quite correct. But add in all the support costs associated with all parties and their fleet and I would be interested to see the comparison. The article makes mention that cost savings from operating one type of aircraft are paramount to a successful low cost operation.
What are the long term goals of Jetstar and Qantas? How one can identify a specific customer, encourage loyalty and avoid competing with and cannabilising the market of the other under present arrangements is difficult for me to fathom. Will the outcome be purely domestic ops to Jetstar and international ops to Qantas? Either way, I'm sure Virgin will be driving wedges between the two and confusing their passengers and staff as much as possible. The arrangements already have me confused.

6th Dec 2003, 06:39
golow -
I certainly agree that true potential of the 717 has been overlooked by QF. I also think the 717 is a superb aircraft. QF could certainly benefit from ordering more and using it for what it is designed to do. Not to mention the lower cost base of the entire 717 operation.

The article is just twisting facts to back up a point. The 717 is useless on transcons. That isn't a lie. I think they call it poetic licence or something...

I do agree that QF's plans re. Jetstar seem to be flawed. Not becuase of the 717. Just QF's attitude re. Virgin and the market it serves. Just my opinion.

Buster Hyman
6th Dec 2003, 06:54
Didn't Boeing recently announce a longer range 717, or was it a stretch?

Qantas during the week & Jetstar over the weekends....a 9 to 5 airline....where've I heard that before???:p

Anyway, I know where Jetstar can get their hands on a few A320's.....;)

6th Dec 2003, 07:02
First, I don't know much about the 717.

With that said, where does a fleet operation fit in with Australian conditions? It may be a lovely aircraft, but 757s are lovely aircraft too, but they only work on long thin routes. Aside from the east/west transcon routes, the figures don't work for anywhere else.

The 717 might be perfect for the Hobart/Melbourne run, but justifying an entire fleet that has to be used between other locations might just mean that the benefits of a 737 fleet outperforms having a fleet of 717 aircraft by a long shot.

"True potential"??? Perhaps they already know its "true potential".

6th Dec 2003, 07:40
177 punters on an a320...... not even Air Biafra could top that !!!

I can see why Branson wanted to get out !

Jetstar will hurt their bottom line .. no doubt.

I just hope that, in the drive for revenue and competitive one upmanship that safety and equipment maintenance are not compromised , as has been the case in other discount markets.

As a fare paying punter now , to me it doesn't matter if I can get a fare to Perth for $ 130 or $ 350 . If it means that I arrive there in a large black plastic bag with a full length zip It makes no difference.

Safety is a big issue for the travelling public . It is up to the airline staff to be vigilant ,

Stay safe, stay happy

6th Dec 2003, 07:51
"As a fare paying punter now , to me it doesn't matter if I can get a fare to Perth for $ 130 or $ 350 ."

sirjfp - it might not matter to you whether the fare is $130 or $350 but it sure as hell matters to the great bulk of the travelling public. I don't think safety is even given a second thought by Joe Blo when he buys his ticket as there has not yet been fatality or even a hull loss (well BKK wasn't a hull loss was it! :\ ). In such a situation how is Jo Blo supposed to make any kind of assesment ?

Buster Hyman
6th Dec 2003, 10:43
177 punters on an a320
How about 296 on a B767-200!!!

6th Dec 2003, 10:53
how about 300 on a 757-300


6th Dec 2003, 11:40
ABC News Online
Saturday, December 6, 2003. 8:54am (AEDT)

Tasmania fears cuts to Qantas flights

Qantas chief executive Geoff Dixon has been asked to clarify the effect the new budget airline Jetstar will have on the carrier's Tasmanian services.

Late last month, Mr Dixon announced Jetstar will begin flying in May with details of routes and fares expected to be announced early next year.

Australian Greens Senator Bob Brown has written to Mr Dixon asking him to explain issues including matters of access, services and staffing.

Senator Brown says Qantas staff tell him they are concerned for their jobs.

"There's a very great fear that the new Jetstar cheap service will be all that Tasmania will get," he said.

"As a result of that we will see the loss of ground staff, we're going to also see the loss of services such as the lounges, business lounges and other amenities which Tasmanian travellers have been used to."

A Qantas spokeswoman says it is too soon to say if services and staffing levels in Tasmania will change with the introduction of Jetstar.


6th Dec 2003, 13:22
This year, Qantas deployed four wide-bodied Airbuses with international entertainment and cuisine on the Perth routes to curb Virgin Blue's transcontinental expansion. It failed. Virgin Blue trebled its services and saw off the big jets, which are being sent overseas.

News to us........... First A330-300 VH-QPA finishes its pre-service lay up this weekend and will go staight into DOMESTIC ops. QPB is due to arrive in less than a fortnight, and it too goes into domestic ops!

Buster Hyman
6th Dec 2003, 20:09
As a result of that we will see the loss of ground staff, we're going to also see the loss of services such as the lounges, business lounges and other amenities which Tasmanian travellers have been used to."

Good heavens, a tree hugger in economy!!:rolleyes: Luckily, he mentioned job losses, otherwise we'd think he was only concerned with his FF points & amenities!

Southern handler
7th Dec 2003, 16:48
interesting re tassie, since the change from QF/southern to tas to all Impulse the number of seats and realiability has soared. Me thinks out of all QF staff the LST and HBA should be concerned prob LST more so. By the was am not a Bob Brown fan but he travels economy.

Going Boeing
9th Dec 2003, 04:23
Red Panda

The A330-300's are only going into domestic service to get enough sectors to qualify for ETOPS approval (apparently the regulator says that it is a different type to the A330-200 and therefore needs to fly the required number of sectors). Once the fleet gets ETOPS approval you wont be seeing them om domestic sectors (except for special event peaks etc).

Wrt Ben Sandilands article - The media just hasn't got their collective heads around the fact that Geoff Dixon wants the entire domestic operation to be transferred to Jetstar. He can't say that of course as there would be immediate industrial action and the operation would be jeopardised but once Jetstar has its entire fleet in service then GD will be more ruthless.

9th Dec 2003, 09:18
the entire domestic QF market will not go to JETSTAR.

There is a business and premium economy market and Qantas club will not allow Jetstar passengers (I have heard Jetstart will not use Qantas terminals, it will be in Virgins face in the common use terminals). International connections will aslo feed to QF domestic.

The issue is the end state size of Domestic, i.e no expansion or possible retraction.

9th Dec 2003, 11:41
Spoke to an A330 (european longhaul charter) with 422 POB the other day. Now that's something to ponder! A LCCs dream.

9th Dec 2003, 11:58
One of the first customers for the A330, Air Inter (France), had a 440 pax config for domestic ops. I have been on JALs 743D and 744D aircraft with around 560 seats and they are no worse seat pitch-wise than VB. I believe they take out half the toilets, a Galley or two, and only have a dozen or so Biz class seats up front to get that many in, but not really an issue for a 80 minute run to Sapporo. In fact the upper deck on the 400D seemed very generous with seat pitch - maybe there is a restriction on the number of seats up there for evac reasons ?? :=

10th Dec 2003, 07:54
Mmmm, Qantas deployed 4 A330s blah blah blah, I'm not sure of the real reason for them going on to long haul, but try getting a seat on one ( especially j ) Per-Mel, and the other 6 flights a day !!
What a failure, 80+ % load factors.

Who tripped over Browns rock and let him out from under it :*

10th Dec 2003, 11:38

Who was the B767-200 operator.

A number of years ago I passengered on a full single class 275 seat B767-300. The Captain confided it was a cattle truck operation with long lines for the toilets.

10th Dec 2003, 12:22
i don't think the A330'S did very well in the OTP category, they take too long to turn around, then again they aren't that much bigger than the 763's that will replace them...

Buster Hyman
10th Dec 2003, 13:25

It was Britannia. It operated for a short time UK to places like Spain etc, but capacity was reduced after much complaining! I think on the Oz run they ran the "leg stretching" 272 seater B762's...still got complaints though! 2-5-2 was the seating from memory & I remember sitting on board at a window seat & the whole side of my body, head included, was touching the side wall! (I'm 6'4") Wonderfull stuff!:eek: