Tiger tracks down customers

A report in The Australian, says that Tiger Airways believes that a strong response to its initial offering in the aviation market supports its belief that there remains significant pent-up demand for air travel in the Australian market.

Tiger chief executive Tony Davis says that the airline is comfortable with sales so far, often for travel well into next year, despite attempts by competitors to undermine Tiger.

The airline has been selling tickets for flights from the end of November on a slew of routes it has been slowly announcing in recent weeks.

Its operations are still subject to regulatory approval but the airline is confident this will come.

“When we decided to set up Tiger Australia, we certainly didn’t expect the competitors to roll out the red carpet but I think we’ve started now selling quite successfully — the consumer reaction to the fares we’ve been selling has been really attractive,” Mr Davis said during the Asia Pacific Aviation summit in Sydney last week. “And, I think generally, we’ve been really happy with the level of support we’ve received across all sectors — from the airport community, from the governments around the country and, most importantly, from our customers.”

Mr Davis says the good response also applies to routes that have raised eyebrows in the industry, such as Melbourne-Mackay and Melbourne-Rockhampton. He says residents in these areas have told Tiger they are sick and tired of being treated like second-class citizens.

“I get letters from grandparents saying they’re really fed up paying hundreds and hundreds of dollars to take a relatively short flight to see their grandchildren, when they go to Asia and fly with us, or they go to Europe and fly with Ryanair, and they can fly for a few dollars.They are basically saying to us: ‘Why can’t we do this in Australia?’. That’s the market that we’re targeting.”

Jetstar has been campaigning strongly to head off Tiger, introducing a “double the difference” voucher guarantee for passengers who find a cheaper fare on an equivalent flight, and says that it has already paid out hundreds of claims.

It has also attacked the way Tiger promotes its fares as being too vague and at one stage was threatening to file a complaint with the Australian Competition and Consumer Commission.

But Mr Davis dismissed Jetstar’s claims it was the fares leader and described its price guarantee as a gimmick .

“We’re comfortable that we’re offering lower fares,” he said.

“And I think the difference between us and what you’re seeing from some of our competitors is that we don’t just talk about low fares, we don’t just offer a reduction for a couple of days and then put the fares up again straight after.

“Our whole business model is about low fares and it’s not about saying something that grabs a headline and then when people actually go to a website they can’t find it.

“It’s not about gimmicks where they might give you a voucher if you comply with an A4 sheet worth of conditions which seem to be designed specifically to make sure it’s very difficult for anyone to actually benefit from the guarantee they give.

“We’re just focused on delivering those low fares. And the proof of the pudding, if you like, is that people are buying those fares with us at a rapid rate of knots and we’re very, very happy with the response we’ve had from consumers.”

Mr Davis is a strong believer in the Ryanair model of no-frills airlines and believes it is a mistake to deviate from that concept.

He said he spent little time worrying about competitors’ latest gimmicks and was more concerned about ensuring Tiger had a cost base that enabled it to keep offering low fares on a sustained and consistent basis.

It did this by targeting those areas where people are being forced to pay for facilities and services they did not necessarily want.

It has stuck to a single fleet-type across its entire operation allowing it to standardise its configuration, the suppliers it used to fit out planes and training.

“We only use the internet as our distribution vehicle — we don’t participate in some of the more expensive travel agency distributions systems, we don’t offer a frequent flyer program, we don’t offer lounge access, we don’t interline with other airlines so people can check their bags through to their final destination. So all the things that add cost and complexity to operations we take care of. And we convert those savings into lower fares.

“And look, the bottom line for us is that I’m more than happy for our product offering to be judged with what they see on our website. If they go to our website and they compare us to the other airlines, we’re very comfortable that we will be competitive.”

While recognising the problems new airline start-ups have had in Australia, Mr Davis said Tiger was committed to becoming an important and integral part of the local aviation scene.

He believed it had the right model, was entering the market at the right time and had the right management and shareholder level to do so effectively.

“No business would flippantly decide to enter the Australian domestic market and we’ve entered the market with our eyes wide open,” he said.

But he continued to play his cards close to his chest, saying the “paranoia” of his competitors demonstrated their enthusiasm for trying to understand Tiger’s business model.

“They’re going to have to wait,” he said.

“They’re desperately trying to get us to disclose our business plans, they’re desperately trying to understand how they can compete against us.

“And we’ve made it clear consistently that they’ll have to judge us retrospectively rather than trying to prejudge us before it’s even happened.”

That reluctance to disclose its business plan extended to whether or not Tiger was sufficiently encouraged by the initial response to make a decision on taking its initial capacity beyond the five aircraft already announced.

The airline this week revealed that its latest route would be between Melbourne and the Sunshine Coast and its competitors calculate routes announced so far have already accounted for 3 1/2 of the five aircraft.

Mr Davis refused to confirm this and said it was too early to make a decision on the Australian fleet, and that any increases would be based on consumer demand.

“We’ve highlighted that we have a strong stream of aircraft deliveries that will take the Tiger fleet to 70 aircraft,” he said.

“What that does is it gives us huge flexibility within our operating network across the Asia-Pacific.

“I think the fact that we are the only low-fare airline in Asia that covers India, and China and Southeast Asia and also now Australia, the flexibility is that we can allocate our airline resources either here in the domestic Australian domestic market or indeed to grow our international services in Asia.”

Report by The Mole