Wirraway
6th Mar 2004, 15:49
Sat "Melbourne Age"
A phoney air war
March 6th, 2004
Clive Dorman writes that the price war between Jetstar and Virgin Blue was more a promotional stunt.
You may have missed it, but apparently there was an "air war" in Australia last week. Up to 300,000 people got to buy a ticket to a choice of interstate destinations on the east coast for $29 one-way, which was effectively a promotional freebie designed to simply cover airport charges as Qantas launched its no-frills subsidiary, Jetstar, and rival Virgin Blue hit back with its customary headline-making hoopla.
It was a great one-off bonus for consumers, but the "war" was over in days. There's no smoking battlefield of airline competition in which punters will necessarily continue to be the winners. Qantas has simply invented a new way of making money.
"To you, Jetstar, we say: We'll match your 100,000 ($29 seats) and raise you another 100,000," Virgin Blue boss Brett Godfrey said as he tried to upstage Jetstar's launch.
On the same day, he said Jetstar's "everyday" pricing - the fares that kicked in after the freebies ran out - was "pretty rational" because it matched fares that Virgin Blue already had in the market, for example, from $69 to $199 one-way between Melbourne and Sydney.
"I don't think there's going to be (a fares) war," Qantas boss Geoff Dixon said, in unreported comments, at the Jetstar launch. "I'm really sure there won't be ¤ I mean, if you want a nice outcome on this, you'll have three airlines (Qantas, Jetstar and Virgin Blue) that can make good money and a tourist sector and a business sector that are being hellishly well served with competent airlines and decent prices and ¤ that's pretty much what is going to happen."
Qantas is ramping up the combined Qantas-Jetstar seating capacity on key leisure routes - from Melbourne to the Gold Coast and Hobart, for example - by 20 to 30 per cent and that will make available many more hundreds of weekly cheap seats. Qantas says that even without significant new price competition some of these routes have been recording annualised growth of up to 15 per cent on recent monthly figures.
There won't be a bonanza in the short term on some routes. As Jetstar takes over most of Qantas's leisure flying, Jetstar services will simply replace lost Qantas capacity between Melbourne and the Gold Coast for most of this year. And services by the former Impulse Airlines - the Qantas subsidiary that is being used as the vehicle to launch Jetstar - between Hobart, Launceston and Melbourne, which Qantas originally used to replace its own services, will be cut back during the winter months.
In the long term, it's likely that Jetstar, with its new 177-seat Airbus A320s progressively replacing Impulse's 125-seat Boeing 717s from June, will take over from Qantas on routes from Melbourne to Broome, Alice Springs and Darwin, although Qantas retains the right to run its own services.
Buried in the subtext is the fact that to get Jetstar's cheap fares, you will have to have your knees pushed further towards your face than ever. While Qantas's new space-saving "slimline" seating offers 31 inches per seat row (the airline industry sticks to an imperial measure of so-called seat "pitch") compared to Virgin's 31 to 32 inches, Jetstar's is just 30 inches, close to the minimum allowed by regulation and the tightest ever flown in Australia.
The Jetstar puzzle gets curiouser and curiouser with the decision to begin flights from Avalon to Sydney and Brisbane. On the face of it, this is an attempt to copy no-frills airlines in Europe and America. Jetstar will put plenty of marketing effort into persuading Melburnians to fly to Sydney and Brisbane from Avalon, with the carrot of cheap parking and shuttle buses from the city at the same price as those to Tullamarine, with only about 15 minutes' extra travelling time.
There's also the lure of the population pools of Geelong and Melbourne's outer western suburbs that are closer to Avalon than Tullamarine, and that Avalon is a natural gateway for interstate travellers wanting to get to Victoria's west coast and the Bellarine Peninsula.
However, although Mr Dixon has been diplomatic about it, there is no doubt Qantas is firing a shot across the bows of the privatised capital-city airport monopolies that have increased aeronautical charges to airlines by an average of 40 per cent and by up to 100 per cent in the past two years. (The Federal Government lifted price controls on privatised airports to get a better cheque for the sale of Sydney's Kingsford Smith, a move that has significantly increased discount air fares. After admitting a "strategic error" in accepting the new charges, Qantas is now joining Virgin Blue in legal action aimed at reintroducing price monitoring by the Australian Competition and Consumer Commission.)
Jetstar can operate flights in and out of Avalon for a fraction of the airport charges it faces at Tullamarine.
Jetstar is having a bob each way. Most of its flying will be into and out of the main Melbourne and Sydney airports. But, if it can gain consumer acceptance and make better money flying from Avalon, most of the growth it hopes to achieve in the domestic market may be moved to the secondary airports.
Like Virgin, Jetstar's cheap fares are effectively advance-purchase. You have to look at least a fortnight out - and sometimes up to two months - to get the ultra-cheap rate. As you get closer to the date, the cheapest seats get dearer in $5 or $10 increments. And if, for example, you want to fly to Maroochydore on a Saturday, the one-way fare is likely to be closer to $159 than the $119 ultra-cheapie. On most routes, you get the bargain-basement rate during the week.
What will take even more effort to sell for Jetstar is the frequency and timing of its Avalon services. Jetstar aircraft will not be based at Avalon: they will fly in each day from Sydney and Brisbane.
As a result the first Avalon-Sydney flight won't leave each day until 8.30am, arriving in Sydney at 9.50am, with the other departures at 5.05pm and 6pm. Daily Sydney-Avalon departures are at 6.30am, 3.05pm and 7.55pm.
Melbourne departures for Brisbane will be at 9.30am and 9.45pm; Brisbane-Avalon at 6.50am and 3.20pm. You'll be able to fly to Sydney from Avalon on business for the day, but not to Brisbane, which will need an overnight stay.
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A phoney air war
March 6th, 2004
Clive Dorman writes that the price war between Jetstar and Virgin Blue was more a promotional stunt.
You may have missed it, but apparently there was an "air war" in Australia last week. Up to 300,000 people got to buy a ticket to a choice of interstate destinations on the east coast for $29 one-way, which was effectively a promotional freebie designed to simply cover airport charges as Qantas launched its no-frills subsidiary, Jetstar, and rival Virgin Blue hit back with its customary headline-making hoopla.
It was a great one-off bonus for consumers, but the "war" was over in days. There's no smoking battlefield of airline competition in which punters will necessarily continue to be the winners. Qantas has simply invented a new way of making money.
"To you, Jetstar, we say: We'll match your 100,000 ($29 seats) and raise you another 100,000," Virgin Blue boss Brett Godfrey said as he tried to upstage Jetstar's launch.
On the same day, he said Jetstar's "everyday" pricing - the fares that kicked in after the freebies ran out - was "pretty rational" because it matched fares that Virgin Blue already had in the market, for example, from $69 to $199 one-way between Melbourne and Sydney.
"I don't think there's going to be (a fares) war," Qantas boss Geoff Dixon said, in unreported comments, at the Jetstar launch. "I'm really sure there won't be ¤ I mean, if you want a nice outcome on this, you'll have three airlines (Qantas, Jetstar and Virgin Blue) that can make good money and a tourist sector and a business sector that are being hellishly well served with competent airlines and decent prices and ¤ that's pretty much what is going to happen."
Qantas is ramping up the combined Qantas-Jetstar seating capacity on key leisure routes - from Melbourne to the Gold Coast and Hobart, for example - by 20 to 30 per cent and that will make available many more hundreds of weekly cheap seats. Qantas says that even without significant new price competition some of these routes have been recording annualised growth of up to 15 per cent on recent monthly figures.
There won't be a bonanza in the short term on some routes. As Jetstar takes over most of Qantas's leisure flying, Jetstar services will simply replace lost Qantas capacity between Melbourne and the Gold Coast for most of this year. And services by the former Impulse Airlines - the Qantas subsidiary that is being used as the vehicle to launch Jetstar - between Hobart, Launceston and Melbourne, which Qantas originally used to replace its own services, will be cut back during the winter months.
In the long term, it's likely that Jetstar, with its new 177-seat Airbus A320s progressively replacing Impulse's 125-seat Boeing 717s from June, will take over from Qantas on routes from Melbourne to Broome, Alice Springs and Darwin, although Qantas retains the right to run its own services.
Buried in the subtext is the fact that to get Jetstar's cheap fares, you will have to have your knees pushed further towards your face than ever. While Qantas's new space-saving "slimline" seating offers 31 inches per seat row (the airline industry sticks to an imperial measure of so-called seat "pitch") compared to Virgin's 31 to 32 inches, Jetstar's is just 30 inches, close to the minimum allowed by regulation and the tightest ever flown in Australia.
The Jetstar puzzle gets curiouser and curiouser with the decision to begin flights from Avalon to Sydney and Brisbane. On the face of it, this is an attempt to copy no-frills airlines in Europe and America. Jetstar will put plenty of marketing effort into persuading Melburnians to fly to Sydney and Brisbane from Avalon, with the carrot of cheap parking and shuttle buses from the city at the same price as those to Tullamarine, with only about 15 minutes' extra travelling time.
There's also the lure of the population pools of Geelong and Melbourne's outer western suburbs that are closer to Avalon than Tullamarine, and that Avalon is a natural gateway for interstate travellers wanting to get to Victoria's west coast and the Bellarine Peninsula.
However, although Mr Dixon has been diplomatic about it, there is no doubt Qantas is firing a shot across the bows of the privatised capital-city airport monopolies that have increased aeronautical charges to airlines by an average of 40 per cent and by up to 100 per cent in the past two years. (The Federal Government lifted price controls on privatised airports to get a better cheque for the sale of Sydney's Kingsford Smith, a move that has significantly increased discount air fares. After admitting a "strategic error" in accepting the new charges, Qantas is now joining Virgin Blue in legal action aimed at reintroducing price monitoring by the Australian Competition and Consumer Commission.)
Jetstar can operate flights in and out of Avalon for a fraction of the airport charges it faces at Tullamarine.
Jetstar is having a bob each way. Most of its flying will be into and out of the main Melbourne and Sydney airports. But, if it can gain consumer acceptance and make better money flying from Avalon, most of the growth it hopes to achieve in the domestic market may be moved to the secondary airports.
Like Virgin, Jetstar's cheap fares are effectively advance-purchase. You have to look at least a fortnight out - and sometimes up to two months - to get the ultra-cheap rate. As you get closer to the date, the cheapest seats get dearer in $5 or $10 increments. And if, for example, you want to fly to Maroochydore on a Saturday, the one-way fare is likely to be closer to $159 than the $119 ultra-cheapie. On most routes, you get the bargain-basement rate during the week.
What will take even more effort to sell for Jetstar is the frequency and timing of its Avalon services. Jetstar aircraft will not be based at Avalon: they will fly in each day from Sydney and Brisbane.
As a result the first Avalon-Sydney flight won't leave each day until 8.30am, arriving in Sydney at 9.50am, with the other departures at 5.05pm and 6pm. Daily Sydney-Avalon departures are at 6.30am, 3.05pm and 7.55pm.
Melbourne departures for Brisbane will be at 9.30am and 9.45pm; Brisbane-Avalon at 6.50am and 3.20pm. You'll be able to fly to Sydney from Avalon on business for the day, but not to Brisbane, which will need an overnight stay.
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