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The Australian Domestic Market 2011

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The Australian Domestic Market 2011

Old 30th Dec 2010, 02:32
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The Australian Domestic Market 2011

2011 is shaping up to be somewhat interesting year for the Australian Domestic Market? Here are some of my thoughts!

[*]Virgin- With the new CEO at the helm we shall be seeing quite a few changes with the 'Virgin" Brand as we know it. Basically we can say "Out with the old, In with the New". With the new A330's coming on line for the West / East coast runs enabling Virgin to snare bigger chunk of the Business market. With the recent gains of the AFL contract and more its definate that Virgin are serious.
The EMB-170's are out, a very wise choice in anyone's eyes. High DOC's compared to Turboprop aircraft they were a very bad choice [Similar to Kendall's venture into CRJ-200's]
Will we be seeing an order of ATR42/72 aircraft this year?

[*]Qantas- We have probably seen the 'New' Business class seats on board the A330, this comes straight to my mind...

What the heck were they thinking?

When those aircraft deploy on the West/East coast runs, watch the Business punters flock to Virgin Business class product. Although we havn't seen what Virgin has to offer, it has to be better than cloth 3 - Abreast seating!
The move by Qantas to purchase of Network Aviation is interesting. There are plenty of 'rumours' floating around of what Qantas has to gain for this purchase mainly from increased FIFO revenue. The Fokker F100 are excellent examples of aircraft, cheap and have one of the lowest DOC's in the market the FK100's operate with.I guess we will have to see what happens in this market?
One thing that stands out is now Qantas has access to a Perth Hanger which we will more likely see the 737's stay in Perth for its A - Checks, avoiding costly flights / schedule to the East Coast.
What does Qantas have in store for us this year?

[*]Skywest- Finally the A320 has arrived! WA's True regional airline... With the WA Governments near completion of dividing up WA market routes, Skywest looks likely to snare a majority share of these routes.
Could we see another A320 coming in shortly and see them operating more RPT services interstate and abroad?[/LIST][*]Strategic- I wonder what goodies they have in the bag for us this year? Could thinking out of the box routes be Strategic's gain??? From all accounts their PER - DPS routes are actually doing quite well up against the cheaper options and lower operating cost International Airlines.

[*]REX- Australia's largest regional airline. Operating probably the worlds largest fleet of Saab 340B aircraft where will be seeing them operate this year?


I am interested to hearing everyone's thoughts of what they expect / or think
of what the carries will do this year. I know I've missed a few, so anyone can stump up!
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Old 30th Dec 2010, 05:03
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Qantas Will finally "lose it" with Boeing over the 787 and tell them to jam it. Will purchase several F100's for growth of Network. Will inject more money into Jetstar and grow Jetstar aggressively. Question is - will the big Q buy Alliance and finish off their FIFO plans?

Jetstar Will push ahead with "Pan Asian" strategy. Singapore and NZ operations will run well. Cadets will become a bigger and bigger part of the resource process eventually phasing out other sources apart from DE Captains within 5 years.

Virgin Will announce its new branding. Will announce an Asian partner (this will be the big news of the year). At the end of the year will announce a turbo prop to replace the Embraers and finally compete with Qlink.

Tiger Will start a Gold Coast base and annoy the living crap out of Jetstar in doing do. Will get their EBA thru. Will end up with an Australian partner...

Not sure what the GA charter companies will do. Probably more GA charters..

Last edited by Mr. Hat; 30th Dec 2010 at 05:14.
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Old 30th Dec 2010, 05:36
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Okay, Hope I'm wrong about some of this...

Qantas: Will continue to shrink with the rise of Jetstar.

Jetstar: Will continue to expand at the expense of Qantas. HOWEVER... The Senate enquiry may force a re-think of their employment practices. We can only hope!

Virgin: Will ponder the diversity of their fleet, the areas that are losing money, and finally bite the bullet. Those pilots not on an EBA may find themselves at the Governer's pleasure.

Tiger: Unless they follow through with their original planned fleet size (30 aircraft) they are gone. I mean honestly how long can you justify the losses, and make no mistake, they cannot grow to profitability with just 10 aircraft!

Qlink: More Q400's. Hardly a state secret though. And no, progression will not be offered to domestic.

REX: Absolutely no change whatsoever! Although there may be some schedule reduction, depending on the amount of blood loss to the Majors. Feburary 2011 will not be a pretty time for REX Crewing and Customer Service staff.

Last edited by KRUSTY 34; 30th Dec 2010 at 06:53.
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Old 30th Dec 2010, 06:08
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2011 does remind me of the Confucian curse: "May you live in interesting times."

QANTAS - I have thought ever since they announced Jetstar that the plan was to shrink QANTAS mainline back to the J curve plus Perth. In other words, where ever there is a substantial business market. Running full-service flights to holiday destinations packed with people who want the cheapest flight does not work in todays environment. Leave the bogans to others.

Jetstar - is the stalking horse of Australian aviation. It is the test bed to see just how far pilots, government and the community will tolerate lower terms and conditions before someone bites. While it can continue to offer cheap fares no-one but the aviation community will give a damn. However, watch the hypocrites crawl out from under their rocks come the bent airframe.

Virgin - for me is the interesting one. Its survival was being questioned not so long ago and now with Borghetti at the helm some tough decisions will have to be made. It has been pushed closer to the QANTAS full-service model but I doubt that it can afford to go all the way down that path which is extremely risky without very deep pockets. However, it wants the cream of full-fare pax and especially the business class traveller. It is now complicating its fleet structure by introducing the A330 on top of the E-jets with commensurate increase in costs, so why keep further complicating that by introducing yet another type which would not have the "jet" advantage in selling seats to the punters. If they are going to keep the E190 then why not expand that fleet?

Skywest - I don't know enough about the west coast market but if QANTAS is going to get fully involved in the FIFO market then look to a charnel house come negotiation time for the contracts.

Rex - with its all-caring attitude to its staff may yet find life extremely tough in the coming year when nearly all of its senior drivers suddenly find a sunnier future somewhere, anywhere else.
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Old 31st Dec 2010, 11:07
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My Predictions for 2011

Qantas - Decides to split the brand again. Pays millions of dollars to come up with the name Trans Australia Airlines for the domestic operation. International ops are nationalised and the brand becomes known for safety quality and innovation (hang the cost).

Jetstar - Spins off a low cost subsidiary, calls it "Impulse". Buys a fleet of cheap B1900's and ships newspapers around the country with them.

Virgin - The carcass of Jetstar is merged with Virgin. Pays a few million more to brand consultants and comes up with the name "Ansett". Air New Zealand and Newscorp buy a strategic stake (Rupert smiles slyly).

Tiger - Brian Grey becomes CEO. Brand consultants decide "Compass" is the best name and remarkets the airline (for a few weeks anyway).

REX - Changes name to Hazelton and provide a profitable niche regional market until bought out by some big idiot who stuffs the lot. Counts on a pilot cadetship to pull it through the tough times.

Me - My speculative shares pay big dividends and I finally retire ( for the 3rd time and finally by choice) a wealthy sod. Buy a farm with lots of water rights and sell them to the government (during a drought). Sell the land for a freeway bypass and move to the far south west coast of Tasmania. Global warming makes the area a tropical paradise and I grow bananas as a hobby (might even build a big one as a tourist attraction).
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Old 31st Dec 2010, 12:23
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Crystal Ball

Some excellent speculation and exciting possibilities posted. But I would like to know the answer to some of the following questions if somebody has a crystal ball handy for 2011 ???

1) Will Strong James continue to wear bowties to Qantas board meetings ?

2) Will Smiths Dick return as Director of Aviation Safety, CASA ?

3) Where will Trevor Jensen pop up next ?

4) Will Anthony Albanese wear lenses or contacts in the new year ?

5) Will Darth return to Qantas and perform one more public display of erotic affection with Margy for old times sake ?

6) Will GA become a focus of government strategy due to the government realising GA's absolute relevance to a multitude of Australian businesses ?

7) Will there be a 'White Paper Part 2' which will contain lots of irrelevant data, nil defined commitment to anything and be filled with words such as - 'robust, transparency, worlds best practise, cohesive, enhanced, empower, innovate, promulgate and strategic framework ?
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Old 2nd Jan 2011, 06:53
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Virgin and Skywest will tie up and Skywest will be virgins turboprop arm.
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Old 2nd Jan 2011, 07:21
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10000Ft says
Virgin and Skywest will tie up and Skywest will be virgins turboprop arm.
Nice dream but that wont happen. VB want to expand there own base in PH and get more FlyInFlyOut stuff on their own. Expect to see 73s based in Perth this year.
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Old 2nd Jan 2011, 09:31
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Virgin would be mad to get into the regional turboprop market, for all the reasons discussed on this forum about a year ago.

About the only way they could achieve regional dominance is to effectively decimate the opposition, and that won't happen unless of course they do something really wild, like stand outside the REX carpark and sign up all the experienced crew on 20% increase in salary and eventual progression to jet jobs!

Ooooo!
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Old 2nd Jan 2011, 09:47
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like stand outside the REX carpark and sign up all the experienced crew on 20% increase in salary and eventual progression to jet jobs!
Dont think you can talk your way into a pay rise that easily. Your going to have to do the hard yards yourself, sorry, but true.
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Old 2nd Jan 2011, 10:56
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Just stirring the pot Arnie'.

Truth be known of course, no airline manager worth his/her salt would ever offer a rise in salary to attract crews to a new operation, let alone progression. In fact the opposite is true. ie: E-jet - 20% drop in salary, 777 - Further 20%, NZ and Sing positions on A320/30 for less money than many turbo-prop captains. etc, etc, Bawahaha!

My point is, the Only way for Virgin to compete in the regional market would be to decimate it's opposition before the first shot is even fired. The only way to do that would be to bleed white the opposition's skilled workforce, and the only way to do that would be to offer a deal in excess to what would amount to a "sideways step". That of course would go against the very nature of airline management (they are only interested in driving conditions down), and like you, I am well aware of that being something that will never happen.

As for "hard yards". I'm sure we could compare notes on that subject!

Last edited by KRUSTY 34; 2nd Jan 2011 at 11:20. Reason: Clarity
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Old 2nd Jan 2011, 11:03
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Virgin will be operating turboprops within the 2011/ 2012 timeframe but REX will not be operating them. The owners of REX have told Virgin the only way they will operate turboprops for them is if Virgin buys them out. Virgin have told them thanks but no thanks and are now looking at other options.
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Old 2nd Jan 2011, 11:10
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Ok F111,

Do you know how many Turbo-props Virgin intend on operating?
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Old 2nd Jan 2011, 11:36
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I've heard 15-20, but that could change if the 190's leave the fleet in a few years time.
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Old 2nd Jan 2011, 13:46
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Very interesting.

Now this has been done before, but my prediction for Virgin Turbo-props in 2011-12.

If it does happen, I hope Virgin have a rabbit to pull out of the hat, either that or virgin management are even more inept than I first feared. Frankly I don't think even they would be that naive or reckless. Why?

I'm assuming 15-20 aircraft would be to compete with REX and QLink on the East Coast and possibly SA. REX have 45 aircraft opperating on approx 90% monopoly routes. Qlink a similar number. Dubbo, Albury Balina, Wagga Wagga, Ad-PLQ, and Mildura are the only routes with competition. These prime routes are fully serviced by REX and/or QLink (except Ballina), and like most regional services the profit margins are fairly tight.

REX have arguably the lowest Debt/Equity ratio of not only any airline in Australia, but most other businesses as well! With almost total ownership of assets (aircraft included), REX posted a profit of around $24Mil last financial year. It is a very tight financial organisation.

Now, how much to set up a regional Turbo-prop organisation from scratch? What would be the cost of say 15-20 ATR72/42's? $200-$300 Mil? and that's with less than half the fleet size of just one of the competitors. Then there's training, Engineering, port infrastructure, additional terminal space at the capitals, not to mention the need for approx 200-250 pilots and flight attendants. How much will the initial set-up cost? What will the returns be?

Mind you VA has consumed around $250Mil of Virgin's cash reserves for nil profit, so maybe they're on to something!

I'm not sure why this rumour persists, but if what you say is true F111, I for one would like to know the rationale. If you are in the know, please share with the forum. Serious question, maybe I'm missing something, because IMHO such a move would be disasterous for all concerned!
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Old 2nd Jan 2011, 20:15
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Qantas - All future 738 will be owned/crewed by Jetconnect, to allow them to operate domestic flights with cheaper crew and using the 1:50 ratio for crewing.

Jetstar - Will continue to outsourcing crew, to the point of using off shore bassed crew for domestic services.

Virgin - Will operate the first half of the year under the Tasman alliance, doing everything to the book. Allow them to megre the full airline with NZ & becomes Ansett2
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Old 2nd Jan 2011, 23:08
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QANTAS - mainline pilots will unite and stand against the rubbish. The 787 will be secured in the LH EA. More promotional opportunities for crew with the new arrival of 380's, 330's and 73's, as well as the handing back of the 330's given to J* (because now QF will pay for JQ 787's instead....) Increase in the premium market. AJ's contract not renewed.

Jetstar - senate inquiry will mandate a minimum 1500 hrs for FO's. Cadet program blown out of the water. Forced to recruit through the usual channels. Moderate expansion in Asia, nothing much doing in Aus. 330's will be crewed by overseas pilots, but when the EBA is up (not sure when) J* guys and girls will tire of the bullshit and make a stand. Finally realising that being undercut by the next lowest bidder is bloody frustrating........

Jetconnect - FWA will rule that Jitconnict crew to be paid the same as mainline crew, or they have to stop wearing the uniforms, calling themselves the spirit of Australia and screening the JT safety demo which says there are QANTAS pilots up the front. A reduction in flying as the Tasman flights are slowly recrewed by mainline

Virgin - will keep plodding along, being cast aside by QF and J*. Will sneak under the radar, and before you know it, wil be a fully competitve outfit, turning a profit, with engaged staff, solid management and open communication

Rex - starts bleeding pilots again due to the scrapping of Jetstars cadetship. Rex will be allowed to keep operating their's though.

QLink - Same same......

GA - spurred on by the scrapping of the J* cadetship, the lack of a QF cadetship, newbies will be forced to go through the industry via GA again. More pilots competing for the first job. Probably less people learning though.

I thought it was time for a more positive (i guess depending on where you sit...) response

PPRuNe or ppdreamne????
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Old 2nd Jan 2011, 23:25
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Re: DJ A330's

Not yet, but it's not far off till the first one arrives!

BB
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Old 3rd Jan 2011, 10:08
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Krusty, they have the cash but are they ready to part with the war chest for the sake of turboprops ? I'm not so sure. It is a big gamble. If China's economy takes a dive then in 18 -24 months time there may be no need for these aircraft on the west coast. Redeployment to the east coast to service FIFO due to LNG projects is possible, but it is a huge risk right now. If they want to borrow the cash from somewhere who is going to support such a huge risk and back them during a time when the economy IS NOT even on the road to recovery ?
Anything is possible when you look at the past decade in AUS, but I don't think DJ is going to purchase and set up a bugsmasher operation in the near future.
Mind you, Clive Palmer could probably back them financially and in return ask for a percentage of the profits and become a part-time board member. If the whole thing went tits up at least Clive would only have a small dent in his wallet as he could afford the loss. However Il Deuce would have some explaining to do.....
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Old 3rd Jan 2011, 12:58
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I agree gobbledock. I just can't see the logic. I mean the margins are thin. I would think Virgin would be looking to decrease the complexities of the fleet, not increase it?

Mind you nothing would surprise me after the last 10 years we've been through.
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