Brave or foolish? Australia's newest airline

BRAVE is not a word you want to hear applied to an airline. But that looks like the descriptor for the new little independent outfit, Air Australia (formerly Strategic Airlines), which plans to begin offering regular domestic flights between Melbourne and Brisbane in a month’s time in conjunction with its international flying.

The self-styled hybrid holiday and business airline – at first offering full in-flight service, even in economy, now adopting the pay-for-extras model of the low-cost airlines – is dipping its toe in the water to see whether it can be viable offering just one major domestic route, Melbourne-Brisbane, with two return services a day on weekdays and one on weekends.

The service will offer an eight-seat fully serviced business class as well as a relatively spacious economy class with just 152 total seats on its A320s, compared with 180 seats in sardine class on the same planes flown by Jetstar and Tiger.

But you still can’t book a seat. Fares for the new service still haven’t gone on sale as the airline’s Brisbane call centre (phone 13 53 20) is still only handling bookings to Denpasar, Phuket and Honolulu from Brisbane and Melbourne, as well as its two existing remote domestic routes, Perth-Derby and Brisbane-Port Hedland.

The Brisbane-Melbourne domestic service will begin at the same time as twice weekly flights from both Melbourne and Brisbane to Honolulu take off on December 15.

In the meantime, Air Australia continues to run twice-weeklies from Melbourne and Brisbane to Phuket with its 273-seat two-class A330-200s, as well as up to five weekly services from Brisbane to Bali, now operated by A320s via Darwin. Melbourne-Honolulu and Brisbane-Honolulu will be boosted to three a week each in the new year.

Strategic/Air Australia has found a ready market for services to Phuket, which were previously operated by Virgin Australia. I expect it will also find a many takers from Melbourne and Brisbane to Hawaii, as Melbourne was abandoned by Jetstar in favour of increased flights from Sydney to Honolulu to service the whole of Australia outbound. Jetstar never contemplated Brisbane-Honolulu, in spite of south-east Queensland’s large population catchment.

The only other player, Hawaiian Airlines, is also interested only in Sydney, which it is in the process of increasing to a daily frequency to Honolulu.

“Simplicity, value, operational integrity, genuine fares and service are our promise and all that we believe many Australian travellers want in order to get safely and enjoyably from A to B,” says CEO Michael James.

“Air Australia will avoid the massive product complexity of larger airlines as we do not want to be strapped down to charging our passengers ever higher fares to cover ever escalating costs.

“Many of our staff and advisors have extensive airline backgrounds and we have seen it all before, we understand the challenges of the industry and we understand the market. We also believe that there is mounting nostalgia in the consumer market and in the industry for an airline which offers genuine value and makes it readily possible for families and Australians of all ages to have the chance to fly.”

Part of the idea of the new Melbourne-Brisbane service is to effectively increase its international frequencies by making available connections from both cities to Phuket and Honolulu.

But who is going to buy tickets on an airline that has no other significant domestic network?

James’s oblique mention of “operational integrity” refers to Strategic Airlines’ major stuff-up in June, when it stranded several hundred people after a minor technical fault on one of its A330-200 jets en route to Phuket turned into a four-day aircraft grounding in Kuala Lumpur.

James says the airline's internal procedures have been overhauled and aircraft utilisation schedules altered to ensure there are always backup planes available to move people if there is a technical issue.

The Phuket episode cost the airline more than $1 million in expenses to look after the people stranded, but the bill will be much higher if the airline’s strategy of launching domestic services against four head-to-head competitors is a miscalculation.

Strategic/Air Australia switched from full service to low-cost to fill what it reckons is a gap in the market as Virgin Australia reduces its reliance on holidaymakers to hunt Qantas’s market share among business flyers.

Its international routes work because no-one else is flying them, except for the services from Brisbane to Bali via Darwin, which compete with Jetstar and Virgin.

Air Australia could decide to do something really different, which its competitors couldn’t or wouldn’t match: increase the space in economy class to 34 inches (86 centimetres) per seat row, like America’s most successful new low-cost carrier, JetBlue. It’s the one thing that leisure flyers are screaming for, but most airlines won’t give them.

If Air Australia goes head-to-head on domestic routes when its product is sort of the same as its competitors’, but not quite, I reckon it’s asking for trouble.

Will you use you Air Australia's new services? Have you already used Air Australia/Strategic Airlines to Bali or Phuket? Is it important to support a small, new independent or do we already have enough choice?

UPDATE: The airline's new website, including an online booking facility, was launched on Tuesday, November 15, 2011 at