Virgin Blue, Tiger Seek to Lure Business Flyers From Qantas
Alan Joyce, chief executive officer of Qantas Airways Ltd., speaks in Sydney. Photographer: Ian Waldie/Bloomberg
Qantas Airways Ltd. is revamping its business class services to beat back efforts by Virgin Blue Holdings Ltd. to lure away corporate travelers and as rival Tiger Airways Holdings Ltd. attracts budget fliers.
Qantas, which controls 90 percent of Australia’s market for business fliers, will refurbish airport lounges, food menus and business-class cabins, Chief Executive Officer Alan Joyce said. The airline is also implementing technology to make luggage tracking, check in and avoiding queues easier.
“It’s about raising the bar for what business travelers can expect,” Joyce, 44, said today in an interview at a conference in Sydney. “This isn’t a defensive strategy, it’s about setting the pace to keep our customers.”
Virgin Blue may overhaul premium services to help double its share of Australia’s domestic corporate travel market from 10 percent. The carrier is targeting business flyers as competition from low-cost airline Tiger and Qantas’ budget unit Jetstar crimps leisure fares.
“We are chasing a share of the lucrative business market,” Liz Savage, Virgin Blue’s head of commercial activities, said yesterday. She didn’t elaborate on the Brisbane-based company’s plans.
Qantas shares rose 0.4 percent to A$2.48 at the 4:10 p.m. close of trading in Sydney, paring this year’s decline to 17 percent. Brisbane-based Virgin Blue climbed 4.8 percent to 32.5 Australian cents.
Fares Tumble
Australian air fares have tumbled since Singapore Airlines Ltd.-backed Tiger Air began flights in the country in 2007, with discount fares falling more than a third, according to a government-run index. The budget carrier is now aiming to lure business travelers with low fares, as it shuns perks including frequent-flier programs and business lounges.
“Customers looking for value will come to us,” Crawford Rix, Tiger’s Australian head, said in an interview yesterday. Business lounges are “financial black holes with mood lighting,” he said.
The carrier has had limited impact in the corporate market because of a greater focus on leisure travel. In May, it wasn’t included among a list of domestic airlines approved for use by politicians, advisers and bureaucrats in a shakeup of government travel after it sat out of the tender process. Qantas, Jetstar and Virgin Blue were included in the list.
Low Cost
Tiger has helped drive down fares by having the lowest costs in the market, according to Citigroup Inc. Excluding fuel, it costs Tiger 2.75 Australian cents to fly each seat a kilometer, compared with 5 cents for Jetstar, 5.75 cents at the Qantas-brand carrier and 6.25 cents at Virgin Blue, Citigroup analysts including Shavarsh Bedrossian said in a July 16 note.
Tiger also pares tickets prices by charging extra for food, airport check-in and reserved seating, which helps it generate 19 percent of revenue from “ancillary services,” or non-ticket sources. That’s the highest proportion in Australia and the fifth-highest worldwide, the company said this week, citing data from consultants IdeaWorks.
To boost sales further, the carrier may consider charging passengers to use on-board toilets, Rix said. It may also install “vertical seating,” where passengers stand up, so that it can fit more people into each plane.
“Nobody has developed the right system yet but we will consider it when they do,” Rix said.
To contact the reporter on this story: Robert Fenner in Sydney rfenner@bloomberg.net
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