View Full Version : Geoff Dixon under more pressure

11th Dec 2003, 00:55
Thurs "The Australian"

A mighty flighty jungle up there
Mark Westfield
December 11, 2003

Geoff Dixon may have achieved an uneasy ascendancy in Australia's domestic airline war, but he is under constant assault from minority market player Virgin Blue and now has another discount airline to deal with offshore.

The Qantas share price fell 5c yesterday to $3.34 after losing a similar amount the previous day. The hounds are closing in and Dixon has to rely on the risky strategy of setting up his own low-cost airlines to fight off the pack.

The news late on Tuesday night that Singapore Airlines had set up a joint venture with Ireland's Ryan family and David Bonderman of the Texas Pacific Group to start yet another low-cost airline called Tiger Airways to begin operations late next year is another pressure point on Qantas and its chief executive.

Singapore has been tantalisingly brief in its plans, giving away little but the fact that the new carrier will fly to destinations within four hours of Singapore's Changi Airport. Darwin just squeezes into this flight radius, but more importantly it will reach Hong Kong and Taipei -- two key destinations for Singapore and Qantas. The routes will be primarily to Asia and designed to protect Singapore's market against the bevy of low-cost airlines springing up in Malaysia and Thailand.

Tiger may do as much damage to Singapore as it does to Qantas but the market is taking a dim perspective of the development from Qantas's point of view.

Even newly listed Virgin Blue took a bit of a hit yesterday, falling 1c to $2.50, with the market disappointed that Singapore didn't choose Virgin to be its partner in the new airline.

Tiger will be 49 per cent owned by Singapore, 11 per cent by the Singapore government's investment vehicle Temasek Holdings with Ireland's Ryan brothers -- who own the highly successful Ryanair discount carrier -- owning 16 per cent, and Bonderman's Indigo Partners 24 per cent.

Tiger will be run by independent management, initially by former Ryanair ground operations manager Charlie Clifton, so it won't be tied down by the high costs associated with Singapore's pilots and staff.

Qantas moved more than a year ago to introduce a single-class cheapish carrier, Australian Airlines, to target the leisure market in and out of Australia, and last week unveiled its domestic low-cost operator, JetStar, to take on Virgin Blue.

The market believes JetStar will cannibalise Qantas customers rather than take back some of the 28 per cent of the market that Virgin Blue has grabbed since the demise of Ansett in early 2002.

Dixon says JetStar will be Australia's cheapest carrier, and he should be taken seriously, so Qantas is prepared to spend money to stop the erosion of its market share to Virgin Blue.

The international airline industry is being swamped by discounters. The full-service carriers have no choice but to play the game as well, as Singapore is demonstrating, although in Singapore's case at arms' length.

In Australia, Virgin Blue has been successful in terms of grabbing market share and moving to profitability beyond even the airline management's wildest expectations.

It has momentum to take even more of the market following its float and listing, while Qantas appears to be on the back foot.

The state of play can change just as quickly and dramatically over the next two years, as it has done since September 11, 2001, and the demise shortly thereafter of Ansett.

Geoff Dixon should not be underestimated in meeting the challenge of the low-cost airlines snapping all around him. He is showing every sign of fighting to the end to retain his dominant market share, and even take some back if he can.

The game has moved on quickly after the failed attempt to partly merge with Air New Zealand. This would have been akin to merging two dinosaurs and perhaps seriously diverted Dixon and his board. Dixon may thank Graeme Samuel one day.

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Thurs "The Australian"

Flying start for plan to help Qantas rivals
By Steve Lewis, Chief political reporter
December 11, 2003

A Federal Government plan to give Virgin Blue and Rex airlines 10 per cent of the lucrative Sydney-Canberra market has been a success, with cabinet yesterday agreeing on new measures to boost the airlines' capacity to compete against Qantas.

Despite being denied access to flight lounges and business-class seats, bureaucrats are taking seriously the edict to use Qantas's competitors. A study shows 16.5 per cent of flights in September used one of the smaller airlines.

Senior ministers yesterday agreed to lock in new arrangements and have asked the Finance Department to take a more hands-on role to ensure taxpayers get value for money. Commonwealth bureaucrats normally fly between 2500 and 3000 times between the national capital and Sydney each week, but until recently have essentially boycotted non-Qantas travel.

That brought warnings that some of the smaller airlines would pull out of the big-money route, which in turn forced the Government to implement its 10 per cent objective.

An independent report has given bureaucrats the thumbs-up. It reported "all Australian government departments and agencies have taken seriously the concern that smaller airlines should be able to compete fairly for agencies' business and that agencies' travellers should utilise the cheapest fare that suits their business needs".


11th Dec 2003, 06:38
Senior ministers ensuring taxpayers get value for money...................who else smells an election coming on:bored: