Jetstar applied the blowtorch to the proposed trans Tasman alliance between Virgin Blue and Air New Zealand at the Australian Pacific Aviation Outlook Summit in Sydney today.
It’s CEO, Bruce Buchanan announced Auckland-Melbourne daily A320s from December 13, and three times weekly Auckland-Cairns A320s from April 12 next year.
Duelling icons. Photo by David Blackwell
These are perfectly timed to pre-empt the expectations of Virgin Blue and Air New Zealand that they will by then have gained competition authority approval on both sides of the Tasman for the joint marketing of their services and domestic Australian and New Zealand domestic connections, and thus be in a position to put some of their plans for such an alliance into action.
Add the launch of daily non-stop A330 wide bodies between Auckland and Singapore on March 17 next year, or the December 16 launch of Singapore-Melbourne non-stops this year with the same type, and the grip Jetstar will be taking on regional international low fare services should be very obvious.
Air NZ and Virgin Blue, and Singapore Airlines and its LCC associate Tiger, face some significant strategic initiatives by Jetstar, yet Tiger insists it isn’t going wide-body to gain non-stop linkages between its Singapore base and east coast Australian cities, and new Virgin Blue CEO John Borghetti isn’t impressed with the sub-economic performance of V Australia 777-300ERs on such comparatively short routes.
The route changes discussed by Buchanan also advance the Qantas use of Jetstar to export jobs from Australia to either Singapore or New Zealand in pursuit of lower group costs.
The trans Tasman A320 route expansions will be done by Jetstar NZ aircraft, while the initial basing of two Australian registered Jetstar Australia A330s in Singapore will generate around 200 new positions, for which Australia based Jetstar pilots, engineers and other staff can apply.
The Australian and International Pilots Association is challenging the Qantas/Jetstar labor strategy in court, as reported in The Australian.
But there is another aspect to this, in that it divides pilots along the lines of age and career prospects. Younger pilots who relocate to Singapore as a career move may be paid less in Australian dollars than they were here, yet will pay less tax and enjoy a superior superannuation scheme, and be at one of the growth focuses of Asia-Pacific air transport for the foreseeable future.
Buchanan emphasised the importance of the future Jetstar wide body expansion over its Singapore base into routes like southern Europe, while its Singapore based single aisle operation, Jetstar Asia, was already expanding into the Taiwan-Japan market.
This is not about two, three or maybe four A330-200s, but within five years, a squadron of Jetstar 787s.
To put it in context, Australian jets based in Singapore and flying in one direction to Australia and NZ, and in the other to Europe, give Qantas an escape card from the disadvantages bemoaned by its CEOs for the last two decades of being ‘trapped’ at the end of the line, rather than being like Singapore Airlines, and able to feed from the massive markets of Asia.
Virgin Blue’s answer to this may hold the key to its international growth prospects, although it isn’t clear if it is going to slap its cards on the table for all to see at this stage of the game.
5 Comments
All very interesting and practical in a business sense but what about this from the Qantas Sale Act requiring that the Qantas constitution must contain a provision that:
(f) prohibit Qantas from conducting scheduled international air transport passenger services under a name other than:
(i) its company name; or
(ii) a registered business name that includes the expression “Qantas”;
So how does Qantas operate the “Jetstar” brand on international routes then?
Well, Qantas execs blithley state that the QSA doesnt apply to subsidiaries. This response begs the real question though – if the same Qantas execs could subvert the QSA by moving all Qantas’ assets into a subsidiary what force does the QSA have?
Too hard basket – enforcing or even clarifying the QSA that is . . . and who would want to do it anyway?
In my opinion Qantas is evading the intent of the QSA, and that probably sooner rather than later a government could decide to amend the act to prevent this, which could in turn lead to Qantas selling down its stake to 49% of Jetstar based on the premise that it will in future make more from that diminished equity than it will ever make with Australian costs and taxes out of the Qantas brand.
Or, a government could decide to amend the act to facilitate this, since the prohibitions in the QSA do not apply to the Virgin Blue group or any other Australian carrier, present or future. As the act works now, any recapitalisation or ownership restructuring of the Virgin Blue group could in a comparatively short period of time severely disadvantage Qantas. This is a hypothetical argument, but a possibility that the current act never envisaged, just as it never envisaged the Jetstar initiative or the rise of the LCC model in general.
At the moment the policy appears to be one of ignoring the obvious failure of the QSA to work as intended. I don’t think any future government will rate the survival of the Qantas Group or the Virgin Blue Group as a matter of high national importance, although if either falls by the wayside there will be the usual helpless hand wringing and platitudes.
“Air NZ and Virgin Blue, and Singapore Airlines and its LCC associate Tiger, face some significant strategic initiatives by Jetstar, yet Tiger insists it isn’t going wide-body to gain non-stop linkages between its Singapore base and east coast Australian cities,”
Jetstar can bring to the table as many strategic initiatives as it likes. Eventually they will continue to sacrifice market share to true LCC carriers like AirAsia and Tiger. It is not a matter of if but when. Davis know a unique opportunity exists to marry the two. Something Airasia has done with amazing success except for its own governments failure to face economic reality that protectionism of the National Carrier will ultimately fail.(Sydney Seoul) I find it quite amazing that the re badged qantas (Jetstar) has the audacity to call it self a LCC. If i didnt know better I swear to God price fixing is going on between Jetstar and Virgin Blue on the East Coast / Denpasar route where are the ACCC when you need them.