Shining Stars & Leaping Tigers

Both have powerful parents – Qantas for Jetstar, ‘Singapore Inc’ for Tiger – and both have chosen the Airbus A320 Family as their core aircraft type (it doesn’t seem all that long ago that one of Boeing’s key marketing boasts was that all the major low cost carriers operated the 737).

But there are key differences of course, and it is very interesting to note the different growth paths mapped out by an Australian low cost airline in Jetstar trying to expand in Asia, and an Asian low cost carrier trying to expand in Australia. In one sense this highlights that, in aviation terms at least, Australia is becoming more and more a part of Asia. But it also serves to confirm – not that there has been any doubt – that Asia and Australia are key aviation growth markets.

Internationally Jetstar has its Jetstar International arm serving several Asian ports and plans to hub Australian and Asian services via Darwin and Perth, while in contrast foreign owned Tiger can only serve Australia from Singapore, and Davis says there will be no long haul, widebody Tiger operation.

Locally both have mapped out aggressive expansion plans that reflect Australia’s ever growing aviation market, with significant capacity increases planned over the next few years as they take delivery of great big fleets of Airbus A320 Family aircraft.

However, one interesting difference is Jetstar’s acquisition of the A321 and Tiger’s announcement of plans to introduce the A319 later this year. These represent very interesting contrasting strategies, with Jetstar moving to a larger aircraft with (slightly) lower operating costs per seat to operate on routes where the A320 is almost too small, and Tiger opting to introduce a fleet of smaller aircraft with (slightly) more expensive operating costs per seat to fly to regional ports. How this regional strategy transpires though remains to be seen – Richard Branson promised much the same thing when Virgin Blue first launched – and at 144-seats the A319 is hardly a ‘regional’ aircraft.

In Europe easyJet uses the A319 to great effect, so it does have a proven record in a low cost airline environment, but it doesn’t seem likely that too many turboprop airports will be invaded by jets – so far Virgin Blue has deemed just Albury and Port Macquarie as regional ports that can be viably served with its new 78-seat E-170s. Instead the A319 will have the same seat count as Virgin Blue’s 737-700s.

But what’s most interesting about the A319 plans is that Tiger sees growth opportunities in Australia where its competitors haven’t. The continuing transformation of the Australian domestic airline scene never ceases to amaze.

Of course the fact that Tiger can operate in Australia is one of this market’s key attractions.

Australia’s deregulated airline system means 100 per cent foreign owned airlines can fly domestically (this is how Virgin Blue got its start), so Tiger can operate in Australia in its own right, whereas in other countries it has to look at joint ventures and franchising opportunities.

This is probably where the biggest similarities between Jetstar and Tiger lie. They are chasing AirAsia to quickly become established as the leading low cost carrier in Asia, trying to emulate the success of Ryanair in Europe and Southwest in the States, in a market that should ultimately be far bigger than either of those two massive markets. It will be a fascinating race to watch.

AirAsia, as detailed in our last issue, is leading the charge in that area with the Malaysian based airline already having operations in Indonesia (a rapidly growing market itself) and Thailand. Tiger is negotiating to establish one of its “Tiger cubs” in South Korea, while Jetstar is the major shareholder in Jetstar Asia, and is expected to franchise the Jetstar brand to Vietnam’s Pacific Airlines, which parent Qantas owns an equity stake in.

The challenge for both Tiger and Jetstar is how their Asian and Australian networks link up to become a seamless whole.