Predictions
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Predictions
Hi all.
I thought that it would be a bit of fun to make some aviation related predictions and see how accurate we are at reading into what is going on in this industry that we like to bitch about, but at the same time love.
I'll kick it of with the prediction that Tiger Airways proposed Australian venture will, within 18 months of start-up, merge or be bought out by Virgin Blue. I base this on the facts that the Australian market has proven that it cannot support more than two domestic carriers at any one time, and VB is reinventing itself to cater to the more lucrative business market, thus will compete more directly with QF and place less of a focus on the leisure market.
According to my sources, VB have already looked at a low-cost alternative to take on J* and Tiger. Based on the current incestuous ownership arrangements regarding V Atlantic, SQ, Tiger and VB, I consider a closer relationship between VB and Tiger as very likely. Quite a few synergies will eventuate from such a move.
Anyway, thats my prediction. Lets wait and see.
I thought that it would be a bit of fun to make some aviation related predictions and see how accurate we are at reading into what is going on in this industry that we like to bitch about, but at the same time love.
I'll kick it of with the prediction that Tiger Airways proposed Australian venture will, within 18 months of start-up, merge or be bought out by Virgin Blue. I base this on the facts that the Australian market has proven that it cannot support more than two domestic carriers at any one time, and VB is reinventing itself to cater to the more lucrative business market, thus will compete more directly with QF and place less of a focus on the leisure market.
According to my sources, VB have already looked at a low-cost alternative to take on J* and Tiger. Based on the current incestuous ownership arrangements regarding V Atlantic, SQ, Tiger and VB, I consider a closer relationship between VB and Tiger as very likely. Quite a few synergies will eventuate from such a move.
Anyway, thats my prediction. Lets wait and see.
I predict that the CASA Regulatory Reform will not be completed in my life time.
Two years, three months and nine days ago:
I predict Australian aviation will survive, despite CASA.
Two years, three months and nine days ago:
Mr Byron - "We have an action item to develop a plan to forward to the minister about when we plan to have them to the minister, and I assume that plan would be done in the next couple of months."
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Tiger won't merge.
Tiger's going to need a LOT of time and money to survive the knee-jerk reactions of VB and J*/Qantas. There will be a squeeze, which these other ailrines can sustain for quite a while, albeit hammering their bottom line (as hard as a 5 plane start-up can hammer its competitors). Such steps are often necesarry in the interests of longevity, though. That's not news.
In the current climate of massive, and frankly often unreal expectations in business, I'm curious to see just how far the Tiger benefactors will go to try and break into Australia.
I sense this Tiger Airways venture is more about Singapore Airlines getting a claw into Australia than really giving VB and J* a run for their money. The Tiger model isn't serious enough - I think they're just out for some fun along the way, with the real aim of establishing a presence for the boss company. If they are being serious, then they're being very naive.
Personally - and be assured, I REALLY couldn't give a **** what happens, afterall, I'm just a tourist in OZ, although I have a certain level of expertise when it comes to lo-co, for what it's worth - I think the true european-style lo-co model (yes, I know it's originally American, yadda, yadda, yadda) that Tiger are bringing to Oz with their retail-based franchise business model, won't succeed in significantly affecting the general landscape.
There's a whole heap of factors to consider, obvious ones being infrastructure, established frequent flyer initiatives, market knowledge, etc, along with other non-tangible, but nonetheless very real factors such as 'fans' and positive experiences with the existing airlines and their wider brands. Fact is, passengers in Australia get a hell of a lot of value for their low fare - definitely more than in europe. Tiger doesn't appear to be factoring significant benefits into its offering, other than dropping the price. A bit.
On the question of fans, Tiger can win it's own, but this will take time it may not have. I've flown with Tiger a number of times in Asia - they're really quite unremarkable, as you'd expect from a lo-co airline. There's nothing whatsoever to set them apart from a customer's perspective. If anything, there's a key negative factor that sets them apart, in that their seats are noticably more cramped. Clarification will be needed here on whether they intend to use the same config in the Australian franchise. And franchise or not, the name Tiger and experiences of it will transfer, regardless of how seperate the regional companies actually are. If one is failing customers in a particular way, a level of impact will be felt by the others - although this also works the other way, but the average human being is notorious for being quicker to criticise than praise (just look at these forums!).
I just don't think that slightly lower fares are the be-all-and-end-all (because slightly lower is all they can really be, given current fare prices and the moves J* and VB will take to counteract), especially in an already highly value-centric, low fare driven market. This has been proven in other areas all over the world, notably the retail sector, so why should the airline industry be any different? I'm open to other opinions - this is a good subject to discuss. My mind isn't made up entirely.
I've experiened low fares with both Jetstar and Virgin Blue time and time again (I only chose to travel by plane when the price is right!) and I reckon that their offereing, particularly Virgin Blue's, is strong enough and adaptable enough to withold being 'torn to shreds' by Tiger, as folks have predicted.
Rather than Tiger blowing the market apart, I think at best they'll find a niche and exist alongside the VB and J*, if they survive the squeeze that'll come at the end - indeed hail the end - of their 'honeymoon' period. They might well slow the expansion of the other airlines and cause a few boardroom headaches (the Australian domestic market can only get so big, anyway), but I think it's all going to be quite unremarkable.
Future growth for Australian airlines in general will be by way of complementing domestic services by evolving the lo-co model and growing the business beyond the limited domestic market, like turning an eye to long haul as i now happening, albeit belatedly in the opinion of some folks. This is the crux - the Australian lo-co model of VB and J* is already a considerable evolution of the classic low cost model, and that's why I think that Tiger's bare bones, no frills low-cost business model (with absolutely no plans to look to long haul, according to Tony Davis very recently) is not going to make waves, if survive at all for any respectable period of time. It's not bringing enough to the party for its own long-term survival, and slightly lower fares on limited domestic services alone won't win it for them in the long run.
No frills doesn't carry the same weight in Oz - the market has low fares with frills. No frills is a backward step. When J* and VB drop their fares to compete with Tiger, they won't drop their perks - on the contrary, they'll adapt them to make the VB offering more desirable. Their perks are a key point of difference and a real customer winner across the entire customer spectrum.
I know it's largely PR guff, but I nonetheless was interested to see that Tiger have been asking Australian people where they want to fly to. What did they expect to hear? I can't think that this survey returned any major revelations for them. Most of the feasible destinations not served by the current airlines aren't served for a reason. They're either slated for future services already, aren't worth serving financially (even from an uber-low cost perspective) or can't accomodate a A320 or 737. If anyone's got the upper-hand here, it's VB with their addition of smaller Embraer jets. These jets may by committed to other routes already, but they nonetheless contribute to a considerably more reactive and flexible arsenal for VB, with their very existence in the VB armoury being yet another example of the ever-evolving lo-co model downunder - a key fundamental of the classic lo-co model is the restriction to 1 type of aircraft. Evolution before your eyes. Darwin would be proud.
Tiger's scope for innovation seems to be somewhat limited, but let's wait and see. It's just how Tiger intened to adapt the lo-co model that's the big issue here. Jetstar's priorities seem to be on show, as they press on with more A330s and a suite of fancy 787s. This may work in Tiger's favour. Then again, it may not. Of the two existing lo-co airlines, it's Jet* that will have their work most cut-out as they are behind VB with their current offering, in terms of destinations and frequency. However, Qantas are clearly switched on to the significance of the budget market, so expect more cash to be thrown at Jet*. Especially now the Tiger is lurking.
Lastly, nobody with an ounce of common sense can believe that Tiger can sustain a serious, comprehensive offering of the 'single digit fares' it's crowing about in the build-up to launch. It won't happen - that's a certainty. Their low fares will pale into the general low-fare backdrop of the current market.
The upshot of all of this...
Competitors will adapt and things will change a bit.
Fares may come down slightly.
And that will be it.
(I could've just written that last bit, couldn't I?)
Tiger's going to need a LOT of time and money to survive the knee-jerk reactions of VB and J*/Qantas. There will be a squeeze, which these other ailrines can sustain for quite a while, albeit hammering their bottom line (as hard as a 5 plane start-up can hammer its competitors). Such steps are often necesarry in the interests of longevity, though. That's not news.
In the current climate of massive, and frankly often unreal expectations in business, I'm curious to see just how far the Tiger benefactors will go to try and break into Australia.
I sense this Tiger Airways venture is more about Singapore Airlines getting a claw into Australia than really giving VB and J* a run for their money. The Tiger model isn't serious enough - I think they're just out for some fun along the way, with the real aim of establishing a presence for the boss company. If they are being serious, then they're being very naive.
Personally - and be assured, I REALLY couldn't give a **** what happens, afterall, I'm just a tourist in OZ, although I have a certain level of expertise when it comes to lo-co, for what it's worth - I think the true european-style lo-co model (yes, I know it's originally American, yadda, yadda, yadda) that Tiger are bringing to Oz with their retail-based franchise business model, won't succeed in significantly affecting the general landscape.
There's a whole heap of factors to consider, obvious ones being infrastructure, established frequent flyer initiatives, market knowledge, etc, along with other non-tangible, but nonetheless very real factors such as 'fans' and positive experiences with the existing airlines and their wider brands. Fact is, passengers in Australia get a hell of a lot of value for their low fare - definitely more than in europe. Tiger doesn't appear to be factoring significant benefits into its offering, other than dropping the price. A bit.
On the question of fans, Tiger can win it's own, but this will take time it may not have. I've flown with Tiger a number of times in Asia - they're really quite unremarkable, as you'd expect from a lo-co airline. There's nothing whatsoever to set them apart from a customer's perspective. If anything, there's a key negative factor that sets them apart, in that their seats are noticably more cramped. Clarification will be needed here on whether they intend to use the same config in the Australian franchise. And franchise or not, the name Tiger and experiences of it will transfer, regardless of how seperate the regional companies actually are. If one is failing customers in a particular way, a level of impact will be felt by the others - although this also works the other way, but the average human being is notorious for being quicker to criticise than praise (just look at these forums!).
I just don't think that slightly lower fares are the be-all-and-end-all (because slightly lower is all they can really be, given current fare prices and the moves J* and VB will take to counteract), especially in an already highly value-centric, low fare driven market. This has been proven in other areas all over the world, notably the retail sector, so why should the airline industry be any different? I'm open to other opinions - this is a good subject to discuss. My mind isn't made up entirely.
I've experiened low fares with both Jetstar and Virgin Blue time and time again (I only chose to travel by plane when the price is right!) and I reckon that their offereing, particularly Virgin Blue's, is strong enough and adaptable enough to withold being 'torn to shreds' by Tiger, as folks have predicted.
Rather than Tiger blowing the market apart, I think at best they'll find a niche and exist alongside the VB and J*, if they survive the squeeze that'll come at the end - indeed hail the end - of their 'honeymoon' period. They might well slow the expansion of the other airlines and cause a few boardroom headaches (the Australian domestic market can only get so big, anyway), but I think it's all going to be quite unremarkable.
Future growth for Australian airlines in general will be by way of complementing domestic services by evolving the lo-co model and growing the business beyond the limited domestic market, like turning an eye to long haul as i now happening, albeit belatedly in the opinion of some folks. This is the crux - the Australian lo-co model of VB and J* is already a considerable evolution of the classic low cost model, and that's why I think that Tiger's bare bones, no frills low-cost business model (with absolutely no plans to look to long haul, according to Tony Davis very recently) is not going to make waves, if survive at all for any respectable period of time. It's not bringing enough to the party for its own long-term survival, and slightly lower fares on limited domestic services alone won't win it for them in the long run.
No frills doesn't carry the same weight in Oz - the market has low fares with frills. No frills is a backward step. When J* and VB drop their fares to compete with Tiger, they won't drop their perks - on the contrary, they'll adapt them to make the VB offering more desirable. Their perks are a key point of difference and a real customer winner across the entire customer spectrum.
I know it's largely PR guff, but I nonetheless was interested to see that Tiger have been asking Australian people where they want to fly to. What did they expect to hear? I can't think that this survey returned any major revelations for them. Most of the feasible destinations not served by the current airlines aren't served for a reason. They're either slated for future services already, aren't worth serving financially (even from an uber-low cost perspective) or can't accomodate a A320 or 737. If anyone's got the upper-hand here, it's VB with their addition of smaller Embraer jets. These jets may by committed to other routes already, but they nonetheless contribute to a considerably more reactive and flexible arsenal for VB, with their very existence in the VB armoury being yet another example of the ever-evolving lo-co model downunder - a key fundamental of the classic lo-co model is the restriction to 1 type of aircraft. Evolution before your eyes. Darwin would be proud.
Tiger's scope for innovation seems to be somewhat limited, but let's wait and see. It's just how Tiger intened to adapt the lo-co model that's the big issue here. Jetstar's priorities seem to be on show, as they press on with more A330s and a suite of fancy 787s. This may work in Tiger's favour. Then again, it may not. Of the two existing lo-co airlines, it's Jet* that will have their work most cut-out as they are behind VB with their current offering, in terms of destinations and frequency. However, Qantas are clearly switched on to the significance of the budget market, so expect more cash to be thrown at Jet*. Especially now the Tiger is lurking.
Lastly, nobody with an ounce of common sense can believe that Tiger can sustain a serious, comprehensive offering of the 'single digit fares' it's crowing about in the build-up to launch. It won't happen - that's a certainty. Their low fares will pale into the general low-fare backdrop of the current market.
The upshot of all of this...
Competitors will adapt and things will change a bit.
Fares may come down slightly.
And that will be it.
(I could've just written that last bit, couldn't I?)
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Great post Harrogate
Agree entirely re VB. I think they are definately better geared to deal with the newcomers and the existing players for that matter.
Re low-cost. Isnt it interesting to see the number of LLC's that slowly drift away from this formula over time.
Cheers
Re low-cost. Isnt it interesting to see the number of LLC's that slowly drift away from this formula over time.
Cheers
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There will no doubt be a dodgey operator that suffers a tragic loss of aircraft and life with a year.
CASA will be blamed for not taking appropriate action sooner as they will have been monitoring the operator for some time and will not have done anything.
Nothing will happen after that.
The ATSB will release it's report.
It will be moderately factual but missing some important information.
People will lobby the Government and nothing will result.
The cycle will repeat itself in a year or two.
CASA will be blamed for not taking appropriate action sooner as they will have been monitoring the operator for some time and will not have done anything.
Nothing will happen after that.
The ATSB will release it's report.
It will be moderately factual but missing some important information.
People will lobby the Government and nothing will result.
The cycle will repeat itself in a year or two.
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