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.
6 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.
What does Ben Sandiland have against competition? He says Cityflyer’s problem is “the undermining of its product by four way competition.” Isn’t that a good thing? Aren’t we told competition is good. Or do we still pine for the good old days of Telecom, Australian Airlines and Ansett, just to list a few. Ben, can you please point me to one positive article you have written about foreign competition in the aviation industry in the last twelve months. I think you would be well advised to read Joey’s comments (above) about where the aviation industry is headed. This is 2010. Not 1960.
TonyK,
Let’s start with the basics and put aside your insults.
I’m not your librarian. Look them up yourself, using the search engines. It’s not hard. If you have teenagers they will help out.
Maybe you are having trouble with the sarcasm that does, I admit, creep into my language from time to time.
The post you refer to was directed at reminding Cityflyer regulars, who often bemoan the passing of the good old days, when a tiny fraction of the population could afford to fly, that their real competition is Qantas itself, through Jetstar, which is its instrument of choice in ridding itself of what it sees as inefficient and costly work practices.
I’m not going all the way with Qantas on that. Especially when it comes to flight standards, however, as a statement, I am reporting the situation vis a vis Jetstar.
You need to focus on the meaning and context of words more sharply. I am very pro-competition, and some what naturally anti-establishment by nature. Some of my friends are less than kind. They just regard me as a ‘cussed son-of-a-bitch’, when they are trying to be ‘nice’.
Now, if I assume you are not a Tiger troll, let’s research my attitude to Tiger. I really liked its entry into the Australian market when announced, and was pretty quick, despite my generally thick attitude, to identify that this was the law of unintended consequences coming back to bite Jetstar Asia, and that the spread of trans border LCC franchises added a whole new dimension to the growth of air travel in the Asia-Pacific.
Problem. I try to see things from the consumer point of view. And Tiger’s attitude to the provision of low cost travel in Australia had the same unfortunate condescending class consciousness that is apparent in its approach to the Singapore market. In my opinion, and it is a strong personal opinion, the attitude of its owners in general was that Tiger was an act of charity to servants, guest workers and the less successful demographic in general. This is not a good way to succeed in Australia. Nor is it good to be ‘tricky’ with a range of ill defined and variable rules in relation to excess baggage and so forth. Tiger made Jetstar look like it possessed people skills overnight.
It was also impossible to contact, and when challenged on numerous occasions here, always struggled to explain its actions other than to make lame excuses about staff not understanding the rules. It is the job of staff to understand them.
I have tried to book Tiger flights on a number of occasions. The fares were in fact uncompetitive at short notice compared to even Qantas, so help me, taking into account the recently emphasised official advice that passengers should really present themselves two hours before scheduled departure, and the lack of frequency of service, the baggage situation, and the rebooking situation ad nauseum.
So, I am critical of Tiger for not actually making itself relevant to the needs of Australian travellers other than those who punt on a $1 or similar fare months in advance. But I admire it for its generosity in coming here and inspiring the other carriers to do things better. Tiger and its shareholders have subsidised Australian travellers with big losses, for which we are all grateful and we hope they keep on doing it too.
Meanwhile, AirAsia and Jetstar (gosh, I’m nearly chocking over saying this) are making Tiger look very amateur in terms of being market smart or actually making money.
I doubt this situation will be tolerated for much longer, although it has obtained since it began flying. It’s been an under performer for five years as an entity. To survive Tiger needs a lot more than the proceeds of the recent IPO. It needs to reinvent itself as a competitive LCC, rather than a basket case.
It can do this. I know it can succeed and I’d like very much for this to happen. All that is needed is less tricky conditions, better clarity in customers relations, and competitive everyday prices, as distinct from the give aways.
TonyK,
I have reread all the comments to this post. They all add to the discussion and I agree with most of them too, not that agreeing with me matters. What matters is understanding what I had written. While you are the only respondent who did not fully understand what I had written I will nevertheless try to be clearer in future.