091124_Clarifier

My company booked me on Jetstar, made me go to Avalon airport, the check-in boy didn’t salute my Platinum Qantas card, there was no lounge, and I was wedged between two bikies exchanging death threats. Why?

Jetstar is the only Qantas airline making money. You love Qantas, you love Jetstar. Cheap is good, everyone can fly, but you are 30 seconds late for minimum check-in, so your ticket is toast and you have to pay 10 times the fare to fly now or try again next week.

But I’m an executive. Why is the company doing this to me?

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Estimates vary, but among the chronically frequently flown, corporate travel account managers control about 80% of bookings, set and vet the travel policy and are rewarded for slashing costs.

They can easily halve the firm’s flight costs (and boost their bonuses) by adjusting travel policies.  Which is what “best fare of the day”, “no business class” and “forward planning” is all about.

This is why companies demand to know why you chose a high fare on Virgin Blue or Qantas for an 8am departure, when you could have saved the company $100 by flying at 6am or 10.30am.  It’s not what suits your diary anymore, but how your diary can be arranged to capture the lowest fare.

Qantas has stopped flying to some cities completely or frequently. Don’t they understand I’m important, nobody hangs my coat up for me, and the seat is two thirds the width of my arse.

Business-class on domestic routes is currently a fixed cabin for which there may be no full-fare paying passengers for more than half the times the jet flies. On a Cityflyer 767 30, business-class seats can take as much room  49 economy seats, for which there is better demand all day.

So brace for changes. You company won’t pay as much for it  as Qantas would like, and the airline is going to change it to an “evolved” product, better than regular economy, but nothing  like business-class used to be.

On an A380 long-haul, business-class seating for two rows or 12 sleepers can make way for at least five rows of economy or 40 seats, or four rows of premium economy or 28 seats.

If Qantas were to get its normal fares for those seats (and now that the bargains are drying up this is more likely) it would gross about $120,000 for the return fares to London whether using the space for business or economy, and maybe $126,000 for premium economy.  And it’s not either/or, if it only earns $80,000 from the economy seats, but can’t sell any or just a few seats in business, the returns from cattle class are going to be a lot better than a “fat cat” class that is nearly empty.

All of the equations that said the premium cabins subsidised the economy cabins are now in doubt. They aren’t subsidising anything, and they are getting smaller. The mass market is making the most money.

Whining about this is like lamenting the end of first-class on the Paris metro, or on the horse-drawn trams of the Victorian era. It’s over. No business in its right mind is coughing up five or six times the cheapest fare for luxury air travel over any distance.

Which is where the new plans by Qantas (we are going to become a new premium carrier) and Virgin Blue (we are a new world carrier) start to converge, despite what they say to the contrary.

What is Qantas really doing?

On long haul it’s cutting back business-class in favour of more premium economy, it may further limit the availability of first-class, and in due course it can reasonably be expected to  look at higher density economy seating in its A380s.

On domestic there has been guidance on the weakness of business-class demand, however, Alan Joyce has referred to innovations and its relaunch as a “new premium carrier”.

But Qantas will also remain a twin-branded airline group in which Jetstar is tight and cheap and flies everywhere, while Qantas shrinks to fit those routes with adequate demand for premium products.

What are the Virgins up to?

Well, apart from possibly losing their “Virginity” and becoming a single brand, and perhaps calling everything “V Australia” there are signs of a  new spacious economy product, and an as-tight-as  discount economy product flying together in every jet in its fleet.

Already a Virgin Blue 737 with punitively tight seating in the rear half of the jet has been spotted in service.

Curiously enough, this seems to be the same general direction Qantas is really headed, in that the super-spacious economy product Brett Godfrey has alluded to is where Qantas is expected to head if it ditches the old Royal Barge version of business-class that is in decline.

Of course, what Qantas does in the rear half of its jets is uncertain. Maybe a sort of twilight zone separating the new less-is-less premium domestic product at prices business might tolerate, and the utter darkness of Jetstar.

We can expect that the front of a future Virgin or V flight between say Melbourne and Sydney will define premium economy as room to open a normal-sized laptop computer and drink from a cup, while value economy will be so tight that you will only drink through a straw and struggle to use a Blackberry or iPhone.

Remember, Qantas and Virgin will be fully internet enabled in the medium term.

Where does this leave Tiger?

Tiger is for some time likely to be hard for frequent flyers to use, in that it is infrequent, has limited network and doesn’t really make its inventory usefully available to the systems business-account managers like to use so they can track expenditure and hunt down and kill those who disobey company travel policies.

But this may change. Tiger also has a weird habit of charging high fares at short notice at close to the Virgin, Qantas and Jetstar fares, and quite frankly, they aren’t worth it.  Tiger has, however, enormous potential to injure Qantas and Jetstar in particular, which is why we are suddenly seeing the former allow the latter to fly at times and on routes where they were supposed to stay out of each other’s way.

Qantas appears ready to let Jetstar draw custom off its Cityflyers to  compete with Tiger in defence of Jetstar, which is where at the moment the profits are.

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Josh
Sydney, NSW

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