While shares in Qantas and Virgin Australia did a “dead” Tiger bounce in trading this morning, the implication that they stood to make more money from higher fares isn’t well based.
The Singapore-owned, low-cost carrier had lost its pricing power over the major carriers months ago as fuel cost pressures fed through to higher fares that are already testing the limits of fare elasticity.
For shorter-notice bookings, Tiger has been little different to the best fares on its bigger competitors, and Qantas was often undercutting not just Virgin Australia, but realistically alternative flights on Jetstar on occasions.
But a year ago, a bout of price cutting by Tiger in April and May wiped out the first-half profitability of Qantas and Jetstar domestic operations for long enough to depress full-year earnings, and had an effect on what was still Virgin Blue.
That leverage by Tiger was long gone before a whole series of deficiencies, not just two dangerous approaches to Melbourne Airports in June, had put an unresponsive Tiger management on a collision course with CASA CEO John McCormick, whose intolerance for non-compliance has now put the other carriers on notice to lift their games, sharply.
McCormick has left no doubt in the minds of the airlines that had he been in the regulatory hot seat when Jetstar changed the go-around procedures for A320s to a crazy and incompetent process that nearly caused one of them to crash in fog at Melbourne’s airport in July 2007, it would have copped a show-cause notice.
As would have REX when it was shamefully let off by CASA and the ATSB later that year after it flew a fully loaded turbo-prop for an hour on one engine to Sydney Airport after the other engine had failed shortly after taking off from Wagga Wagga. In a disgraceful disregard for the regulations, REX flew past or away from alternative airports it was obliged to land at as soon as possible in the event of an engine failure, and the non-investigation of the incident stinks badly almost four years on.
Those days seem to be over, although McCormick is not without his critics at various levels as CASA works on a much-needed process of regulatory reform.
Tony Davis, the president and CEO of Tiger Holdings, which owns Tiger Singapore and Tiger Australia today is being personally acquainted with the new low-tolerance CASA in meetings in Canberra. Davis is responsible for the comprehensive and protracted failure of Tiger to respect and obey the Australian regulations that is obliged to uphold under the terms of its air operator certificate or AOC . Before he was ordered by his board to fly to Australia, and fix the mess, he made defiant public statements rejecting CASA’s claims that his airline was too dangerous to be allowed to continue flying. He has already had his Singapore Tiger responsibilities taken over by the overnight appointment of a senior Singapore Airlines executive, Chin Yau Seng, as an executive director.
This reflects the need of Singapore Airlines, which owns 32.9% of Tiger Holdings, to put as much space between yet another disastrous investment in Australia and the launching of its 100%-owned and as yet unnamed wide-body, longer-haul, international low-cost carrier next year.
That carrier, which will be Singapore Airlines’ answer to Qantas-owned Jetstar international, is understood to be planning to launch in Australia by taking over the parent brand’s services to Brisbane followed by Adelaide.
By then the fate of an atrociously poorly run Tiger Australia will have been determined. Tiger Holdings last night said that is was committed to meeting CASA’s requirements and resuming services, and was this morning still taking money off those who believe it will resume services this Saturday.
But the brand value of the carrier has been destroyed by its own actions. It had already become unpopular for its tricky ticketing processes and unreliable services, and had its plan to double its loss-making fleet of 10 A320s cancelled by CASA, which told it in March that it wouldn’t approve any additional jets until safety deficiencies in pilot competency and maintenance oversight were resolved. Now it has become the first Australian airline in history to have its entire operations suspended as a dangerous risk to public safety.
This is scarcely the right stuff for a rehabilitation before Singapore Airlines rolls out a wide-body, low-cost carrier about a year from now.
Postscript: Crikey has received information that a Tiger flight between Perth and Melbourne on Wednesday afternoon suffered a navigational systems failure before re-establishing its location on ATC radar while approaching Adelaide airport. To the astonishment of other air crew, it didn’t land at Adelaide but continued on to Melbourne.