Jetstar to sell five cent airfares

[B A Lert]

From todays Sydney Boring Herald



Scott Rochfort
November 20, 2007 - 7:00PM

Jetstar is planning the cheapest ever airfare sale in Australian history in an attempt to draw public attention away from Tiger Airways upcoming launch of domestic services.

The Qantas low-cost offshoot plans to sell 5000 five cent fares (including taxes) on its website from 7pm tomorrow night on a handful of its routes.

Jetstar has claimed the sale is a celebration of it recently winning five awards, including the Sydney-based Centre for Asia Pacific Aviation's award for the best low-cost airline in the Asia-Pacific for 2007.

But it is more likely, Jetstar not only wants to frustrate Tiger's upcoming launch but also ensure its Singapore-headquartered rival does not undermine the Qantas offshoot's reputation as the lowest fare airline in Australia.

"It is just another example of why we are and will remain Australia's low fares airline," Jetstar chief Alan Joyce said in a statement issued by the airline.

However, the only flights on offer from Sydney are to the Gold Coast. From Melbourne - Tiger's homebase - the flights are only on three routes served by Tiger.

The tickets are also for travel in the low winter season, more than six months away and on selected flights on the low-peak Tuesday, Wednesday and Saturday daytimes. The five cent tickets also entail a $2 credit card fee for people booking over the internet..

The 5000 tickets on offer are a small percentage of the average 700,000 seats Jetstar would expect to sell every month.

News of the sale comes as Tiger attempts to gain final regulatory approval to launch flights by Friday. With a plane load of passengers, crew and Civil Aviation Safety Authority inspectors, Tiger made a "proving" flight from Melbourne to the Sunshine Coast today. Tonight Tiger will undertake a final "proving" flight from Melbourne to Launceston. If the flights go off without a hitch, Tiger could expect to have its Air Operators Certificate by Thursday. If not, it will be forced to reschedule another "proving" flight and refund thousands of tickets for its first scheduled flights.


If this stunt is "an attempt to draw public attention away from Tiger Airways upcoming launch of domestic services', surely Jetstar are achieving the opposite result. While the 5 cent fare will draw headlines and plenty of Nosey Parkers, the same people will surely be also aware of Tiger - not something they'd know about were it not for Jetstar fares.

JQ may think they are smart and clever but are they just stoopid?

[Trustworthy]

Well at least there is ONE true low cost airline in business in Oz judging by this report if true. And where's Tiger? Up and running yet or still no AOC? I guess you need a Chief Pilot for that - still no sign of one of them either?? And a Flight Dept and working conditions that can attract professionals would be out of the question....

[Pundit]

Trusty,

they have one and he is a ripper.

[Icarus2001]

I guess you need a Chief Pilot for that - still no sign of one of them either?? What a ridiculous first post. Do you really think CASA would have them doing proving flights without a CP or first revenue flights in the next week?

Since you are a probationer perhaps you should have your posting rights suspended for a while for making a stupid comment.:ok:

[silvafox]

ease up Icarus. Your wings will melt if you display any more of that attitude!

[Section28- BE]

The Qantas low-cost offshoot plans to sell 5000 five cent fares (including taxes) on its website from 7pm tomorrow night on a handful of its routes.



Could someone explain how 5 cents Tax inclusive- exceeds the "cost of providing the service" vis the Trade Practices Act/ACCC???

[B A Lert]

Could someone explain how 5 cents Tax inclusive- exceeds the "cost of providing the service" vis the Trade Practices Act/ACCC???

This thought has no doubt crossed the minds of many but I believe that someone needs to complain to the ACCC before it acts. Like most, if not all, Government authorities, the ACCC has a track record of 'reactivity', as opposed to 'pro-activity'.

I am surprised that the media isn't all over this aspect of the story. Maybe Tiger needs someone like Branson and another well known whinger and complainant on their team.
.

[Section28- BE]

Exactly- I can understand AJ and the amateurs letting it rip- but given history I thought “The Big Q” may have tasked some sort of watching brief over such a fundamental issue- given at the end of the day they are representing QF’s shareholders in the market??

Maybe Tiger needs someone like Branson and another well known whinger and complainant on their team.

Don't know about the bleat factor that we have seen- it shows lack of depth or self fixation, in my view. There are more productive ways I would have thought for such a professional aviation culture....

[UNOME]

According to the Tiger Airways Chief Pilot (KB)...

"CASA has described the Tiger proving flight as the best they have ever seen"

Very well done to all concerned.:ok:

[radiation junkie]

Who pays for this marketing stunt ? Well of course Mainline Qantas pays. All part of the J* creative accounting, smoke and mirrors finance style survival initiative. Oh and let's not forget the Management Bonus scheme which kicks in with this Tiger crushing initiative.

Bah! Humbug! , must be getting close to Christmas..........

[Tiger01]

Has anyone had any luck getting through to access the 5 cent fares ?
No luck myself !

[Skystar320]

Nope wont even load the website

Unfortunately, we're experiencing some technical difficulties, and Jetstar.com is temporarily unavailable.

Our technicians are working on the problem, and we hope to have the site up again as soon as possible.

We apologise for any inconvenience.

[Skystar320]

The server is temporarily unable to service your request. Please try again later.
Reference #6.a44809d2.1195636448.2113d8e0

[Tiger01]

Im getting the same message to !
I wonder if anyone is actully getting through at all lol

[Skystar320]

I just got through, PER - MEL were showing as $149 dollars. Where abouts these 5c airfares, are they on all routes?

[Tiger01]

Brisbane - Rockhampton/Newcastle/Mackay

Melbourne - Hobart/Launceston/Newcastle

Sydney - Goldcoast

[QFinsider]

Of course they needn't build yield, product and look after staff so the staff look after customers.Nah just keep reducing margins. Now where is the contribution margin to group profit???..That would imply business acumen, something lacking in the "group"

Of course us humble employees must realise it is US that are the problem, our pesky unions, our contracts and our work practices. J* a lean model losing $ hand over fist.

How anyone can believe this is sustainable is beyond me!

[radiation junkie]

It's sustainable because Mainline Qantas keeps the funds flowing.

[aircraft]

How anyone can believe this is sustainable is beyond me!
Where do you get the "sustainable" idea from? Nobody has said anything about these fares being sustained.

[chimbu warrior]

How the ACCC can swallow the "...we're not losing money on these fares..." line is beyond me. If any other operator tried it there would be an uproar from the Jetstar parent.

What really worries me is that Joe Public really believes that this represents the cost of providing the service (did I say service; sorry, meant to say product). JP now really believes that aviation staff are overpaid, and will be expecting 5 cent fares every time he wants to travel.

[QF DRIVE]

Clever marketing if you ask me. 5000 5c fares is nothing on routes where the seats normally go empty. These fares were only available if you were a jetmail subscriber.

I would say now after 60 mill hits, they now have a sh1tload of new jetmail subscribers that they can peddle their deals to. Cheaper advertising will offset the losses on the 5c fares.

[AEROMEDIC]

It's only clever marketing if profits go up. The resentment that most of the "e-mail subscribers" have felt when failing to get onto the website works against the original purpose. I actually got onto the website , but having selected my dates, got bumped off several times. So, I gave up. Being one way, I would have had a half price fare, but as there are many other costs incurred when travelling, the saving is small anyway.
Jetstar offers "no frills" cheap fares when you book early and travel in low season periods, which I do.
As for them making a profit when Tiger gets into full swing........... that WILL be interesting.
The new e-mail subscribers that were disappointed will think again before wasting their time trying to book "Sale" fares with Jetstar.
"no frills" fares also means "no frills infrastructure" which translates to low capacity servers,inadequate websites and low level quality assurance.

[tail wheel]

I wonder whether the authorities will look at the obvious predatory pricing practices of Jet*'s 5 cent offer?

Now, how do we get a little more competition into the fuel retail and banking industries???? :mad:

[blow.n.gasket]

By voting that Big End Of Town pandering Howard out of office tomorrow might be a start!:}

[Keg]

Joyce reckons they're only losing $20-30 on each ticket.

Isn't the J* seat cost per ASK something like 7.9 cents?

My great circle tracker shows it's about 822km SYD-MEL. That means that the 'cost' of each seat is about $65. I guess once you take out the QF subsidy then they probably are only losing $20-30. At least I now know how much QF is subsidising J* for! :rolleyes: :ugh: :E

[Captain Sherm]

Keg
For most of my long but not so distinguished career the great circle distance SYD-MEL was 707 km. What happened? Or where you looking at the longest SID-longest STAR air route?
That aside.....do not rely too much on what is a simplistic (no disrespect) piece of arithmetic...even assuming your cost/ASK is correct, you can't draw inferences on subsidies, losses etc from any of this, sorry.
If I get some time I would be happy to write more on this and may well do so. It would be a good thread starter and might encourage a few others who have made their living in this form of analysis to contribute. The analysis would cover price elasticities in each of the market segments, behaviour of the fixed/variable cost mix by route and utilization, transfer pricing mechanisms, cash flow vs accrual accounting, reaction to competitors' strategies, "whole of group" competitive strategies, short and long-run average and marginal cost curves, yield management strategies for the route, company and "whole of group", predatory pricing and capacity management issues, yield mix down the aisles of the aircraft, cost of brand building, building a marketing database, history lessons from European and US "fare wars", building loyalty mechanisms, capacity constraints at key airports, labour cost and flexibility, costs of different types (by seat, trip, route, life), ratio analysis (revenue per seat in the air, revenue per employee, aircraft utilization etc etc) and lots more......
Anyone else who thinks a "real world" (vs Business School) thread on airline economics and marketing would be useful...put your hand up. It could be interesting to sort out some wooly thinking and educate ourselves.

[Knockout]

I didn't get an email from Jet Star until 7:24pm that day. By that time I'm guessing everything was sold out. I think I'll fly Qantas, Virgin or myself.

[Kiwiguy]

Not from an airline perspective but rather from a commercial perspective when does all this stuff become unfair trade practice or restraint of trade ?

Any clown can sell seats for less than they're worth, but it damages the overall industry.

A dominant airline who uses other routes to support unsustainable fares to maintain a monopoly situation must surely be in breach of commerce laws preventing trade monopolies.

As a non Ozzie, why is the OZ Government looking the other way and why are there no complaints by other players in the industry ?

[SM4 Pirate]

My very rough calculations give no more than 4 seats per sector (maximum) on offer; so 4 seats at 5 cents and the others a normal prices. Very clever.

Not so clever, not setting up their system to cope and not a very clever way of making people search for the flights; which in itself made the system slower.

The other minor problem they 'created' was anyone getting a single one way fare has just turned around and purchase a Tiger return leg; where it's an option. So in effect these 5 cents fares may have helped Tiger, not pulled the wind out of their sails (sales). Well that's what happened in my family.

[lowerlobe]

You don't need a degree to understand that it will cost a lot more than 5 cents to fly on these sectors.

Whatever the seat/km cost is it is a heck of a lot more than 5 cents.

Add to that the cost of the various taxes which we all normally pay and someone is subsidising the cheap fares and to a considerable amount.

[Keg]

Sherm. SYD-WOL-MEL.

[ruby tuesday]

So does anyone actually know anybody that got a 5c fare? Just JQ friends n family maybe?

[aircraft]

Captain Sherm,

My hand is up.

[Tiger01]

So does anyone actually know anybody that got a 5c fare? Just JQ freinds n family maybe?



I managed after many attempts, to get a return trip for 3 people for 30 cents in total

[BallTearer]

For those who are asking - I managed to get 2 return seats, Melb - Laun, travelling next July. At 5c each, plus $2 per seat if paying by credit card (how else do you pay?), the total cost for me was $8.20. It took a few tries to get to the end of the booking process as it kept timing out, but in the end it only took 10 min of my time. Not bad really. :ok:

[Skystar320]

You don't need a degree to understand that it will cost a lot more than 5 cents to fly on these sectors.
Whatever the seat/km cost is it is a heck of a lot more than 5 cents.
Add to that the cost of the various taxes which we all normally pay and someone is subsidising the cheap fares and to a considerable amount.

Jetstar's ASK per seat is around 7.9cents per available seat km. Therefore read above post to get a real understanding.

"Wouldnt have thought it was heck of alot more"

Obvious you need to understand the financial operations on how it really works....