Tiger Airways was mauled overnight by Jetstar on the Melbourne-Perth route, in the latest cat fight between the two airlines claiming to be the cheapest on any route they fly.

The action was as follows. Yesterday Jetstar boosted its flights on the route from single to double daily and posted a $49 one-way fare, which lasted as long as a snowflake in a furnace, but undercut Tiger’s original and long sold out deal of $59 one way.

The cheapest and costliest fares for the same budget seat on Jetstar yesterday went for the ephemeral $49 bargain and a regular $449, compared to Monday, when the cheapest offer was $149.

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However, Tiger was looking pretty bitten even before Jetstar made its move. Its fare range was $199 or $209.95 on Monday and yesterday, but overnight has changed to $89.95 or $99.95, which is more than interesting, because it shows it still had seats unsold in a peak holiday period despite the original $59 offer, and is now desperate enough to sell more at a loss.

Such fare fights go on all the time. Crikey subscribers will find the fares quoted and their availability can switch, often in a matter of hours.

This is screen jockey wars between the “yield managers” at all the airlines, checking to see what each other is putting on the internet, and making quick decisions whether to match, undercut or lie low in the grass.

Individually they don’t support predictions Tiger is doomed, much as Jetstar would like this to be the case, but the Melbourne-Perth numbers show just how cruel the Australian jungle may prove to be to the Singaporean Tiger.

This becomes clearer looking at what it costs an airline just to fly a jet between the two cities.

We don’t know what Tiger’s CASK (cost per available seat per kilometre) is, other than it claims it will be lower than Jetstar’s domestic network average of 7.53 cents in the year to June 30.

So based on the shortest possible route between Melbourne Tullamarine and Perth Airport, 2706 kilometres, and the fact that both carriers offer 177 seats in identical Airbus A320s, we know Jetstar has to collect total fares of $36,066 or an average of $204 before taxes and levies in a fully booked flight to break even.

In the real world, the distance flown will be longer, and there will be cost variables specific to the route, so this is an indicative, not a definitive, exercise in low fare airline maths, and at the mercy of fuel prices and hedges.

Put another way, Jetstar has to sell a lot of those 177 seats at much more than $49, or even $149, to make money, and those fares are inclusive of around $20 in airport fees (which are different in Avalon and Tullamarine) making the lower sucker bait fare about as useful to its owner Qantas as leaving envelopes full of money on each seat.

And Jetstar does sell a lot of seats at near Qantas or Virgin Blue fares, but sometimes only once, to customers who book them because it’s the only suitable flight available at short notice.

Both Tiger and Jetstar have to try and flog stuff to their customers, with extras for meals and video player rentals, or the commissions they might get from cars, rooms and insurance booked online at the same time as the fare is bought.

This model works fabulously well for Ryanair in Europe, but so far, not so well in Australia, with the big pussy and the death star, as some unkindly call them, pushing the “extras” as hard as they can.

At this point, Tiger is not a happy hunter on the Melbourne-Perth route. But punters beware, the real contest in air fares, the ones you can readily book yet save money on, is not at the $49 level, but somewhere north of $249.

Anything lower is just a con, or being both quick and lucky.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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