Wirraway
19th Feb 2004, 22:45
Fri "The Australian"
Jetstar 'to make Virgin blue'
By Steve Creedy
February 20, 2004
WITH union agreements now in place, Qantas chief executive Geoff Dixon is confident low-cost offshoot Jetstar will start operations in May with a lower cost base than Virgin Blue.
The airline chief said the start-up would begin operations with a cost base of 8.25c per available seat kilometre (ASK) - a measure of unit costs - compared with the 8.72c per ASK quoted in Virgin's prospectus late last year.
"This confidence is based on certified agreements Jetstar has with its staff and unions and contracts already signed with suppliers," Mr Dixon said.
"When Jetstar has an all-A2320 fleet, we expect its cost base to be 7.8c per ASK."
If Jetstar can achieve those costs, analysts believe, it could prove a real threat to Virgin.
But Virgin said it doubted whether the estimates would hold true.
"Considering how many Qantas people are assisting with Jetstar today, I have no doubt that Jetstar's budget can be very lean," Virgin's David Huttner said. "But $100 million start-up capital and $25 million in advertising has to come from somewhere."
The jury is still out on Jetstar until it reveals its route network and pricing next week.
Some analysts remain worried the offshoot will cannibalise Qantas mainline.
While noting that Qantas had never said this would not be the case, Mr Dixon said he did not believe it would happen to any great degree.
"I believe we've worked out a formula whereby ... the three domestic flying segments of Qantas - Qantas mainline domestic, Jetstar and Qantaslink - will interact quite well and we'll be able to cater for all segments of the market," he said.
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Jetstar 'to make Virgin blue'
By Steve Creedy
February 20, 2004
WITH union agreements now in place, Qantas chief executive Geoff Dixon is confident low-cost offshoot Jetstar will start operations in May with a lower cost base than Virgin Blue.
The airline chief said the start-up would begin operations with a cost base of 8.25c per available seat kilometre (ASK) - a measure of unit costs - compared with the 8.72c per ASK quoted in Virgin's prospectus late last year.
"This confidence is based on certified agreements Jetstar has with its staff and unions and contracts already signed with suppliers," Mr Dixon said.
"When Jetstar has an all-A2320 fleet, we expect its cost base to be 7.8c per ASK."
If Jetstar can achieve those costs, analysts believe, it could prove a real threat to Virgin.
But Virgin said it doubted whether the estimates would hold true.
"Considering how many Qantas people are assisting with Jetstar today, I have no doubt that Jetstar's budget can be very lean," Virgin's David Huttner said. "But $100 million start-up capital and $25 million in advertising has to come from somewhere."
The jury is still out on Jetstar until it reveals its route network and pricing next week.
Some analysts remain worried the offshoot will cannibalise Qantas mainline.
While noting that Qantas had never said this would not be the case, Mr Dixon said he did not believe it would happen to any great degree.
"I believe we've worked out a formula whereby ... the three domestic flying segments of Qantas - Qantas mainline domestic, Jetstar and Qantaslink - will interact quite well and we'll be able to cater for all segments of the market," he said.
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