Tiger’s second announcement of new Sydney flights in two days underlines the pressure the Singapore Airlines controlled low fare airline is applying to the high fare Qantas Cityflyer operation.
Yes. Cityflyer. Not low fare Jetstar, nor middle market Virgin Blue, but high fare Qantas, and especially its inter capital Cityflyers.
Today Tiger’s touch up is the doubling of services between the Gold Coast and Sydney from early February following yesterday’s announcement of entering the route in December.
And while the Cityflyer product doesn’t serve the Gold Coast, the effects of Tiger’s increased presence in Sydney include further dilution of the relevance of the high fare and high cost Qantas product on a network wide basis.
Tiger set about its Sydney centric assault on the Qantas domestic network early in July when it entered the Sydney-Melbourne route with up to four daily returns. It will have up to the 13 return services daily out of Sydney by mid February, to Melbourne (9), Adelaide (2) and the Gold Coast (2).
February is the misery month for its competitors because business travel activity normally doesn’t emerge from the holiday season doldrums until then.By which time more announcements of new routes by Tiger are certain.
The problem for Cityflyer and its high fares and inefficient two class cabins is the undermining of its product by four way competition featuring increased frequency and convenience at fares that make the full service Qantas product seem out of touch with a market that has changed radically in its demands since the arrival of Virgin Blue and collapse of Ansett.
Travellers are no longer locked into return fares, because they are sold on a one way basis and single screen mix and match searches are available through on-line travel retailers and company account booking portals.
And Qantas has already shown where it sees its true interests by scheduling flights by its low fare subsidiary Jetstar head to head against the two class Cityflyers on Sydney-Melbourne contrary to its public insistence that it will do no such thing.
It seems to be more important to Qantas to contain Tiger by stalking it with increased Jetstar flights than it is to prop up the expensive operations of a full service domestic network that business travellers like but their corporate travel managers dislike.
Tiger of course doesn’t distribute its capacity through business account friendly channels, but when it comes to SMEs and individual entrepreneurs or persons controlling their own travel budgets the fare competition it is causing probably does far more to induce customers away from Qantas to Virgin Blue or Jetstar than to itself.
This doesn’t seem to worry Tiger. It is largely buying market share by giving away flights well in advance for little if anything more than the taxes, levies and charges it has to pay per seat for air traffic services (!) security screening, noise, and airport facilities.
What it plans to do once it has acquired substantially more market share is one of the bigger questions in Australian air transport at this moment.
3 Comments
I have to say, Qantas seem to have Tiger covered. There are two distinct markets as you pointed out in your piece, and they will derive revenue from both. As inefficient as you say Qantas’ product is, corporate folk are unlikely to be persuaded across to the Tiger situation, especially when they are spending 50%+ of their year away from their families. The “feel good” factor applies here.
Without for one second bringing Tiger to account for it’s reliability…
At least if Qantas has a problem, it’s a problem. Not the fact the airplane is still on the other side of the continent. If they do, they can use Jetstar to bear the load.
I find it’s a big Q/J win in this one, and deservedly.
Tiger generally have a lower cancellation rate than the others, and their OTP is on par with Jetstar. The reason QF are irrelevant is more to do with DJ’s effectiveness in the corporate sector. As soon as they revamp their PE offering they’re going to have no issue picking up the very higher yield traffic. I like Tony Davis’ quote today in the australian that states that TT’s investors would not allow it to grow if it didn’t earn the right to. I just went on their website and there’s no a seat available between sydney and melbourne tomorrow. JQ’s site is showing atleast 20 free seats on EVERY MELSYD SYDMEL flight. The issue is Jetstar forgot how to be a low cost carrier and left the market open for Tiger. One simply has to look at RyanAir (who indirectly have a stake in Tiger) to see that the ‘ULCC’ model does actually work (and thus doesn’t have to be concerned with some consipracy theory that ben has about SQ trying to force QF to merge).
I can’t quite see the win here for QF. They’re burdened by an awfull fleet. Their product domestically is shockingly unremarkable and long haul DJ has provided a product that is second to none. QF barring any true innovation is going to see itself devolve into a absolutely niche carrier in the medium term.
I’m flying Tiger in December to MEL and then on a leisure trip w family to OOL in JAN. I paid around 60% of the avail QF fare and 70% of the avail DJ/ JQ fare.
Expectations are the critical factor here. I don’t expect more than a bus trip.
On QF/DJ, on the other hand, its a diff matter. If I pay the extra, I expect extra.
I don’t think the value proposition stacks up, however. This is esp true regarding QF. Last JUN, I flew the SYD-MEL route having paid for a J Class trip on QF FFLY points. I was due to be served a 2 course meal plus coffee . Unfortunately, time ran out. I would have been better off back in Y Class where at least the whole meal would have been dumped in front of me holus bolus. Even better, I could have paid for and chosen my own meal at the terminal food court. The Space was nice in J Class but the seat hardware is getting way too old. Which brings me to the ageing B767s .. !!!
DJ at least has Foxtel, a premium economy and may strike the right balance for corporates. Their frequency and punctuality, esp on the trunk routes aint too bad. However, are they alienating their traditional leisure clients with a publicly stated focus on corporates? Are they having a bet each way which the target markets will see through? They can’t be everything to everyone. Expectations, expectations !!
That said, QF has its behemoth of a frequent flyer programme which has 110% of Aussies entwined. That’s its unique selling proposition and should sustain it until DJ grows and improves its offering (bring it to the stanadard of Ansett’s Global Rewards and we might be talking!) I understand that DJ is a hybrid carrier. However, joining the likes of Star Alliance, notwithstanding its clips on the cost side of the P + L, might be a deal maker.
So assuming that each carrier finds its niche, communicates it clearly and meets the expectations (the crucial word) of their customers, there should be room for everyone. I just don’t believe that QF domestic is sustainable in its current form. The product is not meeting expectations given ageing hardware, old-world (legacy carrier meets cost cutting) ideas and a too greater focus on the loyalty of its frequent flyer programme base. It also doesn’t seem as though DJ is focussed enough on its knitting and might be entering battles with competitors who are more entrenched in their market sectors.