Tigerair Australia will introduce a new fleet type and commence international operations from March 2016 when it begins flights to Bali just in time for the Easter holidays.
As part of wider changes to Virgin’s loss-making international network, Virgin will hand over the Adelaide-Bali, Melbourne-Bali and Perth-Bali routes to its wholly-owned low-cost unit Tigerair from March 23 2016.
However, Virgin said it would maintain its services to Bali from Sydney, Brisbane and Port Hedland.
Tigerair will operate to Bali with a fleet of three all-economy Boeing 737-800s that will be sourced from the Virgin fleet. Currently, Tigerair has an all-Airbus A320 fleet of 13 aircraft.
The three 737s will remain on Virgin Australia International Airlines air operator’s certificate and have Virgin pilots flying the aircraft alongside Tigerair cabin crew.
The 737-800s will be reconfigured into a one-class layout with 180 seats, have the galleys changed and repainted into Tigerair livery. Standard economy seat pitch will be 31 inches, Tigerair chief executive Rob Sharp said on Friday, while there will also be three extra legroom seats at the front of the aircraft with between 34- to 39-inch pitch, along with two exit rows available for a fee on top of the base fare.
Sharp said he was confident Tigerair would be able to compete with the likes of low-cost carriers Jetstar and Indonesia Air Asia X, who use widebody Boeing 787-8 and Airbus A330-300 aircraft, respectively, on the Melbourne-Bali route. Garuda also serves Perth and Melbourne from Bali.
“We make our decisions based on what we see as the underlying consumer demand and the demand for travel to Bali still remains strong,” Sharp said.
“We believe with the runs that we are getting on the board domestically – great customer feedback – that we can take that model and now grow it into short-haul destinations.”
The previously flagged move of Tigerair into the international market was confirmed at Virgin’s full year results announcement on Friday.
“The Tigerair Australia brand will launch in the short-haul international market with Denpasar (Bali) as its first international destination to enable the group to better cater to the changing dynamics in the region,” Virgin said in a statement on Friday.
“The Virgin Australia Group today announced plans to optimise its international network to deliver improved fleet utilisation and meet customer demand on key trans-Tasman and short-haul international routes.”
Virgin chief executive John Borghetti said Tigerair would be a much more price competitive operator on that route than the full-service Virgin.
And Borghetti flagged more split operations in the international markets, with both Virgin and low-cost Tigerair flying to the same destinations as occurs currently in the Australian domestic market.
“For example on the Gold Coast we use both brands and you will see us do that more and more,” Borghetti said told reporters at Virgin’s full year results presentation in Sydney on Friday..
“You’ve seen us do it domestically but you will see us doing it international where there are two different segments of the market that appeal to two different types of models.”
Virgin said Tigerair posted an earnings before interest and tax (EBIT) loss of $8.6 million between October 17 2014 and June 30 2015, which was an improvement of $42.7 million from the prior year.
Virgin said Tiger was “on track to achieve full year profitability for FY16”.
The performance of Virgin’s international routes declined further in 2014/15, with its overseas flying suffering an underlying EBIT loss of $68.9 million in the 12 months to June 30 2015, a decline of $22.8 million from the prior corresponding period.
Revenue from its international operations fell 3.3 per cent, while capacity was reduced by 0.4 per cent.
“Increased competitive pressure, particularly in the South East Asian and long-haul markets, constrained yield recovery during the financial year,” Virgin said in a statement.
However, Virgin said some of the previously announced changes such as the introduction of business class across the Tasman and cutting the Melbourne-Los Angeles route had started to turn the ship around.
Virgin said members of its Velocity frequent flyer program would be able to redeem points for travel on Tigerair services to Bali.
Meanwhile, Virgin said it would drop Phuket from its international network, with the last flights to operate on January 31 2016.
Borghetti said the Phuket market was not strong enough and not big enough to sustain the direct service.
On the plus side, Virgin is adding extra flights to New Zealand, Fiji and the Solomon Islands from October.
“These increases represent more than 52,000 additional seats on trans-Tasman and Pacific routes during the 2016 financial year,” Virgin said in a statement.