Is it an illusion to say that Virgin Australia now has control of Tiger Australia, where Qantas alumnus Rob Sharp was announced as CEO today?
The low fare travel experience here and abroad says carriers like Tiger’s longer established Qantas counterpart Jetstar exercise an influence on air travel that neither their various owners nor competitors can control.
It’s something full service customers already find when they board jets, particularly 737s or A320s where the more costly product comes with painfully reduced leg room and the refreshments that have replaced most meals resemble supermarket discounted snack packs wrapped in their own ready to stuff garbage bags.
The full service experience on Air France, Lufthansa or American is very nearly as miserable at times as that sold for less by Ryanair, or in the US case, is significantly inferior to that offered until recently on Southwest which is being accused in the consumer media of deciding to be just as bad as its more costly legacy competitors.
Qantas and Virgin Australia do rise above their full or higher service peers abroad, but the trend to less space and less quality compared to Qantas and Ansett at the start of the century is obvious.
The legacy carrier language when they set up or even comment on upon low cost brands is that of quarantining the LCC experience and appeal as being one that is confined to new traveller demographics, people who used to drive or catch a bus, who are motivated by price not schedule, and even, who don’t know any better in some of the more condescending commentaries.
Which is as effective as building fences to keep out fog, at least over short to medium flight stages.
The reality of Jetstar has morphed in recent years to a fast growing competitor to the parent brand Qantas as well as Virgin Blue and then Virgin Australia, often flying the trunk routes like Sydney-Melbourne at times that are competitive with the full service alternatives and from the same airports if not terminals.
If a full service Qantaslink turboprop is up against a Jetstar A320 at similarly convenient times on flights to Ballina or Hobart the passenger in the former suffers a miserable seat for longer in a lower flying aircraft with a free cup of tea or coffee with a sugar snack while the latter is uncomfortable for a shorter period of time for what is usually a lower fare.
And Qantas appears to routinely lose control of its pricing policies between the carriers, when the Jetstar alternative is at times more costly than the best priced Qantas offer, or so close to it that the lack of charges for checked luggage, and less onerous check-in requirements makes full service the better option all things considered.
The cynical view is often encountered that Qantas has been deliberately turning down the quality value on its full service offerings to reduce the difference with the Jetstar experience, which it is able to produce at lower cost than is the case for the legacy brand.
This verges on a conspiracy theory. But it might not be wrong, at least in part. The value proposition difference between full service and low fare brands has shrunk, everywhere they come into collision, and the fare competition, which has overall driven down the costs of full fare service fares, has catered for if not caused a huge growth in air travel particularly in emerging economies in Asia, Latin America, and Africa.
Where airports are either privately owned or held responsible for their financial performances, the growth in revenue from car parking and terminal retail leases is in the make or break class.
Low fare travellers don’t use valet parking or vanish into loyalty club rooms. They use public car parks, and fill the airport shops.
The notion that low fare airlines could be somehow ‘banished’ to the end of a long trip into the country to a remote airport in the case of Sydney Airport overlooks the disaster such a loss of patronage by alleged ‘bogans’ would have on its earnings, including those based on the per passenger higher fee take they get from an A320 packed with 180 passengers rather than the 132 that Ansett flew shortly before it went broke.
When it comes to airport business realities, as well as low cost airlines, the low fare traveller represents the largest opportunity for profits or turnover, as the case may be.
None of this is good news for 182 cm tall passengers like the writer. But the gravitational pull of increasingly large numbers of lower fare motivated travellers, and businesses that find the savings irresistible, are changing the meaning of ‘full service’ and in all probability, reducing its extent or frequency.
It also erodes the capacity of full service carriers to utilize their airliners for the same high hours flown by low fare carriers, whose customers are less sensitive to flying off peak giving them consistent patterns of demand all day and sometimes all night.
At least until recently the only thing holding the low fare offers of Jetstar and Tiger at bay has been the capacity and fare war being fought by Qantas and Virgin Australia.
Even at an $80 fare the low cost carriers aren’t going to be either profitable or competitive against the full service brands if they are flying 60% full on the Sydney-Melbourne route against $110-120 offers from fuller Qantas or Virgin Australia jets where the yield mix includes some much higher fares in business class and some fully flexible economy fares.
Nor are they attractive if the pitiful difference in the fares is about what it costs per day to park at the airport anyhow. The only way to fill a low fare jet on such routes is to be around $100 cheaper than Qantas or Virgin Australia, which is guaranteed to make Qantas and Virgin Australia much poorer, and leave the fixed costs of the low cost aircraft they invested in uncovered by the revenue.
In the longer term we see a downward trend in full service quality to save costs anywhere possible, and a migration of disaffected customers to misery commensurate with the lower fare charged.
Jetstar doesn’t appear to have solved these problems for Qantas. Will Tiger solve them for Virgin?
Not if it just does the same thing as Jetstar, and in turn that means Tiger may have to be more attractive to the customer than Virgin Australia would like.