It looks like Jetstar is about to “accidentally” take on its parent airline Qantas on the Melbourne-Sydney route for the greater goal of keeping Tiger Airways in its cage.

Head-on competition between the Qantas full service Cityflyer and budget Jetstar brands has been officially taboo ever since Qantas announced a two-brand strategy in August 2003.

But having the Singapore Airlines directed Tiger running loose in the sheltered garden in which Qantas tries to quarantine its higher yielding trunk routes is seen as an even bigger no-no.

Sources have confirmed that Jetstar is considering stalking every Tiger flight with nearly identical scheduled departures between both cities when the low cost carrier launches on the country’s major domestic route this July.

This means Jetstar flights to Sydney would leave from Melbourne’s Tullamarine Airport, rather than the more distant and bare bones experience of using its Avalon airport terminal.

It would also mean that with the two budget fare carriers flying identical tight fit 180 seat A320s, Tiger and Jetstar would add a combined 1440 price slashed seats each way each day at convenient times that Qantas has until now insisted it wouldn’t offer to avoid cannibalising its full service domestic Cityflyers.

It would be a further temptation for the big corporate accounts that used to prop up Qantas domestic operations to ask whether there was any sense in spending between $200 to $500 more on a 70 minute flight given the prices offered by the low fare operators.

The March traffic figures show that Qantas has something else to worry about as Virgin Blue comes close to submerging the group’s 65% “line-in-the-sand” domestic market share which it has long sworn to defend at any cost. How close is hard to quantify without accurate comparative data from Tiger and Rex and some small regional jet operations that accounted for around 5-6% of the figures even though several of them recently went broke.

In the nine months to the end of March Virgin Blue’s domestic passenger count rose by 5.9% while the combined figures for Qantas domestic, Qantaslink and Jetstar domestic fell by about 1%. This is despite Virgin Blue domestic dropping 1.4% in March, compared to a year earlier, with Qantas mainline, down 2.6%, Qantaslink down 1.2% and Jetstar domestic up by 1.8% in the same month.

If the race for the middle ground continues the way in has in the February and March figures, with Virgin Blue performing better than the aggregate Qantas brands it competes with, it will likely contribute far more to Qantas having its 65% line-in-the-sand washed away than Tiger entering the Sydney market.

In Qantas, some see the problem arising because of its much greater exposure to large corporate and government travel accounts, with the former in sharp retreat.

However Virgin Blue argues that its strength is the cadres of self employed or small business professionals who began to fly frequently once price competition became a fact of life on domestic routes.

So far these smaller enterprise business travellers seem less affected by the recession than big companies, from whom Virgin claims to be winning increased custom.

But Jetstar and Tiger threaten them too by changing customer expectations of air travel and its price. Qantas has no reason to believe that when the recession ends corporate travel will revert to its former expensive habits.

On international routes Qantas CEO Alan Joyce has already confirmed serious consideration is being given to slashing business class seating to make way for more premium economy and standard economy seating.

The myth that corporate high flyers will continue to be indulged with business class fares that can cost four or times as much as economy fares appears to have been an early casualty of the economic crisis, together with thousands of those flyers who used to have jobs in the financial services sectors, especially in the US and UK.

Peter Fray

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