Business class is the battleground

In the past week, Australian domestic air travellers have ascended to nirvana: not only are they the beneficiaries of a ferocious market share war that is keeping prices down, but politicians of all hues are listening to their every concern as air travel takes the mantle as the nation’s No.1 political issue.

And it’s no flash in the pan: the current crisis in the financial sustainability of the air transport business has been more than a decade in the making and it will take months at least – probably years – for stability to return.

On Monday night federal cabinet meet to consider removing one of the restrictions on the ownership of Qantas – that at least 51 per cent of its shares be held by Australians – but that will make little difference to the carrier’s fortunes in the short term and, in any case, it is unlikely to gain passage through parliament, with conservative nationalists (chiefly the Palmer United Party) holding sway in the new Senate from July.

But the real story is that Qantas and Virgin Australia remain totally committed to their bloody war of self-harm.

For the first time in two decades, the Australian domestic flying business is collectively losing money. But, with its war chest of funds from its 77 per cent foreign ownership – chiefly Etihad of Abu Dhabi, Singapore Airlines and Air New Zealand - Virgin Australia is now fully committed to dragging Qantas’s domestic market share back from 65 per cent to nearer 50 per cent.

In a healthy industry, the market share war would have been resolved long ago. But the post-Ansett world of flying in Australia was anything but healthy, with Qantas dominating the industry and Virgin Blue happy to be a little non-business backpackers’ airline.

All-out war between Qantas and Virgin didn’t erupt until three years ago, when Virgin added business class to its inventory and leased a fleet of widebody A330-200s to neutralise its disadvantage on the long transcontinental routes to Perth.

Most of the bargains since 2011 haven’t been in the cheap seats down the back; they’ve been in the heavily discounted business class seats to and from Perth, as well as in business class in the Melbourne-Sydney-Brisbane triangle.

The war is all about being able to brag to the high-yielding business market about which airline has the best service and frequencies on any given route. The spin-off has been a rapid ramp-up by Virgin in services on destinations vital to the mining industry, like Paraburdoo, Newman and Karratha, Western Australia, and Gladstone and Bundaberg in Queensland.

Lies have flown thick and fast as each airline accuses the other of flooding the market. But neither is going to call off the escalation any time soon.

In unveiling a $235 million loss on Thursday, Qantas announced it would list domestic capacity by between three and four per cent.

On Friday, Virgin Australia CEO John Borghetti unveiled a loss of $83.7 million, but refused to reveal how much he planned to increase capacity this half on the basis it would be a signal to Qantas to double it.

Qantas says it has increased capacity in the past three years by eight per cent, compared with Virgin’s 18 per cent. Virgin says Qantas has increased the number of seats it has in the market by 7.1 million versus Virgin’s 2.1 million. One of them is fibbing.

However, bargain-hunters who don’t use business class shouldn't feel left out with a flood of new cheap seats mainly to holiday destinations about to hit the market as Virgin continues to ramp up its newly acquired budget brand, Tigerair.

Industry analyst the Centre for Asia-Pacific Aviation says Tigerair capacity will rise by about 50 per cent in the next few months.

“Schedules filed with OAG show Tigerair Australia on 2-Mar-2014 at a weekly 60,480 seats, rising more or less steadily to 90,000 in the last week of Jul-2014,” CAPA reported on Saturday. “This would take Tigerair from 4% overall domestic market share to around 5.7 per cent. Over the same period, Jetstar, whose capacity fluctuates more, will go from 272,000 to 290,000, maintaining its share of around 18.7%.

“Meanwhile, Virgin branded seats over this period are projected to go from 439,000 weekly seats to 469,000, keeping it steady at a total market share of just on 30 per cent; on the OAG  (Official Airline Guide) schedules, Qantas is showing a smaller proportional increase, from 631,000 to 643,000, reducing its share of the total domestic market by around 1 per cent, to 41.4 per cent.”

Are you noticing a difference in the chatter as you move through the airport-airline system? Have you gone out of your way to pass on your opinion to politicians about the future of the airline industry? Have you been enjoying the airfare war, as a flyer? What sort of bargain flights have you picked up? Post your comments below.