We have issues, Houston

The only constant in air travel is constant drama. In Australia, the low-fares leader, Tiger Airways, has just been grounded for a month for safety violations while at the other end of the market, Australia’s biggest airline, Qantas, is about to be shrunk.

But not before a pilots' strike, which is likely to be announced in the next 24 hours or so, as part of continuing haggling between Qantas pilots and management over a new enterprise deal. Among other things, the pilots are worried about the looming shrinkage of Qantas and what they fear is a future where most of the jobs are lower-paid positions at low-cost subsidiary Jetstar.

But, just in case you were losing interest, there’s the small matter of a new ticket tax of around $9 per return trip in Australia as a result of the tripling of aviation fuel excise as part of the carbox tax package from next year.

It has indeed been a fascinating week up here in the peanut gallery, where many initially believed Tiger Airways was finished in Australia. For nearly two years, I’ve been using Traveller’s Check as a platform for your discussions about the “value proposition”, to use the industry cliché, that Tiger brought to Australia in 2007.

The aggression of Tiger’s “ancillary” charges for items such as excess baggage and credit card usage has been extremely unpopular in Australia – much more so than in Asia, where Tiger has been flying since 2005. Australia had its first ultra-cheap fares in 1990, when Compass Mark I at one stage was offering $49 one-way Melbourne-Sydney fares and $99 Melbourne-Perth fares with a level of seating luxury (86 centimetres/34 inches per seat row), which is matched only by America’s JetBlue among modern-day low-cost carriers. So Tiger’s squeezy 73-centimetre/29-inch seat rows have been a rude shock for Australians, especially accompanied by price-gouging for “ancillary” items that used to be free.

Alan Joyce, who used to run Jetstar and now runs Qantas, is one who reckons Tiger will get back on its feet.

Joyce, who is sweating on new announcements about the future of Qantas, which he will make on August 24, told the ABC’s Inside Business yesterday the new Qantas plan would have four pillars: investment in the premium airline service, partnerships with other airlines, an aggressive review of international operations with cuts "where we need to make them", and a review of participation in the fast-growing Asian market.
He said the aim was to reduce costs in areas where efficiency could be achieved and then to reinvest in other areas. On top of its new aircraft deliveries, the airline had spent $75 million on new lounges and $100 million on its automated check-in system, he said.

Most of Joyce’s plan for Qantas is aimed at the flyers it most needs: international business travellers, who deserted the airline in 2008-09 during the global economic crisis and haven’t returned in the required numbers. Since then, Qantas International has become a money-burning basket case where, until the middle of last decade, it was a river of gold.

In the meantime, it’s not business travellers, but holiday-makers, who’ll be hardest hit by the new domestic ticket tax. And, in order, it will be Tiger, Jetstar and Virgin Blue, the main carriers of leisure travellers, who’ll have to deal with the greatest damping of demand.

I reckon it’s about $9 per return ticket (Qantas this morning reckoned it to be $7 - it'll be different for each carrier) based on the levying of an estimated $250 million extra a year in aviation fuel excise on about 55 million domestic one-way trips (international travel is exempt). Once again, air travel proves to be an irresistible cash cow for government and Australians pay plenty, starting with the $47 international departure tax.

Do you think Tiger Airways will get back on its feet? Will you continue to use Qantas if it cuts even more of its international routes? What new “investment in the premium airline service” would you like to see Qantas implement? Will a tax-related increase in air fares put you off domestic travel?

 

 

 

 

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