Wirraway
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.
============================================
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.
============================================