Tiger turns five, meets Virgins, lives happily ever after?
Tiger’s 5th birthday here comes as the competition between low cost carriers and their high fare airline owners appears to be lining up for a ferocious fight for dominance
Tiger Airways Australia has turned five today, and emailed the media seeking a plug for celebratory deals that as always require significant due diligence when it comes to the conditions before ever pushing the buy buttons.
Let’s not play along with the free advertising pitch and think instead about what happened to this carrier, and what might happen in the future, now that Virgin Australia is taking control with a 60% equity stake paid for with part of the proceeds of its recent 10% equity issue to Singapore Airlines, which owns 32% of Tiger Airways Holdings in Singapore, at the apex of the Tiger transborder low fare carrier franchise.
This YouTube, of an episode of a reality TV program about the carrier made with the full support of Tiger’s first disastrously bad management in this country, might help set the scene.
The two stars of the show are Eric, the only passenger ever seen in the entire program wearing business clothes, and 17 year old Jack, who is attempting to get to work to take up his first ever full time job.
Before Eric is lead away by security he says, among other things “The flight has not left yet and you are not flexible enough. I have no luggage.” Jack had been accepted as a passenger on his outbound flight by Tiger, but as he checks in for the return leg, a vigilant check in ‘chick’ tells him he is underage and needs a signed consent form from his guardians or parents, who are on the other side of the continent.
On Plane Talking Tiger at the time was helping keep the now dormant Angry Flyers Lounge full of furious customers robbed by the airline on technicalities, and frustrated by it not having a help line to call in Australia to make complaints, and like Jetstar having a refund policy that appeared to have been set up to pay after you had died waiting.
This was before Tony Davis, the first Australian gm of the carrier, said in an interview that Tiger would decided what part of Australia’s safety regulations applied to it, displaying the indifference to the rules that lead to the carrier being grounded as a threat to public safety for more than five weeks in mid 2011.
It included several attempts by the writer to fly Tiger from Canberra to Melbourne, at short notice, resulting in offers of $384 or something like that for a 50 minute flirtation with deep vein thrombosis prior to an 11.15 pm arrival at Tullamarine.
After several hundred millions of dollars of catastrophically derelict oversight and strategic lunacy by its Singaporean owners, Tiger Australia now enters a promised age of benevolent independent vigilance by Virgin Australia.
It would be facile to suggest that had it been well run from day one it would today be almost as large as Jetstar in Australia or anything like that. A tougher, smarter Tiger would be have most likely resulted in an even tougher and smarter Jetstar than the carrier that basically shamed it in every contest that arose right up until it also seemed to lose its way in recent years.
Tiger today might have thus remained a small player, with less than 10% of the contested domestic market, but its owners would be several hundred million dollars better off than has been the case up until now, and Qantas may well have indirectly benefited from this by Jetstar performing even better than it did, if we make cautious assumptions about what went into the blender when Qantas aggregates the domestic performances of Jetstar, Qantas and Qantaslink.
Had Tiger and Jetstar been as successful at changing customer expectations as have been Southwest, WestJet, Ryanair and easyJet in their respective North American and European markets, there is little doubt the battle for a shrunken full service domestic market segment between Qantas and Virgin Australia would be a much bloodier affair than it has been so far.
Which is why what John Borghetti does, as the founding chairman of a Virgin Australia controlled Tiger Australia, will be of considerable interest. Borghetti is on the record as saying there will be no code shares with Virgin Australia or the services of its powerful collection of equity holders in Singapore Airlines, Etihad and Air New Zealand, or the non-equity holding alliance partner Delta.
Nor will there be any Virgin Australia lounge access. There will be at least five new Tiger Australia routes soon, that Virgin Australia in its own right wouldn’t find attractive at this stage. Prior to the Tiger buy-in it was announced that the Tiger franchise and the 100% Singapore Airlines owned Scoot brand will effectively integrate their networks and easy connection processes at Singapore’s Changi airport.
So we see the clear intent that whatever Qantas/Jetstar does at Singapore Airport will be contested by what looks like being a larger range of options by Virgin Australia, Singapore Airlines, the various Tigers and Scoot, with the last named getting 20 Boeing 787-9s, some of which will be aimed at AirAsia X, which means we can expect to see them in Australia too, where the long haul arm of AirAsia has taken a substantial slice of budget services to Changi’s competing hub at Kuala Lumper with flights serving Melbourne, Perth, the Gold Coast and Sydney.
On top of this Qantas has signalled that it will also code share to Singapore and Kuala Lumpur on Emirates where its proposed partner has flights to those cities from Australia.
From a shareholder point of view this all looks scary, whether your equity is in Qantas, Singapore Airlines, Tiger Holdings, AirAsia or Virgin Australia. From a consumer point of view, or for those other shareholders in Australian airports, it all looks …. fabulous.