There was a expert on ABC radion indicating it may true for regional areas and low passenger legs, but if a second airline only did the busy routes (BNE -SYD-MEL), then it possibly would be profitable, albeit a small airline compared to Virgin. There was discussion that this is what Virgin could turn into…drop international and regional routes, and focus on the three biggest capital city legs,
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Or?
Speculation.
Japan supports two major airlines and a notable number of smaller carriers. 90M - 100M passengers annually. Air travel, my personal observation is not as heavily discounted as Australia. Air travel is not as cheap compared to Australia and for some the economy seats not so roomy.
(JAL, ANA, SkyMark, Peach, Jetstar, et al) Note Jetstar Japan is nominally only no 3 in the lower cost carriers. The second tier carriers account for approx 25% of the market.
By comparison.
Australian domestic travel boards more than 61million passengers - rolling annual average. That was across Qantas/Jetstar/QantasLink, Virgin/Tiger, Alliance, REX and the other minor operators.
The industry load factor has been greater than 80%.
There are those of us flying the most popular routes, with the greatest demand.
There are those of us flying routes where the demand cannot support efficiently more than one carrier. The airline that services directly or through related carriers these routes, can carry an advantage into the rest of the market.
Do we need a different solution?
Or is Qantas + Jetstar + QantasLink, the three Airline future. Yes - I’ve redefined how many airlines that is. It is closer to what the next version of Virgin, or any alternative needs to compete with.
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Ridchard Branson only owns 10% of Virgin.
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And a population 5 times that of Australia…
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in about 1/20th the land mass, accompanied by one of the most reliable and speedy train services with wide coverage on the planet. Having been to Japan many times I never understood why they needed air connections excepting some specific routes and island hoppers. Japan is not short on airports with 29 served by commercial carriers!
The shinkansen are under 3 hours between Tokyo and Osaka for example, and not prone to weather delays, lost luggage, and then having to make one’s way into the city yet the airlines seem to be doing well.
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If you have Velocity Points stored up, this info might be useful:
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Just in relation to those who may have redeemed points before the pause and yet to receive the products, Velocity Frequent Flyer has sent the following email to affected members…
Your Velocity Rewards Store online order
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Worked at Ansett, left before the collapse. VA is like AN a good airline but a poor business. Any business that gets loaded up with far more debt than the company is worth, has not in any real way made a profit in the last decade, has so little cash that it can’t pay debts when due after only one month of grounding, and has an ownership that can’t or won’t put some cash in deserves to fail. Let the administration do its job, the foreign owners can take a big loss, and VA can get back to being a good business again with new owners. And the taxpayer should not be an owner.
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This is possibly true in the very long term. Possibly not in our lifetime.
Virgin was already running before the Ansett collapse. Even so, it took 9 years before it flew internationally (initially as V Australia) and 12+ years before they flew wide-body planes domestically. I’d call it 15 years before they were a decent competitor to Qantas. If VA collapses, will another carrier eventuate from nothing? Yeah, probably. In about 20 years. 20 years of a Qantas monopoly.
I would usually not be in favour of bailing out a foreign company. However, in this instance, someone should do some serious calculations as to how much money will be lost to Australian tourism and the Australian public if we have a couple of decades of a Qantas monopoly. Or even one decade.
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Many years ago the CEO of Qantas said very sagely that the Australian market was only big enough for one and a half airlines. Australia operates under lots of bilateral air travel agreements. The designated flag carrier is Qantas and therefore a protected airline. Foreign airlines cannot fly domestically within Australia. So, Ansett was that half an airline until they went under and Virgin Blue took over the role. Virgin blue took over Tiger and Virgin pacific and became Virgin Australia and loaded up with debt tried to match it with Qantas and make it two full airlines in Australia. It won’t work. We will go back to one and a half domestic airlines again, with a reduced VA, or some new smallish new airline.
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Here’s another solution that was proposed on April 2nd. https://www.michaelwest.com.au/virgin-australia-buy-the-business-dont-bail-out-the-shareholders/
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VIRGIN Australia is already owned 90% by Overseas - Singapore Airlines, China Conglomerate … etc.
… Richie still owns 10% of it ONLY…
agree with GregR - Australian consumers (including me) want 2 Airlines for the sake of Competition - but, in reality only 1.5 Airlines = a Profitability Ratio (based on population and usage)
I read pennycarrier’s link to Michael West’s article - he is right, we should definitely NOT be giving VA 1.4 billion bcoz it will NEVER be paid back.
Better off spending this 1.4 billion to redirect –
(a) Employment to Manufacturing - Australia should be self sufficient – forget importing… WHY do we export OUR Raw Materials & then Import them back as Finished Goods … then we complain that Unemployment is a problem… and, we let ‘other countries’ buy our resources including our Primary Industries (so that THEY can export them back to THEIR Country…) ……
(b) Resources to ENSURE that our Primary Industries are producing through Droughts… that the effects of bushfires are reduced because our Forests are not as dry as kindling…
Sagely, or out of self interest?
Why not say the Australian market is only big enough for one carrier? (Sarcasm, and perhaps not acceptable to say per the ACCC?)
That was effectively the position Australia found itself in in 1946. ANA privately owned between Overseas (British) and Australian interests had a dominant domestic position. It went on to become Ansett. The Australian Govt of the day went out of it’s way to create a second carrier, government owned and funded (TAA), after failing to nationalise air travel.
The opposition of the day held firm against change away from the one major privately owned operator.
Consumers were simply along for the ride. Or not, if you were to look at the cost of an airline ticket from the period. Air travel was for those well off.
Perhaps the Leadership roles have been reversed. It is still the same question today. What serves the consumer interest best?
Two or more airlines competing on equal terms,
Or
A single airline, nationalised or fare regulated to provide equal access to all parts of Australia, at the same cost per kilometre.
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While I appreciate the question, it would be unrealistic to price air travel at a constant amount per km unless the major routes paid a heavy price to subsidise the most minor ones.
Take-off uses an inordinate amount of fuel as compared to cruise and decent. Short flights are thus more expensive to operate. Airplane maintenance is based on flight hours or take-off/landing cycles. The more cycles (eg many short flights compared to a few longer ones) the higher the maintenance costs. Landing and gate fees at SYD will be more than at WEI. Since airport privatisation how will the owners react since their objective is shareholder value?
Since most of us live around the major metro hubs how many would be happy for eg SYD-MEL air fares to go up sufficiently for a constant cost per km equation to work across the country?
Once upon a time long long ago, it seemed how most of Australia was priced across the board, and the regions were not disadvantaged as compared to the cities, and the cities paid for it although it was rarely presented that way in polite company. Could we ever return to that formula? (no need to answer, although I’ll never say never)
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imo the best solution is the government buys out a portion of those shares. That would inject cash, bring more Australian ownership and make the government profit in the long term should they choose to sell those shares.
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How so when one of the few bi-partisan policies since the Hawke-Keating years has been divesting everything not nailed down as well as some things that were thought to be welded down?
I agree it appears to be an answer if government assumed 51% control, but otherwise they would only be propping up foreign private interests. Having a minority stake guarantees nothing except some dividends, and perhaps a repeat injection to stave off failure the next time. Is propping up foreign private enterprise good government? It went so well with GM although the situations are not exactly congruent…
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Like your comments. Your take on the history of airlines differs a bit from my view of it but that is not the point of we have here. I really hope we get two airlines back again competing on the domestic market. Qantas can compete on the international market with all the others, and Jetstar/Qantas and a revamped Virgin can compete on the domestic market.
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Unfortunately Qantas hasn’t been able to compete on international flights…it barely makes a profit and it is often runs a loss on this part of the business.
Virgin also did international flights trying to also compete with foreign airlines which have significantly lower operating costs/tax regimes or have subsidies.
I did say it was what I believed. Maybe I should make it a little clearer
