Wirraway
25th Nov 2004, 15:12
Fri "The Australian"
Fledgling takes off after bumpy start
Steve Creedy
November 26, 2004
SIX months after Jetstar's first aircraft took to the skies, chief executive Alan Joyce says he is happy with the way the fledgling carrier is performing and ready to take on new challenges.
Despite the naysaying and criticism that accompanied the carrier's launch, Joyce says profitability is meeting expectations and operations are going well.
He says load factors since the launch have averaged in the mid-seventies - with bookings sometimes exceeding that by more than five percentage points as passengers grab cheap tickets but fail to show on the day.
Joyce expects to keep pumping those low fares into the market to stimulate traffic during quiet periods and give Virgin Blue a run for its money.
"We're meeting our expectations in terms of performance, so we're happy with that, and we're doing well in terms of operational reliability and our on-time performance is pretty strong," he says.
"We're also doing very well in terms of brand recognition - we're probably one of the most recognised new brands. So all the indicators are that for a new business we got to where we want to be after six months."
Expanding again after consolidating its east coast services, Jetstar on Monday announced daily services from Adelaide to three destinations from its first new port since June.
The new services to and from the Gold Coast, Victoria's Avalon and Hobart from February 1 herald a westward expansion that will see the carrier fly next year to Perth, Darwin and possibly Alice Springs.
The low-cost Qantas offshoot flies 17 aircraft, and another three 177-seat Airbus A320s will enter service by the end of January. Jetstar expects to reach its fleet target of 23 planes by July when it will begin swapping out its Boeing 717s, some of which will be transferred to sister company Qantaslink, with plans to be all Airbus by mid-2006.
The timing of services to Perth will depend on the outcome of Jetstar's bid to continue operating and maintaining the Boeing 717s for Qantaslink. It is competing for the contract against incumbent Qantaslink operator National Jet Systems (NJS).
Joyce says winning the contract would push Jetstar to move on establishing facilities in Perth and would accelerate the timing of its own services.
He says Jetstar is keen to win the contract, which would give the carrier additional economies of scale and help lower unit costs.
But he concedes that competition for the contract will be tough.
"They (NJS) are certainly a very efficient operation, they know the market over there and they have the experience of those ports," he says.
"We enter new ports all the time, we have the experience of the 717 aircraft, we have the pilots already trained, we have engineering capability already built up and there's a lot of start-up costs in doing that."
Costs are also emerging as a key factor in the battle with Virgin Blue.
At 7.26c per available seat kilometre, Virgin boasts it has the nation's lowest unit costs, but the Jetstar chief has that title in his sights.
Joyce argues that costs at the two airlines are comparable when adjusted for Virgin's bigger average sector length.
"As our scale grows, that will make us the lowest cost," he says, adding that the introduction of lower-cost A320s will also help reduce costs.
Joyce is unfazed by Virgin's decision to equip its planes with live pay-TV services, saying he doesn't believe it will prove a significant competitive advantage on short sectors.
"On the long sectors, I can see it definitely working there, people watching movies and looking at programs, but I think there are other technologies out there," he says, pointing to the use by some airlines of personal DVD players.
Overall, Joyce believes that Qantas boss Geoff Dixon's famous market share "line in the sand" is now set.
"Virgin's capacity growth is very modest over the next year and I think we'll probably maintain the 65 per cent market share the Qantas Group wants to maintain," Joyce says.
Addressing criticisms levelled at the airline during start-up, he admits Jetstar could have handled some issues better.
The carrier came under fire for leaving behind passengers who failed to meet its strict policy about closing flights 30 minutes before take-off, its excess baggage charges and its unallocated seating.
Joyce believes travellers are now starting to see the benefit of the 30-minute close-out in terms of on-time performance.
He says a colour-coded boarding process being rolled out across the network is more structured, and designed to address confusion about the boarding process.
Joyce says the proportion of business travellers on Jetstar is growing and he is confident it can attract more, particularly from small to medium enterprises.
One new initiative the airline is also looking at is to allow businesses to pre-purchase meal vouchers and excess baggage credits.
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Fledgling takes off after bumpy start
Steve Creedy
November 26, 2004
SIX months after Jetstar's first aircraft took to the skies, chief executive Alan Joyce says he is happy with the way the fledgling carrier is performing and ready to take on new challenges.
Despite the naysaying and criticism that accompanied the carrier's launch, Joyce says profitability is meeting expectations and operations are going well.
He says load factors since the launch have averaged in the mid-seventies - with bookings sometimes exceeding that by more than five percentage points as passengers grab cheap tickets but fail to show on the day.
Joyce expects to keep pumping those low fares into the market to stimulate traffic during quiet periods and give Virgin Blue a run for its money.
"We're meeting our expectations in terms of performance, so we're happy with that, and we're doing well in terms of operational reliability and our on-time performance is pretty strong," he says.
"We're also doing very well in terms of brand recognition - we're probably one of the most recognised new brands. So all the indicators are that for a new business we got to where we want to be after six months."
Expanding again after consolidating its east coast services, Jetstar on Monday announced daily services from Adelaide to three destinations from its first new port since June.
The new services to and from the Gold Coast, Victoria's Avalon and Hobart from February 1 herald a westward expansion that will see the carrier fly next year to Perth, Darwin and possibly Alice Springs.
The low-cost Qantas offshoot flies 17 aircraft, and another three 177-seat Airbus A320s will enter service by the end of January. Jetstar expects to reach its fleet target of 23 planes by July when it will begin swapping out its Boeing 717s, some of which will be transferred to sister company Qantaslink, with plans to be all Airbus by mid-2006.
The timing of services to Perth will depend on the outcome of Jetstar's bid to continue operating and maintaining the Boeing 717s for Qantaslink. It is competing for the contract against incumbent Qantaslink operator National Jet Systems (NJS).
Joyce says winning the contract would push Jetstar to move on establishing facilities in Perth and would accelerate the timing of its own services.
He says Jetstar is keen to win the contract, which would give the carrier additional economies of scale and help lower unit costs.
But he concedes that competition for the contract will be tough.
"They (NJS) are certainly a very efficient operation, they know the market over there and they have the experience of those ports," he says.
"We enter new ports all the time, we have the experience of the 717 aircraft, we have the pilots already trained, we have engineering capability already built up and there's a lot of start-up costs in doing that."
Costs are also emerging as a key factor in the battle with Virgin Blue.
At 7.26c per available seat kilometre, Virgin boasts it has the nation's lowest unit costs, but the Jetstar chief has that title in his sights.
Joyce argues that costs at the two airlines are comparable when adjusted for Virgin's bigger average sector length.
"As our scale grows, that will make us the lowest cost," he says, adding that the introduction of lower-cost A320s will also help reduce costs.
Joyce is unfazed by Virgin's decision to equip its planes with live pay-TV services, saying he doesn't believe it will prove a significant competitive advantage on short sectors.
"On the long sectors, I can see it definitely working there, people watching movies and looking at programs, but I think there are other technologies out there," he says, pointing to the use by some airlines of personal DVD players.
Overall, Joyce believes that Qantas boss Geoff Dixon's famous market share "line in the sand" is now set.
"Virgin's capacity growth is very modest over the next year and I think we'll probably maintain the 65 per cent market share the Qantas Group wants to maintain," Joyce says.
Addressing criticisms levelled at the airline during start-up, he admits Jetstar could have handled some issues better.
The carrier came under fire for leaving behind passengers who failed to meet its strict policy about closing flights 30 minutes before take-off, its excess baggage charges and its unallocated seating.
Joyce believes travellers are now starting to see the benefit of the 30-minute close-out in terms of on-time performance.
He says a colour-coded boarding process being rolled out across the network is more structured, and designed to address confusion about the boarding process.
Joyce says the proportion of business travellers on Jetstar is growing and he is confident it can attract more, particularly from small to medium enterprises.
One new initiative the airline is also looking at is to allow businesses to pre-purchase meal vouchers and excess baggage credits.
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