Year of the Tiger?

Naturally, The Response From The Competing Airlines At The Time Was Less Than Complimentary.

“When We Came To Australia There Was A Lot Of Scepticism About Would We Set Up, Would It Ever Actually Come Through, And We Did,” Tiger Airways Australia’s Managing Director Shelley Roberts Told Australian Aviation. “We Set Up On Time, We Set Up On Budget, And Here We Are A Year Later Having Flown One Million People With Our Record Low Fares. ” That Change Started On November 23 Last Year, When The Airline’s First 180-seat A320s Entered Service On A Route Network From Its Melbourne Base To The Gold Coast, Launceston And Darwin (Linking Up With Its Existing Singapore-darwin Services). This Was Followed By Services To Perth, Rockhampton And Mackay As More A320s Came On Board, Bringing The Total Fleet To Four Aircraft.

Initially, This Was To Have Included Three Weekly Flights To Alice Springs, Which Had To Be Suspended As Qantas Refused To Provide Ground Handling Services For Tiger’s Flights, Which Forced Tiger To Start Its Own Ground Handling Company There, And Delayed Its Services Until March.

This Started The First Of Many Exchanges Between Tiger And The Qantas Group, Which Has Included Allegations That Jetstar Has Been Poaching Key Staff From Tiger, A Claim Which Jetstar Rejects. In January the carrier expanded its route network, progressively adding services from Melbourne to Newcastle, Hobart, Canberra and Adelaide, all the time proclaiming the virtues of its low fares and no frills service.

However, since then there have also been some casualties in its route network, with the airline cutting its three times weekly service to Newcastle – a key market for Jetstar – from August 11, wiping the only New South Wales destination from its network.

“I think Newcastle was a particularly interesting case,” explains Roberts. “We’re not saying we won’t go back to Newcastle.

I think what we experienced at the time was that given the schedule we had on sale when the Newcastle opportunity came up, we could only fit in a middle of the day service and the demand for that service wasn’t as strong as the demand might be at other times of the day. ” Tiger also announced in June that as of September 1 it was reducing its Melbourne- Darwin services to four per week as a result of the high price of fuel and the end of the peak dry season. The airline later announced that it was cutting flights to Darwin altogether from October 25, blaming “unreasonably high airport charges and unprecedented capacity increases from the dominant airline Qantas/Jetstar,” the latter relating to Jetstar increasing the flights operating through the Northern Territory capital as part of its Asian hub strategy.

Tiger’s chief operating officer Steve Burns warned in September that the airline could return to Darwin in the future. “Rest assured that Tiger Airways will be keeping an eye on Qantas/Jetstar’s monopoly and will be ready to pounce if airport charges become more reasonable,” he said.

Nevertheless, while its route spread has shrunk, Tiger has offset this by adding frequencies on key routes, such as increasing frequencies between Melbourne and Adelaide, the Sunshine Coast, Canberra and Perth.

While not denying the cuts the airline has made, Roberts remains philosophical.

“I think that we are a young company, we are flexible and the competitive dynamics change all the time. We’re in Australia for the long term and we’re building a sustainable business,” she said.

One year on, the results of Tiger’s entry into the market are best demonstrated in the statistics. According to reports from the Bureau of Infrastructure, Transport and Regional Economics, most of the routes on Tiger’s network have posted increases above 15 per cent, compared to 1. 9 per cent on other routes.

Not surprisingly, Roberts is quick to claim credit for this increase. “I have to say that’s pretty obvious for me and its wonderful that of all the additional people who have travelled on our routes, 83 per cent of those people were flying with Tiger,” she said.

“It’s clear that because of the additional capacity in the market and the people who are travelling, that our low cost model is stimulating demand. ” And while not identifying a specific figure, Roberts also said that the airline’s load factor has been sitting comfortably at between 75-85 per cent, and even “towards the end of that figure,” she said, adding, “Obviously, if you’re flying around with full planes people are responding to our offer. ” Another figure Roberts is also keen to point out is that since the airline started reporting its on-time performance (OTP) figures to the Department of Infrastructure, Transport, Regional Development and Local Government, it has consistently had the highest OTP of the four major airlines.

“We have the record on-time performance in the industry and are also the industry leader in terms of percentage completion rate. That’s something we’re very proud of. ” However, the company is keeping its financial performance close to its chest, amid reports that Tiger appears to have lost up to $23 million during the first four months of operations in Australia, although it is understood that the airline is now cashflow positive.

As with other airlines, Tiger has also had to deal with major challenges, such as higher fuel prices which spiked in July this year. But unlike others, Roberts holds proud to the fact that the airline did not impose a fuel surcharge.

“We empower the passenger to pay for what they want. We didn’t just stick on the fuel surcharge that people can’t opt in or out of,” she said. “When fuel prices were at record highs, we looked at what’s driving that. One of the costs is taking on board baggage and we said that on the basis of you pay for what you want, you can pay to bring on baggage. ” But of course, the biggest highlight during the year for Roberts has been the fares that the carrier has been able to offer.

“I don’t think there’s been many times in Australia you’ve heard of $9. 95 fares, an

“Of all the additional people who have travelled on our routes, 83 per cent of those people were flying with Tiger,” Roberts said.

today our lead-in fares are $19. 95 on a Melbourne-Canberra sector. ”

Adelaide Base

During the year, one of the most talked about topics has been where Tiger would put its second base. Following what is understood to have been a highly competitive bid process from a number of airports, the carrier announced in July that it had chosen Adelaide.

Interestingly, this decision came only weeks after Jetstar announced that it would close its Adelaide base by August, but maintain its presence to the city by operating flights with aircraft based elsewhere.

For Roberts, the announcement of the Adelaide base was one of the first items of business when she took over from previous managing director Chris Ward, who has now moved to help start Incheon Tiger Airways in South Korea. “It was actually very exciting to be only a few weeks into the job announcing Tiger’s second base,” she said.

As Roberts explains, the airline felt that it had gained a good understanding of the South Australian market from its experience on the Melbourne-Adelaide route. “We’d really started with a service into that market, and what we’d seen is that market was being unduly constrained by the high fares of the incumbent carriers, so we knew with our model that we were going to be able to stimulate demand and bring our low, low fares to the people of South Australia. ” As a result, Tiger has been busy recruiting and training up to 50 employees for the start of operations from its new base in March, when the airline will operate two new 144-seat Airbus A319s to a number of existing Tiger destinations including Perth, Melbourne, Alice Springs, Hobart and the Gold Coast.

While this initial route network only appears to be connecting Adelaide to existing Tiger destinations, Roberts noted that this was driven by its online destination voting.

“We did ask people to vote and that certainly informed our thinking on the route structure out of Adelaide. ” “It really shows how the people of South Australia had previously transited through the ports of Sydney to Brisbane, whereas now they will be served directly, point to point with low fares with Tiger. ” Tiger is also expecting to add more flights from Adelaide as more aircraft come through.

“We are going to grow in Adelaide and there are many, many opportunities we will start to serve from Adelaide across the country to many other destinations which are on the drawing board,” said Roberts.

Roberts also says that Tiger will continue to open new bases around Australia, although she remains cagey about the timing.

Leaping forward

Although Australia faces the possibility of slipping into a recession, Roberts says that Tiger still has major growth plans during the next year and beyond.

“The Tiger Aviation Group has 60 aircraft on order and Australia is a key part of our growth plans and I would expect to see easily over 30 aircraft in Australia over the next seven years,” she said.

Unlike some other airlines, Roberts says that Tiger is not planning to defer its aircraft deliveries. “We have a delivery profile which is agreed and we’re taking delivery according to that profile. ” Despite the recent economic uncertainty causing some airlines to rethink their growth plans, Roberts says that Tiger will continue to expand, and could stand to gain from any economic slowdown in Australia. “What we’ve seen in Europe is that people can start looking for better value for their travel, and that automatically means that the Tiger market’s just opened up and many more people are going to fly with us,” said Roberts. “This is really where we have the opportunity and this is one of the factors which are going to contribute to our growth. ” Once again, Roberts points to the strict cost control mantra of Tiger as the major source of the airline’s strength. “I think our experience has generally been that if you’re disciplined when the going is good and you build a sustainable, robust organisation, then when the times are tough that’s really when the opportunities are. ” Whether that opportunity will extend into Sydney remains to be seen. Tiger’s Tony Davis set tongues wagging in March when he suggested that the carrier’s A319s could potentially operate from Bankstown, although this was quickly hosed down when Transport Minister Anthony Albanese said that it was unsuitable for use as a commercial airport.

A number of regional airports are also trying to court Tiger, which raised the prospect of using its A319s to operate into airports where the larger A320s couldn’t.

However, with the current A319 schedule linking major cities from Adelaide, it seems that in the short term that new regional routes are off the cards.

Nevertheless, the interest from regional airports remains strong. “I’ve had a number of approaches from many regional airports wanting us bring our model to their region because it’s clear that it’s working and stimulating the economic development, particularly inbound tourism,” said Roberts.

Roberts says that Tiger’s point-to-point offering to regional ports, such as its direct flights from Mackay and Rockhampton to Melbourne, has performed well. “The great thing about some of those markets is we’ve been able to give them a point-to-point offering they didn’t previously have. ” Tiger has also made no secret of the fact that it would like to get the opportunity to start international services from Australia – something it cannot currently do as it is 100 per cent foreign owned. It even went so far as issuing a press release when Jetstar withdrew its services to Kuala Lumpur calling on the government to allow it to fly to Malaysia.

“We know that our model would very much work in the regional catchments around Australia in that we would be able to bring new travellers internationally into those regions, but also to take the Australian travelling public point to point from those regions to new international destinations,” said Roberts. “It’s certainly something we’re very excited about. ” To that end, Tiger has made getting access to international services a major part of its submission to the federal government’s National Aviation Policy discussion paper.

Should this be successful, Shelley says that Tiger could quickly start international flights from Australia. “We would absolutely make it work and we could jump on any opportunity very quickly. ” And while there have been predictions that with the airlines cutting capacity low fares will become harder to get, Roberts promises that it will not be the case with Tiger. “I think what’s clear is that we stimulate demand through our low fares, and I’d never put a floor on that. ” As well as growing the Australian operations, Tiger is also hoping to expand its Asian operations, including launching its South Korean operation, which it hopes to get off the ground during 2009.

For Roberts, who was previously on the board of major European low cost carrier Easyjet, the liberalisation in the Asia Pacific region seems all too familiar. “I think Easyjet had a fantastic opportunity with the liberalisation in Europe, and that’s actually where Tiger’s placed at the moment with the whole Asia Pacific region starting to open up. ” Tiger Airways Singapore has been quick to take advantage of this liberalisation, with the carrier announcing that it is adding a number of flights on the Singapore-Kuala Lumpur route in December as a result of the liberalisation of the agreement between Singapore and Malaysia on the route.

And while there is sure to be a continued ramp up in its Asian services to take advantage of new opportunities there, growing its presence in Australia remains a high priority for the Tiger Aviation Group.

“We’re very, very confident about the Australian market and we’re going to continue to expand so that we can continue to expand the low fare revolution so we can bring our offering to more and more people across Australia,” said Roberts.

While Roberts remains typically cagey about the details of its forward planning, she insists, “You haven’t seen anything yet. We’ve only just started. ”