Whether its in fleet planning, or offering adequate frequency, or in the pressure on fares and the games airlines can play with them, today’s moves by Qantas and American on the Australia-US routes pose major challenges for Virgin Australia and its main equity holder, Air NZ.
As outlined in a Crikey subscriber story today, they also add to the no doubt completely independent but substantial rises in air fares by Qantas and Virgin Australia in recent months.
What Qantas is demonstrating is that it has access to very keenly priced new jets, and the confidence of a large US carrier in terms of accessing the vital America routes. This is compared to its Australian competitor, which has three foreign airline backers, which don’t necessarily agree on anything other than that Virgin Australia isn’t making enough money.
For consumers, the pressure that Virgin is under means that it is unlikely to engage in a red-hot fare war with a competitor with inherent advantages of scale and, it seems, better fuel price contracts, and all of the connectivity that comes from American code-shares in one hemisphere, and those of Emirates in another.
Where this will lead is another matter. Virgin Australia’s responses in fleet, frequency, fares, and alliance behavior are unknown. But they will have to be substantial, and prompt.