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The whole ULCC and LCC model is basically unviable with oil above $100. These words came from an ex Irish loco boss that I once worked for.
The others have loyalty programs, contracts, corps, and the ability to hike prices to play it out. Rex and Bonz will lose an absolute ****load if Fuel sat at such prices for the next year or two. More likely than not it seems. Especially in that they are only charging airport costs to fill the machine, let alone paying for fuel. |
Airport expenses will play a big part in their cost base. They'll be looking to negotiate some serious deals with these regional airports. And I think these airports will play ball. They may likely offset charges with economic benefit by increased tourism traffic to their centres. It may or may not happen. The demand is there if the price is right. Bonza will have a very low cost base. They'll do that because they will base their office in regional Australia with likely heavy government incentives be it tax or other means.
They'll have a lean head office and they'll offer lower renumeration levels otherwise required to fund capital city employees. That will include crews, who I suspect will be regionally based teams too. All ground support will of course likely be fully outsourced. They can build their model from the ground up. Leveraging the best technologies available today. No legacy pain. Scale as required. 777 Partners has deep pockets and will enable Bonza to adjust their aircraft scaling as they see fit. No fixed commitments to ASK growth. An advantage that's never available to any other airline here. They'll also have very low maintenance expenses since the aircraft will be brand new for several years. And being solely independent - they won't have to do anything anyone else expects or directs them to do, which is what occurs with Jetstar and occurred with Tigerair. 777 Partners isn't private equity. They'll be in this for the long-haul. They may look at capital cities in time if the price is right and it makes sense to do so. I think this might just work.
Originally Posted by PoppaJo
The whole ULCC and LCC model is basically unviable with oil above $100.
That's really dependant on your cost base and how well one hedges. |
737-800/900 cost between $5000 and $10000 AUD per operating hour to run. The figure is wildly variable depending on mostly utilisation and economy of scale to bring down the huge fixed costs, but also sector length, crew cost and of course fuel price and maintenance. Council airport charges will be a couple of hundred bucks, security will be per passenger, which will be required at all ports due to the aircraft size. That figure does not include ground handling, airways, etc... The main airport costs will be the large end user ie Gold Coast or Cairns, who really won't give a dam about doing deals unless you are shuffling a lot of airframes in and out, one flight a day at minimum cots you will get shafted to freight apron with a container for check in, and still pay more than what QF do.
As far as head office costs, its more related to what CASA wants and the cost of compliance, what you want is irrelevant there. The next part is basing in the country you have to get people of high enough calibre to leave the city to work there. No point having a head office if its full of inexperienced monkeys with no idea. Just getting pilots to base in the country is hard enough let alone a high end business leader that's worth his salary. Then you have to have a huge Marketing budget, LCCs require constant advertising to remind the public they are cheap, especially in the early days. No marketing, expect a dribble of passengers, that fluctuates with other airlines offerings. Anything is possible, but airlines are shoe string returns at best, in the Australian domestic market you are surrounded by large operators with economies of scale, meaning where you save in small streamlining, they save on just having lots of everything and bargaining power. Good luck but all this sounds very naive. |
Originally Posted by 43Inches
(Post 11134261)
No doubt, the US especially is printing money and giving it away. The national debt figure has just been blown away by Trump and now Biden and is massive compared with the Obama days where they tried to block supply because of debt. Massive Covid stimulus on the back of GFC stimulus, it's starting to bite now and the economy has become used to living with high stimulus input. Add the stupid US/China Trade war and yes, the next few years will see US inflation go bonkers unless something drastic happens.
Australia has managed to remain almost fiscally sensible in all this, that does not mean we are immune, but much better off at a baseline. Still actual inflation, when you take into account all the things mentioned is through the roof. CPI is a silly measure of inflation as the government uses the supermarkets to cap basic item prices here so the number means very little. Ever wondered why milk stays $1 a litre? Bread $2 a loaf... so on, if inflation had affected those goods they should now be at least double those numbers and maybe significantly more. It should also be noted that a sizeable amount of US Debt is actually based on US Bonds owned by Americans I believe, although I may be wrong on that. Don't forget that Clinton got debt to a manageable level and produced surpluses, then "W" got in and created more debt than all 41 previous presidents. |
And just think how rich Australia will be when every house is worth $10 million. Heck, let's make it $100 million. And all the superannuation funds invested in residential housing will be worth $100 trillion. Heck, let's make it $1,000 trillion. What could possibly go wrong?
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I own my own house, so bring it on. I can sell it and then move to France and buy a small walled village and run my own totalitarian regime. Or even Russia and become an oligarch and spend summer hunting with Putin.
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Originally Posted by 43Inches
(Post 11135790)
I own my own house, so bring it on. I can sell it and then move to France and buy a small walled village and run my own totalitarian regime.
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No way!, McGowan would still tell me what to do....
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Head of Ground Operations now announced. Melissa Wilson - ex Air New Zealand and Swissport.
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The main airport costs will be the large end user ie Gold Coast or Cairns, who really won't give a dam about doing deals unless you are shuffling a lot of airframes in and out, one flight a day at minimum cots you will get shafted to freight apron with a container for check in, and still pay more than what QF do. |
Originally Posted by Traffic_Is_Er_Was
(Post 11136068)
Airports are wary of LCCs because they are here today, gone tomorrow. They are loath to provide infrastructure because the LCC will want everything, but want to pay nothing. LCCs also bring LCC problems, like LCC passengers, lowest tender GHAs, minimal staffing (if any) when things go wrong, etc.
Not saying Menzies are like that now but it does tend to reinforce the efficacy of the old adage....... "pay peanuts, get monkeys".... |
New Aussie start-up Bonza says more than 35 airports have so far expressed interest in hosting its flights as it collects bids prior to determining its domestic network. Bonza hopes to start services in the second quarter of 2022 and is calling on airports that have not yet expressed an interest to do so before the closing date of November 15. The start-up invited 46 airports it sees as potential destinations to bid for its services and is also talking with state and territory governments about a head office site to be based in a regional center. “Bonza’s entry to the Australian market will bring more travel choices than ever to everyday Aussies and in turn, stimulate demand for regional destinations that have traditionally struggled with perceptions like distance and cost,’’ chief executive Tim Jordan said. “We are moving at pace to have flights on sale, so we encourage airports to work with us now on finalizing our network.” The call comes as the airline’s chief commercial, Carly Povey, started work on Monday and takes responsibility for airport partnerships. Povey has worked with easyJet, Jetstar and UK start-up Jet2.com and said she had seen first-hand the impact low-cost carriers have on regional communities in terms of employment and economic benefits. “Working to better connect the regions is so important and timely with the pent-up demand to see more of our own backyard,” she said. “I encourage airports to challenge themselves to provide the best possible deal to secure their own future. It will help us not only with our launch network decisions but, critically, with a projection of future growth potential and partners prepared to support us as we stimulate additional leisure travel demand.” The start-up has announced its leadership team and is seeking regulatory approval to start services using Boeing 737 MAX 8 aircraft on routes to regional and leisure destinations. Is it backed by US private investment firm 777 Partners which is also sourcing the fuel-efficient Boeing planes. Bonza will enter a market that has thwarted several previous attempts to launch airlines, including by experienced players such as Singapore Airlines. However, Jordan and his backers believe there is scope for an independent, ultra-low-cost entrant in the Australian market despite the existing battle for market share between Qantas Group, Singapore-backed Regional Express and Bain Capital’s Virgin Australia. |
Does Aus even have 35/46 airports that can take a full 737, not including mines..?
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2nd quarter start! How long does it take to get an AOC for a foreign company from scratch? CASA doesn’t hand these things out all that quickly.
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Originally Posted by TimmyTee
(Post 11136508)
Does Aus even have 35/46 airports that can take a full 737, not including mines..?
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Originally Posted by TimmyTee
(Post 11136508)
Does Aus even have 35/46 airports that can take a full 737, not including mines..?
Sydney Melbourne Brisbane Perth Adelaide Gold Coast Cairns Canberra Hobart Darwin Townsville Launceston Newcastle Sunshine Coast Mackay Alice Springs Rockhampton Ballina Proserpine Karratha Hamilton Island Ayers Rock Broome Coffs Harbour Port Hedland Newman Kalgoorlie Albury Gladstone Mildura Wagga Wagga Port Macquarie Dubbo Mount Isa Emerald Tamworth Paraburdoo Port Lincoln Hervey Bay Bundaberg Devonport Armidale Toowoomba Wellcamp Geraldton Moranbah Thursday Island Learmonth Mount Gambier Weipa Roma You can pull out the likes of Port Hedland, Karratha, Newman, Paraburdoo, Moranbah as being mainly FIFO. I'm sure that someone will be able to nominate the ones that you wouldn't get a B737 in to/out of. |
The vast majority of the bottom half of the list couldn't take an even half full 737, ignoring how insanely low some of their load factors would be. Lucky to be 40 there that can (including the mine sites).
So to get 35 even, either the mine sites in the middle of nowhere were pitching for a LCC tourists, airports with NFI applied, or he's having a lend |
Originally Posted by TimmyTee
(Post 11136823)
The vast majority of the bottom half of the list couldn't take an even half full 737, ignoring how insanely low some of their load factors would be. Lucky to be 40 there that can (including the mine sites).
So to get 35 even, either the mine sites in the middle of nowhere were pitching for a LCC tourists, airports with NFI applied, or he's having a lend |
Let’s open that list up a bit further.
Port Vila Nadi, Suva. Auckland, Hamilton, Tauranga, Palmerston North, Wellington, Christchurch, Queenstown, Dunedin, Invercargill. Tonga, Samoa, Rarotonga. Bali. Honiara, Port Moresby. |
Originally Posted by big buddah
(Post 11136862)
Let’s open that list up a bit further.
Port Vila Nadi, Suva. Auckland, Hamilton, Tauranga, Palmerston North, Wellington, Christchurch, Queenstown, Dunedin, Invercargill. Tonga, Samoa, Rarotonga. Bali. Honiara, Port Moresby.
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Originally Posted by kiwi grey
(Post 11136868)
The Hamilton catchment area has grown around 500k people since the last international services. Air NZ has driven a hub spoke model away from there pushing people into Akl. Dunedin was a successful international port for Virgin up until Covid, will be interesting to see with their recovery and NZ borders restrictions if they pick it back up. All ports have custom and immigration facilities available. It just comes down to who is going to pay for them. |
Let’s open that list up a bit further. Port Vila Nadi, Suva. Auckland, Hamilton, Tauranga, Palmerston North, Wellington, Christchurch, Queenstown, Dunedin, Invercargill. Tonga, Samoa, Rarotonga. Bali. Honiara, Port Moresby. |
Originally Posted by kiwi grey
(Post 11136868)
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https://cimg5.ibsrv.net/gimg/pprune....90c266f61.jpeg
The focal point of the airline appears to be regional leisure routes using Boeing 737-Max 8 aircraft. The Max-8 has a seat count of 162--210 and a runway take-off requirement that varies depending on temp., elevation, load and weather. This runway requirement could be challenging for some regional airports. The aircraft has a range of 6,500km so it covers all AUS city pairs. I think the owners of Bonza have seen (1) Tigerair exit the market taking 7% of the market with it, (2) the size of Jetstar's CASK, and (3) the expected demand for an AUS leisure holiday over the next 12-24 months as many Aussies choose to holiday at home. (1) + (2) + (3) = you little ripper. Bonza in fact. Let me elaborate on (2). The figure below indicates by world standards that Jetstar has a relatively high unit cost (CASK) for a LCC. The airline with the lowest CASK adjusted for sector length in the world in 2019 is Ryanair. Bonza would love to have its CASK of 2.8 US c/ASK but I think that is out of its reach given its lack of scale. Bonza is probably looking at a CASK that is closer to that of Spirit Airlines which is around 4.3 US c/ASK. After adjusting Jetstar's CASK for sector length, this will give Bonza a 2 US c/ASK cost advantage over Jetstar. If I were a betting man, I think Bonza could take Jetstar head-on on key tier 2 leisure routes such as Ballina, Maroochydore and Hamilton Island (amongst others) if it can secure a cost advantage of 2 US c/ASK. It may also head in a different strategic direction and open up completely new routes involving airports like Busselton, Merimbula, Port Macquarie, Coffs Harbour, Broome and Devonport. I really like the Merimbula (MIM) option because not only is it an amazing tourism spot but it is equidistant from MEL and SYD and can also cater for the CBR market. If Bonza does decide to open up new markets that are relatively short sectors, the big question will be whether it can take cars off the road. The way I analyse this issue is to establish for each potential passenger whether the following holds: P-AIR < P-TIMEx(Time-Car - Time-Air) + P-Car where P-AIR = airfare, P-TIME = cost of time, Time-CAR = journey time by car, Time-Air = journey time by air, and P-Car = cost of travel by car per PAX. This inequality says that a passenger will go with air if the fare offer is less than the additional time opportunity cost of car travel plus the explicit cost per PAX of car travel. A critical parameter in this is P-Time. To see this, consider a family of four who wish to travel from SYD to MIM. The air time is 1 hr and the car time is 6 hrs. The car cost = 72 c/km (from ATO) or around $100 per PAX. If the time opportunity cost is $20 then the inequality is: P-AIR < 20x(6 - 1) + 100 = 200 Bonza can attract this family if it offers fares below $200. The fare offer is higher if P-TIME is higher. Now that's Bonza (must be said like Steve Irwin)! https://www.linkedin.com/posts/drton...038556160-rHGu |
Originally Posted by T-Vasis
(Post 11137998)
https://cimg5.ibsrv.net/gimg/pprune....90c266f61.jpeg
https://www.linkedin.com/posts/drton...038556160-rHGu
Separately, the author's fly v drive equation looks a bit off on a few counts. First, he seems to be overcooking the average Australian's recognition of the value/cost of their own time. One thing that the slow/low uptake of toll roads in most Australian cities demonstrates is a general reluctance to pay money to get time back. Second, he does not account for the value many place on having a car at their destination. It is often the case that airport transfers alone end up costing more than the airfare. Third, he is overcooking the way most people consider car costs. When thinking about the cost of a short road trip (4-6 hours), many (if not most) punters simply look at the cost of fuel as their cost. I doubt that many of the sort of pax that Bonza would be hoping to attract run a full total cost of ownership/operation calculation using numbers like the ATO or NRMA cost/km. The rational economic consumer model routinely fails to determine actual behaviours because consumers are frequently either not rational or not economic, sometimes both, when making decisions. |
Nominating Merimbula as an ideal destination for Bonza doesn't seem to account for the performance of the Max; the 1600 metre runway would prove problematic I would think. |
Originally Posted by 43Inches
(Post 11138101)
The runway distance wont be a problem for landing as the Max will land and then as it decelerates it will sink into the ground and stop very quickly. Might be a while before it next departs the airport, on the back of a truck that is. Pretty sure the turboprops already operate with pavement concessions.
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I don’t think the Bonz is in the business of making money.
(I’m not sure if it’s actually technically possible for them to actually make money. No numbers add up) |
I don’t think the Bonz is in the business of making money. |
Originally Posted by PoppaJo
(Post 11138464)
I don’t think the Bonz is in the business of making money.
(I’m not sure if it’s actually technically possible for them to actually make money. No numbers add up) |
Since learning to fly in 1965 I've observed for around 20K hours the Australian aviation landscape from the front window of regional aircraft. In that time many dreamers have come and gone in trying to establish an airline in what they see is the great south land of undeveloped and undiscovered city pairs ripe for exploitation. In reality we are not the USA with dozens of Canberra sized cities scattered throughout our states and territories. All profitable city pairs in OZ that support medium sized jet transports are well serviced with little potential for extra capacity. There are many reasons for new entrants to fail in Australia, just one is that there are no further opportunities in terms of new markets to deploy 737/A320 sized aircraft at a viable utilization rate and load factor which would return a profit to investors.
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I think you have just eloquently summarised in one paragraph what everyone is thinking.
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Originally Posted by lamax
(Post 11140425)
Since learning to fly in 1965 I've observed for around 20K hours the Australian aviation landscape from the front window of regional aircraft. In that time many dreamers have come and gone in trying to establish an airline in what they see is the great south land of undeveloped and undiscovered city pairs ripe for exploitation. In reality we are not the USA with dozens of Canberra sized cities scattered throughout our states and territories. All profitable city pairs in OZ that support medium sized jet transports are well serviced with little potential for extra capacity. There are many reasons for new entrants to fail in Australia, just one is that there are no further opportunities in terms of new markets to deploy 737/A320 sized aircraft at a viable utilization rate and load factor which would return a profit to investors.
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It's not the concentration, its the lack of facilities. No new entrant can do anything different than what is being done, no real commuter slots are available. Melbourne has effectively one runway, with just options for when the wind changes. Sydney operates with two hands and a leg tied behind its back due to curfew. Both won't tell internationals to get lost from peak times to allow more commuter slots. So you get an A380 arriving at peak hour which chews up 5 minutes of spacing, etc etc etc. QF is allowed predatory practices to devour all the slots and pretend to use them and get to have an arrival bookings system that obviously favor a large operator that can just swing arrival times between companies. Any new entrant goes into a pool of users that scramble over the last few scraps and hopefully don't cop a 5 hour ground delay and that's before weather kicks in.
Reality is you need a complete overhaul of the current system to allow for competition, then you need at least 1 more decent airport at each major city. The feds are hung on the idea people will travel by train up the east coast, willing to spend trillions on that project while all they need is 1/10th that for some investment in new airports and their connections. I have to laugh when Melbourne airport spruiks all its car parks and new taxiways, and have spent billions on them, yet a new runway? Nah, too expensive. We can just park planes on the taxiways while we organise the single runway. |
About Melbourne, agreed. There is a plan to build a third runway but it wouldn't be completed for many years. What that city needs instead of a 3rd runway at MEL is a Western Sydney type airport but built to the south-east of Melbourne, closer to a large number of people in the eastern/south eastern suburbs. I remember there was a proposal for another airport somewhere near Tooradin (which has major roads and a rail line nearby), does anyone know if it's likely to progress?
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It's not the concentration, its the lack of facilities. No new entrant can do anything different than what is being done, no real commuter slots are available. Melbourne has effectively one runway, with just options for when the wind changes. |
Avalon hasn’t really been much success for Jetstar, it’s subsidized by the Andrews government until the middle of this decade. Really need something in Melbourne’s East in the burbs, or edge. Tiger was also subsidized at Avalon by a previous Victorian government.
These rural/secondary major ports only work if paid for by taxpayers. Tullamarine needs a complete rebuild, or a second efficient competitor out in the East. |
A major airport to the South East would have to be out near Lang Lang down along the coast of Westernport. Any further towards the city, South or West of Kooweerup will bring the ranges into play for a North/South runway, which is essential in the Melbourne area. I can see heaps of opposition to anything near Westernport, esp the wetlands area, so most likely never going to happen. Then there's all the precious horse trainers in the area that can't even stand light aircraft, or anyone for that matter. Avalon fails, and will continue to do so until there is viable city pairs and it actually looks like a modern airport rather than some sheds, then there's all the issues with en-carriage and connections and rapid transit.
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Avalon will work in 100 years when Geelong finally connects Melbourne and a new metropolis starts to build in between the two. Long beyond our lifetimes. The region all connected will be miles higher than Sydney, one mega city will be 15m people. That’s the forecasts. Avalon will be of use then.
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You forget that in 10 years time they will sell the land as the center of this great new suburb, as no one is using it when J* pulls out. So a new airport plan out at Cobram will be required with high speed flying drone trains that use underground tunnels, just because it costs more.
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