OzJet flies into Victoria, from SA

[Buster Hyman]

By Scott Rochford
Sydney
August 1, 2005

Domestic airline wannabe OzJet has switched its home base from Adelaide to Melbourne after failing to secure government subsidies, but said the move would not hinder its plans to launch services by late October.

The all-business-class airline, backed by formula one team owner Paul Stoddart, said as a result it had ditched plans to fly to Canberra and Adelaide in its first phase of operation. It will fly only on the high-volume Sydney-Melbourne route.

OzJet says it plans to fly 16 one-way flights a day after it gains its air operators certificate, hopefully by late September.

This compares with the average 56 Qantas and 46 Virgin Blue weekday flights on the Sydney-Melbourne route, which is the third busiest in the world.

OzJet chief executive Hans van Pelt said the late change of plan and lack of government funding would not derail the airline's planned launch.

"It won't hurt the business plan," he said. "It may slow it down somewhat but ultimately the market will determine how quickly that (OzJet's expansion) happens. From a funding perspective we're fine. We've got funding in place," he said, noting the airline was debt free and had $45 million in capital.

After the South Australian Government's initial upbeat response to OzJet's planned launch in February, it did not sound too enthused with the airline over the weekend.

The chief executive of the state's Department of Economic Development, Ray Garrand, said: "The dilemma for the . . . Government is that since we last had detailed discussions with them (OzJet), their plans have changed markedly.

"Their plans have changed from employing originally 550 people nationally and about 300 of those in South Australia, to really now changing their whole business model plan to only employing 90 people in South Australia in stage one.

"That really alters any consideration the Government would give to providing support." He declined to say how much the Government was prepared to put on the table. It is believed the South Australian Government's plans to help OzJet were complicated when the airline also applied for a Federal Government sponsored grant.

OzJet's second 30-year-old Boeing 737-200 is due to arrive in Melbourne on Wednesday with Minardi team boss Mr Stoddart on board. With a three-week break in the formula one season, he is expected to hold talks with the South Australian Government next week.

OzJet says it plans to have three 737s in Australia by October. The aircraft are undergoing heavy maintenance "D" checks in Romania, but the airline is yet to spell out where it intends to service the aircraft in future. It hopes to have two of its former Ansett BAe 146-300s in service early next year.

[oldhasbeen]

..........now if only he could secure funding from Fox and Lew ,I'll put my application in!:uhoh:

[Buster Hyman]

It still amazes me that only Rivkin & Vizard have been caught!:suspect:

[Ultralights]

after what Rivkin got, and Visards punishment, Visard still got away with it.

[Buster Hyman]

Just proves that Vizards got better mates than Rivkin...:suspect:

[BAE146]

This "airline" won't get airborne.

Gotta a case of Amstel on the line for anyone wanting a piece of the action ! :ouch:

[pullock]

It amazes me how people love to cut down tall poppies in Australia.

The all round good guy Vizard gets sprung doing a little insider trading and whammo he's public enemy number one.

I just don't think insider trading is a severe crime - let's face it, it's all that separates the stock market from the gaming industry. Without real knowledge of what a company is doing, when you buy shares all you are doing is gambling.

I bet if the tables were turned that there is not a person here who would not trade shares with insuide knowledge in order to make a profit.

Inside trading becomes a different issue when it causes people to get hurt, but when all that happens is someone makes profit - how is that bad?

Rant over now - and back to the original thread - I love Adelaide, and I love the idea of an all business class airline.
Australian business travelers are desperate for an airline to provide them with an intercity travel service that treats them in a manner that would reflect their job/demographic status. When they travel they stay in five star hotels often paying in excess of $300 per night, so why would they want to be crammed in to sardine seating and treated with contempt by underpaid staff in low cost carriers?

QF business class is too expensive for what it is, and it's not half the business class service that Ansett provided. There is a firm demand for a mid range quality business class seat at a reasonable price.

The only people who care about the age of the aircraft are the airline staff, as a well maintained ageing aircraft can be safe, and trust me I have seen some poorly maintained new aircraft in my aviation career. - Tell me - who is up for flying in an A380 SYD-LA shortly after it gets here ??? NOT ME !!!

All this said, with the SA government dropping the airline because it has changed it's business plan, I am disappointed. The SA government's lack of foresight is what is keeping the state in the economic dark ages. Sure supporting an airline is a long bow to draw, but is it any worse than supporting a dying car manufacturer years beyond it's viabilities end? Time for the SA government to wake up and encourage business rather than keeping the state a sleepy backwater forever.

[tinpis]

Riddle me this..is it really smart economics using a -200 rather than a -300?

[frangatang]

Stoddart didnt last too long with his fleet of knackered 747s in bournemouth england,found it a bit too hard going.Will be interesting to see how long this venture lasts.

[pullock]

Tinpis, it depends on how much cheaper the -200 was than the -300.

Lets say a -200 costs $ 1 000 000 and a -300 costs $ 5 000 000, then apportioning a rule of thumb 10% (but I bet it's higher - I wouldn't invest in a risky venture like this at 10 %!!) capital cost the weekly costs just to have the aircraft are

-200 $1917
-300 $9615

If financing at an LVR of 50%, you would need the following clear equity in bricks and mortar assets.

-200 $ 2 000 000
-300 $ 10 000 000

It's far easier to spend cashflow on ongoing maintenance than it is to earn equity. Once, however, the cashflow builds to equity, it can be used to purchase newer aircraft !!

Also, examining the downside, if the business doesn't work, and the aircraft have to be sold at a loss, lets say for arguments sake 50%, then a -200 looses you $500K, whilst a -300 looses you $ 2 500 000.

[Buster Hyman]

pullock I guess its all perception really. Don't forget he was in a position of trust, not just an ordinary employee. Thousands of shareholders depended on his performance (a generalisation) to ensure that what they gambled was in safe hands.

Of course, if the tables were turned, yeah, why not? But, that doesn't make it (a) legal or (b) ethical. Who would invest in stocks when there was a chance your directors were making decisions based on their personal gain? What is sorely lacking in many boardrooms across Australia is integrity! This doesn't help.

Sometimes people hide behind the tall poppy syndrome, but, occasionally, some poppies grow too tall & bold.

[rescue 1]

Well...at least I hear that they are offering free (yes that's FREE!!) endorsements. Now there's a win for the industry.

Can anyone substantiate??

[gaunty]

pullock me old.

I just don't think insider trading is a severe crime - let's face it, it's all that separates the stock market from the gaming industry. Without real knowledge of what a company is doing, when you buy shares all you are doing is gambling.
You would be one of the few people in Australia, besides Vizard and a few others, who believe that.

Telstra wasn't exactly one of those penny dreadfuls beloved of dodgy bros entrepreneurs who plunder the widows and orphans piggy banks.

He was much funnier when he was writing the comedy scripts that were so good at lampooning the same behaviour.
His dodgy bros skits were hilarious.

Perhaps life does imitate art after all.

Let's see ..... Media Release:
OzJet airlines are disappointed with the withdrawal of the SA Govt support for our airline.
Their participation was a pivotal part of our plan to bring real choice to the Australian business traveller. blah blah blah....
We are also finding that whilst the Australian regulator is processing our application speedily it is insisting on unrealistic maintenance, environmental and airport noise restrictions which will make it difficult to operate our aircraft profitably.
It is with regret .... blah bah blah, .. concentrate on F1.......will make another announcement beginning of the next F1 season in Melb when we need some exposure for our F1 sponsors etc etc.......:sad:

[BAE146]

Although I confess you are 100% spot on gaunty, you realise I won't be getting any takers for my wager now ! :mad:

[pullock]

Hi Gaunty,

Firstly at the inside trading thing - it is my understanding that he bought shares in a company that was awarded a decent contract by Telstra. If I am wrong then please correct me.

It seems to me that most Australians equate a little inside trading like this to major fraud that hurts the little people, and you would seem to be of this opinion Telstra wasn't exactly one of those penny dreadfuls beloved of dodgy bros entrepreneurs who plunder the widows and orphans piggy banks.. His actions as a director by purchasing a third parties shares did not adversely effect either the third party, nor Telstra, nor anyone else for that matter. Just because Qintex and HIH failed spectacularly under poor corporate governance, doesn't mean that a little third party inside trading is the crime of the century. What it really means is that people don't understand a damn thing about it!! Personally I think a far greater crime is feathering ones nest whilst in the position of CEO by selling the hoarse to buy a new saddle, but funnily enough that one is legal. Compared to a police man shooting an innocent guy in the head eight times in a subway inside trading is minor as well, but I bet you will find that the cop gets off whilst the inside trader has been hung from a very public cross. Both were in a position of trust. There is a concept of natural justice that the punishment should fit the crime. In this case, where nobody at all was disadvantaged by the crime, it seems somewhat over the top to crucify someone for taking the opportunity to make some profit. Oh and you think that Telstra don't take advantage of disadvantaged people.............you obviously don't have much to do with the telecommunication industry, where Telstra don't have such a great reputation for being the nice guy. Did you miss the disproportionate increase in line rental over the last two years ??

Oh and by the way - I couldn't stand Vizard as a comedian one little bit, but I think that punishing him for being an erkful personality in this way is just too much. Imagine what Rove is in for in years to come :{

Re Ozjet,

I have always enjoyed your posts, thinking that you are a well informed and unbiased comentater, but I think I see your QF spots coming out :cool:

As a consumer of airline services, would love to see another operator entering the market, as the current marketplace post Ansett (no I have never worked for Ansett but I have traveled Ansett and QF business a LOT) is not one that provides very much quality of service due to a lack of competition. There seems to be a mindset against the Stodart thing in Australia - I don't follow sport and therefore don't understand this. It is simply my understanding that the marketplace could well do with a carrier that will provide a premium service at a decent price, rather than a premium service at a price that ensures that there are always business seats available for staff :E :E :E

Every airline including the great QF requests government assistance and grants from state governments to assist with startup costs. I simply think that it is short sighted that SA aren't taking yet another opportunity to attract business yet again. Personally, if I was wanting to start a corporate hub style operation I would head to Adelaide as it's Australia’s cheapest mainland city in terms of infrastructure and labor costs, yet it from Adelaide that corparates are flocking in droves because the SA government doesn't offer the carrots that the other states do - particularly VIC. Remember that VIC's economy was STUFFED some years ago, and what the remedy was - attracting money to the state by offering substantial incentives to business there, specifically attracting the cream of business and events (remember the grand prix??) from SA. SA lost through bad government.

Re CASA being slow - it's just a fact of life - I recall Virgin had the same problems trying to get an AOC. CASA aren't easy to deal with on AOC's. The incumbents enjoy the protection afforded them by barriers to entry, but there is always a way around it - just look at history - if you employ people with CASA expertise to assist your AOC application then it has a far greater chance of getting up first time - just like asking a banker to help with a loan application.

I hope OZjet gets up, and if not I hope Singapore come in, and if not I hope someone else enters, so that I can travel nicely without having to go the expense of chartering a business jet.

[Buster Hyman]

Comparing a "tragic error" to greed is a poor argument.

[pullock]

You somehow think that if you receive a tip from a friend that it's less a crime than if your friends are other board members?

Personally I would rather receive a share tip from a mate who is on a board than a mate who turns a spanner.

If you hang with mates on a board then you get share tips from board level, if you hang with mates who turn spanners then you get advice from them that is at consumer level.

Why is it a crime to receive share tips from someone who knows what they are talking about, whilst receiving advice from someone who doesn't isquite legal?????????????

The real winners on the stock market receive great tips every day. The rest of us have to use the best of what we can get. The inside trading laws are meant to make it a level playing field, but like speeding, everyone does it if they can, and so would you as you were reading this. Like speeding the fine should be a slap on the wrist. If nobody is hurt then no foul no harm I say. Still not as bad as being shot in the head eight times for making the mistake of being innocent !!!

[ITCZ]

So pullock, if I came round and rooted your wife or your 17yo daughter, that would be okay, mate?

After all, it would probably be just the once, and hey, I realise that given the opportunity you would do mine, and what harm is there in it really? So many people are cheating on each other there is really no reason for you to be upset.

[pullock]

I have been guilty if hijacking this thread with insider trading way too much, and shuldn't be drawn too far down this path, as it's a thread about an airline that I hope to support if it's advertised concept becomes reality. I would prefer to talk about that here, but simply don't want to be seen running away from my stance.

My stance is no harm no foul, and let the punishment fit the crime. In this case nobody was harmed by a minor foul, so the punishment should fit the crime. The previous post equates a minor crime with a major one or two, and highlights my point, that most people haveno idea what they are on about.

QED

[Buster Hyman]

The difference being that the Board member was using the information for himself...if he's got the scruples (or lack thereof) to feather his own nest, how far could it have gone? Passing information is a different argument completely. It's still illegal.

"I was only a little drunk...I was only a little bit over the speed limit...It was only a couple of million shares..."

[Lodown]

pullock, what part of the word "illegal" don't you understand? I mean that in a nice way if possible and am trying not to be inflammatory.

Firstly at the inside trading thing - it is my understanding that he bought shares in a company that was awarded a decent contract by Telstra.
No one got hurt? And the difference between insider trading and stealing is...???

Board members and company execs have responsibilities to their shareholders - all their shareholders, not just one or two at the expense of the others. If board members release information in a manner that they aren't authorised to do so, then those same companies and the legal system are required to hold those board members accountable.

How would you feel if you were an investor, large or small, in a company that was the target of insider trading?

Ozjet???

Personally, if I was wanting to start a corporate hub style operation I would head to Adelaide as it's Australia’s cheapest mainland city in terms of infrastructure and labor costs, yet it from Adelaide that corporates are flocking in droves because the SA government doesn't offer the carrots that the other states do - particularly VIC.

The facts as you describe them should tell you something. It doesn't matter if Adelaide is the cheapest. If it doesn't have a viable market, your company will still go broke no matter how cheap the infrastructure.

While Ozjet was planning on Adelaide, Qantas would have looked on with interest knowing that the operation would not be viable. Ozjet are stepping on some mighty big toes trying to enter the Melbourne-Sydney route. Ozjet better have big shoes and the muscle to fill them.

[king oath]

In the old days circa the 60's and 70's you'd have some dentist who learned to fly and had stars in his eyes for aviation. He'd buy a clapped out light twin and start a charter company. Soon he'd undercut the established charter companies, pay his staff crap, and get himself into aviation. Much more fun than drilling teeth.

Fast forward to now. Some rich dude who likes burning money on expensive hobbies can buy a old 737 for a song and start an airline. Still the same dreamer as the dentist.

Problem is you've got to convince punters to fly with you.

How long will it be before the inevitable happens and we all say "told you so." But hey - there's always some other hobby to blow money on. Nothing lost.

[ITCZ]

It is a shame that all the people that really know whats going on are driving taxis, cutting hair, and posting on Pprune.

Pullock, its not that I don't understand where you are coming from. I think you don't understand where we are coming from.

To say no harm, no foul might sound reasonable.

The most successful economies are those that have healthy and vigorous equities markets with wide participation and a large number of investors. Even better if international investors participate.

Confidence and fairness are key factors in stimulating and maintaining this interest.

Some forms of insider trading are legal. Some other forms of insider trading have been recognised as harmful for over a hundred years.

Following is an excerpt from a speech from the US SEC.

Finally, there are those who argue that insider trading is a victimless offense and that enforcing insider trading prohibitions is simply not cost effective; the amount of money recovered does not justify the money and human capital spent on investigating and prosecuting insider traders.17 With respect to equities trading, it may well be true that public shareholders' transactions would have taken place whether or not an insider was unlawfully in the market. But the options market presents a different story. Professional option writers write options only in response to a particular demand. Where that demand comes from an insider possessing material non-public information, the option writer suffers a loss that would not otherwise have occurred.18 Additionally, this penny-wise, pound-foolish argument neglects the external costs that result from a perception that insider trading is unchecked. In fact, as regulators throughout the world are discovering, governments cannot afford to turn a blind eye to insider trading if they hope to promote an active securities market and attract international investment. As one commentator on the subject observed:
"But one of the main reasons that capital is available in such quantities in the U.S. markets is basically that the investor trusts the U.S. markets to be fair. Fairness is a major issue. Even though it sounds simplistic, it is a critical factor and one that is absent, really to a surprising degree in many of the sophisticated foreign markets. . . .The common belief in Europe that certain investors have access to confidential information and regularly profit from that information may be the major reason why comparatively few Europeans actually own stock. [This may] partially explain why the U.S. markets are so active and why so much money is available for those companies that seek to enter U.S. markets."

Newkirk and Robinson, 1998
http://www.sec.gov/news/speech/speecharchive/1998/spch221.htm

Anyway, back to the thread......

[gaunty]

pullock old mate back to Ozjets.

I have always enjoyed your posts, thinking that you are a well informed and unbiased comentater, but I think I see your QF spots coming out you damn me with faint praise I see :}

Not QF or VB spots just a recognition that;

I have in the past been less than flattering about QF.

So far there has been much wind and little real evidence that it going to happen, except at F1 Grands Prix time

I am not the slightest convinced that the business case can be supported notwithstanding the use of written down clunkers.

We don't have room in the market for cherry picking the high yield pax without, assuming they are succesful, diluting the majors revenue to the point where everybody loses.

Higher fares all round, fewer services, even lower profits.

The Australian aviation market never was, despite the Governments fondest dreams a truly free market.

Since deregulation the city folks have won big time but as usual the rest get less for more and the Ozjet model will make that even worse.

Yes the trakkie daks and Ugg boot punters (I think in the UK they're called the "shellsuit brigade") get to fill up the surplus seats and generally add to the bottom line, but they wont pay Ozjet fares and the majors cant afford to have an aircraft full of them.

Try somewhere with high density catchment areas in the hundreds of millions and you're talking. We've only got 2 1/2 big towns with a few scattered villages in a country the size of the US or Europe.

But hang on that's where these aircraft come from.:sad:

And who said Australia wasn't a third world country

[waav8r]

Ozjet - You're In Business
3 August 2005


Hello from OzJet,

These are exciting times for us here at OzJet, Australia's new business-class airline, with our second plane arriving in Australia today (August 3) with our Chairman, Paul Stoddart, on board.

We expect the plane, another Boeing 737 with 60 business seats and in full OzJet livery, to touch down in Melbourne from the UK late-afternoon.

As has been reported in the media over the past few days, OzJet has decided to make Melbourne its interim headquarters as the financial incentive package we have been negotiating with South Australia to make Adelaide our base has not yet been finalised.

We are keeping Adelaide open as an option for our headquarters, but with the application for our Air Operator's Certificate (AOC) proceeding smoothly we needed to make a decision on our starting base.

One big advantage of operating from Melbourne is that we will be close to our maintenance facilities.

We will have our offices off Garden Drive, Tullamarine, right alongside the freeway to Melbourne Airport. These offices will initially house about 60 people, including our call centre.

We are hopeful of gaining our AOC by late September, which would allow us to start flying around the middle of October. As soon as the necessary approvals to fly are granted you will see plenty of OzJet promotional activity as we launch fully into a marketing program highlighting our unique product aimed at showing how we will return great customer service to the skies in the Australian domestic aviation market.

In light of the decision we had to make on our headquarters, and the likely timing of the AOC approval, we intend to start our scheduled services on the Melbourne-Sydney route and add other routes in our first phase early in 2006.

Our staff numbers are growing. We are now at 24 and by the time of our next regular monthly update I expect the number will have almost trebled as we get closer to launching our time-based service into the skies at traditional fully-flexible economy prices.

Pilots and cabin crew are about to begin their respective training programs. We have recruited 16 pilots and 24 cabin crew so far, and we are thrilled by the proven customer service backgrounds of some of these people.

Cabin crew training will be done in Melbourne while the pilots will go through ground training in Melbourne before traveling to the UK for simulator and line-training activity.

We will soon be looking for ground crew to handle all OzJet customer service activity at the airports. Advertisements for these service roles will be published on the OzJet website in the near future.

Our National Sales Manager, Liz Young, joined us this week and will immediately begin meetings with key travel agents as well as corporate and government customers. Liz will start putting our sales strategies and team in place, meaning OzJet will be well prepared to sell and market airline tickets as soon as we receive the necessary approvals from the Civil Aviation Safety Authority (CASA).

All OzJet tickets will be e-tickets and all fares will be available via travel agents, on the internet at www.ozjet.com.au, and via the OzJet call centre. All our fares will be at traditional Australian fully-flexible economy price points. OzJet aircraft will have 60 business-class seats exclusively, configured side-by-side either side of the aisle and with extensive legroom. Passengers will be allowed to take on board three items of luggage, averting those often long and annoying waits at carousels, and all our meals, which will be hot and the best in the skies, will be served on china.

Matt Payne recently joined Ozjet as Airline Services Manager. Matt has extensive airline and customer service experience and will be responsible for creating and managing OzJet's customer activities at airports and on the telephone in our call centre. Matt is looking forward to presenting OzJet customers with a unique and consistent business-class experience at very attractive prices.

OzJet thanks you for your interest in our business and we look forward to updating you further on our launch and customer service details that we feel will revolutionise domestic air travel in Australia through a significant improvement in service standards.

With OzJet it will be a hassle-free, enjoyable travel experience at no extra cost. We look forward to welcoming you onboard as soon as we possibly can.


Regards,


Hans van Pelt,

Chief Executive,
OzJet Airlines Pty Ltd

[BAE146]

..........and the band played Waltzing Matilda as we.....................:confused:

[BAE146]

Owen S why do you think you'll get any action for that proposal when I can't even get a bet for a non - start ?

Lotta nervous punters out there despite the spin. :suspect:

[Legal_Counsel]

My view is they have no real business plan although the propaganda machine appears to be alive and well. Seriously, I wish them luck.

I think personally, whoever recommended them to jump into the Mebourne-Sydney Sector straight off lacks market insight. Are followers expecting some sort of bizaar success?

The market will deal with the new entrant very quickly:

(1) bracket Ozjet flights with irresistable offers on existing flights to keep the pressure on Ozjet to keep its fares down
(2) simulate the Ozjet model and determine its strengths and weaknesses (that is easy since Ozjet is only starting with one route) and attack Ozjet's percieved sustainable advantage
(3) embark on a discredit campaign about Ozjet practices (noisy air polluting 737-200s)
(4) enforce slot time management

Frankly, what are they trying to do? Appease a few whingers who say there is room for such a product. I think not. :}

[56P]

I wish them luck but it won't be easy. With hungry JT8s and limited track shortening (no omega, gps, irs etc), the operation won't be cheap.

[BAE146]

No probs OS, but I doubt we are gunna get any takers !:*

[pullock]

I have to agree that entering the SYD-MEL and SYD-BNE market is STUPID STUPID STUPID.

Their advice on that one is poor indeed. Lets just hope that they don't go the impulse way and keep putting all of their capacity on those two sectors until they go broke !!

I still support an all business class airline, as will my business, and many of my business associates have been dreaming of this kind of thing for a long time as well.

I am afraid that the anti competitive encumbents will successfully kill them, as airline travel right now is just crap for everybody.

I will support any airline that offers affordable quality - I don't want to fly like a rat, and I can afford not to. If Ozjet causes other airlines to recognise this market, and at the same time employ a few more Australians, then they have my full support.

[apacau]

Why stupid?

MEL-SYD is one of the biggest routes in the world and only has 2 carriers flying on it. Last time I looked most other major routes had more than that (look at LAX-JFK, LHR-JFK etc).

I think there is vast potential for a 3rd, possibly 4th or 5th carrier on the route. I'm not saying it will be easy - the carrier needs to fill a niche. But that is exactly what Ozjet are proposing...

Where I think ozjet will work is that they are not pretending to be a national network airline, they are not proposing to fly the more marginal routes.

Let's be honest, 8 flights per day with a plane with 60 seats on Melbourne-Sydney barely exceeds the capacity of a single 747. What with Qantas offering half-hourly 767s on the route, many of whose seats are sold at full economy prices - the market that ozjet is targeting - I think there is plenty of opportunity.

Especially as Mr and Mrs Joe Bloggs of Bloggs Small Business Ltd, who doesn't have a massive corporate account with Qantas but still does need to travel regularly for business, may prefer the business class product over the middle seat up the back of Qantas' 767 - after all the cost will the same!

Well I guess time will tell... After all, none of us are soothsayers!

[Chilli Muscle]

Melbourne - Sydney is a good choice in my opinion. Just exactly what are the competitors going to do about it - cut prices! Whoopy the chook - some people are fed up to the teeth with the current level of service and will fly on any other option that comes along if it is an improvement.
60 seats to fill on each plane - is that a big ask ?.:ok:

[gaunty]

Well lets do the numbers then.

For each of the 8 flights per day Mel/Syd/Mel with the two majors =336 seats inc J class return.

Assume average 68% load over the day. = 225 revenue seats.

Assume Yield as follows. Same simple assumptions applied to all three carriers.
Load as a percentage of revenue seats both carriers.
Super Saver 30% = 127 seats
Flexi Fare 40% = 169 seats
Fully Flexi 30% = 127 seats
Business 68% J Class seats avail = 16 seats

Average Revenue available on the route 2 existing carriers
Super $51,000
Flexi $90,000
Fully $93,000
Busn $17,900

Total $252,400/flight = $2,020,000/day

Add Ozjet an assume they leach 60 x 68% avge/flt = 41 seats @ Full Flexi = $30,200 per flight = $242,000/day

I dont believe there will be any significant market growth simply a revenue redistribution of existing travellers. My instincts tell me that if there is any further leaching it may be out of the Flexi pax.

Either way a yield reduction by the above calcs of around 12% will not go unchallenged.
Margins are tighter than that.

You can fiddle around with the numbers if you like but the quantum should be the same.

IMHO of course.

I am interested to see how Ozjets with only 60 seats will be able to generate better than 68%, in any event they simply do not have the seating capacity to try any serious opportunity pricing strategies.

With an average of only 20 seats per flight to spare, against the majors with 52 seats each.

When I went to stats school the old Bell Curve random motion probabilities were pretty hard to skew any way.

Up to a point the people who spend the money just wanna go when they wanna go.

IMHO you inderstand

[Buster Hyman]

Gaunty Whilst I have the utmost respect for your calculations, I think its really just a lottery. Would DJ have faired as well as they have without Bransons charisma? I honestly couldn't see an airline getting such support if Bratt was the "point man".

Also, given the fact that they are seriously pushing their *New* build aircraft, the punter may be swayed by this as well. I'd say Stoddart has looked at all angles & found the lack of "comfy" seats wanting in this market. He's picked his angle and is running with it. The punters will decide if they like the idea of the comfy seats & have enough confidence in his engineers to maintain the airframes...assuming they even know how old they are!

Let's hope there is a market for them to slot into & it expands our little corner of the industry for all of us!:ok:

[Rudder]

Gaunty,

While I agree with the sentiment and I could be wrong, I think there is something wrong with your maths.

I understand that the proposed fare is $200 per sector.

Even at 100% load factor that gives only $12,000/sector.

Last time I flew one of these aircraft they were burning about 3000lb/hr/engine at cruise. Add high maintenance costs, airport charges, ticketing charges, overhead, crew, handling etc etc etc.

I think there is not too much place to go here. Even double the ticket price it doesn't look that good let alone add load factor risk into it.

Other comments:

Notwithstanding the above, the business flyer is more interested in convenience and frequency. Add the fact that your only market is terminating traffic which further reduces your traffic pool, the inablity to catch the next flight in 30 minutes if you run late or the aircraft breaks down will ensure that that there is an unlikely winner here by the people who normally travel business class.

Add to that the lack of frequent flyer points which mean anything. The large majority of people in Business Class are accumulating points particularly as a large number of them are government employees or from major companies who don't care how much it costs as it's not their money in the first place, but do care about the points and perks. I'm sure most when converting the points probably travel economy with their family as well. These points would normally be redeemed on routes other than the ones proposed as well.

So what do we have here, we have the people that are already flying business class unlikely to migrate and the ones who aren't, price senstitive and unlikely to migrate.


I know that there has been reference here to the age of the aircraft. I actually think the flying public do care about what they fly in, they are much more astute and better informed than given credit for and for those that aren't, it won't take much of an advertisng campaign to educate them as to what they are actually flying in. As a friend of mine said, a good picture of the cabriole 737-200 in Hawaii should do the trick! Same type and about the same age... should work a treat!!

However good for Stodart for having a go we need more in the industry like himn for it to go forward however in this case I just hope no one gets hurt.

[gaunty]

Rudder

You are most probably right re the fares I was trying to be generous.

Some might think I'm knocking the idea and Ozjets, far from it but their is a reality and every time some dreamer gets going somebody gets hurt, serious money is lost and we all wind up that much poorer.

It's the airline equivalent of what ailsthe GA business.

The environment isnt going to be better for it either.

If they were required to do an environmental impact statement as part of their license application, the "load" per passenger relative to the majors would most certainly be unsustainable.

Apply a carbon tax and she's all over.

I hope those sitting in their "comfy" seats are comfortable with it, but I doubt somehow they will even think about it.:rolleyes:

The day is fast approaching if not already here, when we are all gong to have to reassess our priorities in his regard.

But then the human condition has always been for the short term as IMHO is this organisation.

The concept of pressing written off old junk into service, burning maintenance and a heap of fuel (in this case) to squeeze the last drop of cash out of it has already been visited upon us with the loss of lives and a Royal Commission.

When will they ever learn.:sad:

Oh and Buster Hyman any organisation taking $88,000,000 by my calcs or $70,000,000 by Rudders from the existing players is called "kicking a sleeping dog" in Business 101.

And thats just for one sector.:uhoh:

They cannot survive the deep discounting war that will follow, the long suffering Oz pax will get in the neck once more and pilots and staff salaries will get chopped even further.

Anyone wanna bet that the Government might be forced to go back to a 'two" airline type policy.

[Legal_Counsel]

Gaunty and Rudder, I think there is an issue here as to whether business travellers in this country should, on principle, support the continuation of flights by aeroplanes with inefficient engines. That is to say, there must be a disincentive put there. Imagine if every jet today blew smoke like that. I don't think these planes should be allowed to fly.

On the subject of Ozjet jumping onto the Melbourne and Sydney route, I suspect this is really a last ditch attempt by them to make their bold budgeted profit and loss break even in year one because I reckon they really pulled out of Adelaide because their numbers didn't stack up. Do not be surprised if they do not yet again change their configuration or try to base themselves in Sydney. Sydney has room for such a carrier across the Tasman and is a far better focal point for an all business airline. Sydney can accommodate a small airline with 10 or so jets. Ozjet doesn't have to be greedy and grow any bigger and it would save face.
:hmm:

[Rudder]

Legal,

The issue of polution whether noise or air is an entirely another matter. I'm not aware of the relative comparison between the aircraft types and I believe the aircraft meet the noise standard.

If it is to be stopped on either case then it needs to be legislated.

However with your slant in mind and as an aside I saw a good bumper sticker along these lines on the weekend.

"Fertilise the forest....Doz in a greeny"

Had me chuckling.

[oicur12]

apacau

"MEL-SYD is one of the biggest routes in the world and only has 2 carriers flying on it. Last time I looked most other major routes had more than that (look at LAX-JFK, LHR-JFK etc)."

LA county population is about 10 million. NY population about 20 million. Take into account the greater LA basin and the wider New York area and you have almost double that number of pax willing to fly between these city pairs. MEL-SYD is nothing compared to some city pairs in North America and Europe (and Asia)

Also, you would be surprised at how few direct flights there are between LAX and JFK. As the saying goes in the US with its hub and spoke system - even when you die and go to heaven you still have to go via Chicago.

[apacau]

The actual population in each city is not the issue. What is the issue is the number of passengers on the route itself (the number of people wanting to fly!). So I think the comparison with LAX-JFK is reasonable (if not conservative - I think MEL-SYD has more pax than LAX-JFK, though I'm happy to be corrected on this)

Now I don't have the statistics here in front of me, but from memory SYD-MEL is the 2nd or 3rd busiest route in the world in regards numbers of passengers. What I'm simply saying is that on such a busy route, there is room for a third carrier.

[Legal_Counsel]

The Melbourne Sydney Route has a capacity growth prediction by a factor of 9. It does not automatically mean there is room for a 3rd carrier and that it can share in the growth fairly. The present encumbants will grow their fleets disproprotionately to match that growth and demand greater access. There is no single or two aeroplane operator in that market today because the costs are disproprionately high. This is why Ozjet cannot, in my view succeed in the current configuration. Ozjet has no core operation to protect itself on that route, has no RPT experience and appears to lack market respect.

What Ozjet could do is to start with a low cost high density product to get itself established and then gradually grow its business product. In this way it would buffer its revenues by offering overflow capacity e.g. Friday night when many miss flight or still want late flights.:ok:

[Ace on Base]

Anyone know why OzJet was in Adelaide this morning??

[BAE146]

Ah......let me see.........begging the SA government for some start up money?