Jetstar to fly SYD - MEL (Tullamarine)?

[Jason Le]

http://www.crikey.com.au/2009/05/04/...due-the-tiger/

Jetstar turns cannibal to subdue the Tiger

by Ben Sandilands

It looks like Jetstar is about to “accidentally” take on its parent airline Qantas on the Melbourne-Sydney route for the greater goal of keeping Tiger Airways in its cage.

Head-on competition between the Qantas full service Cityflyer and budget Jetstar brands has been officially taboo ever since Qantas announced a two-brand strategy in August 2003.

But having the Singapore Airlines directed Tiger running loose in the sheltered garden in which Qantas tries to quarantine its higher yielding trunk routes is seen as an even bigger no-no.

Sources have confirmed that Jetstar is considering stalking every Tiger flight with nearly identical scheduled departures between both cities when the low cost carrier launches on the country’s major domestic route this July.

This means Jetstar flights to Sydney would leave from Melbourne’s Tullamarine Airport, rather than the more distant and bare bones experience of using its Avalon airport terminal.

It would also mean that with the two budget fare carriers flying identical tight fit 180 seat A320s, Tiger and Jetstar would add a combined 1440 price slashed seats each way each day at convenient times that Qantas has until now insisted it wouldn’t offer to avoid cannibalising its full service domestic Cityflyers.

It would be a further temptation for the big corporate accounts that used to prop up Qantas domestic operations to ask whether there was any sense in spending between $200 to $500 more on a 70 minute flight given the prices offered by the low fare operators.

The March traffic figures show that Qantas has something else to worry about as Virgin Blue comes close to submerging the group’s 65% “line-in-the-sand” domestic market share which it has long sworn to defend at any cost. How close is hard to quantify without accurate comparative data from Tiger and Rex and some small regional jet operations that accounted for around 5-6% of the figures even though several of them recently went broke.

In the nine months to the end of March Virgin Blue’s domestic passenger count rose by 5.9% while the combined figures for Qantas domestic, Qantaslink and Jetstar domestic fell by about 1%. This is despite Virgin Blue domestic dropping 1.4% in March, compared to a year earlier, with Qantas mainline, down 2.6%, Qantaslink down 1.2% and Jetstar domestic up by 1.8% in the same month.

If the race for the middle ground continues the way in has in the February and March figures, with Virgin Blue performing better than the aggregate Qantas brands it competes with, it will likely contribute far more to Qantas having its 65% line-in-the-sand washed away than Tiger entering the Sydney market.

In Qantas, some see the problem arising because of its much greater exposure to large corporate and government travel accounts, with the former in sharp retreat.

However Virgin Blue argues that its strength is the cadres of self employed or small business professionals who began to fly frequently once price competition became a fact of life on domestic routes.

So far these smaller enterprise business travellers seem less affected by the recession than big companies, from whom Virgin claims to be winning increased custom.

But Jetstar and Tiger threaten them too by changing customer expectations of air travel and its price. Qantas has no reason to believe that when the recession ends corporate travel will revert to its former expensive habits.

On international routes Qantas CEO Alan Joyce has already confirmed serious consideration is being given to slashing business class seating to make way for more premium economy and standard economy seating.

The myth that corporate high flyers will continue to be indulged with business class fares that can cost four or times as much as economy fares appears to have been an early casualty of the economic crisis, together with thousands of those flyers who used to have jobs in the financial services sectors, especially in the US and UK.

Are JQ in some sort of contract with Avalon? If they move their Sydney flights across, that leaves only 2 flights a day from Avalon.

[Marty H]

Please refrain from quoting the whole previous post in your post, it is not necessary, thank you - mod

I thought the same thing, seems sort of a waste of time considering at its peak it was serving ADL, PER, SYD and BNE, dont think there would be much point just operating BNE out of AVV.

[Steve Jones]

Is this the first sign of QF running scared? I guess TT haven't been too much of a threat to date, but SYD-MEL is another story. Maybe they are also accepting that TT might actually be here for the long haul?

JQ therefore have a choice. Either they stick to their AVV strategy and accept the trade-off between lower charges (hence lower fares or higher margins) but more passenger inconvenience, or they dump AVV as a failed strategy and move all ops to MEL.

I think the answer may be already evident in the fact that they moved ADL services from AVV to MEL no doubt in response to TT. Hence it wouldn't surprise me to see the rest move there (maybe keep 1-2 daily flights to SYD for the Geelong-area market).

Does this show that Australia isn't Europe and people don't buy the secondary airport concept?

It's an interesting question, one that I suspect will be causing a few headaches at JQ headquarters.

[NickN]

The secondary airport concept in Europe is already well entrenched. The secondary airport concept over there is dictated primarily by the volume of traffic and not enough spots available at LHR etc. We aren't running at capacity at any of our airports therefore a shift isn't necessary.

But Jetstar and Tiger threaten them too by changing customer expectations of air travel and its price. Qantas has no reason to believe that when the recession ends corporate travel will revert to its former expensive habits.

I have said this a few times in various posts recently. Things will never go back to the way they were. After all this is over with air travel will be an entirely different prospect for many people.

Qantas just came off the back of a $180m loss last quarter, the last thing they need is to be competing with their own subsidiary AND Tiger and VB on the same route.

Add to that the fall in their international airfares and passenger numbers and things are going to look glum for Qantas for a while yet. Unless Qantas changes their strategy they are only going to face more turmoil and financial losses in the future. Personally, I'd prefer to see Geoff Dixon at the helm in times like this rather than Alan Joyce, however I can bet others opinions differ there.

[Adrian B]

I believe that JQ moved Adelaide flights to YMML due to the inability to connect to Tasmania, am I correct?

[Jason Carruthers]

Please refrain from quoting the whole previous post in your post, it is not necessary, thank you - mod

I don't think so because QF give you the option of connecting between QF and JQ (if booked on QF's website) passengers can book ADL-MEL on mainline then MEL-LST/HBA on JQ the other day when looking at OOL-MEL it gave me quite a few JQ/QF via SYD options flight even though there are JQ nonstops.

JQ moved ADL (and PER) to Tullamarine when TT started on those markets. but really unless you lived in say Werribee would you really want to travel the 50km or so (from Melbourne CBD) to Avalon for a hour sector to ADL when there are better options out of Tullamarine.


I don't think JQ will move all their ops to Tullamarine. I think maybe about 3-4 flights will go to Tullamarine during quiet periods and at least 3 will remain at Avalon and will be marked more as a Geelong and a Great Ocean Rd gateway then a secondary airport for Melbourne.

[Clarry S]

The start of the end for QF. Be prepared for a significantly different australian aviation landscape. TT are not going anywhere. QF will have to use JQ more and more to maintain its profitability on thin margin routes.

OOL - Gone
HBA - Almost gone
LST -Almost gone
CNS - On its way
DRW - On its way

A shame that our national carrier will no longer operate nationally.

[Greg F]

Yes it is a shame that QF are cutting back, but if the hadn't of launched JQ Somebody else would have filled that gap and QF would be dead or on its last legs by now.

At least with the 2 brand strategy they can grow/slim down each side of the business as required.

Once the GFC starts to lift (who knows when!?) I think QF should focus on being a top Quality International / Main trunk route airline, Leisure is largely LCC work now....


Like the Australian Airlines / QF Days

Qantas = Intenational
Australian = Domestic

[Peter H.]

What do you expect with an overseas head of Qantas who was with an overseas cheapie airline.

There is only one way he would want the Qantas group to go.Thats all he knows