Tracking New Markets

The schedule will include five flights a week between Adelaide and Bali, as well as daily Melbourne-Bali and Perth-Bali services using a fleet of three Boeing 737-800s sourced from Virgin that will be reconfigured with 180 all-economy seats.

Although the aircraft will have Tigerair cabin crew and be repainted in Tigerair livery, the three 737s are staying on Virgin Australia International’s air operator’s certificate and will be flown by Virgin pilots.

Sharp says the decision to use Virgin 737s that are already certified for international flying would help minimise the regulatorywork required to commence flights during what is traditionally a popular time to travel.

Moreover, it was a logical step given Tigerair, which has only flown domestically within Australia since launching in 2007, and parent Virgin were still assessing the budget carrier’s fleet requirements for the years ahead.

“If you are going to launch an international carrier you want to pick a season or point where it is attractive and the Easter holidays is a very good point for us,” Sharp told Australian Aviation after Virgin’s full year results presentation on August 7.

“In terms of expediting entry with regulatory approvals and getting a consistent product, it made sense to use those aircraft.

“We also don’t have any finalisation on our longer-term fleet plan so to go and get extra aircraft whilst we are still firming up our fleet strategy didn’t make sense. ” While Sharp acknowledged the 737 would have some payload restrictions on the Melbourne-Bali route – as it does today with Virgin operating – he described it as “within the economics of the model”.

The transfer of the three Bali services to Tigerair was one of several initiatives Virgin has undertaken in a bid to turnaround its loss-making international network, which covers New Zealand, the Pacific and South-East Asia, as well as two long-haul hubs in Los Angeles and Abu Dhabi.

Sydney-Bali and Brisbane-Bali will remain on Virgin’s own, full-service, metal for now, although there may be further adjustments down the track.

Virgin chief executive John Borghetti says having both Virgin and its low-cost unit Tigerair serving the same international destinations was “really no different to a lot of the split operations” in the domestic market, citing the Gold Coast as one example where Tiger and Virgin have overlapping routes.

“You will see us do that more and more,” Borghetti told reporters when delivering Virgin’s 2014/15 full year results. “You’ve seen us do it domestically but you will see us doing it internationally where there are two different segments of the market that appeal to two different types of models. ” Borghetti said Tigerair was now in a “solid state and performing well”, adding that the tide of public opinion against the airline when it was grounded over safety reasons in 2011 was a thing of the past.

“All of our independent research and our own research shows that the brand is very, very strong, it has recovered very well,” Borghetti said.

“In fact, if anything it is a textbook example of a brand recovery exercise. ” Tigerair will compete with widebody operators Jetstar, Garuda and Indonesia AirAsia X out of Melbourne. Jetstar also flies from Adelaide and Perth to the popular Indonesian tourist destination, while short-haul Indonesia AirAsia and flag carrier Garuda are on the Perth route.

The 737-800’s one-class layout will have a standard economy seat pitch of 31in. There will also be three rows of extra legroom seats at the front of the aircraft with between 34 and 39in pitch, along with two exit rows available for a fee on top of the base fare.

Sharp is confident Tigerair will be competitive with the likes of Jetstar and Indonesia AirAsia X, which use Boeing 787-8 and Airbus A330‑300 aircraft, respectively, on the Melbourne-Bali route.

“If you are running a low-cost model, you have got to fill that to a fairly high load factor,” Sharp said. “We believe we can fill our narrowbodies to that load factor, provide a product that is commensurate in terms of personal space and comfort and inflight entertainment offerings and a package of things consumers can choose.

“We make our decisions based on what we see as the underlying consumer demand and the demand for travel to Bali still remains strong. ” CAPA – Centre for Aviation says Melbourne-Bali could prove a challenging route on which to achieve profitability with all-economy 737s.

The aviation consulting house said Melbourne-Bali could be viewed as a “test case” for Tigerair given it was very unusual for a narrowbody LCC to operate a route of more than five hours.

“If Melbourne-Bali is successful it could give the Virgin Australia group the confidence to hand over similar medium-haul routes such as Brisbane-Bali and Sydney-Bali,” CAPA said in a research note dated August 7.

“But ultimately it seems unlikely that Tigeair Australia will be able to generate sufficient yields to cover the relatively high cost of operating long narrowbody routes such as Melbourne-Bali.

“Tigerair Australia could see better results on Adelaide-Bali and Perth-Bali as these are shorter routes with competition from narrowbody rather than widebody LCCs. ” Sharp, who started as Tigerair chief executive on May 1 2013, said the new flights would stimulate demand and play to the airline’s strengths, given Melbourne was Tigerair’s biggest base.

“We are obviously not going to put three aircraft into international and say that’s it,” Sharp says.

“We are going to assess the market, how the sales go.

“We will eventually get the

Melbourne-Bali could be viewed as a “test case” for Tigerair.

A320s onto international, more as a fallback with disruption management so we can get aircraft up and back, but ultimately the 737s made sense for us to expedite the launch. ” On the domestic front, Tigerair is scheduled to add a 14th A320 to the fleet by the end of August. There are no further commitments beyond that.

Despite a weaker fourth quarter, the airline increased capacity by 9. 6 per cent in 2014/15, while passenger numbers rose 10. 7 per cent to 3. 6 million and load factors grew 1. 8 percentage points to 86. 1 per cent compared with the prior year, with the extra flying achieved through increased fleet utilisation.

The airline’s punctuality has also improved, with the most recent data from the Bureau of Infrastructure, Transport and Regional Economics showing 87. 5 per cent of Tigerair’s flights arrived at the gate within 15 minutes of schedule in June 2015, while 89. 5 per cent departed on time. This was up from 63 per cent for arrivals and 72. 3 per cent for departures in June 2014.

Tigerair’s cancellation rate of 0. 7 per cent in June was also significantly lower than the 3. 2 per cent recorded a year earlier.

Part of the reason for the improvement was the commercial agreement with Sydney Airport struck in August 2014. The deal secured priority access to departure gates and virtually eliminated passenger bussing to remote stands and also led to increased Tigerair terminal signage and the installation of self-service checkin kiosks to improve passenger flows.

“That managed to address a lot of our first wave on-time performance issues out of Sydney,” Sharp said.

“That was a big help but a lot of it is around operational focus and operational consistency. This has not been an overnight thing, this has been two years of work and we have now got a very reliable operation.

“The metrics are very pleasing and heading in the right direction.

“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 [international] destinations. ” And there will be further operational improvements when Tigerair begins operating out of a new dedicated LCC terminal at Melbourne Tullamarine.

The significance of the move is not lost on Sharp, given where the airline has come from and where it is headed, with Tigerair on track to be profitable in 2015/16 for the first time since it launched in this country in 2007.

“Most people associate what I would describe as the tin shed and the cattle race with the old Tiger,” Sharp said.

“It is going to be a pretty symbolic day when we move into a tailor-made low-cost terminal. ”