When Virgin Australia CEO John Borghetti announced his airline was taking a 60% stake in Tigerair, he vowed that the investment would not repeat the mistakes he became familiar with as a senior Qantas executive when it launched its Jetstar low fare brand into operations from 2004.
We might be seeing some of that resolve in today’s announcement that Tigerair will become (so far) Brisbane’s only resident or based low fare operation.
Tigerair will base two A320s there from March and April next year. They will launch flights between Brisbane, Darwin and Adelaide, and provide enough capacity for an Adelaide-Sydney flight by the low fare brand as well.
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However there was no additional Brisbane-Sydney services by Tigerair mentioned in the announcement, although a much later email from the company says it will do additional Brisbane-Sydney flights.
Borghetti’s observations that there was brand confusion and mutual damage between Jetstar and Qantas, may not therefore extend as far as avoiding leakage between Tigerair and Virgin Australia on trunk routes, albeit on a smaller scale for the time being.
If there is one thing that airline investors would be keen to see demonstrated is how full service and low fare brands can co-exist to the benefit of a common set of shareholders.
In the case of Qantas and Jetstar the latter may be changing the perceptions and expectations of former full service fare customers including frequent users of managed business travel accounts in favour of saving costs by using the budget brands wherever possible.
Tigerair Australia CEO Rob Sharp said “This is a significant milestone for our airline, which is embarking on its future Australian expansion as planned.”
There is an expectation created by Virgin Australia that it will be much more careful with its budget brand than Qantas was with Jetstar, yet not to the extent where it doesn’t benefit from it.
Could this be the start of more wide-ranging scheduling reviews of Tigerair? Borghetti has in a sense taunted Qantas by saying he will not reveal anything about Tigerair’s capacity growth in the coming year, while indicating that Virgin Australia growth will be sensible.
What will Jetstar, and Qantas, do about this? The consumers, as always will be the winner, so long as the market grows faster than than the disruptions caused by the two conflicting concepts of passenger service.