Tiger ready to pounce on Avalon

Well sourced rumours that the Tiger-Avalon Airport deal is close to being announced claim that it will split its Melbourne operations and leave the ones that most trouble Qantas and Jetstar, including its Sydney and Brisbane services, at the main Melbourne International (Tullamarine) airport.

If this is true, and there is no confirmation as yet, both Tiger and Avalon Airport, owned by Lindsay Fox, look set to be winners in the shorter and longer terms.

Qantas and Virgin Blue were clearly hoping Tiger would shift all its Melbourne flights to Avalon, which is for the most part, much less attractive to frequent business travellers than Tullamarine, and remove the pricing pressure the Singapore Airlines controlled carrier is able to place on the higher yielding Sydney-Melbourne route.

Let’s work on the premise that the split operation rumour is true.

Tiger, or anyone, is going to save around $5 per seat to fly from Avalon compared to Tullamarine. For lower yielding leisure flights, like those to the Gold Coast, or those that take a long time and operate less frequently, like those to Perth, the extra 20 kilometres distance to Avalon from the Melbourne CBD is probably immaterial to most travellers.

For them, Avalon might be a minor inconvenience, rather than a show stopper for someone from Sydney in Melbourne for the day and running to a tight personal schedule.

There is another broader context to the two airport situation at Melbourne that adds to the very large upside over time for Avalon. Sydney is becoming less convenient for the big generators of business travel by the year. Its main airport is unable to cope effectively with growth, and access to the airport, despite its proximity to the CBD is bad and getting worse, and the announcement of a second Sydney airport outside Sydney, at say Goulburn, Marulan, Wells Creek, or Newcastle, will just be the absolute killer stupidity for corporations with a low tolerance for transport hassles.

As Melbourne competes with Brisbane for the commerce that Sydney can’t provide for, the under developed areas between western Melbourne and Geelong are likely targets for accelerated growth and passenger and freight generation, and thus potent sources of future growth for Avalon.

What might to some look like a trivial shift of around eight flights a day by Tiger from Melbourne Tullamarine to not-Melbourne-airport at Avalon could within 10-15 years look very far sighted indeed.

Tiger may also be only part of the start of a new wave of activity for Avalon. There are persistent reports that Emirates has kept an open mind about the potential of Avalon, something that is consistent with its enthusiasm for developing flights into secondary cities in Europe, and even its scoping of the potential for limited frequency services to Port Moresby and Nadi.

Whatever Tiger announces at Avalon in the near future should be seen as a reminder to the established airlines that unconventional ideas, especially from those with money, can be very dangerous.