Virgin Blue says can fend off Jetstar threat

[Wirraway]

Reuters
Posted 4/23/2004

Virgin Blue says can fend off Jetstar threat

BRISBANE (Reuters) — Richard Branson's budget Australian airline Virgin Blue says it can outlast any threat from rival Qantas Airways's domestic start-up Jetstar and expects to boost market share.
The discount carrier also flagged plans to add Noumea, the capital of New Caledonia, to its network.

Virgin Blue, which has snagged a third of the domestic market from incumbent Qantas in four years, said it did not expect Jetstar to chip away at its 33% domestic market share when the rival start-up takes to the skies in May.

"I'd be surprised if at Christmas we're not north of where we are today," Virgin Blue Chief Executive Brett Godfrey told Reuters in an interview.

Godfrey said in the event of a drawn-out domestic fare price war, Virgin was in a stronger position than Qantas because of its lower costs.

"If we stop taking a penny today, we can last about 150 days, whereas I think Qantas is somewhere around 70. So if there is going to be a fight then we have the staying power to outlast them," Godfrey said.

Ready for battle

Qantas launched its cut-price Jetstar in February by offering 100,000 seats at A$29 each. Virgin Blue responded the same day by releasing 200,000 seats at the same price.

Virgin's Godfrey added that he expected the airline to grow more than Qantas in percentage terms over the next three years.

Virgin listed in December and is 45% owned by Chris Corrigan's Patrick Corp Ltd transport group.

The airline launched its Pacific Blue international network with flights to Christchurch in New Zealand and hopes to begin flying to Fiji by September and on New Zealand domestic routes within 12 months.

"We've got a team in Noumea today talking to ministers and airport officials and I think there's every likelihood that we will end up doing something there," Godfrey said.

The company said last month it was on track to meet its A$150 million earnings target for the year to March 31. The airline is due to report its results on May 17.

"We put in our forecast and we've always met our targets," said Godfrey.

He denied rumors Virgin Blue was looking at buying into Malaysian budget carrier AirAsia, but said the company was eyeing Asia as a potential growth market.

Earlier this month, Qantas unveiled plans to enter the Asian budget air market with a 49.9% stake in a US$60 million Singapore-based carrier.

"There's 3.5 billion people within the range of an aeroplane from Singapore, Malaysia, Hong Kong or Bangkok and we have 20 million in our Australian market. So it would be irresponsible to not look at those opportunities in Asia," said Godfrey.

"But we're not in any specific discussions today that would suggest an announcement is imminent."


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[Cactus Jack]

"If we stop taking a penny today, we can last about 150 days, whereas I think Qantas is somewhere around 70. So if there is going to be a fight then we have the staying power to outlast them,"

Where does this guy get off, dribbling sh1t like this? Godfrey, justify your figures please. Be accountable for what you say, for once.

Geez, I'm so sick of his voice. You'd have respect for the guy if he just closed his mouth and got on with it.

[HGW]

Cactus Jack

Jeez, you have a real beef with Godfrey don't you. The only thing you do is whinge about him, what ever he says. You say you are sick of his voice but you seem to get pissed of even when it is print. Is there something you are not telling us. No one would go on so much about one person for no reason.

I remember your ramblings when I predicted last year the Jetstar startup using Airbus, following the LCC model and the eventual taking over of QF routes. Your reply was as childish then as it is now.

Grow up or get over it. Your replies sound worse than the person you are complaining about. Try and offer some sensible comments or don't bother. It is hard having having a meaningful, informative debate when people like you spout the crap that you do.

And no, I am not defending the man. I personally don't like him but I am mature enough to debate without having to resort to your standard, or have I.

[balance]

Hmm, I reckon he's a whinger too!

[rtforu]

Hmmm... Poor old HGW, I think you may have touched a nerve here Jack. I'm sure Geoffery is a very nice boy HGW, just don't listen to them.

Ops did I say Geoffery, I meant Godfrey. Sorry I know how important Bratt, opps there I go again, Brett, really is.

[HGW]

What are talking abour "touched a nerve". The only input the famous Jack has ever put into any forum is to have a whinge about someone or something. Really useful contribution.

[Cactus Jack]

Well, hello to you too HGW. Sounds horribly like you are whinging about my whinging! (Which in turn is about BG's whinging - but that's where it gets a bit complicated!)

Now, don't be like that. Or are you still upset about my comments to you from ages ago? Thought you'd get a little back?

Well, don't worry HGW. No offence taken.

Now, on BG's behalf, are you going to justify his idiotic comments? Because they clearly are ludicrous. Or is it inappropriate in your view that I (or anybody else) question his high pitched, over the top rantings?

Can I not ask him to be accountable?

Come to think of it, HGW. You value my contribution as worth nothing, yet your contribution here has amounted to nil. Why don't YOU contribute something, rather than just critisizing those who do...?

Have a nice day, HGW.

[HGW]

I give up. How can you argue with that.

At least my prediction about Jetstar came true. I thought that was contrbuting. Oh well, I was wrong again. Tell me again what you called me then. You seem to be a very bitter man Jack.

Have a nice day also

[Cactus Jack]

Ohhhh, HGW! I'm not bitter at all. Matter of fact I amuse the bejezus outa myself.:}

And methinks you have taken my contribution comment the wrong way, mate. I was only referring to this thread. I've read all of your previous "contributions" with great mirth, and I highly value your input!

Keep up the good work, son.

Now, is anyone going to comment further on Godfrey's claim which I believe to be a little on the outrageous side. That is:

"If we stop taking a penny today, we can last about 150 days, whereas I think Qantas is somewhere around 70. So if there is going to be a fight then we have the staying power to outlast them,"

[bitter balance]

I recall another airline exec in Oz saying a couple of years ago that they had $1B in cash reserve. Not saying VB will go the way of that carrier but you have to be careful listening to beancounters when they're being tricky! I think this has more to do with financial analysts (and press) putting VB shares under the microscope and not liking what they see.

[Raider1]

The difference in service standards between DJ and Jetstar might influence who wins.
Personally Jetstars policy of no seating allocation and no multi sector bookings doesnt appeal to me.
Living in Canberra I usually want to travel beyond Sydney and dont want the hassle of waiting for my bag in Syd only to have to line up again to re check in.

[Southern handler]

been told that the no bag through check is being reviewed.

Wasn't this the case when DJ started out???

[TIMMEEEE]

Got to agree with Cactus Jack on this one.

Godfrey is the who's who of pain-in-the-arses.
Many VB drivers will attest to this - just ask the Captain he sacked for following the letter of the law !!!

I have commented about him before, but when he comes up and quotes figures he cant even justify then we know he is really under pressure.
What is Godfrey going to say?
They are going to lose market share? - I dont think so.

There is only a definitive market out there and if it cant grow at some huge rate then somebody is going to come off second best.
They're the facts of basic economics and a market reality.
So what does Brett do?
He goes off the handle and pulls some crazy figures out of his blurter.

Just look at the waning VB share price - it doesnt exactly inspire confidence from many analysts, especially from the company that underwrote their share listing no less.

As I've said about Godfrey before, time will tell whether he is up to the task.
He oversaw the stuffing-up of VB's much delayed granting of an AOC and the debacle that their engineering department has become.

Anyone can ride the gravy train folks and make the excuse of rapid expansion for certain problems, but a real manager will anticipate these problems before they become that - a major problem!!

Personally I give him 2 years tops before he pulls the pin.

[apacau]

I have been a passenger on many free seating flights among Europe's low cost airlines. No matter how hard they try (priority boarding for low seq numbers etc) there is always that final crush at the gate to get on first. Indeed I wonder how many injuries have been caused by people running down the aircraft cabin as people boarding from the front and rear both head for the overwing exit rows. It'll be just the same here.

And there seems (to the untrained eye) to be little difference in terms of aircraft turnarounds with those LCCs who do allocate seating.

In fact the best boarding system I have expereinced was a LH 747-400 flight from Frankfurt where boarding wasn't by row number but by letter. Eg: allocated window seats first and aisles last - so no people clambering out of seats to let others in etc.

[dodgybrothers]

The grandpappy of all LCCs, Southwest Airlines in the US (and arguably the best airline in the world) have no seat allocation and never will. They use an A, B and C system. There aircraft is broken into 3 boarding groups (all equal) so if you get to the airport and check-in early you get a boarding pass with an A on it. You get there on time you get a boarding pass with a B on it. You get there late you get a boarding pass with a C on it. When it comes time to board there are 3 queues at the gate, funnily enough A, B and C.

The 'A' s board first and get the pick of the seats, Bs next and the Cs get what I like to call using harness racing parlance, the death seats (not great in aviation terms though!), or middle seats.

While it does not eliminate the possibility of a stampede, the system certainly reduces the rush and actively encourages passengers to CHECK IN EARLY. For the airline, it almost illiminates the the possibility of passengers damaging the on time departure performance. (Almost!)

It is a great system and works extremely well, if Jetstar were going to use a drafting race to board passengers they could do worse than to have a look at SWAs system

[TIMMEEEE]

Dodgy - just saw a great article on CNN about the CEO of Jet Blue and its overall operation.

I'm sure that if you watched it you would realise that Jet Blue is a far superior product to Southwest and it is growing at a great rate - both in terms of profits and pax numbers/routes serviced.

Extremely innovative CEO that is very hands on with seat-back videos on all aircraft, leather interiors and good seat pitch.
All employees are shareholders and are on a first name basis with the big boss.

Sounds too good to be true.
Wonder how much they pay compared to the opposition ?

[dodgybrothers]

Timmee,

I am sure there are improvments on the original LCC model, but they all try and mold themselves on SWA because it is such a sucessful formula. If Jet Blue can do it and do it well that is great news because it means that another company has 'cracked' the SWA code.
Many have tried to use the model and failed because the basic underlying factor is that you have to empower and entrust your emplyees. SWA employees all profit share and are encouraged to think outside the box.

SWA has turned a profit every year since 1975 and that includes 2001 when all the rest suffered enourmous losses.

It sounds great, but name one airline in Oz that would be prepared to do that?

So well done to Jet Blue, to be honest I didn't realise they were that far advanced.

[Pete Conrad]

No wind up here, but who wants to have a wager on Godfrey and DJ suffering and within 2 years Singapore Airlines picking up DJ for a song thus getting the Australian airline market they want?

[TIMMEEEE]

Just been very politely reminded of the fact that Brett Godfrey has to remain in his present position for a 3 year period before he can cash in his share options.
Change that 2 years I mentioned to 3 - then he will bolt.

He has also mentioned cutting costs across the board by 10%.
Interesting to see who will suffer in this area.

As for SQ buying into DJ, they would wait until the share price plumetted or decreased substantially before attempting to buy any shares.
Having Jet Star enter the market may have put the dampener on SQ looking to buy shares for at least a few years until they can gauge the effects of market reality.

If they were to buy into DJ just watch wages/conditions go for a slide!