Sharp-eyed interstate flyers might have noticed that neither Qantas nor Virgin Blue seem fussed over the $1 fare wars that broke out this morning between Jetstar and Tiger.
Jetstar had 10,000 seats at that price up for grabs until noon for pre-registered clients for use on routes where Tiger is trying to claw itself some market share.
Good news for the other two. “If you are Qantas or Virgin Blue and you don’t have to set aside a few seats at really low fares to keep in touch with your main rival your profit per flight gets boosted,” says the manager of one of Australia’s corporate travel firms.
“It makes Tiger or Jetstar a god send, at least in the current situation of too many high fare payers and too few seats.”
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The $1 fare war also points to the pain game being played between Qantas subsidiary Jetstar and Tiger while Virgin Blue looks on and keeps banking the money. Each of those 10,000 $1 seats sold by Jetstar costs it up to $39 or so in compulsory taxes, fees and levies, including those that go straight into the profits of the airports and security firms.
That’s before the $50 or so per hour the lowest fare carriers have to collect above such charges to pay for fuel, pilots, maintenance, leasing and other fixed costs.
But burning the Tiger seems to be worth it, with Qantas vowing to play hard to defend its part of the jungle. Tiger’s initial uninspiring deals between Melbourne and Darwin, Rockhampton, Mackay and the Gold Coast, down to $49 one way, were already doomed to cost many millions in initial operating losses.
But the $1 fares are a sideshow.
The real action is Qantas versus Virgin Blue at the $200+ level on the ‘golden triangle’ of Melbourne-Sydney-Brisbane.
Qantas is fighting hard to stop its loyal legions of sky warriors who pay up to $411 in economy for a one-way between Sydney-Melbourne defecting to $249 on Virgin Blue, or even its top fare of $341, with entry to The Lounge, big screen movies, a full meal and wi-fi on the side.
The real prey on the ‘golden triangle’ is the discretionary business traveller, the sole traders or small operators who Virgin Blue identified as an untapped source of higher yielding growth over a year ago, and hoped, in vain, that Qantas wouldn’t realise that it was chasing.
Tomorrow for a trip starting in Sydney to Melbourne for example, most of the cheap fares ($146 on Qantas and $199 on Virgin Blue) are already sold out. At the top end Qantas has plenty of $411 offers versus the $320 with all the extras from Virgin Blue, or $452 or $622 in Qantas business class for those who don’t care what it costs.
The real battle ground covers the slightly conditional economy seats at between $249-$279 on Virgin Blue and $289-$341 on Qantas, the fare zone populated by the large majority of frequent flyers.
Until Tiger makes good its promise to attack the prime intercity routes, Qantas and Virgin Blue can keep hitting each other with feathers and pocket some of the best profits being made on major city services anywhere in the world.