Illustration: Greg Bakes
Jetstar is counting on leisure travellers to fill its extra seats, writes Clive Dorman.
Jetstar has begun implementing a gung-ho increase in capacity of up to 30 per cent in the Australian skies, betting that a stronger economy in the second half of the year will spark a surge in the number of people taking leisure trips.
The chief executive of Jetstar, Bruce Buchanan, believes his company is winning the cut-throat war between the three airlines catering for Australian leisure travellers. Jetstar, Virgin Blue and Tiger Airways were hit hard by economic conditions in the first half of the year - as was the business airline, Qantas.
Even though Jetstar was treading water financially between April and June, Buchanan believes the tide is turning. But a 30 per cent increase in seats and flights is a huge gamble considering Australian air travel increased by just 3 per cent in the year to June.
"We've got the flexibility to come down [in capacity], but that's what we've geared up to give ourselves the capability to do," Buchanan says. "That last quarter of the financial year was pretty tough in the domestic market, especially at the leisure end."
Buchanan watched Tiger Airways and Virgin Blue compete during the last quarter as "Virgin ceded five or six points of market share to Tiger" because of the ferocious price competition, before both decided to call off the fight.
In fact, Virgin Blue has been in transition. The airline is under new management, with chief executive John Borghetti concentrating on a revamp of his "product", with a new business class expected to be announced in the next few months to increase the airline's tiny 10 per cent share of the Australian business-travel market.
Tiger Airways has also been feeling the pinch, axing a number of routes from Melbourne and Adelaide. The airline froze the number of Airbus A320 planes in its Australian fleet at nine - although it has since announced plans to add a 10th in December.
With four domestic airlines flying head-to-head in Australia - compared with just two a decade ago - Buchanan says he doesn't know whether there's room for them all.
"You'd have to ask each of them," he says. "We're very confident of where we sit in the market. We've noticed our competitors pulling back a bit. We saw Virgin pull out of New Zealand and we're seeing Tiger pull off a whole bunch of markets recently. They've been in and out of a whole bunch of different markets over time and they've pulled back a lot of their capacity commitments. So I think we're seeing both of our competitors responding to market forces.
"Sometimes it's obviously getting a bit too hot for them in some of the competitive battles … some of it's pretty aggressive.
"We're used to competing with some pretty aggressive Asian competitors and that's made us fighting fit, shall we say."
More from Clive Dorman at the Travellers' Check blog.
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