No-frills kangaroo ready to hop
A321 was mentioned as an option. OK, you go the Boeing route.
Advantages continued.
8- 737NG operation. Poach poorly paid but critical staff from your competition who are attempting to start up-Pacific Blue. Hint, but don't put on paper, Long Haul transfers for pilots in the future.
QF recruited KD CRJ drivers which created crewing problems and added to that little mess. Makes good business sense to a ruthless CEO.
9- A totally seperate company, pilots included, adds espirit de corp. Like the family atmosphere Virgin Blue had before the gloss wore off. This, with the new company image, will bring a welcome change from some of the ingrained and cancerous bad attitudes you see on current QF sevices.
Advantages continued.
8- 737NG operation. Poach poorly paid but critical staff from your competition who are attempting to start up-Pacific Blue. Hint, but don't put on paper, Long Haul transfers for pilots in the future.
QF recruited KD CRJ drivers which created crewing problems and added to that little mess. Makes good business sense to a ruthless CEO.
9- A totally seperate company, pilots included, adds espirit de corp. Like the family atmosphere Virgin Blue had before the gloss wore off. This, with the new company image, will bring a welcome change from some of the ingrained and cancerous bad attitudes you see on current QF sevices.
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Weekend "Australian Financial Review"
Turbulence Ahead for Qantas's Low - Cost Carrier
Qantas's decision to launch a low- cost carrier could spark industrial action from unions as well as spell a cannibalisation of its existing domestic operations, market watchers warned on Friday.
Qantas said on Thursday it would launch a new domestic carrier by May next year. The new airline has not yet been named, although Qantas met on Friday with appointed ad agency Dewey & Horton to table six suggested monikers. The airline will have 23 aircraft by mid-2005 and will primarily service leisure routes not currently profitable for Qantas.
Qantas chief executive Geoff Dixon maintained at the carrier's annual general meeting the new airline would not affect Qantas's existing domestic operations, saying having a third domestic carrier would grow Australia's leisure travel market by 20 per cent.
However, other industry players beg to differ.
``Undoubtedly this will put pressure on Qantas as a mainline carrier,'' Centre for Asia Pacific Aviation managing director Peter Harbison said.
``It's a serious risk because 23 aircraft represents roughly half of their current domestic fleet so there has to be some cannibalisation.''
Virgin Blue chief executive Brett Godfrey also said there was a ``huge potential risk in the execution, including cannibalisation of Qantas's own market and further disenfranchising of their own staff''.
Currently Richard Branson's Virgin Blue commands 30 per cent of the domestic market.
Others, meanwhile, pointed to the failure of other full service airlines' low-cost carrier spin-offs.
Those airlines whose low-cost carriers have struggled include Air Canada with Tango, Continental with Continental Lite, KLM with Buzz, US Airways with MetroJet, United Airlines with Shuttle and British Airway's Go.
Another risk associated with establishing a low-cost carrier is the threat of industrial action from unions.
Qantas has not released its staffing plans for the low-cost carrier yet but industry watchers said the airline could face union action if, for example, it tried to get existing staff to transfer to the new airline on lower pay.
Representatives from the ACTU and the Australian Services Union said on Friday they were monitoring the situation and waiting for more details on employment plans from Qantas.
Mr Dixon said Qantas did not expect any trouble from unions and that the new airline would create ``considerably more jobs in the industry''.
===========================================
"Business Sunday" (transcript)
UP IN THE AIR
19 October 2003
Helen McCombie
"… if you look at the last two or three years, the management team and the board at Qantas we’ve actually got a lot of decisions right."
A new low-cost version of Qantas, aimed at the about-to-float Virgin, plus continuing uncertainty over the Air New Zealand alliance and reports of senior managers being trained in the US in ground management and plane-handling techniques ... there is a lot going on for the country's major airline.
This week's annual meeting in Adelaide saw shareholders questioning the airline's direction.
Chairman Margaret Jackson was there to answer their questions. She speaks to Helen McCombie.
MARGARET JACKSON, CHAIRMAN, QANTAS: But if you look at the global world I think here is a structural change in aviation. I mean the growth in low cost carriers over recent years has been about 20 per cent per annum, and the full service airlines have grown at about four per cent per annum. So there is a structural shift and if you look at what is happening with the consumer is that they are very, very price sensitive. So we have to acknowledge that structural change that has occurred in the world. I think we capture and that we are a very focussed, can be a very focussed airline operator. So we’ve got Australian airlines, we’ve now got a history of a year since the start up of Australian Airlines. That started just about the time of SARS so that was pretty tricky but it is now doing very well, we also operate all of the regional operations so we’ve had the history of operating regional and we now think it is time to look at low cost operator.
HELEN McCOMBIE: It didn’t work for BA though, why will it work for Qantas?
MARGARET JACKSON: Well we think we have got the advantage of being able to look around the world and see where it has worked and where it has worked and why it hasn’t worked, and obviously not repeating some of the mistakes that other carriers have undertaken. And I think if you look at the last two or three years, the management team and the board at Qantas we’ve actually got a lot of decisions right. So we think we are very good at analysing, we’re very good at making good strategic decisions and hopefully we will get it right.
HELEN McCOMBIE: You will have to acknowledge there is some risk, you think it is worth the risk?
MARGARET JACKSON: Well we’ve think we have got the risk anyway, whether we have the full service or start a low cost as well, so if the risk exists how are we going to face that risk and we think this is our best bet.
HELEN McCOMBIE: There is a hint of desperation? You can’t stop Virgin so you will join them?
MARGARET JACKSON: Well I don’t think it is a hint of desperation. I think it is just us looking at the market, looking at what we can do to service the market better, what can we do to underpin tourism in Australia because you look at the impact of all of these events over the last few years, September the 11th, Bali and particularly SARS, quite dramatic impact on the tourist industry in Australia, from inbound and indeed travel around Australia. So we think that starting a low cost carrier, what we know is that people are sensitive to price and we believe that we might be able to also stimulate the demand for travel.
HELEN McCOMBIE: Isn’t there a big delusion here of the basic strength of Qantas?
MARGARET JACKSON: Well I think one of the strengths of Qantas is actually in our diversity and our ability to take on new challenges in a managed way and to try and reinvent ourselves and if you look at the history of Qantas that is what we have always done. Just a small example which not everyone remembers is Qantas actually invented business class in the world, and took it to the world in 1979, and then the rest of the world followed us. So there is lots of things in our history where we have been very innovative and brave, and we have always had very high standards.
HELEN McCOMBIE: How can the board run three different airlines?
MARGARET JACKSON: Well we’re actually talking about four airlines. Full service international and domestic, the regional operations, low cost and Australian Airlines. So today we have announced a reorganisation and each of those businesses will actually have its own head and in the reorganisation what we are hoping for is greater accountability, greater focus by the various heads.
HELEN McCOMBIE: That reorganisation, that restructure, that’s all about cost cutting?
MARGARET JACKSON: Cost cutting is one of the issues, what it is is that we have a business that is very dependent on capital, we spent a lot of money on aircraft, on lounges. What we want to make sure is that we remain very focussed on getting a return on that capital and one of the difficulties we have had in the network business. It is very difficult to then have clear accountability on that capital and the return on that capital so one of the reasons for the reorganisations is to increase the focus on the return on capital, to look at ways to do things in a more efficient manner, to increase the accountability and decision making speed of our management team. So we are hoping that we are going to empower the organisation even more than we have in the past.
HELEN McCOMBIE: And the reorganisation is also about succession planning?
MARGARET JACKSON: Yes, always in large corporations you need to think about succession planning and I think there is some really delightful things in the reorganisation. We now have two women reporting directory to Jeff Dixon. We have all bar two of the direct reports to Jeff Dixon are under 50 and we have three executives who are new to the management team and three who are under 40, so I think we have got a very energetic, lively and talented group of people.
HELEN McCOMBIE: And you do need a new Jeff?
MARGARET JACKSON: Well we don’t need a new Jeff yet but one day we will.
HELEN McCOMBIE: But that is not so long in the future?
MARGARET JACKSON: Well Jeff’s mid-term through a contract. I think by any standards externally or internally we all would say that Jeff is doing a fabulous job, we’re very lucky to have an outstanding CEO like Jeff but he is backed by a fabulous management team, and sometime in the future we will evolve and Jeff will go on and do something else at an appropriate time but when that is I can’t say and neither can Jeff.
HELEN McCOMBIE; There is also speculation that some of these units could be floated off, you are considering that?
MARGARET JACKSON: No we have no intention at this point to be floating any of our businesses off.
HELEN McCOMBIE: So not catering or Qantas Holidays or eventually Australian and even this new low cost airline?
MARGARET JACKSON: Well at the moment we have no intention but it doesn’t mean that sometime in the future your intention changes or circumstances change, or opportunities emerge, but at the moment we are very happy with the mix of businesses that we have, the flying businesses, the support businesses and indeed you mentioned catering and freight. We think there is some great opportunities for growth in those businesses.
==========================================
Turbulence Ahead for Qantas's Low - Cost Carrier
Qantas's decision to launch a low- cost carrier could spark industrial action from unions as well as spell a cannibalisation of its existing domestic operations, market watchers warned on Friday.
Qantas said on Thursday it would launch a new domestic carrier by May next year. The new airline has not yet been named, although Qantas met on Friday with appointed ad agency Dewey & Horton to table six suggested monikers. The airline will have 23 aircraft by mid-2005 and will primarily service leisure routes not currently profitable for Qantas.
Qantas chief executive Geoff Dixon maintained at the carrier's annual general meeting the new airline would not affect Qantas's existing domestic operations, saying having a third domestic carrier would grow Australia's leisure travel market by 20 per cent.
However, other industry players beg to differ.
``Undoubtedly this will put pressure on Qantas as a mainline carrier,'' Centre for Asia Pacific Aviation managing director Peter Harbison said.
``It's a serious risk because 23 aircraft represents roughly half of their current domestic fleet so there has to be some cannibalisation.''
Virgin Blue chief executive Brett Godfrey also said there was a ``huge potential risk in the execution, including cannibalisation of Qantas's own market and further disenfranchising of their own staff''.
Currently Richard Branson's Virgin Blue commands 30 per cent of the domestic market.
Others, meanwhile, pointed to the failure of other full service airlines' low-cost carrier spin-offs.
Those airlines whose low-cost carriers have struggled include Air Canada with Tango, Continental with Continental Lite, KLM with Buzz, US Airways with MetroJet, United Airlines with Shuttle and British Airway's Go.
Another risk associated with establishing a low-cost carrier is the threat of industrial action from unions.
Qantas has not released its staffing plans for the low-cost carrier yet but industry watchers said the airline could face union action if, for example, it tried to get existing staff to transfer to the new airline on lower pay.
Representatives from the ACTU and the Australian Services Union said on Friday they were monitoring the situation and waiting for more details on employment plans from Qantas.
Mr Dixon said Qantas did not expect any trouble from unions and that the new airline would create ``considerably more jobs in the industry''.
===========================================
"Business Sunday" (transcript)
UP IN THE AIR
19 October 2003
Helen McCombie
"… if you look at the last two or three years, the management team and the board at Qantas we’ve actually got a lot of decisions right."
A new low-cost version of Qantas, aimed at the about-to-float Virgin, plus continuing uncertainty over the Air New Zealand alliance and reports of senior managers being trained in the US in ground management and plane-handling techniques ... there is a lot going on for the country's major airline.
This week's annual meeting in Adelaide saw shareholders questioning the airline's direction.
Chairman Margaret Jackson was there to answer their questions. She speaks to Helen McCombie.
MARGARET JACKSON, CHAIRMAN, QANTAS: But if you look at the global world I think here is a structural change in aviation. I mean the growth in low cost carriers over recent years has been about 20 per cent per annum, and the full service airlines have grown at about four per cent per annum. So there is a structural shift and if you look at what is happening with the consumer is that they are very, very price sensitive. So we have to acknowledge that structural change that has occurred in the world. I think we capture and that we are a very focussed, can be a very focussed airline operator. So we’ve got Australian airlines, we’ve now got a history of a year since the start up of Australian Airlines. That started just about the time of SARS so that was pretty tricky but it is now doing very well, we also operate all of the regional operations so we’ve had the history of operating regional and we now think it is time to look at low cost operator.
HELEN McCOMBIE: It didn’t work for BA though, why will it work for Qantas?
MARGARET JACKSON: Well we think we have got the advantage of being able to look around the world and see where it has worked and where it has worked and why it hasn’t worked, and obviously not repeating some of the mistakes that other carriers have undertaken. And I think if you look at the last two or three years, the management team and the board at Qantas we’ve actually got a lot of decisions right. So we think we are very good at analysing, we’re very good at making good strategic decisions and hopefully we will get it right.
HELEN McCOMBIE: You will have to acknowledge there is some risk, you think it is worth the risk?
MARGARET JACKSON: Well we’ve think we have got the risk anyway, whether we have the full service or start a low cost as well, so if the risk exists how are we going to face that risk and we think this is our best bet.
HELEN McCOMBIE: There is a hint of desperation? You can’t stop Virgin so you will join them?
MARGARET JACKSON: Well I don’t think it is a hint of desperation. I think it is just us looking at the market, looking at what we can do to service the market better, what can we do to underpin tourism in Australia because you look at the impact of all of these events over the last few years, September the 11th, Bali and particularly SARS, quite dramatic impact on the tourist industry in Australia, from inbound and indeed travel around Australia. So we think that starting a low cost carrier, what we know is that people are sensitive to price and we believe that we might be able to also stimulate the demand for travel.
HELEN McCOMBIE: Isn’t there a big delusion here of the basic strength of Qantas?
MARGARET JACKSON: Well I think one of the strengths of Qantas is actually in our diversity and our ability to take on new challenges in a managed way and to try and reinvent ourselves and if you look at the history of Qantas that is what we have always done. Just a small example which not everyone remembers is Qantas actually invented business class in the world, and took it to the world in 1979, and then the rest of the world followed us. So there is lots of things in our history where we have been very innovative and brave, and we have always had very high standards.
HELEN McCOMBIE: How can the board run three different airlines?
MARGARET JACKSON: Well we’re actually talking about four airlines. Full service international and domestic, the regional operations, low cost and Australian Airlines. So today we have announced a reorganisation and each of those businesses will actually have its own head and in the reorganisation what we are hoping for is greater accountability, greater focus by the various heads.
HELEN McCOMBIE: That reorganisation, that restructure, that’s all about cost cutting?
MARGARET JACKSON: Cost cutting is one of the issues, what it is is that we have a business that is very dependent on capital, we spent a lot of money on aircraft, on lounges. What we want to make sure is that we remain very focussed on getting a return on that capital and one of the difficulties we have had in the network business. It is very difficult to then have clear accountability on that capital and the return on that capital so one of the reasons for the reorganisations is to increase the focus on the return on capital, to look at ways to do things in a more efficient manner, to increase the accountability and decision making speed of our management team. So we are hoping that we are going to empower the organisation even more than we have in the past.
HELEN McCOMBIE: And the reorganisation is also about succession planning?
MARGARET JACKSON: Yes, always in large corporations you need to think about succession planning and I think there is some really delightful things in the reorganisation. We now have two women reporting directory to Jeff Dixon. We have all bar two of the direct reports to Jeff Dixon are under 50 and we have three executives who are new to the management team and three who are under 40, so I think we have got a very energetic, lively and talented group of people.
HELEN McCOMBIE: And you do need a new Jeff?
MARGARET JACKSON: Well we don’t need a new Jeff yet but one day we will.
HELEN McCOMBIE: But that is not so long in the future?
MARGARET JACKSON: Well Jeff’s mid-term through a contract. I think by any standards externally or internally we all would say that Jeff is doing a fabulous job, we’re very lucky to have an outstanding CEO like Jeff but he is backed by a fabulous management team, and sometime in the future we will evolve and Jeff will go on and do something else at an appropriate time but when that is I can’t say and neither can Jeff.
HELEN McCOMBIE; There is also speculation that some of these units could be floated off, you are considering that?
MARGARET JACKSON: No we have no intention at this point to be floating any of our businesses off.
HELEN McCOMBIE: So not catering or Qantas Holidays or eventually Australian and even this new low cost airline?
MARGARET JACKSON: Well at the moment we have no intention but it doesn’t mean that sometime in the future your intention changes or circumstances change, or opportunities emerge, but at the moment we are very happy with the mix of businesses that we have, the flying businesses, the support businesses and indeed you mentioned catering and freight. We think there is some great opportunities for growth in those businesses.
==========================================
Last edited by Wirraway; 20th Oct 2003 at 09:16.
Nunc est bibendum
Gnade, AO seems to be doing quite well with their 'culture' using QF mainline techies.
People salivating at getting a job or an upgrade onto jets I can understand, people salivating at QF mainline crews getting 'done over' I find baffling. If QF pilots(in whatever form) pay goes down there is only one direction for EVERY other pilots job in the country!!
Talk about cutting off your nose to spite your face.
People salivating at getting a job or an upgrade onto jets I can understand, people salivating at QF mainline crews getting 'done over' I find baffling. If QF pilots(in whatever form) pay goes down there is only one direction for EVERY other pilots job in the country!!
Talk about cutting off your nose to spite your face.
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YOU KNOW IT'S A "NO FRILLS" AIRLINE WHEN ...
...they don't sell tickets, they sell chances.
...all the insurance machines in the terminal are sold out.
...before the flight, the passengers get together and elect a pilot.
...if you kiss the wing for luck before boarding, it kisses you back.
...you cannot board the plane unless you have the exact change.
...before you took off, the stewardess tells you to fasten your Velcro.
...the Captain asks all the passengers to chip in a little for gas.
...when they pull the steps away, the plane starts rocking.
...the Captain yells at the ground crew to get the cows off the runway.
...you ask the Captain how often their planes crash and he sez, "Just once."
...no movie. Don't need one. Your life keeps flashing before your eyes
...you see a man with a gun, but he's demanding to be let off the plane.
...all the planes have both a bathroom and a chapel.
============================================
...they don't sell tickets, they sell chances.
...all the insurance machines in the terminal are sold out.
...before the flight, the passengers get together and elect a pilot.
...if you kiss the wing for luck before boarding, it kisses you back.
...you cannot board the plane unless you have the exact change.
...before you took off, the stewardess tells you to fasten your Velcro.
...the Captain asks all the passengers to chip in a little for gas.
...when they pull the steps away, the plane starts rocking.
...the Captain yells at the ground crew to get the cows off the runway.
...you ask the Captain how often their planes crash and he sez, "Just once."
...no movie. Don't need one. Your life keeps flashing before your eyes
...you see a man with a gun, but he's demanding to be let off the plane.
...all the planes have both a bathroom and a chapel.
============================================
Last edited by Wirraway; 20th Oct 2003 at 10:13.
Keg - so true about salaries, but I am wondering if AIPA have a battle strategy given the seismic shifts that seem to be going on in the industry generally? Some posters here have indicated that the association hierarchy may have become a bit complacent on this type of issue? (or just numb from too many trips to LA LA land!
)
)
Jake,
Please stop pretending to know what’s going to happen. You are sounding like a jumped up tosser. I am a FO with AO and a financial member of AIPA. I just checked the AIPA web site and still no info as to who will definitely be crewing the new Skimpy. You can't possibly know what you purport and if you really had an inside running on things you certainly. wouldn’t be posting on here
Please stop pretending to know what’s going to happen. You are sounding like a jumped up tosser. I am a FO with AO and a financial member of AIPA. I just checked the AIPA web site and still no info as to who will definitely be crewing the new Skimpy. You can't possibly know what you purport and if you really had an inside running on things you certainly. wouldn’t be posting on here
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http://www.businessweekly.co.uk/
20 October 2003
Latest News In Academia
Warning on low fares airlines
A potential over-supply of airline seats could take some of Europe's scheduled low-cost carriers under, according to new research from Cranfield University’s Air Transport Group.
The report highlights the differences between the business models of the two most successful European no-frills airlines, EasyJet and Ryanair, and analyses the economic performance of over 20 of Europe’s charter and no-frills scheduled operators, benchmarking these against low-cost carriers in the US.
Although the no-frills sector has "revolutionised short-haul air travel in the UK and Western Europe", as the sector matures, it is feared that some of the airlines will struggle to survive.
The rapid growth of low-cost scheduled carriers in Europe is in sharp contrast to the charter airlines who have seen traffic stagnate or even decline.
The report is titled: 'Market analysis of Europe’s low-cost airlines: an examination of trends in the economics and operating characteristics of Europe’s charter and no-frills scheduled airlines' and follows on from the first Cranfield report, published at the beginning of 2000.
"In our first report we speculated that no-frills scheduled carriers would account for 12 per cent and 15 per cent of the intra-EU air market by 2010," said Dr George Williams, senior lecturer in air transport and co-writer of the report.
"But, like most forecasters, we underestimated the scale of transformation that has been occurring in the provision of short haul service in Europe. We now believe this market share will be achieved four to five years earlier.
"The air transport sector in Europe has been totally transformed as a result of the activities of no-frills airlines and the implications for full service providers have been dramatic.
"Around 40 per cent of passengers travelling within the UK and between the UK and European Economic Area countries now use low-cost scheduled airlines. In all, there are now some 500 routes in Europe served by 20 no-frills carriers."
============================================
A repost from August from
"Sydney Morning Herald"
Soaring budget airlines are no flight of fancy
By Kirsty Needham, Consumer Writer
August 22, 2003
Pack your bags, and lunch . . . Qantas's Geoff Dixon at a news conference yesterday to announce the plan to launch a no-frills airline. Photo: David Moir
Plans by Qantas to introduce a low-cost domestic airline to compete with Virgin Blue come as no-frills airlines revolutionise air travel worldwide.
With no tickets, seat allocation, frequent flyer points, refunds or free meals, and turn-around of aircraft within 30 minutes, the services can seem more like a bus shuttle.
According to the website lowcostairlines.org, there are 34 no-frills airlines in Europe, 13 in the United States and five in Asia, and the list is growing.
Air New Zealand introduced a no-frills service to Australia last week, due to begin in October.
Passengers have been warned to "bring a good book" because there will be no free newspapers and magazines. Children's meals and infant supplies also will not be available. The cheapest "use it or lose it" fares mean passengers who miss their flight have to pay for another ticket. No changes can be made to fares.
Since Air New Zealand started a domestic no-frills service a year ago, passenger numbers had risen 23 per cent, the airline said.
In the United States, Delta Air Lines introduced its Song service in April, with self-service kiosk check-in or the option of passengers checking in at home up to a day in advance and printing their own boarding pass. Free soft drinks and water are available, but passengers pay for food.
No-frills JetBlue and budget pioneer Southwest were reported to be the only US airlines to make a profit last year. JetBlue enjoyed passenger growth of 71 per cent.
In Europe, passenger numbers on ticketless, foodless easyJet rose 75 per cent last year with a service that sells one-way fares online, and does not offer refunds or alterations.
A downside for passengers is that many low-cost airlines avoid hefty landing fees by choosing small airports that may be far from the destination city. In Europe, Ryanair has attracted complaints because its flights to Frankfurt land in Hahn, about 100 kilometres from Frankfurt.
Flight Centre's managing director, Graham Turner, said the international experience showed there was a big opportunity for new-style airlines to make money.
Regardless of whether they had to pay for food, consumers would book with discount airlines if they met basic requirements on leg room, and the food was edible, Mr Turner said.
"Many so-called full-service carriers have coffee that is undrinkable," he said.
But he questioned whether the Qantas proposal was "mutton dressed up as lamb".
"It has to be a new model, not the old Qantas model without the unions."
Qantas frequent flyers travelling on Australian Airlines - its Asian "low-cost carrier" - have found themselves refused entry to Qantas Club lounges.
Qantas said that apart from this, and restrictions on earning points, the service on Australian Airlines was no different to that on regular Qantas flight.
Analysts believe Qantas will be more ruthless in reducing onboard and other services on a domestic discount carrier.
The founder of frequentflyer.com.au, Clifford Reichlin, said it was likely a no-frills Qantas domestic airline would not cater to frequent flyers.
"Competition is always a good thing, provided they lower their cost structure to offer competition on fares. Otherwise they will recoup it somewhere else. Qantas travel will become premium paid."
==========================================
20 October 2003
Latest News In Academia
Warning on low fares airlines
A potential over-supply of airline seats could take some of Europe's scheduled low-cost carriers under, according to new research from Cranfield University’s Air Transport Group.
The report highlights the differences between the business models of the two most successful European no-frills airlines, EasyJet and Ryanair, and analyses the economic performance of over 20 of Europe’s charter and no-frills scheduled operators, benchmarking these against low-cost carriers in the US.
Although the no-frills sector has "revolutionised short-haul air travel in the UK and Western Europe", as the sector matures, it is feared that some of the airlines will struggle to survive.
The rapid growth of low-cost scheduled carriers in Europe is in sharp contrast to the charter airlines who have seen traffic stagnate or even decline.
The report is titled: 'Market analysis of Europe’s low-cost airlines: an examination of trends in the economics and operating characteristics of Europe’s charter and no-frills scheduled airlines' and follows on from the first Cranfield report, published at the beginning of 2000.
"In our first report we speculated that no-frills scheduled carriers would account for 12 per cent and 15 per cent of the intra-EU air market by 2010," said Dr George Williams, senior lecturer in air transport and co-writer of the report.
"But, like most forecasters, we underestimated the scale of transformation that has been occurring in the provision of short haul service in Europe. We now believe this market share will be achieved four to five years earlier.
"The air transport sector in Europe has been totally transformed as a result of the activities of no-frills airlines and the implications for full service providers have been dramatic.
"Around 40 per cent of passengers travelling within the UK and between the UK and European Economic Area countries now use low-cost scheduled airlines. In all, there are now some 500 routes in Europe served by 20 no-frills carriers."
============================================
A repost from August from
"Sydney Morning Herald"
Soaring budget airlines are no flight of fancy
By Kirsty Needham, Consumer Writer
August 22, 2003
Pack your bags, and lunch . . . Qantas's Geoff Dixon at a news conference yesterday to announce the plan to launch a no-frills airline. Photo: David Moir
Plans by Qantas to introduce a low-cost domestic airline to compete with Virgin Blue come as no-frills airlines revolutionise air travel worldwide.
With no tickets, seat allocation, frequent flyer points, refunds or free meals, and turn-around of aircraft within 30 minutes, the services can seem more like a bus shuttle.
According to the website lowcostairlines.org, there are 34 no-frills airlines in Europe, 13 in the United States and five in Asia, and the list is growing.
Air New Zealand introduced a no-frills service to Australia last week, due to begin in October.
Passengers have been warned to "bring a good book" because there will be no free newspapers and magazines. Children's meals and infant supplies also will not be available. The cheapest "use it or lose it" fares mean passengers who miss their flight have to pay for another ticket. No changes can be made to fares.
Since Air New Zealand started a domestic no-frills service a year ago, passenger numbers had risen 23 per cent, the airline said.
In the United States, Delta Air Lines introduced its Song service in April, with self-service kiosk check-in or the option of passengers checking in at home up to a day in advance and printing their own boarding pass. Free soft drinks and water are available, but passengers pay for food.
No-frills JetBlue and budget pioneer Southwest were reported to be the only US airlines to make a profit last year. JetBlue enjoyed passenger growth of 71 per cent.
In Europe, passenger numbers on ticketless, foodless easyJet rose 75 per cent last year with a service that sells one-way fares online, and does not offer refunds or alterations.
A downside for passengers is that many low-cost airlines avoid hefty landing fees by choosing small airports that may be far from the destination city. In Europe, Ryanair has attracted complaints because its flights to Frankfurt land in Hahn, about 100 kilometres from Frankfurt.
Flight Centre's managing director, Graham Turner, said the international experience showed there was a big opportunity for new-style airlines to make money.
Regardless of whether they had to pay for food, consumers would book with discount airlines if they met basic requirements on leg room, and the food was edible, Mr Turner said.
"Many so-called full-service carriers have coffee that is undrinkable," he said.
But he questioned whether the Qantas proposal was "mutton dressed up as lamb".
"It has to be a new model, not the old Qantas model without the unions."
Qantas frequent flyers travelling on Australian Airlines - its Asian "low-cost carrier" - have found themselves refused entry to Qantas Club lounges.
Qantas said that apart from this, and restrictions on earning points, the service on Australian Airlines was no different to that on regular Qantas flight.
Analysts believe Qantas will be more ruthless in reducing onboard and other services on a domestic discount carrier.
The founder of frequentflyer.com.au, Clifford Reichlin, said it was likely a no-frills Qantas domestic airline would not cater to frequent flyers.
"Competition is always a good thing, provided they lower their cost structure to offer competition on fares. Otherwise they will recoup it somewhere else. Qantas travel will become premium paid."
==========================================
Last edited by Wirraway; 20th Oct 2003 at 11:04.
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My tip for the new airline
Base location may be MEL
Main Office may be at 88 Franklin St the former home
of TAA/Australian
The main ex AN maintenance facility may be acquired
Discussions may be taking place with the Victorian
Government and Korda Mentha
Base location may be MEL
Main Office may be at 88 Franklin St the former home
of TAA/Australian
The main ex AN maintenance facility may be acquired
Discussions may be taking place with the Victorian
Government and Korda Mentha
Thread Starter
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Cost cutting
Here's a good move Mr Dixon from "The Bulletin" Sept 3, would
save you on middle managment costs for sure and give the
pilots the chance to show you how to really run a No-frills airline.
......Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile)............
Wirraway
"The Bulletin"
September 3, 2003
NO FRILLS TAKES FLIGHT
Cheap air travel is the surefire way to put seats on seats - but who will rule in Asia, the state or the entrepreneurs? By SONIA KOLESNIKOV-JESSOP
When AirAsia started flying out of Kuala Lumpur two years ago, it quickly became the cheapest of the cheap, the lowest-cost airline in the world. AirAsia says it spends only 2.5 cents to fly one passenger one kilometer, compared to 4.5 cents for Ryanair and 7.5 cents for Southwest – the discount leaders of Europe and America.
Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile). Cabin attendants do double duty, cleaning planes and selling drinks on commission. It's a "big fallacy" to think no-frills means just cutting out free drinks, says CEO Tony Fernandes, who has been known to work the check-in counter. You've got to "change the airline culture."
Even that may not be enough for no-frills entrepreneurs. The discount revolution has been slow to arrive in Asia, where governments still control most major airlines and have offered a grudging welcome to new competitors. Last year discount carriers accounted for less than 1 percent of passenger traffic in Asia (excluding Australia and Japan), compared with about 25 percent in the United States and 10 percent in Europe. While Southwest recently became the largest airline in the United States, AirAsia is a small success, with 7 planes and profits of $US5.3 million last year. Now, in a frontal assault on AirAsia and other private upstarts like Cebu Pacific in the Philippines and Bangkok Airways, state-owned carriers like Singapore Airlines, Thai Airways and Qantas are considering their own no-frills spinoffs. "Most of the airlines in Asia are big monopolies; they have always had it their way and they don't like any whiff of competition," says Fernandes. "The unknown is causing this mass hysteria."
It may seem that major airlines can't lose this war, with the state on their side. Asian governments have yet to embrace the wave of deregulation that made it possible for entrepreneurs like Tony Ryan to become major players in the West. There is no Asian equivalent of Ryanair, which flies all over Europe, because Asian states have been much slower to open their airports to all comers. Asian discounters are for the most part limited to domestic flights. Yet when Malaysia Airlines last year launched a fare war against AirAsia, the government stopped it, saying it wanted both to survive. Fernandes says for majors to fly without frills is like Ritz-Carlton competing with the YMCA. "Business sense will prevail," he says.
It will be hard to make the no-frills formula work Asia wide. In Europe and the United States, the strategy includes hiring nonunion staff, using one (often narrow-body) aircraft model to cut maintenance costs, flying short routes (less than two hours) to reduce turnaround times, landing only at secondary airports, selling tickets online to avoid middlemen and eliminating frills like hot food. In Asia, labor is already inexpensive, most regional hops are longer than two hours, secondary airports are not cheap and consumers are less likely to buy online. Asian majors already cram cheap seats into the back of wide body jets, creating a budget "plane within the plane." All this makes it near impossible for discounters to gain cost advantages on routes in Asia, says Richard Stirland, director general of the Association of Asia Pacific Airlines.
So why are the majors testing the down market? In the West, no-frills airlines are luring millions of customers who have never flown before, and Asia has an even larger untapped market – one that no airline executive dares ignore. Analyst Peter Harbison says Asian governments are opening up "possibly faster than many imagine," lowering airport charges and other barriers in response to SARS and the recent downturn in air travel. Singapore and Thailand will decide "fairly soon" on whether to launch a new budget carrier based in Chiang Mai, Thailand, says Singapore Trade Minister George Yeo. And while one former deputy chairman of Singapore Airlines recently warned that aviation history is "littered" with no-frills failures, another is leading a new start-up, ValuAir. None of this scares AirAsia, which is gearing up for regional flights, perhaps next year. Fernandes insists, "We can always beat the big guys on cost." He won't say how, but pretty soon, he'll have a chance to prove it.
With Lorien Holland in Kuala Lumpur
© 2003 Newsweek, Inc.
===========================================
save you on middle managment costs for sure and give the
pilots the chance to show you how to really run a No-frills airline.
......Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile)............
Wirraway
"The Bulletin"
September 3, 2003
NO FRILLS TAKES FLIGHT
Cheap air travel is the surefire way to put seats on seats - but who will rule in Asia, the state or the entrepreneurs? By SONIA KOLESNIKOV-JESSOP
When AirAsia started flying out of Kuala Lumpur two years ago, it quickly became the cheapest of the cheap, the lowest-cost airline in the world. AirAsia says it spends only 2.5 cents to fly one passenger one kilometer, compared to 4.5 cents for Ryanair and 7.5 cents for Southwest – the discount leaders of Europe and America.
Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile). Cabin attendants do double duty, cleaning planes and selling drinks on commission. It's a "big fallacy" to think no-frills means just cutting out free drinks, says CEO Tony Fernandes, who has been known to work the check-in counter. You've got to "change the airline culture."
Even that may not be enough for no-frills entrepreneurs. The discount revolution has been slow to arrive in Asia, where governments still control most major airlines and have offered a grudging welcome to new competitors. Last year discount carriers accounted for less than 1 percent of passenger traffic in Asia (excluding Australia and Japan), compared with about 25 percent in the United States and 10 percent in Europe. While Southwest recently became the largest airline in the United States, AirAsia is a small success, with 7 planes and profits of $US5.3 million last year. Now, in a frontal assault on AirAsia and other private upstarts like Cebu Pacific in the Philippines and Bangkok Airways, state-owned carriers like Singapore Airlines, Thai Airways and Qantas are considering their own no-frills spinoffs. "Most of the airlines in Asia are big monopolies; they have always had it their way and they don't like any whiff of competition," says Fernandes. "The unknown is causing this mass hysteria."
It may seem that major airlines can't lose this war, with the state on their side. Asian governments have yet to embrace the wave of deregulation that made it possible for entrepreneurs like Tony Ryan to become major players in the West. There is no Asian equivalent of Ryanair, which flies all over Europe, because Asian states have been much slower to open their airports to all comers. Asian discounters are for the most part limited to domestic flights. Yet when Malaysia Airlines last year launched a fare war against AirAsia, the government stopped it, saying it wanted both to survive. Fernandes says for majors to fly without frills is like Ritz-Carlton competing with the YMCA. "Business sense will prevail," he says.
It will be hard to make the no-frills formula work Asia wide. In Europe and the United States, the strategy includes hiring nonunion staff, using one (often narrow-body) aircraft model to cut maintenance costs, flying short routes (less than two hours) to reduce turnaround times, landing only at secondary airports, selling tickets online to avoid middlemen and eliminating frills like hot food. In Asia, labor is already inexpensive, most regional hops are longer than two hours, secondary airports are not cheap and consumers are less likely to buy online. Asian majors already cram cheap seats into the back of wide body jets, creating a budget "plane within the plane." All this makes it near impossible for discounters to gain cost advantages on routes in Asia, says Richard Stirland, director general of the Association of Asia Pacific Airlines.
So why are the majors testing the down market? In the West, no-frills airlines are luring millions of customers who have never flown before, and Asia has an even larger untapped market – one that no airline executive dares ignore. Analyst Peter Harbison says Asian governments are opening up "possibly faster than many imagine," lowering airport charges and other barriers in response to SARS and the recent downturn in air travel. Singapore and Thailand will decide "fairly soon" on whether to launch a new budget carrier based in Chiang Mai, Thailand, says Singapore Trade Minister George Yeo. And while one former deputy chairman of Singapore Airlines recently warned that aviation history is "littered" with no-frills failures, another is leading a new start-up, ValuAir. None of this scares AirAsia, which is gearing up for regional flights, perhaps next year. Fernandes insists, "We can always beat the big guys on cost." He won't say how, but pretty soon, he'll have a chance to prove it.
With Lorien Holland in Kuala Lumpur
© 2003 Newsweek, Inc.
===========================================
Keg
An emotional response. It gets worse when somebody says "there goes your command" as a Skimpy jet is taxiing by. Seen similar in a past life.
Hardly salivitating, playing Devil's Advocate with a couple of posters-Jake etc- as to what advantages there were in using mainline crews. I put myself in the hypothetical shoes of a ruthless CEO, proposed a few advantages, and would be happy to be shot down by anything but sooky pilot emotion.
You mentioned AO doing quite well with cross polinisation of QF Long Haul culture. OK. As a ruthless CEO I would look into that. But I will probably use the following as argument to sway the "team".
How did we handle growth when feeding on the Ansett carcass? How can we do it cheaper?
We need pilots and quickly. We want experienced people and don't want to be crippled by training problems (Kendalls).Nor do we feel it neccessary or desirable to go what was anecedotally, the VB route. Where unexpected rapid expansion left them with a pool of inexperience to promote. We want exacting QF standards which are affordable.
Advantages Continued.
10-What would the market provide the ruthless CEO? Captains, First Officers, Training Airmen and managers from both types. There will be no training hickups and upgrading of very experienced 321/737 F/Os down the track will counter the looming experienced pilot shortage. Reinforcing the double whammy cost of upgrading F/O's or S/O's.
And finally Keg, from my perspective, I hope it gets of the ground and utilises experienced pilots off the street. I have no interest in Skimpy but I do have an interest in the market. I witnessed the full 18 months the market took to absorb exAN & KD jet pilots whilst QF continued with cadet programmes.
That affected your pay and conditions subliminally! The threat was VB. The wealth of experience enabled the ease of starting Jetconnect and Pacific Blue. Now witness the pay pressure!
And with my interest in market forces I hope it is the NG.
An emotional response. It gets worse when somebody says "there goes your command" as a Skimpy jet is taxiing by. Seen similar in a past life.
Hardly salivitating, playing Devil's Advocate with a couple of posters-Jake etc- as to what advantages there were in using mainline crews. I put myself in the hypothetical shoes of a ruthless CEO, proposed a few advantages, and would be happy to be shot down by anything but sooky pilot emotion.
You mentioned AO doing quite well with cross polinisation of QF Long Haul culture. OK. As a ruthless CEO I would look into that. But I will probably use the following as argument to sway the "team".
How did we handle growth when feeding on the Ansett carcass? How can we do it cheaper?
We need pilots and quickly. We want experienced people and don't want to be crippled by training problems (Kendalls).Nor do we feel it neccessary or desirable to go what was anecedotally, the VB route. Where unexpected rapid expansion left them with a pool of inexperience to promote. We want exacting QF standards which are affordable.
Advantages Continued.
10-What would the market provide the ruthless CEO? Captains, First Officers, Training Airmen and managers from both types. There will be no training hickups and upgrading of very experienced 321/737 F/Os down the track will counter the looming experienced pilot shortage. Reinforcing the double whammy cost of upgrading F/O's or S/O's.
And finally Keg, from my perspective, I hope it gets of the ground and utilises experienced pilots off the street. I have no interest in Skimpy but I do have an interest in the market. I witnessed the full 18 months the market took to absorb exAN & KD jet pilots whilst QF continued with cadet programmes.
That affected your pay and conditions subliminally! The threat was VB. The wealth of experience enabled the ease of starting Jetconnect and Pacific Blue. Now witness the pay pressure!
And with my interest in market forces I hope it is the NG.
Nunc est bibendum
Sorry Gnade, didn't mean to imply that YOU were salivating but there have been posts by other players in this discussion that were exactly that. We may not have seen eye to eye on certain issues in the past but I respect where you are coming from!
I certainly don't disagree with your sentiments regarding the hiring of crews. That said, there are some cadets out there at the moment who haven't been employed due to this 'down turn'. I'm certainly not a part of the 'there goes your command' brigade. I'm unlikely to go for Skimpy even if QF crews fly it due to the commuting issue and moving the family out of Sydney.
Anyway, I go back to my previous post. QF drivers pay goes down,, there is little hope of the bottom end of the market going up!
I certainly don't disagree with your sentiments regarding the hiring of crews. That said, there are some cadets out there at the moment who haven't been employed due to this 'down turn'. I'm certainly not a part of the 'there goes your command' brigade. I'm unlikely to go for Skimpy even if QF crews fly it due to the commuting issue and moving the family out of Sydney.
Anyway, I go back to my previous post. QF drivers pay goes down,, there is little hope of the bottom end of the market going up!
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CNN
Pay-per-use in vogue on the road
Nick Easen
CNN
(CNN) -- User-pays is a growing global trend in the biz travel arena, whether you want to send a fax, drink in an airport lounge or order in-flight food.
While corporations cut travel budgets and the value-based airline sector booms, cost-conscious executives are finding it easier to budget when they only pay for what they use.
Pay-per-use lounges, a relatively new concept, have been attracting a lot of attention especially in Brisbane and Sydney, Australia.
Here a casual fee of $3 allows you to relax, surf the Net, watch a free movie or play on a Sony Playstation -- apparently all the rage among grown men with executive stress.
"These lounges are proving to be a popular option with business guests," Amanda Bolger from Virgin Blue told CNN.
"If you don't want to use it, it doesn't have an impact on the price of your air fare," she adds.
Traditionally airlines have bundled lounge and in-flight services for business and first class travelers in a bid to attract premium prices for tickets and attract the high-end traveler.
Yet with travel budgets under increasing scrutiny, executives are appreciating the greater transparency, were costs are unraveled and they can choose which services to use.
"Business travelers have no problem paying for a service, but they now like to have that option," adds Bolger.
Virgin Blue's pay-per-use lounges have been so popular that they plan to roll out another in Melbourne and at other airports across Australia.
Their formula for success is likely to be mirrored by Qantas, who plans to introduce a competing domestic airline along the same lines as Virgin Blue.
Delta Air Lines introduced its no-frills Song service this April in the US. Free soft drinks and water are available in-flight, but passengers pay for food -- as they do on EasyJet in Europe.
User-pay conveniences such as lounges, business services, and in-flight food are a sound investment for no-frills airlines, as people only use what they need.
If there is increasing or decreasing demand then it is easier to alter the services on offer.
Whereas the major global airlines have made huge investment on premium lounges, staffing and services that are maintained whether business is boom or bust.
According to the website http://www.lowcostairlines.org/ there are 34 no-frills airlines in Europe, 13 in the United States and five in the Asia-Pacific region, and the list is on the rise.
Experts say these are the airlines that are likely to spearhead pay-per-use travel services in the future.
==========================================
http://www.lowcostairlines.org/ Which I have just had a quick
look at, seems to have a lot of inside information on how these No-frills-LCCs work.
Wirraway
Pay-per-use in vogue on the road
Nick Easen
CNN
(CNN) -- User-pays is a growing global trend in the biz travel arena, whether you want to send a fax, drink in an airport lounge or order in-flight food.
While corporations cut travel budgets and the value-based airline sector booms, cost-conscious executives are finding it easier to budget when they only pay for what they use.
Pay-per-use lounges, a relatively new concept, have been attracting a lot of attention especially in Brisbane and Sydney, Australia.
Here a casual fee of $3 allows you to relax, surf the Net, watch a free movie or play on a Sony Playstation -- apparently all the rage among grown men with executive stress.
"These lounges are proving to be a popular option with business guests," Amanda Bolger from Virgin Blue told CNN.
"If you don't want to use it, it doesn't have an impact on the price of your air fare," she adds.
Traditionally airlines have bundled lounge and in-flight services for business and first class travelers in a bid to attract premium prices for tickets and attract the high-end traveler.
Yet with travel budgets under increasing scrutiny, executives are appreciating the greater transparency, were costs are unraveled and they can choose which services to use.
"Business travelers have no problem paying for a service, but they now like to have that option," adds Bolger.
Virgin Blue's pay-per-use lounges have been so popular that they plan to roll out another in Melbourne and at other airports across Australia.
Their formula for success is likely to be mirrored by Qantas, who plans to introduce a competing domestic airline along the same lines as Virgin Blue.
Delta Air Lines introduced its no-frills Song service this April in the US. Free soft drinks and water are available in-flight, but passengers pay for food -- as they do on EasyJet in Europe.
User-pay conveniences such as lounges, business services, and in-flight food are a sound investment for no-frills airlines, as people only use what they need.
If there is increasing or decreasing demand then it is easier to alter the services on offer.
Whereas the major global airlines have made huge investment on premium lounges, staffing and services that are maintained whether business is boom or bust.
According to the website http://www.lowcostairlines.org/ there are 34 no-frills airlines in Europe, 13 in the United States and five in the Asia-Pacific region, and the list is on the rise.
Experts say these are the airlines that are likely to spearhead pay-per-use travel services in the future.
==========================================
http://www.lowcostairlines.org/ Which I have just had a quick
look at, seems to have a lot of inside information on how these No-frills-LCCs work.
Wirraway
Last edited by Wirraway; 20th Oct 2003 at 14:06.
Youre all missing the point,
Its a separate company same as virgin is separate the shareholders will be the same as QF but it is a separate entitiy.
It may even be 50% owned by a third party (Air NZ).
It will certainly be Airbus aircraft they will have pilots to fill all the seats without any endorsements required , that is low cost, the AN sim centre is for sale with an A320 Sim and so is the maintenance base, tooled for airbus maintenance ,great to share with Air NZ now they operate A320.
The A321 freighter due out soon could be integrated to take out AAE flying .
How many mainline guys from QF left to go to VB for a command , i would guess none so why would they go to skimpy for the same deal a quick fix for a command.
You QF guys still have the best jobs and are so ungrateful for what you have chances of 747 commands one day what the hell do you want , if you need a command now go to Emirates otherwise bide your time , dont throw your careers away on a lcc.
In 10 years the LCC may not be required QF mainline will always be there.
b
Its a separate company same as virgin is separate the shareholders will be the same as QF but it is a separate entitiy.
It may even be 50% owned by a third party (Air NZ).
It will certainly be Airbus aircraft they will have pilots to fill all the seats without any endorsements required , that is low cost, the AN sim centre is for sale with an A320 Sim and so is the maintenance base, tooled for airbus maintenance ,great to share with Air NZ now they operate A320.
The A321 freighter due out soon could be integrated to take out AAE flying .
How many mainline guys from QF left to go to VB for a command , i would guess none so why would they go to skimpy for the same deal a quick fix for a command.
You QF guys still have the best jobs and are so ungrateful for what you have chances of 747 commands one day what the hell do you want , if you need a command now go to Emirates otherwise bide your time , dont throw your careers away on a lcc.
In 10 years the LCC may not be required QF mainline will always be there.
b
Rambo,
You're thoughts are always interesting, if not always that coherent, but PLEASE either get a book on punctuation and grammar, or else get someone who went to high-school to proof read your posts!!
You're thoughts are always interesting, if not always that coherent, but PLEASE either get a book on punctuation and grammar, or else get someone who went to high-school to proof read your posts!!
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Tues "Sydney Morning Herald"
Dixon wants to do his own damage
By Stephen Bartholomeusz
October 21, 2003
Qantas chairman Margaret Jackson denied at the weekend that the airline's decision to launch its own low-cost airline was an act of desperation.
Whether or not Qantas is desperate, however, the decision to start a new domestic airline is a recognition of defeat.
Despite the frenetic pace of change within Qantas as Geoff Dixon responds to the challenge posed by Virgin Blue, there isn't an instance anywhere in the world of a full-service carrier being able to arrest the erosion of its market share by launching a well-run value-based airline (VBA).
Dixon knows that the very nature of a full-service airline, while it confers some competitive advantages, makes it impossible for him to compete profitably and arrest the inexorable shift of market share to Virgin Blue.
While he is attempting to address the legacy issues that handicap Qantas - the heavily unionised nature of his workforce, the multiplicity of unions and terms and conditions of employment and employment practices that have been built up over generations - even if the unions were completely co-operative the cost structures of a full-service airline will always be more complex and higher than those of a VBA.
The more share Virgin Blue attracts - and it is at about 30 per cent of the market and rising - the more it undermines the economics of Qantas's business.
While Qantas has a stranglehold on higher-value business, the economics of airlines are sensitive to volumes - Qantas won't survive as a domestic airline carrying only business travellers but it needs a full-service domestic network to support its international operations.
With domestic travel increasingly being commoditised, Dixon has no choice but to slash costs and try to slow the erosion of market share.
While it is a risky strategy, his low-cost airline could help him do both. The bonus, if the strategy works, is that it might enshrine the domestic duopoly.
If and when Virgin Blue is floated later this year, a lot of attention will be devoted to its profitability and prospects.
The Virgin team took an $11 million seed investment and turned it into a $1.4 billion-plus airline in three years: there is some risk that someone else might decide it's worth taking a crack at a market shared by a full-service carrier and a very profitable VBA with, for a VBA, some frills.
Dixon and Virgin Blue are engaged in reasonably civilised competition. Neither would want the complication and the disruption of a third player, particularly as the latest entrant tends to dictate the terms of engagement.
Thus a Qantas VBA is a way to head off that threat while complicating Virgin Blue's float by creating question marks about its future ability to dictate pricing and strip share from Qantas.
It is also a way for Qantas to participate in the fastest growing market segment, domestic tourism and leisure, and perhaps expand it.
Virgin Blue has made the segment highly price-sensitive - and therefore Qantas's full service offering confers little competitive benefit the profitability of those services is undermined.
Qantas is going to try to do something no other full-service carrier has been able to do - launch a discount carrier without cannibalising its own businesses.
Its ally, British Airways, got the first part of that equation right when it launched Go. But Go was too successful and undermined the sensitive network effects that characterise major carriers like BA and Qantas. It was sold.
Any new VBA or low-cost entrant to this market will damage Qantas, given that a network carrier has to maintain at least minimum schedules throughout its network. Plus the Qantas unions will monitor the launch intensely to ensure Qantas doesn't use the new airline to smash current work practices and workplace agreements.
Given that Qantas's existing volumes pour over the high-cost structures required to run full service network carriers, any volume losses will have a leveraged impact on the profitability of Qantas's domestic operations. Dixon will have to achieve his planned $1 billion reduction in Qantas's cost base over the next two years, if not more, to create space for the impact of his VBA.
It is that need to maintain an entire network, including sub-economic routes, which is the point of vulnerability that the VBA point-to-point carriers exploit.
Presumably Dixon has decided that if he is going to be cherry-picked by a low-cost player, he'd prefer some of the volume losses to go to an airline he owns rather than exclusively to Virgin Blue.
He would be hoping for profitable diversion of Qantas volume onto the lower-cost platform - Virgin Blue's costs are 25-30 per cent below Qantas's and Qantas would presumably hope to create an airline with a cost base at least comparable to Virgin Blue's.
No doubt Dixon also plans to use the new airline to deploy new lower-cost aircraft and accelerate the retirement of his fleet of Boeing 737-300s. While Qantas has said the new airline will have about 23 aircraft flying by mid-2005, it hasn't outlined the implications for the size or deployment of the Qantas-badged fleet.
To be successful, Qantas's VBA will need to be operationally independent of its parent and its historical structures and practices but strategically in tune. Dixon will want to finesse the overlaps in routes and schedules to minimise the damage done to the network business and focus as much of the competitive impact as he can on Virgin Blue.
Given that no one has successfully co-managed a full-service carrier and a VBA within the same stable, the challenge to Qantas shouldn't be underestimated.
It would have been even less palatable for Virgin Blue to continue to erode Qantas's market share until all it had left was a diminishing rump of price-insensitive customers.
===========================================
Dixon wants to do his own damage
By Stephen Bartholomeusz
October 21, 2003
Qantas chairman Margaret Jackson denied at the weekend that the airline's decision to launch its own low-cost airline was an act of desperation.
Whether or not Qantas is desperate, however, the decision to start a new domestic airline is a recognition of defeat.
Despite the frenetic pace of change within Qantas as Geoff Dixon responds to the challenge posed by Virgin Blue, there isn't an instance anywhere in the world of a full-service carrier being able to arrest the erosion of its market share by launching a well-run value-based airline (VBA).
Dixon knows that the very nature of a full-service airline, while it confers some competitive advantages, makes it impossible for him to compete profitably and arrest the inexorable shift of market share to Virgin Blue.
While he is attempting to address the legacy issues that handicap Qantas - the heavily unionised nature of his workforce, the multiplicity of unions and terms and conditions of employment and employment practices that have been built up over generations - even if the unions were completely co-operative the cost structures of a full-service airline will always be more complex and higher than those of a VBA.
The more share Virgin Blue attracts - and it is at about 30 per cent of the market and rising - the more it undermines the economics of Qantas's business.
While Qantas has a stranglehold on higher-value business, the economics of airlines are sensitive to volumes - Qantas won't survive as a domestic airline carrying only business travellers but it needs a full-service domestic network to support its international operations.
With domestic travel increasingly being commoditised, Dixon has no choice but to slash costs and try to slow the erosion of market share.
While it is a risky strategy, his low-cost airline could help him do both. The bonus, if the strategy works, is that it might enshrine the domestic duopoly.
If and when Virgin Blue is floated later this year, a lot of attention will be devoted to its profitability and prospects.
The Virgin team took an $11 million seed investment and turned it into a $1.4 billion-plus airline in three years: there is some risk that someone else might decide it's worth taking a crack at a market shared by a full-service carrier and a very profitable VBA with, for a VBA, some frills.
Dixon and Virgin Blue are engaged in reasonably civilised competition. Neither would want the complication and the disruption of a third player, particularly as the latest entrant tends to dictate the terms of engagement.
Thus a Qantas VBA is a way to head off that threat while complicating Virgin Blue's float by creating question marks about its future ability to dictate pricing and strip share from Qantas.
It is also a way for Qantas to participate in the fastest growing market segment, domestic tourism and leisure, and perhaps expand it.
Virgin Blue has made the segment highly price-sensitive - and therefore Qantas's full service offering confers little competitive benefit the profitability of those services is undermined.
Qantas is going to try to do something no other full-service carrier has been able to do - launch a discount carrier without cannibalising its own businesses.
Its ally, British Airways, got the first part of that equation right when it launched Go. But Go was too successful and undermined the sensitive network effects that characterise major carriers like BA and Qantas. It was sold.
Any new VBA or low-cost entrant to this market will damage Qantas, given that a network carrier has to maintain at least minimum schedules throughout its network. Plus the Qantas unions will monitor the launch intensely to ensure Qantas doesn't use the new airline to smash current work practices and workplace agreements.
Given that Qantas's existing volumes pour over the high-cost structures required to run full service network carriers, any volume losses will have a leveraged impact on the profitability of Qantas's domestic operations. Dixon will have to achieve his planned $1 billion reduction in Qantas's cost base over the next two years, if not more, to create space for the impact of his VBA.
It is that need to maintain an entire network, including sub-economic routes, which is the point of vulnerability that the VBA point-to-point carriers exploit.
Presumably Dixon has decided that if he is going to be cherry-picked by a low-cost player, he'd prefer some of the volume losses to go to an airline he owns rather than exclusively to Virgin Blue.
He would be hoping for profitable diversion of Qantas volume onto the lower-cost platform - Virgin Blue's costs are 25-30 per cent below Qantas's and Qantas would presumably hope to create an airline with a cost base at least comparable to Virgin Blue's.
No doubt Dixon also plans to use the new airline to deploy new lower-cost aircraft and accelerate the retirement of his fleet of Boeing 737-300s. While Qantas has said the new airline will have about 23 aircraft flying by mid-2005, it hasn't outlined the implications for the size or deployment of the Qantas-badged fleet.
To be successful, Qantas's VBA will need to be operationally independent of its parent and its historical structures and practices but strategically in tune. Dixon will want to finesse the overlaps in routes and schedules to minimise the damage done to the network business and focus as much of the competitive impact as he can on Virgin Blue.
Given that no one has successfully co-managed a full-service carrier and a VBA within the same stable, the challenge to Qantas shouldn't be underestimated.
It would have been even less palatable for Virgin Blue to continue to erode Qantas's market share until all it had left was a diminishing rump of price-insensitive customers.
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Keg
It has always been important to me that QF pilots keep their conditions. It affects the international market in a number of ways- 1) Don't want a proportion of QF drivers seeking bucks on the international market and 2) Foreign airlines survey the conditions of pilots in reputable airlines such as QF to play the market.
I shake my head at the short sighted nature of some of these contributors aswell- handles such as the Roo Rooter etc- who will only be done over themselves eventually.
Advantages Continued
11) State Government payroll concessions etc with the 200 pilots and 100 middle management locally based leading the charge.
12) A slow boxing of the ACTU into a corner which will eventually result in the knockout punch! " But you did this for Virgin Blue and conceded here". Will probably only work with an arms length approach from mainline. As a ruthless CEO I would play on the heart strings of Combert and state this an opportunity for displaced and former airline employees-AN/KD etc.
The knockout punch will be a slow but eventual alignment of QF employees to the market VB and the New Zealanders creating.
As a prophecy, we through professional foolishness, only a few years ahead of what will be dished upon the "lazy and overpaid" baggage handlers.
Rambo
The 707 beckons!
It has always been important to me that QF pilots keep their conditions. It affects the international market in a number of ways- 1) Don't want a proportion of QF drivers seeking bucks on the international market and 2) Foreign airlines survey the conditions of pilots in reputable airlines such as QF to play the market.
I shake my head at the short sighted nature of some of these contributors aswell- handles such as the Roo Rooter etc- who will only be done over themselves eventually.
Advantages Continued
11) State Government payroll concessions etc with the 200 pilots and 100 middle management locally based leading the charge.
12) A slow boxing of the ACTU into a corner which will eventually result in the knockout punch! " But you did this for Virgin Blue and conceded here". Will probably only work with an arms length approach from mainline. As a ruthless CEO I would play on the heart strings of Combert and state this an opportunity for displaced and former airline employees-AN/KD etc.
The knockout punch will be a slow but eventual alignment of QF employees to the market VB and the New Zealanders creating.
As a prophecy, we through professional foolishness, only a few years ahead of what will be dished upon the "lazy and overpaid" baggage handlers.
Rambo
The 707 beckons!
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Rambo,
The selection of a particular aircraft type over another because there are endorsed pilots readily available? Are you kidding?
A business doesn't revolve around pilots, in fact we are simply no different in a business plan than say, engines...eg. 1 plane - 2 engines, 2 pilots etc. Pilots are a tiny part of the equation of operating costs, support etc
The selection of a particular aircraft type over another because there are endorsed pilots readily available? Are you kidding?
A business doesn't revolve around pilots, in fact we are simply no different in a business plan than say, engines...eg. 1 plane - 2 engines, 2 pilots etc. Pilots are a tiny part of the equation of operating costs, support etc
Join Date: Dec 1999
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Personally, I'd say it would have to be 737's as QF has a large supply of them and options on even more. Why go Airbus if they the infrastucture is already there to support 737's? But then I'm like the rest of you, not an expert, only offering my opinion.
Join Date: May 2003
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Sorry DM, been away for over a week on a trip. This doesn't affect me, I like to sit back and watch what happens, but as far as smug goes. Your airline was one of the ones that started cheap labour in the aviation industry here, so if you feel proud and smug that you have a job flying a 717, you hold that thought, it may get you through the next three years, but when QF ditch the 717 in the same way that NJS and the 146's got ditched you just remember back to how much of a wally you were.
I like how your mob have this illusion QF will hang on to you. I don't work in he QF group, in fact shortly to Asia for me, so like I said, you hold the thought that your mob are here to stay. If I was you though I would not sling mud at mainline QF about them having a Runway overrun, when publicly you guys have been singled out for retracting flap instead of gear after takeoff, nearly landing on a highway etc.
You want informative, I promise to wave farewell to you when taxiing out at Sydney looking down on your 717 DM, my contract is for 3 years, hopefully by the time I come back to Oz, you guys would have gone.
I like how your mob have this illusion QF will hang on to you. I don't work in he QF group, in fact shortly to Asia for me, so like I said, you hold the thought that your mob are here to stay. If I was you though I would not sling mud at mainline QF about them having a Runway overrun, when publicly you guys have been singled out for retracting flap instead of gear after takeoff, nearly landing on a highway etc.
You want informative, I promise to wave farewell to you when taxiing out at Sydney looking down on your 717 DM, my contract is for 3 years, hopefully by the time I come back to Oz, you guys would have gone.