Wirraway
28th Mar 2004, 05:14
Sat "Herald Sun"
Chasing the cheap seats
The latest domestic air war is only just starting but budget travellers can expect to be on the winning side, as GEOFF EASDOWN reports
A NEW benchmark for domestic air travel will be set this Easter, when more than 500,000 Australians are expected to fly.
Little wonder that Qantas and Virgin Blue predict their busiest long weekend ever.
This year's loads indicate how readily Australians are beginning to embrace the age of cut-price tourism.
But airline experts are saying the record 2004 figure may well be dwarfed by next year's Easter numbers.
The reason is simple: price. In 2005, with discount carriers Virgin Blue and Jetstar going head to head, the cost of going one way to Sydney will be almost $200 cheaper compared with a present full-price Qantas ticket.
In the lead-up to its May start-up, Jetstar has advertised a one-way Avalon to Sydney fare of $59, compared with $199 fully flexible.
Australians have well and truly caught the travel bug, and it is changing their lifestyles.
Where flying was once gift-wrapped in marketing illusions, travel agents dismiss the experience now as a bus ride.
They agree that whereas once the air traveller dressed for the occasion, these days it's pull on the jeans, an open shirt, and sandals, stuff a backpack full of casuals, and jump on a jet.
The overseas experience has seen people buy cheap tickets in advance to get to their holiday houses in other countries.
Virgin Blue's head of strategy and communications, David Huttner, believes that's already happening in Australia.
Ian Thomas, from the Centre for Asian Pacific Aviation, adds the potential for that to occur is there, especially with the sorts of prices being talked of.
Mr Huttner told the Herald Sun cheaper air travel was encouraging more families to leave their cars at home and fly to Queensland for their holidays.
"A few years ago, if your PA or an office assistant went to Noosa for the weekend you'd wonder whether they were being paid too much," Mr Huttner says. "Now it is the normal thing to do. "
Mr Huttner is convinced that over time the traditional airline model, where service is dependent on amenities, will disappear.
He suggests that, before long, business class could be removed from many rival Qantas routes.
"Aside from a few key trunk routes, we expect Qantas to operate a two-class service only, where very high-level corporate executives and government officials are willing to pay the premium," Mr Huttner says. "The public won't. "
Mr Huttner came to Australia with boss Brett Godfrey to launch Virgin Blue midway through 2000.
The pair have achieved a runaway success, gaining public support of their start-up that has drawn custom from Qantas and chalked up market share that's reached 31.5 per cent and rising.
Qantas chief Geoff Dixon admits his group has learned from what's happened with Virgin.
Mr Thomas says: "The one-way fare structure they (Qantas) introduced last year was Virgin's.
"That enabled people to book per sector rather than schedule return trips.
"As a result they could shop around for their return sector, allowing them freedom to decide when they wanted to travel. "
Mr Dixon recently paid Mr Godfrey and Mr Huttner the ultimate compliment, noting that Virgin Blue was "a well-run and profitable airline".
"But they are not going to grow quite as big as they set out to be," he quipped.
Mr Dixon's Jetstar will carry its first passengers on May 25, and operate services to 10 popular east-coast tourist destinations and to Tasmania.
As the route network expands further, services will be introduced to Western Australia, South Australia and the Northern Territory.
Jetstar will begin with 14 small 115-seat Boeing 717 jets that Qantas inherited from short-lived operator Impulse.
MAJOR parts of the Impulse business plan were snapped up by Qantas in shaping Jetstar.
As Jetstar chief Alan Joyce told the Herald Sun: "If we had to start up from scratch we would not have got there. "
Jetstar will use the Air Operations Certificate granted to Impulse, the vital licence to fly that otherwise would have taken months to obtain through a demanding training and qualification process.
"Our model is every day, all day low fares. Book early and you will get them even for travel on Fridays, Saturdays and Sundays," says Mr Joyce.
Fares will go up as spaces sell, he says, noting that experience by overseas operators shows Fridays and Saturday are first to sell out.
Working with Mr Dixon since last August, 37-year-old Mr Joyce -- who cut his airline teeth with Aer Lingus in his native Ireland -- has committed Qantas to buying 23 new 177-seat, A320 airliners from Airbus.
They are expected to begin arriving from the Toulouse factory from August; the last one is due about mid-2006.
While this indicates a slow start for the Qantas infant, the A320s will go to war with what Qantas claims is a distinct advantage.
They will take off and land from airports that Virgin Blue's larger Boeing 737-800s don't go to.
Typical is the Whitsunday resort strip on Hamilton Island, which Virgin services from the mainland airport at nearby Proserpine.
But Virgin's Mr Huttner argues his group is one up on Jetstar by having terminals at Tullamarine for Sydney and Brisbane-bound passengers.
"Can you imagine the cold winds of Avalon in winter?" Mr Huttner says of his rival's plans to use billionaire Lindsay Fox's tarmacs in a wheat paddock beside Corio Bay for Jetstar's Sydney and Brisbane services.
But Mr Joyce counters: "We have been overwhelmed by the figures we have got from Avalon.
"We thought it would take a while to build up, but it was the number-one seller in the first three days. It is still in our top-five routes. Gold Coast is number one, followed by Avalon.
"At some stage, we will have to look at adding capacity on that route because Brisbane is selling particularly well through June. "
Lindsay Fox -- assisted by the City of Greater Geelong, which is tipping money into rebuilding access roads -- will spend $3 million at Avalon to improve passenger services.
A terminal building, said to be similar to the one Virgin Blue had at Tullamarine at the outset of its services to Melbourne, is being built, along with car parking and upgraded security.
JETSTAR will fly 60 services a week in and out of Avalon and 250 to Tasmania and regional holiday destinations from Tullamarine.
Mr Dixon claims he has been able to wrangle an edge on Virgin, declaring some weeks back that his budget offshoot would be more profitable than Virgin.
Releasing the mainline carrier's half-year accounts, Mr Dixon told reporters that Jetstar would have a cost base of 7.8c per available seat kilometre (ASK ) when the A320s were rolled out, compared with 8.35c by Virgin.
By comparison, the Qantas mainline domestic carrier is estimated at 11c per ASK.
Mr Dixon's costs have been aided, however, by the helping hand he was reportedly given by his 717 crews, who are paid less than the mainline staff and purportedly below the rates agreed to by Virgin.
What's more, his 143 Jetstar pilots flying 717s have agreed to fly the A320s for the same money. This is about half the money paid to a Qantas pilot flying an equivalent aircraft.
The lucrative deal for Mr Dixon came about because the pilots went to him and offered to fly, fearing that had they not they, like their former Ansett colleagues, would be out of a job.
It's the sort of strategy that a few years back would have caused pilots to walk out and caused turmoil at airports.
Australians will long remember the last pilots' strike. It lasted months and nearly broke the country and the domestic airlines over a 29 per cent pay claim.
The 717 pilots' pay cut will be offset with overtime payments through productivity.
"That will allow us to get a cost advantage over Virgin," says Mr Dixon, explaining how overtime would be paid to flight crews flying more than 75 hours a month.
He hopes, too, for better aircraft use. He wants 25-minute airport turnarounds, which will be helped in no short measure by the A320s' containerised cargoes.
That will get more sectors out of crews. It will also avoid overnight and aircraft positioning costs that can erode the cost base.
"Five minutes on a turn time doesn't look much, but it adds up," says Mr Joyce, telling how the only overnights are likely on the yet-to-come flights to WA.
Mr Joyce and Mr Huttner differ on the ability of both to continue to stimulate the market.
Mr Huttner acknowledges Jetstar will find it hard to create further growth on routes where low-cost Virgin fares have already created a 20-30 per cent boost.
"You can't imagine that Launceston will stimulate by another 20 or 30 per cent," Mr Huttner says.
"That market has already done it, but they are not going to get another 20 per cent on top of 20 per cent. "
But after Virgin doubled Jetstar's launch offer of 100,000 seats at $29, Mr Joyce replied: "They have come down to our levels exactly as expected. The big thing is making sure we stimulate the markets and get the traffic growth we need.
"That's why we are going to be targeting 20 to 30 per cent capacity growth, and that means the fares have to come down by that to stimulate the growth we need."
Mr Joyce says Jetstar seats on the A320s will be wider than Virgin Blue's 737 -800s.
Mr Huttner replies: "They'll need it because with the seat pitch they will have, you won't get your knees in front of you. "
Mr Joyce says Jetstar seats will be 3.81cm wider in the centre cabin.
"We will have in-flight entertainment, bigger storage bins and quality food items from Gate Gourmet," he says. "We even plan to have on our website a special booking facility where items such as champagne can be pre-ordered on a celebratory flight. "
But travellers using Jetstar will have to walk on to some tarmacs in all weather, find their seats and carry baggage between connecting flights.
Mr Huttner points out that is not a problem at Virgin.
But he says: "People realise that frequent flyer miles and those onboard meals they complain about are no longer deciding factors in making travel decisions.
"In future it will be service and timeliness that will be paramount."
=============================================
Chasing the cheap seats
The latest domestic air war is only just starting but budget travellers can expect to be on the winning side, as GEOFF EASDOWN reports
A NEW benchmark for domestic air travel will be set this Easter, when more than 500,000 Australians are expected to fly.
Little wonder that Qantas and Virgin Blue predict their busiest long weekend ever.
This year's loads indicate how readily Australians are beginning to embrace the age of cut-price tourism.
But airline experts are saying the record 2004 figure may well be dwarfed by next year's Easter numbers.
The reason is simple: price. In 2005, with discount carriers Virgin Blue and Jetstar going head to head, the cost of going one way to Sydney will be almost $200 cheaper compared with a present full-price Qantas ticket.
In the lead-up to its May start-up, Jetstar has advertised a one-way Avalon to Sydney fare of $59, compared with $199 fully flexible.
Australians have well and truly caught the travel bug, and it is changing their lifestyles.
Where flying was once gift-wrapped in marketing illusions, travel agents dismiss the experience now as a bus ride.
They agree that whereas once the air traveller dressed for the occasion, these days it's pull on the jeans, an open shirt, and sandals, stuff a backpack full of casuals, and jump on a jet.
The overseas experience has seen people buy cheap tickets in advance to get to their holiday houses in other countries.
Virgin Blue's head of strategy and communications, David Huttner, believes that's already happening in Australia.
Ian Thomas, from the Centre for Asian Pacific Aviation, adds the potential for that to occur is there, especially with the sorts of prices being talked of.
Mr Huttner told the Herald Sun cheaper air travel was encouraging more families to leave their cars at home and fly to Queensland for their holidays.
"A few years ago, if your PA or an office assistant went to Noosa for the weekend you'd wonder whether they were being paid too much," Mr Huttner says. "Now it is the normal thing to do. "
Mr Huttner is convinced that over time the traditional airline model, where service is dependent on amenities, will disappear.
He suggests that, before long, business class could be removed from many rival Qantas routes.
"Aside from a few key trunk routes, we expect Qantas to operate a two-class service only, where very high-level corporate executives and government officials are willing to pay the premium," Mr Huttner says. "The public won't. "
Mr Huttner came to Australia with boss Brett Godfrey to launch Virgin Blue midway through 2000.
The pair have achieved a runaway success, gaining public support of their start-up that has drawn custom from Qantas and chalked up market share that's reached 31.5 per cent and rising.
Qantas chief Geoff Dixon admits his group has learned from what's happened with Virgin.
Mr Thomas says: "The one-way fare structure they (Qantas) introduced last year was Virgin's.
"That enabled people to book per sector rather than schedule return trips.
"As a result they could shop around for their return sector, allowing them freedom to decide when they wanted to travel. "
Mr Dixon recently paid Mr Godfrey and Mr Huttner the ultimate compliment, noting that Virgin Blue was "a well-run and profitable airline".
"But they are not going to grow quite as big as they set out to be," he quipped.
Mr Dixon's Jetstar will carry its first passengers on May 25, and operate services to 10 popular east-coast tourist destinations and to Tasmania.
As the route network expands further, services will be introduced to Western Australia, South Australia and the Northern Territory.
Jetstar will begin with 14 small 115-seat Boeing 717 jets that Qantas inherited from short-lived operator Impulse.
MAJOR parts of the Impulse business plan were snapped up by Qantas in shaping Jetstar.
As Jetstar chief Alan Joyce told the Herald Sun: "If we had to start up from scratch we would not have got there. "
Jetstar will use the Air Operations Certificate granted to Impulse, the vital licence to fly that otherwise would have taken months to obtain through a demanding training and qualification process.
"Our model is every day, all day low fares. Book early and you will get them even for travel on Fridays, Saturdays and Sundays," says Mr Joyce.
Fares will go up as spaces sell, he says, noting that experience by overseas operators shows Fridays and Saturday are first to sell out.
Working with Mr Dixon since last August, 37-year-old Mr Joyce -- who cut his airline teeth with Aer Lingus in his native Ireland -- has committed Qantas to buying 23 new 177-seat, A320 airliners from Airbus.
They are expected to begin arriving from the Toulouse factory from August; the last one is due about mid-2006.
While this indicates a slow start for the Qantas infant, the A320s will go to war with what Qantas claims is a distinct advantage.
They will take off and land from airports that Virgin Blue's larger Boeing 737-800s don't go to.
Typical is the Whitsunday resort strip on Hamilton Island, which Virgin services from the mainland airport at nearby Proserpine.
But Virgin's Mr Huttner argues his group is one up on Jetstar by having terminals at Tullamarine for Sydney and Brisbane-bound passengers.
"Can you imagine the cold winds of Avalon in winter?" Mr Huttner says of his rival's plans to use billionaire Lindsay Fox's tarmacs in a wheat paddock beside Corio Bay for Jetstar's Sydney and Brisbane services.
But Mr Joyce counters: "We have been overwhelmed by the figures we have got from Avalon.
"We thought it would take a while to build up, but it was the number-one seller in the first three days. It is still in our top-five routes. Gold Coast is number one, followed by Avalon.
"At some stage, we will have to look at adding capacity on that route because Brisbane is selling particularly well through June. "
Lindsay Fox -- assisted by the City of Greater Geelong, which is tipping money into rebuilding access roads -- will spend $3 million at Avalon to improve passenger services.
A terminal building, said to be similar to the one Virgin Blue had at Tullamarine at the outset of its services to Melbourne, is being built, along with car parking and upgraded security.
JETSTAR will fly 60 services a week in and out of Avalon and 250 to Tasmania and regional holiday destinations from Tullamarine.
Mr Dixon claims he has been able to wrangle an edge on Virgin, declaring some weeks back that his budget offshoot would be more profitable than Virgin.
Releasing the mainline carrier's half-year accounts, Mr Dixon told reporters that Jetstar would have a cost base of 7.8c per available seat kilometre (ASK ) when the A320s were rolled out, compared with 8.35c by Virgin.
By comparison, the Qantas mainline domestic carrier is estimated at 11c per ASK.
Mr Dixon's costs have been aided, however, by the helping hand he was reportedly given by his 717 crews, who are paid less than the mainline staff and purportedly below the rates agreed to by Virgin.
What's more, his 143 Jetstar pilots flying 717s have agreed to fly the A320s for the same money. This is about half the money paid to a Qantas pilot flying an equivalent aircraft.
The lucrative deal for Mr Dixon came about because the pilots went to him and offered to fly, fearing that had they not they, like their former Ansett colleagues, would be out of a job.
It's the sort of strategy that a few years back would have caused pilots to walk out and caused turmoil at airports.
Australians will long remember the last pilots' strike. It lasted months and nearly broke the country and the domestic airlines over a 29 per cent pay claim.
The 717 pilots' pay cut will be offset with overtime payments through productivity.
"That will allow us to get a cost advantage over Virgin," says Mr Dixon, explaining how overtime would be paid to flight crews flying more than 75 hours a month.
He hopes, too, for better aircraft use. He wants 25-minute airport turnarounds, which will be helped in no short measure by the A320s' containerised cargoes.
That will get more sectors out of crews. It will also avoid overnight and aircraft positioning costs that can erode the cost base.
"Five minutes on a turn time doesn't look much, but it adds up," says Mr Joyce, telling how the only overnights are likely on the yet-to-come flights to WA.
Mr Joyce and Mr Huttner differ on the ability of both to continue to stimulate the market.
Mr Huttner acknowledges Jetstar will find it hard to create further growth on routes where low-cost Virgin fares have already created a 20-30 per cent boost.
"You can't imagine that Launceston will stimulate by another 20 or 30 per cent," Mr Huttner says.
"That market has already done it, but they are not going to get another 20 per cent on top of 20 per cent. "
But after Virgin doubled Jetstar's launch offer of 100,000 seats at $29, Mr Joyce replied: "They have come down to our levels exactly as expected. The big thing is making sure we stimulate the markets and get the traffic growth we need.
"That's why we are going to be targeting 20 to 30 per cent capacity growth, and that means the fares have to come down by that to stimulate the growth we need."
Mr Joyce says Jetstar seats on the A320s will be wider than Virgin Blue's 737 -800s.
Mr Huttner replies: "They'll need it because with the seat pitch they will have, you won't get your knees in front of you. "
Mr Joyce says Jetstar seats will be 3.81cm wider in the centre cabin.
"We will have in-flight entertainment, bigger storage bins and quality food items from Gate Gourmet," he says. "We even plan to have on our website a special booking facility where items such as champagne can be pre-ordered on a celebratory flight. "
But travellers using Jetstar will have to walk on to some tarmacs in all weather, find their seats and carry baggage between connecting flights.
Mr Huttner points out that is not a problem at Virgin.
But he says: "People realise that frequent flyer miles and those onboard meals they complain about are no longer deciding factors in making travel decisions.
"In future it will be service and timeliness that will be paramount."
=============================================