Australia’s aviation market set for change after failed Qantas bid
An AFP report in Asia Channel News says that analysts say that Australia’s aviation market is facing major changes in the wake of a failed takeover bid for Qantas, with major fleet expansions and aggressive newcomer Tiger Airways starting flights this year.
The 11.1 billion dollar (9.3 billion US) private equity play for Qantas that collapsed spectacularly in May had diverted attention from strong conditions in the Australian market, Shaw Stockbroking aviation analyst Brent Mitchell said.
“The market at the moment is very buoyant,” Mitchell told AFP. “That’s been helped by high visitor numbers, a strong economy and high load factors.
“We’ve got Virgin Blue and Jetstar expanding and obviously we’re seeing Tiger coming in towards the end of the year, but I think the strength of the market is such that it will be able to cope with the capacity increases.”
The last major shake-up in the Australian market occurred when British billionaire Richard Branson launched his discount carrier Virgin Blue in August 2000, challenging Qantas’ stranglehold on the Australian domestic market.
Qantas responded with its own cut-price offering, Jetstar, in 2004. Mitchell said both airlines had prospered, with Qantas holding about 65% of the domestic market to Virgin Blue’s 35%.
But the arrival of Tiger Airways towards the year’s end had the potential to upset the market balance, with both Virgin Blue and Qantas’ Jetstar preparing to defend their turf.
While Tiger will begin its Australian operations with a relatively modest fleet of five Airbus A320s, chief executive Tony Davis believes the no-frills formula which has worked so well in Asia can also succeed in Australia.
“We’re determined to make Tiger Airways a national carrier and we’ll be entering a lot of markets around the country,” Davis said earlier this year.
Qantas chief Geoff Dixon says the airline’s existing 65% domestic market share is a “line in the sand” that it will defend vigorously, backing his words with the acquisition of new planes soon after Tiger announced its Australian venture.
Dixon will give Jetstar an extra nine A320s to counter the Tiger challenge, although the discount offshoot will push for more aircraft.
“We can see opportunities beyond the additional nine and we’ll be making representations to the Qantas board,” Jetstar spokesman Simon Westaway told AFP, pointing out that Jetstar had been able to turn a profit on routes such as Christchurch in New Zealand that Qantas had previously lost money on.
Virgin Blue is also rumoured to be considering setting up an ultra-cheap airline which would compete with Tiger as its main operation targets business-class travellers.
The Centre for Asia Pacific Aviation (CAPA) says Virgin Blue could launch the cut-price offering within months, although the airline itself remains coy about its intentions.
CAPA said the Australian domestic aviation market was entering uncertain territory.
“Intense pressure on earnings looks unavoidable in the domestic market in the months ahead,” it said.
A Report by The Mole and AFP
John Alwyn-Jones
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