Jetstar aims for one-third market stake
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Jetstar aims for one-third market stake
Mon "Melbourne Age"
Jetstar aims for one-third market stake
By Eli Greenblat
February 9, 2004
Qantas Airways chief executive Geoff Dixon has tipped that his airline's new budget offshoot, Jetstar, will capture at least a third of the Australian market as the region's airline industry enters a new wave of competition that one CEO has labelled a "bloodbath".
The CEO, Air New Zealand head Ralph Norris, says the trans-Tasman carrier has $NZ1 billion ($A898 million) in cash to cope with both Qantas and Virgin competing for passengers between the two countries, but claims his airline won't be the first to fall over in the duel.
"I have used somewhat colourful language in describing it as a bloodbath, certainly when you consider that there are a number of (operators) particularly on the Auckland route, it is easy to see that some of them are going to be damaged by this," he said on Channel Nine's Business Sunday yesterday.
Leading the onslaught will be Jetstar, which was unveiled in December with the ambition of going head-to-head with Virgin Blue.
Taking off in May, it will emerge from the remnants of Impulse Airlines, at first using its fleet of 14 Boeing 717s before taking delivery in June of the first of 23 new Airbus A320s.
Mr Dixon told Business Sunday Jetstar would take a competitive slice of the Australian market. He expected that Jetstar would gain about a third of the market and Virgin would have a third share.
Virgin Blue now holds 34 per cent of the market.
Its CEO, Brett Godfrey, said Qantas's low-cost carrier would not affect Virgin Blue's market share.
"They're going to bring on some aeroplanes, we're going to bring on some aeroplanes: I still believe we are not going to have a material detriment to our market share," he said.
"I am quite confident that we will be very competitive and I don't envisage us losing market share this year."
Mr Dixon maintained that that Qantas continued to compete "very well" against Virgin Blue.
"That will become apparent when our results come out," he said.
Qantas is due to release its half-year results on February 20.
Mr Dixon said Qantas was determined that Jetstar would have the "lowest possible cost-base we could find", with competitively priced tickets.
"On the low yield leisure routes they are on, there'll be quite substantial discounting: it'll be around the Virgin rate now," he said.
"They may go down lower when there's competitive pressures out there."
Meanwhile, Mr Norris from Air New Zealand said it would be wrong to identify his airline as the weakest of the pack.
He said his airline was in a strong position to cope with increased competition on the trans-Tasman route.
Virgin Blue recently launched its trans-Tasman offshoot, Pacific Blue, adding to the intense competition between Air New Zealand and Qantas.
"Air New Zealand is in a significantly improved position from what it was 18 to 24 months ago," Mr Norris said.
"We are certainly going to be inflicted with some competitive damage on the route - there is no doubt about that - but certainly I don't see it being terminal."
- with AAP
=============================================
Jetstar aims for one-third market stake
By Eli Greenblat
February 9, 2004
Qantas Airways chief executive Geoff Dixon has tipped that his airline's new budget offshoot, Jetstar, will capture at least a third of the Australian market as the region's airline industry enters a new wave of competition that one CEO has labelled a "bloodbath".
The CEO, Air New Zealand head Ralph Norris, says the trans-Tasman carrier has $NZ1 billion ($A898 million) in cash to cope with both Qantas and Virgin competing for passengers between the two countries, but claims his airline won't be the first to fall over in the duel.
"I have used somewhat colourful language in describing it as a bloodbath, certainly when you consider that there are a number of (operators) particularly on the Auckland route, it is easy to see that some of them are going to be damaged by this," he said on Channel Nine's Business Sunday yesterday.
Leading the onslaught will be Jetstar, which was unveiled in December with the ambition of going head-to-head with Virgin Blue.
Taking off in May, it will emerge from the remnants of Impulse Airlines, at first using its fleet of 14 Boeing 717s before taking delivery in June of the first of 23 new Airbus A320s.
Mr Dixon told Business Sunday Jetstar would take a competitive slice of the Australian market. He expected that Jetstar would gain about a third of the market and Virgin would have a third share.
Virgin Blue now holds 34 per cent of the market.
Its CEO, Brett Godfrey, said Qantas's low-cost carrier would not affect Virgin Blue's market share.
"They're going to bring on some aeroplanes, we're going to bring on some aeroplanes: I still believe we are not going to have a material detriment to our market share," he said.
"I am quite confident that we will be very competitive and I don't envisage us losing market share this year."
Mr Dixon maintained that that Qantas continued to compete "very well" against Virgin Blue.
"That will become apparent when our results come out," he said.
Qantas is due to release its half-year results on February 20.
Mr Dixon said Qantas was determined that Jetstar would have the "lowest possible cost-base we could find", with competitively priced tickets.
"On the low yield leisure routes they are on, there'll be quite substantial discounting: it'll be around the Virgin rate now," he said.
"They may go down lower when there's competitive pressures out there."
Meanwhile, Mr Norris from Air New Zealand said it would be wrong to identify his airline as the weakest of the pack.
He said his airline was in a strong position to cope with increased competition on the trans-Tasman route.
Virgin Blue recently launched its trans-Tasman offshoot, Pacific Blue, adding to the intense competition between Air New Zealand and Qantas.
"Air New Zealand is in a significantly improved position from what it was 18 to 24 months ago," Mr Norris said.
"We are certainly going to be inflicted with some competitive damage on the route - there is no doubt about that - but certainly I don't see it being terminal."
- with AAP
=============================================
Let me get this right, Dicko says that both DJ & Jetstar will have a third each of the market, which leaves the remaining third for ... oh QF domestic. So by my calculations either the domestic market in Australia is going to have explosive growth or QF domestic will be halved. Any one care to bet a slab of crownies that Dicko's plan is for QF domestic to be non-existant within 5 years.
Since this is a rumour network, heard over the weekend that, 1) QF has ceased all tech crew recruiting, 2)some QF domestic travel bookings are already being allocated to Jetstar.
More interesting times ahead for this industry - AGAIN!!!
Since this is a rumour network, heard over the weekend that, 1) QF has ceased all tech crew recruiting, 2)some QF domestic travel bookings are already being allocated to Jetstar.
More interesting times ahead for this industry - AGAIN!!!
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Home Brew...
Not sure about the QF recruiting aspect (tho' you're probably correct) but on the market share analysis I think you're dead right. Porkies are being told and sensible QF/AIPA people should spend a lot of time watching this. Though there's not much they can do I guess. The Jetstar pilots will be all willing volunteers and if they're smart, will increase their level of union membership. Maybe there's still time for AIP leadership do undo the miseries directly caused by their many years of "it can't happen to us" and finally join the AFAP in rebuilding a single Australian pilot union.
The facts are that QF/Jetstar currently has say 65% of the domestic market. Mr. Dixon is really talking about how, and on what cost base, that flying will be re-allocated within the group over coming years.
The battle lines are clearly drawn.
Not sure about the QF recruiting aspect (tho' you're probably correct) but on the market share analysis I think you're dead right. Porkies are being told and sensible QF/AIPA people should spend a lot of time watching this. Though there's not much they can do I guess. The Jetstar pilots will be all willing volunteers and if they're smart, will increase their level of union membership. Maybe there's still time for AIP leadership do undo the miseries directly caused by their many years of "it can't happen to us" and finally join the AFAP in rebuilding a single Australian pilot union.
The facts are that QF/Jetstar currently has say 65% of the domestic market. Mr. Dixon is really talking about how, and on what cost base, that flying will be re-allocated within the group over coming years.
The battle lines are clearly drawn.
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Home Brew
Any one care to bet a slab of crownies that Dicko's plan is for QF domestic to be non-existant within 5 years.
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Heres my slant on this subject based on a couple of conversations around the console one day;
1. Jetstar will not be around after 2-3 years. It`s only going to be around long enough to get costs down to a more acceptable level i.e. much closer to virgins than the current qfa domestic. Think about it boys and girls why would qfa management throw away the value of the brand and like it or not the name Qantas has significant brand value.
2. Qfa 737 crew are currently flying less than a few months ago and leave (paid & unpaid) is available. Rumour has it some are taking the option of lwop and taking short term contracts in Europe..
1. Jetstar will not be around after 2-3 years. It`s only going to be around long enough to get costs down to a more acceptable level i.e. much closer to virgins than the current qfa domestic. Think about it boys and girls why would qfa management throw away the value of the brand and like it or not the name Qantas has significant brand value.
2. Qfa 737 crew are currently flying less than a few months ago and leave (paid & unpaid) is available. Rumour has it some are taking the option of lwop and taking short term contracts in Europe..
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Can someone please explain to me how the percentages work. If Virgin currently have approx 33% of the market share in domestic travel, Qantas must have 66%.
Was it not just the other week that Dixon said that Jetstar would not effect the market share of Qantas.
Something does not add up??
Was it not just the other week that Dixon said that Jetstar would not effect the market share of Qantas.
Something does not add up??
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The CEO, Air New Zealand head Ralph Norris, says the trans-Tasman carrier has $NZ1 billion ($A898 million) in cash to cope with both Qantas and Virgin competing for passengers between the two countries, but claims his airline won't be the first to fall over in the duel.
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Any one care to bet a slab of crownies that Dicko's plan is for QF domestic to be non-existant within 5 years.
This from another site - make of it what you will:
- A sizeable portion of current mainline domestic carriage is legacy Ansett market. As such, QF mainline shorthaul isn't quite as finely tuned to the volumes it's carrying as it could/should be.
- At present, mainline shorthaul is matching Virgin fares, despite costing it some 20-30% more to carry those fares. In business terms this is inefficient - mainline shorthaul is geared towards premium economy/business/corporate offerings, and is stretching down to cater for the price-sensitive market purely for numbers' sake.
- Jetstar, as I've interpreted it, is a vehicle to take this price-sensitive market away from mainline shorthaul and into a dedicated niche, geared towards turning a break-even (in mainline's case - barely sometimes) into a profit (through Jetstar). This represents a degree of intentional cannibalisation, but in so doing it's turning a revenue-neutral portion of the Qantas group market into a revenue-positive portion = good business move, with little (financial) impact on mainline shorthaul - it certainly isn't a key market for them! The two keys to Jetstar's success will be a) price (it's the 'price sensitive' market they're after, afterall) and b) marketing. The latter remains an unknown quantity.
- Jetstar will be starting relatively small - that's precisely a reflection of its target niche/market. It would be naive to think that everyone suddenly wants Low Cost - they don't. Virgin knows this, Qantas knows this, and no amount of marketing will convince a large portion of people that an airfare is all that matters. That said, the Jetstar model is dynamic - it can easily be ramped up if required to engage any further increases in potential low cost market.
- Don't think it's all about clawing back market share from DJ. I don't think it is - I'm sure an important part of the Jetstar vehicle is to keep DJ in check, but the status quo right here and now is one where already the dupoly situation seems to be maturing, and this is in turn reflected by the current pricing regimes of the two carriers. I think Jetstar (& Qantas group) management have a firm belief that there remains a significant amount of 'new market' out there - all price-sensitive - waiting to be engaged. DJ has stimulated and mopped up alot of it, but its expansion, by no means entirely at the expense of Qantas, suggests that new market is still viable target group for Australian low cost carriers today.
- The alternative hypothesis to the above is that Jetstar is a vehicle to convert existing QF shorthaul (and ultimately longhaul, in conjunction with AO) structures into low cost by 'levering' them out from underneath. This would see Jetstar pick up an increasing amount of domestic business from Qantas mainline, ulimately forcing them into submission and eventually isolating the full service product to high density/demand routes. Why do I not think this will happen anytime soon? Because it's just too hard. Why 'transform rectify' an entire organisation (the size of Qantas) when you already have an enormously profitable (for an airline) suite of targeted businesses (and one about to come), plenty of organic growth, a very strong brand, a $2bn cost reduction intiative already well underway, and a very strong premium (and by that I mean business) service and some extremely lucrative routes whose passengers continue to embrace a full service schedule?
---
I think what GD was referring to in his '30%' speech was the long term scope of Group operations. You can bet your life that Jetstar is indeed relying on new market being 'stimulated' by its low(er) fares. There's no doubt there'll also be some 'transfer' of market directly from shorthaul to jetstar, however all things considered (including timeframe, attrition, market growth etc) I'd be very surprised if that translated into a marked or sizeable reduction in shorthaul numbers and/or fleet requirements..
My 2c worth..
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Trancript from "Business Sunday"
"Airline Wars"
http://businesssunday.ninemsn.com.au...story_2001.asp
Wirraway
"Airline Wars"
http://businesssunday.ninemsn.com.au...story_2001.asp
Wirraway
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I was talking to one of the management types involved in the setup of Jetstar. When I asked him about cannibilisation of QF, he said they were aiming for a totally different market altogether and could not afford to lose the Qantas domestic brand, particuarly in relation to business clientele.
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That's exactly it, EPIRB. It's the backpackers, students, new/once-off/package deal pax and coach/train-goers who are probably more suited to Jetstar than mainline, and will be targeted/transferred as such.
Why decimate the strongest part of your premium domestic brand (the business market) by 'Jetstarring' when you don't have to to produce decent profitability from that segment of the market...
Why decimate the strongest part of your premium domestic brand (the business market) by 'Jetstarring' when you don't have to to produce decent profitability from that segment of the market...
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RMM yes history is repeating itself already.Last time I heard ANZ had a cool billion in cash was just before they sunk ANSETT and all the staff and contractors.I do hope they dont get themselves into more trouble or maybe New Zealand may have to think the unthinkable.
