Tiger’s announcement that it will more than double its flights on the Melbourne-Sydney route from 4 October is going to trigger more than a fare war on the major domestic air route.
It will force Qantas to move faster towards a long term goal of replacing the pay, conditions and product costs of the “full service” Qantas brand with those of its low fare low cost Jetstar brand.
And it creates further opportunities for Virgin Blue to grow its “middle market” brand which competes for those who need fares with flexible conditions at less than Qantas prices.
With up to nine flights daily each way between Melbourne and Sydney Tiger gains the frequency needed by regular travellers who are prepared to trade personal comfort for a tight fit seat for a 90 minute gate-to-gate trip.
Tiger is strongly rumoured to be contemplating adding far more flights to the route after the New Year, and making 2010 the year in which it expands on to all of the most important inter-city pairs with enough frequency to pull down competitor prices.
The issue for Qantas and Virgin Blue is that Singapore Airlines controlled Tiger doesn’t appear to care how much money it loses to carve out a place in Australia.
It is in part a punitive response to Jetstar Asia invading Singapore Airlines’ turf when it set up business there at the end of 2004, and in another part, the instrument by which Singapore Airlines sees itself as ultimately participating in the rationalisation of air transport in the Asia-Pacific hemisphere at large.
Until now Jetstar has been supposed to avoid competing head on with the declining Qantas full service product on major routes, although it has taken over enough of the secondary traffic to be carrying more than 40% of the combined Qantas domestic market. This strategy has already failed on the market share figures, with Virgin Blue growing strongly at Qantas expense on domestic routes on the once golden Melbourne-Sydney-Brisbane triangle, and on routes where Qantas has tried to redirect customers to Jetstar, including the Gold Coast, Hobart and Launceston.
With corporate Australia cutting back on the value of fares paid and the number of trips made, Qantas has been disproportionately affected by the economic downturn, with its domestic business class product being left out in the cold.
And until now, Jetstar seems to have been designed to “punish” those who choose it over the full service Qantas product, especially by banishing most of its Melbourne customers to Avalon Airport instead of the main Tullamarine airport.
That looks like changing soon. Work is underway at the tip of the Qantas pier at Melbourne on extra space for Jetstar flights, which at a wild guess, will move there from Avalon.
There are 66 return flights in the Melbourne-Sydney schedules for tomorrow. Qantas, 30, Jetstar nine, Virgin Blue 24 and Tiger three.
Two of the Jetstar flights are extensions of overseas services, so actually fly between the Sydney international terminal and the main Melbourne airport rather than to Avalon, which is 20 kilometres further from the city.
What is now happening because of Tiger’s onslaught is the same process that saw easyJet and JetBlue expand rapidly in Europe and the US at legacy carrier expense. Unlike Ryanair or Jetstar, these low cost brands were prepared to compete with the established airlines from major airports wherever they could find the space, making themselves business friendly at the outset.
Qantas will be forced to follow suit with Jetstar. And “eat its own” in the process.
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