Qantas CEO Alan Joyce said that domestic operations at Jetstar are “still profitable” despite the Australian leisure market being hurt by high fuel costs and recent natural disasters (The Australian Financial Review, 31-Mar-2011). Mr Joyce’s announcement follows news the airline is cutting management staff, accelerating the retirement of ageing aircraft and reducing capacity growth in light of tough trading conditions. Following Virgin Blue’s forecast of a full-year loss of between AUD30-80 million last week, it was thought the domestic operations of rival airlines, such as Jetstar and Qantas, must also be under significant pressure. On the issue of oil prices, Mr Joyce said sustained high prices (of around USD100 a barrel) could risk some key aviation markets moving backwards just as it appeared they were returning to growth. “Everyone is worried about that,” the CEO said. Jetstar has 23% of Australia’s leisure market, behind parent Qantas and Virgin Blue, which both control 36% of the market. LCC Tiger Airways has the remaining 5%.
Qantas CEO defends Jetstar profitability
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Jetstar’s FlexiBiz offering for SMEs; aiming to avoid cannibalising Qantas’ corporate business
Australian LCC Jetstar, part of the Qantas Group, has introduced its first specifically business-targetted fares, FlexiBiz, in a bid to satisfy its growing SME market.
The new FlexiBiz offering allows business travellers to change flights on the day of travel and provides additional carry-on luggage allowances and free seat selection. Additional fees for the extras range from AUD29-AUD34 for domestic flights and AUD39-AUD55 for international flights. Business travellers must have an Australian Business Number (ABN), indicating their business status, in order to qualify.
Jetstar group chief executive Jayne Hrdlicka says the introduction recognises the “significant number of customers travelling for business on particular routes during peak times”. The FlexiBiz bundle allows the Qantas Group to target these travellers in a dual brand strategy alongside Qantas. The budget-conscious business fare is also available in New Zealand and Singapore, with slight variations.
The new offering complements Qantas’ focus on small and medium-size businesses (through Aquire) and premium corporate travel, ensuring that it has all the segments of the business travel market covered. Aquire is a rewards programme for Australian businesses. Similar to the Qantas Frequent Flyer programme for individuals, Aquire offers Aquire Points to businesses for a range of goods and services, including travel on Qantas flights.
Amadeus and Navitaire: a dual brand strategy allowing greater airline hybridisation
As airlines have embraced dual brand strategies to reach full service and low cost growth aviation IT has responded, as seen with Amadeus' acquisition of Navitaire, which mostly but not exclusively powered the passenger service systems (PSS) of LCCs. In the first six months since the deal closed Navitaire has added 230m passengers boarded, to Amadeus Altea's 393m. Navitaire passengers account for 37% of Amadeus' total.
Having significantly grown its market share, and with past LCC product forays not having worked out, Amadeus receives a new business stream. Some Navitaire customers (Ryanair, AirAsia, IndiGo) are larger than Altea customers and have high growth ahead of them. A second benefit is the Navitaire acquisition supporting Altea customers. By owning both products Amadeus can improve connectivity between Altea and Navitaire airlines. Most of Altea's large customers – Lufthansa, IAG, AF-KLM, Qantas and JAL – have an LCC operating Navitaire software. Of Navitaire's passengers – 35% are on airlines that are LCC units of full service airlines. Other airlines may be holding out on pursuing partnerships and connectivity until there is a cheaper, simpler and streamlined way.
It may seem that the Amadeus-Navitaire marriage is about full service and low cost segments, but its greatest strength is the role it will have in the hybrid segment. Hybridity is growing, and Amadeus-Navitaire could galvanise further expansion.