Jetstar launching controversial Sydney – Brisbane services – competing directly with parent Qantas

Australia’s low fares airline Jetstar has announced that is to expand onto the nation’s second largest domestic market from 4 December 2007, operating double daily return flights between Sydney and Brisbane at launch fares from $39.

The announcement is anticipated to be highly controversial because since the low cost carrier’s establishment, while they have commenced operations on some routes already operated by Qantas, they have tended to be leisure routes, but this appears to be the first time Jetstar will compete directly with Qantas on a key high volume, high yield business route, which when Jetstar was launched was exactly what Qantas and Jetstar said Jetstar would not do!

With Jetstar’s operating costs some 40% lower than Qantas, substantially achieved through lower staffing costs, it is anticipated that there may well be a very strong union reaction to Jetstar commencing operations on one of Qantas’ highest volume and most profitable routes, rather than satisfying what is clearly very high demand on the Sydney-Brisbane route by increasing Qantas services.

Jetstar says that its domestic entry on the Sydney-Brisbane route, which currently carries over 3.8 million passengers each year, will complement Qantas’ existing high levels of frequencies on the route and that the new services are supported by Jetstar’s introduction of 9 additional Airbus A320s into its existing narrow body fleet of 24 aircraft between December this year and March 2009, underpinning the value based carrier’s next growth phase in the Australian domestic market.

Jetstar GM Corporate Relations Simon Westaway told The Mole late on Friday evening that the Qantas Group had made it clear that Jetstar was one of two growth brands for Qantas and that Jetstar was already operating to complement Qantas on a range of routes and now intended to continue to complement each other on most routes.

He admitted though that this was the first time that Jetstar was entering one of Qantas’ top tier markets, but he stressed that it was a complementary strategy and that Jetstar was not operating during the CityFlyer’s key morning and afternoon slots, but would be operating in slots during the day, which were of greater appeal to leisure travellers.

When questioned about any consultation process that might have taken place, Westaway said that it was clear that Jetstar was part of the Qantas two brand strategy and in that regard everyone necessary had been fully appraised that this was the overall approach the group was taking, but he did admit that not everyone had necessarily been appraised on this specific route development.

Westaway said that Jetstar consulted with internal stakeholders as they saw fit and the Qantas Group Flying Committee had been consulted.

When asked if the relevant Qantas unions in particular had been consulted he responded, “Do the unions run Qantas’ or Jetstar’s businesses and do any other businesses have a union representative sitting at the table telling them how to run their business?”  “The answer is no and that is the same at Qantas and Jetstar.”

He added, “We are simply responding to market demand and the market continuing to grow.”

When asked why Qantas did not simply increase its services on this route to satisfy this demand he declined to comment saying he could comment on Qantas specific operational issues.

Jetstar CEO Alan Joyce said in the original statement that the new domestic route would allow for continued expansion of its domestic footprint with its 177 seat A320s into a strong and growing air market.

He also said, “By commencing double daily Sydney-Brisbane services from 4 December, these will complement the Qantas Group’s existing strong position on the route by another 700 daily seats”, adding, “The Sydney – Brisbane route will become Jetstar’s 43rd domestic market as the airline continues to expand its Australian flying network now consisting of over 1000 weekly frequencies.

“Jetstar in its own right will connect Australia’s three largest state capitals of Sydney, Melbourne and Brisbane – achieved in Melbourne through either of our two airport operations – at Melbourne Airport and Melbourne Avalon Airport.”

Special web fares on Jetstar’s newest point to point Sydney-Brisbane route are now available at www.jetstar.com from AUD $39 one way.

The fare special is available at www.jetstar.com from midnight (00:01) Saturday 23 May 2007 to midday (12:00) Monday 25 June 2007 unless seats sell out prior and is for travel over two periods: 4 December – 13 December 2007 and 22 January – 13 March 2008.

Conditions apply.

Industry analysts say that there will be more announcements by Jetstar that it will be commencing operations on key Qantas routes.

Report by The Mole