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Virgin's TigerAir losing $2 million a week
From the SMH :
Virgin's Tigerair Australia losing $2 million a week Losses at Virgin Australia's budget airlineTigerair Australia have risen to “alarming levels” of more than $2 million a week amid heated competition in the domestic aviation market, says CIMB analyst Raymond Yap. Virgin’s joint venture partner, Singapore-based Tigerair, on Wednesday released its accounts for the quarter ended June 30. Tigerair Australia was no longer consolidated into the accounts and instead treated as an associate because the Singapore-based company’s stake fell to 40 per cent. That means disclosure on the Australian arm has been more opaque. Virgin owns 60 per cent of Tigerair Australia and will release its half year results next month. However, based on the Singapore accounts, Tigerair Australia’s operating losses reached $S33.8 million ($29 million), or around $2.2 million a week in the second quarter of the calendar year on a 100 per cent basis. The budget carrier only has 13 planes, meaning each one is losing around $171,000 a week. In the first half, Tigerair Australia’s operating losses nearly doubled to $48 million, from $27.6 million last year, when translated from Singapore dollars. Mr Yap said he was concerned the outlook for the Australian low-cost carrier, which competes against Qantas Airways’s Jetstar arm, could worsen in the current financial year. “This is on the back of heavy competition from Qantas, Jetstar Asia and Virgin Australia, which has created continuing yield pressure,” he said. “With the exception of Melbourne-Sydney (Tigerair Australia’s largest route) and Melbourne-Perth (Tigerair Australia’s sixth-largest route), all of its other routes are expected to see industry-wide capacity expansion in the current quarter, which will exacerbate the present overcapacity.” Tigerair Australia’s load factors, or percentage of seats filled, have been falling in recent months after it added two new planes to its fleet. In May, the load factor plunged 14.9 percentage points to 70.3 per cent versus the same month a year earlier, although Virgin in May said early indications were that loads had improved “materially” in the month of June. Virgin boss John Borghetti is the chairman of Tigerair Australia’s board and the Virgin network management team has been working with the low-cost carrier to optimise its network. In May, Tigerair said it would abandon flights between Sydney and Melbourne to Alice Springs and between Melbourne and the Sunshine Coast due to low consumer demand, with the changes taking effect on July 22. Instead, it will boost its frequency on the Sydney-Gold Coast route to four daily from two, while Virgin will lower its frequencies on that route. |
As I have said many times on these pages, when you are selling tickets for less than it costs for the taxi ride to the airport....something is terribly wrong.
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Instead, it will boost its frequency on the Sydney-Gold Coast route to four daily from two, while Virgin will lower its frequencies on that route. And didn't JB say he would never do this and cannibalise mainline routes? :rolleyes: Bad luck if you want to fly Melb-OOL in the morning getting there much before lunch, or return in the evening after business. That's not to mention the $100 mill loss a year they are providing, if this article is correct..... |
Well, with the loss that Qantas is supposedly about to announce, perhaps my point is a valid one.
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Sick industry when the winner is the one who loses the least .
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Airports, Cab companies and Government doing alright out of Aviation. Well balanced.
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In my forty-five years in and around this airline caper it is my observation that profits can be had in making ground equipment, supplying catering (sometimes), providing cost + ground handling services, consulting to the people with hundreds of aeroplanes and no profit, navigation services, government departments, nav charges, insurance, pilot training, simulator training, crewing agencies, "expert" commentary for hire (that means you, GT!), I.T., reservations systems, security.
In fact, just about anything except operating aeroplanes. Sure, having an airline is sexy, and often fun, but ever since the Wright Brothers not many people have made a go of it without government patronage or court protection (chapter 11 in the US). The problem with the industry is the low barrier to entry of a seemingly endless parade of monied fools who believe that they alone hold the elusive key to aviation success. And the occasional group of investors too blasé to see what psychopaths they have entrusted with their airline. |
At what point does JB concede that building Qantas Lite isn't of itself a strategy to profitability.
He needs to do something different to the competitor, but that would take an original idea. I don't think he has too many. |
Firstly, im not here to bash Jetstar im just concerned about the financial health or lack of financial health of the Qantas group. I think the results to be released in late August will be very ugly. I feel that the Tiger numbers only confirm that. Their load factor is 70%. Jetstar domestic about 77%, however I think Tiger has a lower cost base. Roughly, Jetstar turns over 4 times the revenue of Tiger. If the cost basis favours Tiger by say 3% the Jetstar would lose 4% less per week than Tigers $2 million times 4 for the turnover increase. Not very clear, however I wouldn't be surprised to see Jetstar domestic lose $200/300 million for the financial year. Jetstar international is a shocker and Qf domestic and international not to flash either.
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Originally Posted by Australopithecus
In my forty-five years in and around this airline caper it is my observation that profits can be had in making ground equipment, supplying catering (sometimes), providing cost + ground handling services, consulting to the people with hundreds of aeroplanes and no profit, navigation services, government departments, nav charges, insurance, pilot training, simulator training, crewing agencies, "expert" commentary for hire (that means you, GT!), I.T., reservations systems, security, leasing & financing aircraft
Its all about maximising the number of aircraft flying (or parked, as long as the leasing charge is paid). LCC's are merely the mechanism to maximise demand for leasing companies. The normal market mechanism is being driven in reverse. This is a supply, not demand driven market, the Australian market is being force fed capacity for a reason. The Australian market is litterally awash with capacity, yet more aircraft keep arriving. Leasing companies get their money win lose or draw. Who is behind the leasing & financing. |
Answer: Da Big Banks!
Australopithecus, the well know saying is that "In a gold rush, you don't get rich digging holes, you get rich selling shovels" :ok: |
I am not too surprised that Tiger Australia is losing money.
I recently did SYD-ADL-SYD., about 80% full both ways. One week before doing the ADL-SYD sector they 'rescheduled' it to the next day, no reason given., and customer service was uninformative. They have a 45-minutes-prior-to-departure check-in time limit so I was definitely on time, but their flights departed 20 minutes late., both times. They are absolutely anal about trying to charge for any cabin and checked baggage that is even slightly beyond the bought allowance. Their online booking experience is only slightly better than Jetstar. (but I did get the giggles when I saw the option of paying $3 to 'jump the boarding queue'). I thought airport food prices were high, but the prices of the on-board snacks made me think that they were using gold-foil in the packaging. Their frequency of service to obscure places like Adelaide is woeful. Yes yes yes, I know they are a LCC., but along with Jetstar they are an experience that I am highly likely not to repeat. |
Spot on saying, Anthill and well summed up Austral' :ok:
Sydney Airport Holdings has got a lot to answer for in their charges and onflow effects, just to start with! I for one would rather snap up an airfare on VA close to the price of the LCCs and gain all the extra "gravy" that is associated with it, such as travel points/upgrade/terminal facilities/interline benefits etc etc. This I believe is reflected also in the travel figures, as many punters realise that just for abit extra they can get some mayo' with their ticket instead of the LCC "pay for every little bit extra" ticket. There will always be a place in Oz for a LCC/thongs & singlet-Air, but is the small population able to sustain 2 of them without cannibalising the parent? |
If Tiger folded the tent and gave up, would anybody mind very much?
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Yeah the hundreds of employees....
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As I have said many times on these pages, when you are selling tickets for less than it costs for the taxi ride to the airport....something is terribly wrong. |
Food that tastes like said boarding cards!
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I think most are missing the whole concept of LCC.
Some years ago now it was very expensive to fly & only the rather well healed could do it on any sort of reg basis. Enter the LCCs. Fantastic look at those cheap fares!!! Move people by bulk. We don't care if we have to wait in a tin shed, get zero service, be crammed in like sheep, have to pay for every add on inc baggage as we just wanna get there for the cheapest price, this is amazing bring it on, enter the flourishing LCC who can't get enough seats into the air. Enter the now expectation some years latter that we want better service, better facilities & more choice yet still keep the above comments in place. Trouble is every man & his unwashed dog travels by air these days it's just like hoping a train or tram (which has poor service) BUT now the Joe Public are so used to cheap fares that it's the norm & they now expect better service, they have forgotten how it came about that they got to pay less than the cab fare to the airport to go to the Gold Coast for Eg, something not that may years ago was unheard of. We have such a lazy & disposable society these days, everything at our fingertips mostly cheap inc travel yet we want & expect the top shelf service to go with it all. We don't have enough population to traverse this far & wide brown land of ours to spread out the costs yet the same infrastructure & a lot of the costs are needed whether to fly a 1000 people or 100000 people to the same destination. Fuel costs the same, maint costs the same & all the other associated costs are the same & are not discriminatory, LCC full service they are both in the same boat. The bubble has burst & the Airlines are just about run out of air to keep the bubble inflated, someone has to go. Their all losing money, QF I expect will lose over a $1Billion+, Jesus have we got ourselves in a bloody mess ! Wmk2 |
Some great observations here, most notably Australopithecus and Anthill :D
Despite all of Qantas' woes, of which there are many, at least they have a massive cash reserve, unlike the shed-load of debt JB has shovelled onto Virgin to pursue his "game plan." Let's hope in the next few years the Aussie dollar doesn't fall, there isn't recession, no job lay-offs, no housing bubble bursting, no downturn in mining capex expenditure etc... oh wait :ooh: Clearly the "romance is back"... followed by a sore head, a large bill and a strange itching sensation at the end of the night :E |
2 million a week?
What the Irish rocket scientist wouldn't give to lose that little....... |
Is boy wonder JB in charge of this lot...
Must make for interesting viewing of the monthly accounts. |
I've flown with Tiger about 8 or so times. Had no problems at all. Departed and arrived on time, they got me where I wanted to go in once piece and didn't lose my bags. Sure I got stung by being a few Kg over on my baggage once, but I paid $29-00 for the ticket.
Sure the terminals, aircraft etc weren't flash. At some ports you may have to walk across the tarmac in the rain rather than have an aerobridge. Who cares, a little bit of water never hurt anyone. As for inflight catering, I had gourmet food, thanks to the Mrs who packed me a cut lunch. A news paper and the latest copy of wheels magazine meant I was a happy contented chap. Do you really need the frills on a 1 hr sector? |
As me old mate says, Wilbur and Orville should have been shot at birth.
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"S8" I've said similar things many times amongst these pages about W&O, it's all their fault that we are in this mess today:E
If they had just stuck with bicycles, the world would be a much more serene & slower place. Windjammers would grace the high seas, the horse would be respected like it was all those years ago:-):-) Wmk2 |
An informed rumour is that the Skywest numbers aren't flash either. Has Virgin/Group actually made money since inception???
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Tiger always was about payback
Do you blokes recall the circumstances in which Tiger originally came to our shores? It was right after Dixon, Joyce & Co at Qantas decided that they would own Singapore with their idiotic JetStar Asia idea (one that has been an open wound ever since, money wise).
Tiger was an ancilliary holding of Temasek holdings, the investment arm of the Singapore government. Tiger was a bitch slap to Qantas for Jetstar. Fast forward a few years after Tiger shot off both of its own feet courtesy of local managers even more tone deaf than Joyce. After years of losses and being unable to game either the public or CASA, Tiger was in trouble. Enter Virgin, who, under Borghetti, wasn't above continuing the Qantas hubris therapy, albeit on a more limited scale. I do not think that Tiger was ever planned to make a huge profit or be self-sustaining: it was a strategic move in the both the market place and the head space of its competitors. It continues to be so, but now the losses are getting serious. (Along with, I suspect, Jetstar's. But the JQ P&L situation can only be surmised) I don't think that anyone of the two players/four brands are making money right now...a hangover from the market share wars and the 65% petard upon which Joyce has hoist Qantas/JQ. The current truce on that front may help that a bit for Virgin and Qantas, but not their LCC offshoots in the near term. Fares and traffic are both too low everywhere right now for that. |
There will be an aviation industry in Australia in a decades time. It wont bear any resemblance to today, but it'll still be there.
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Did one of your many management contacts in Virgin tell you that KRUSTY?....:=.
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Is unsubstainable because there just isn't the need for four carriers. In the UK we have nearly three times the population, probably 500 million people within two hours in our catchment area but only two LCCs. The aviation infra structure needs looking at as well. Having worked at Tulla it's a disgrace. I used to have to walk from Tulla to Airport West to get a tram. I'm in Manchester now you can get a bus, train tram you name it. Sydney is no better with rip-off train prices. If you make it easy to travel people will. As much as I love Australia, aviation wise they don't half shoot themselves in the foot.
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Reducing the exorbitant senior corporate and senior executive salaries to the same level that these corporate people want pilots to work at, should solve all the airline profitability problems in one go. :E
There's at least one American ex-CEO, of one large Australian company who has retired very comfortably to the U.S. after extorting a "pension" of AU$1M annually from that company, for his retirement. Naturally, it's payable to the day he dies, and no doubt it's indexed, too. This pension was in addition to all his other retirement benefits that came with his "salary package". |
"Ex CC" that's common knowledge here anyway.
Tell us something we don't know:-) The Airlines have been shooting themselves in the foot as you say for years, there's virtually no feet left to stand on & we are now seeing the feet that keep aviation on it's own legs being eaten away. Two years ago now I started to prepare for the inevitable as personally I believe it's a good time to get ones affairs in order if you are employed as a pilot & that goes for engineers as well plus all the ancillary jobs that support the industry, something has to give soon & it won't be the fat cats at the top either! Wmk2 |
I find it very interesting that the US is still described as struggling economically, however over the past month United, Delta, Alaskan, American and Southwest have all announced substantial profits (the first such results for many years in most cases).
Meanwhile in Australia, where we are apparently riding the crest of the wave of a mining and construction boom (??), all of our airlines seem to be struggling. Could it be -
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Anyone remember the 90's??? If this keeps up something WILL break. I made a comment some years ago that "one day there would be A320 drivers 5 deep at the bar at the local aero club talking about a career in instructing", that may well eventuate.
SN |
Chimbu
The reports are of quarterly earnings. Not profit.
halas |
First there was World Championship Wrestling now we have here Midget Wrestling!
I don't think either CEO can count to more than double figures....:rolleyes: |
The aviation infra structure needs looking at as well. Having worked at Tulla it's a disgrace. I used to have to walk from Tulla to Airport West to get a tram. But then airports aren't really interested in airlines. They're more interested in car parks, $8 coffees and duty free. Airlines and their demands for aerobridges, GSE parking and, what?? You want working ground power AND air con on the international bridges?? All this is simply a nuisance to the airport corporations because it's effectively a monopoly in every state: 1 capital city, 1 airport. So the airports have no desire to cater to the airlines because the airlines largely have no choice but to fly there and grit their teeth at paying exorbitant charges for s**t service and facilities. |
Emergency 000
Bingo!!:ok: |
Some of these airports are making 1 million dollars a day profit. Seems pretty balanced and fair.
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"E000" you hit the nail on the head there "1 Capitol City 1 Airport. Apart from Avalon Airport which really is a dead loss the Capitol City Airports have a monopoly & they know it. Captive market, wouldn't a lot of major businesses love to be in that situation!
Take a look at Tulla, the joke airport of the country. The taxiway improvements that have been going on since DC3's where designed are still being constructed at 1 cubic meter of concrete a month where as the new T4 & associated car-parking infrastructure is going up like gangbusters, they know where the $$$$ are! Although as a side note I heard the other day true or false that construction had halted on the T4 & car park due the toilet facilities had broken down & the union didn't want it's members having to walk up to the terminal to use the dunny's...gotta luv Australia!:-) The status quo will continue for sometime yet with no foreseeable change in the future inc Badgery's Creek, that's so far off & likely to be a lemon if ever it's constructed that it doesn't even figure am sure in the Airlines next 10 yr planing model. 'SN' that's not as silly as it sounds! Wmk2 |
A bit of a thread drift but good point:
But then airports aren't really interested in airlines. They're more interested in car parks, $8 coffees and duty free. Airlines and their demands for aerobridges, GSE parking and, what?? You want working ground power AND air con on the international bridges?? All this is simply a nuisance to the airport corporations because it's effectively a monopoly in every state: 1 capital city, 1 airport. So the airports have no desire to cater to the airlines because the airlines largely have no choice but to fly there and grit their teeth at paying exorbitant charges for s**t service and facilities Unless their charges and attitude towards the airlines improves there will be more corporate airline failures. Which is not good for any of us. |
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