Lean and hungry Tiger makes its move

Tony Davis, the head of Australia’s newest airline, Tiger Airways, in an interview by Peter Wiilmoth in The Sunday Age says that five-cent fares are just a gimmick but low-cost air travel will endure.

He went on to say that the flying bug bit early, adding from his Melbourne office, “I grew up outside Heathrow Airport.” “It was a bit of a distraction when you’re trying to study and you’re watching the planes taking off.”

As part of his involvement in an RAF-sponsored youth organisation called the Air Training Corp, a 15-year Davis was flying gliders and doing aerobatics at airfields across England.

His grandfather was in the air force and Davis wanted a career as a pilot but failed the medical because “my legs were too long. . . and my hearing’s not very good either”.

The best option was to join the business side of the industry, as soon as possible and he left school at 16 and at 19 joined British Airways, the beginning of a 22-year career in aviation that allowed him experience at both the major and low-cost airlines, including British Midland Airways in Britain, Gulf Air in Bahrain and British Airways stationed in London and New York.

It has set him up well for his current role overseeing Tiger Airways Australia, the new kid on the budget airlines block. “Once you get involved in a low-cost sector it’s a bit like a religious conversion,” he says. “You suddenly realise all the things you’d taken for granted and believed in with the traditional airline model weren’t necessarily as sacrosanct as you thought.”

Davis says sceptics have pointed to the failure of other start-ups here suggesting, he says, that “you have to follow the same business model that they attempted because that’s what everybody does”. “What we’ve shown already is that we are prepared to be different.”

Davis’ European experience tells him the low-cost sector can thrive. “It would be wrong to say we spent an awful lot of time studying their (failed start-ups) business models because we don’t believe they have the same model as us.”

“We’ve spent a lot of time (looking at) what has worked in other parts of the world.”

“The misconception is unless you charge high fares you can’t make money.” “The experience in Europe is very different.” “Ryanair has the lowest average fares of any airline in Europe and still continues to make one of the largest profits of any airline in Europe.”

“If you look at Ryanair and EasyJet when they came into Europe, people like me working at British Airways were convinced that this American model wouldn’t work in Europe.” “We were wrong.” “Now, Ryanair carries more people than British Airways.”

“History is showing that as you build in more complexity and build in more cost to your business you are much more susceptible to . . . downturns in the market, to external factors, whether it’s oil or instability in the world, recession.”

“If you are trying to get people to pay a premium, it’s great in the good times, but it’s pretty bad in the bad times.”

Davis was at British Midlands Airways on September 11, 2001, a day that shook the airline industry. “I really did question for the first time whether our industry would pull through and be able to prosper again,” he says. “It was ironic that while the world’s leading airlines were grounding aircraft and going into survival mode, people like Ryanair went out and ordered 100 aircraft.” “I think it started to dawn on many of us that maybe their model was more robust than the traditional model.”

Tiger flew its inaugural flight to the Sunshine Coast on the Friday before election day. “I managed to say hello to every passenger on the flight,” Davis says, saying feedback was vital.

He notes that of the three routes on the first day of service, two are serviced only by Tiger – Melbourne to Rockhampton and Melbourne to Mackay. “Not because of any protection or carving up of the market by allocating of routes,” says Davis, “but just because the incumbents say there isn’t the market, and we say there is.

“We feel very comfortable that the Australian market is ready for a low-cost airline like Tiger.” “Our competitors, to be frank, have done a lot of the preparation work for us.”

“Australian consumers are very comfortable booking air travel online . . . they’ve got used to the fact that you don’t get a free gin and tonic on the plane any more . . . (and that) you probably need to check in a little bit earlier than you used to.”

Tiger’s low-cost competitors have been anything but welcoming. Qantas has refused to provide ground staff at Alice Springs Airport, a decision Davis found surprising.

“I think it’s a short-term view they’re taking,” he says. “What we’ve said consistently since we announced the creation of Tiger in Australia is that the duopoly is not producing the level of competition that other markets are enjoying.”

“It’s not producing the type of air fares that consumers in other parts of the world, particularly Europe, are enjoying.” “It’s having a negative effect on the development of tourism and economic growth.”

Qantas executive general manager John Borgetti gave The Sunday Age a sharp assessment of the Alice Springs Airport deadlock. “It is normal practice for any business to have all of its arrangements in place before it starts operating.” “Assisting competitors is not part of my job description.”

Predictably, Tiger’s arrival sparked an instant fare war. Just days before Tiger’s first flight, Jetstar offered interstate flights for five cents, plus taxes. Not coincidental with Tiger’s arrival, this, says Jetstar’s chief executive, Alan Joyce, was a way to “thank our customers for making us the No.1 airline”.

When Tiger released its first route, Melbourne to Darwin, at a price of $79.99, Jetstar immediately undercut the price, offering sale fares at $79 on the same route over the same period.

When Tiger released its second route, Melbourne to the Gold Coast, at $49.95, Jetstar again undercut the price, offering $39 fares on the same route.

Davis, 41, says his passions outside work include travel, theatre, classical music and rugby.

He is based in Singapore but will often be in Australia, especially at Tiger’s Melbourne Airport offices.

He has relatives in Perth. “I certainly enjoy coming down to Australia as often as I can,” he says.

CV

Age: 41

Schooling: left school at 16, continued courses in accountancy and business studies during work experience with a building society.

Career: 1986-1994 at British Airways, based in London and New York, founding managing director of low-cost British carrier bmibaby 2002-2004, appointed president and CEO of Tiger Airways, based in Singapore, in 2005.

Davis is not married.

A Report by The Mole from the Sunday Age