Been there, done that

The routes will be flown with a fleet of three Boeing 737-800s sourced from Virgin that have been repainted in Tigerair livery at the Flying Colours paintshop in Townsville, while the cabin has been reconfigured with 180 all-economy seats at Virgin’s engineering unit at Melbourne Tullamarine.

While Tigerair’s new Bali flights, comprising daily service from Melbourne and Perth and five flights a week from Adelaide, could have been operated by two aircraft, the airline has opted to have three 737s in its international fleet at the initial stage.

Sharp says that gives the airline an added level of flexibility to deal with unexpected events such as the recent ash cloud that prompted several carriers to stop flights to the popular tourist hotspot.

“For us, two of the aircraft flying with high utilisation could potentially do the patterns that we’ve got,” Sharp tells Australian Aviation in an interview at Tigerair’s Melbourne Tullamarine head office.

“However, having a third aircraft does give us the ability to be flexible and support the operation and provide those recovery options if we get ash cloud for example.

“If you run into an operational disruption, you need to be able to recover. We are well placed to handle disruption management. And obviously being part of the broader Virgin group we have a depth of support there as well.”

Tigerair’s expansion beyond Australian domestic flying was first announced in August 2015. Since then, Sharp and his team have been busy preparing the airline for both the regulatory and operational challenges of the international market.

As Australian Aviation went to print, the airline has been granted Australian regulator approval to fly to Bali, secured traffic rights for Indonesia from the International Air Services Commission (IASC) despite Qantas raising questions about Tigerair’s application, and has locked in optimal landing and takeoff slots for its schedule at the the busy Denpasar Ngurah Rai International Airport.

On the operational front, an initial batch 70 cabin crew has been certified to work on the 737-800, with more to be added over the coming months. To replace those moving across to the new Bali flights, Tigerair has hired about 100 new cabin crew in recent months to work on its domestic Airbus A320 fleet.

“For us, a change in type to 737s for international has meant the cabin crew have had to go through new endorsement training and operating procedures,” Sharp says.

“That logistically entails hiring a hundred crew, putting our best crew across onto international, training them on that type and effectively backfilling or employing crew back into the domestic operation and training them.

“The logistics around hiring large numbers of people, training them and making sure you have got the right skill set for each of the international and domestic businesses has been a key focus.”

While Tigerair will have separate domestic and international crews for now, Sharp says having dual-endorsed cabin crew is something that may be considered down the track.

And supplier agreements with ground handlers and airport staff are in place, including accommodation for crews and pilots overnighting in Bali, and Tigerair’s IT systems have been updated to handle international flights as the clock ticks down to the inaugural flight.

Sharp says the plans drawn up ahead of the official announcement in August to go international have worked well managing the added operational complexity and dealing with all the regulatory requirements. Virgin, which has about eight years’ experience flying to Bali after starting flights there from Australia in 2008, has also provided “invaluable” support to get the flights up and running.

“An airline runs on a large number of things coming together on the day and international flying is another layer of complexity,” Sharp says.

“If you were a carrier doing it on your own, the risk profile would be much higher. Fortunately we can leverage the experience that Virgin Australia has had. They have been flying to Bali, they have got a lot of contacts and suppliers and supplier arrangements.

“One of the great things is that we can minimise the risk by leveraging that synergy.”

Tigerair will be represented by its ground-handling contractor at Bali Airport.

LOW COST BUT WITH SOME FRILLS

The 737s, which will remain on Virgin Australia’s air operators certificate and be flown by Virgin pilots, will feature a mix of free and paid wireless inflight entertainment that passengers will be able to access on their own personal electronic devices, while hot and cold food and drink can be pre-purchased online or during the flight.

Although the 180 seats Tigerair has chosen as its cabin configuration is slightly below the maximum 189 seats the 737-800 is certified for, the low-cost carrier has three rows of extra leg room seats with 34-inch pitch at the front of the aircraft that can be selected for an extra $40, while the regular economy seat has 31-inch pitch. The two over wing exit rows feature 39-inch pitch.

It will also be a lighter 737-800 than when it operated in Virgin colours, given eight business class seats have been replaced by lighter economy class seats, while there have been some changes in the galley to cater for Tigerair’s buy-on-board food service.

That reduced weight should ensure Tigerair will be able to carry a full payload of passengers and bags in both directions between Melbourne and Bali – which clocks in at almost six hours and is one of the longest routes served by narrowbody aircraft – on all but a handful of days during the year, when wind conditions could restrict the number of seats available for sale.

“We’ve been able to actually look at the aircraft type and explore all the flying data and the performance data of the aircraft,” Sharp says, referring to Virgin’s eight years of operating to Bali.

“Each of the aircraft has just completed a heavy engineering check as well, which puts those aircraft into a very high performance position so we are starting with aircraft that will be very optimal for the flying.”

Sharp says the decision to use 737 helped quicken Tigerair’s entry into Australia-Indonesia market, given they were already flying internationally with Virgin.

And he insists the 737 is the right aircraft choice for Tigerair make the Bali route a success against incumbents Indonesia AirAsia X, Garuda Indonesia and Jetstar, who all use widebodied aircraft such as the Airbus A330 or Boeing 787 on the Melbourne-Bali route.

“In terms of airline capacity, the airline industry had a lot of capacity and managing the ebbs and flows and seasonality is absolutely key to it,” Sharp explains.

“Having a narrowbody aircraft absolutely assists in that process and we think it will be a model that works very well for Tigerair.”

Jetstar also flies from Adelaide and Perth to the popular Indonesian tourist destination, while short-haul Indonesia AirAsia and Garuda are on the Perth route.

Figures from the Bureau of Infrastructure, Transport and Regional Economics (BITRE) showed there were 2.4 million passengers that travelled between Australia and Bali in the 12 months to June 30 2015, the last full year for which figures are available.

The average load factor on flights to Bali over 2014/15 was 76 per cent. There is a wide range however, with load factors often more than 90 per cent during the school holiday periods and dropping to near or below 60 per cent during the quieter months of the year, the BITRE data shows, reflecting the leisure nature of the route.

“While the widebody LCC operators are likely to be profitable during the peak periods they have too much capacity during off peak periods, making it difficult to be profitable on a year-round basis,” aviation consulting house CAPA – Centre for Aviation said in an August 2015 research note.

“Tigerair Australia believes it could outperform its competitors on a year-round basis although will obviously not generate the profits the widebody operators can make during the peak travel days.”

However, CAPA said the 737 may not be the right vehicle for the long Melbourne-Bali route and Tigerair “will eventually need a new aircraft type for the Bali market”.

“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.”

“Tigerair Australia needs to make a decision on renewing its existing narrowbody fleet while also deciding if it should take on widebody aircraft for Bali and potential other medium-haul markets. Alternatively it will need to decide if new generation narrowbody aircraft could be sufficient and compete effectively on six-hour routes against A330-300s, 787s and future A330-300neos.”

CHANGES AT TIGERAIR PART OF CHANGES DESIGNED TO IMPROVE VIRGIN INTERNATIONAL’S PERFORMANCE

The transfer of 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.

Although Virgin will maintain its full-service Sydney and Brisbane to Bali flights, there may be further adjustments in the future.

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 in August 2015.

“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.”

CAPA said it expected more changes from Virgin and Tigerair in the period ahead.

“The three Bali routes are more a strategic move that enables the Virgin Australia Group to maintain its presence in a key market while reducing the losses at its full-service international operation,” CAPA said.

“Handing the routes, along with three 737-800s, to Tigerair Australia will not be the last move the group makes as it tries to carve out a profitable niche in the highly competitive Australia-Southeast Asia market. It is a modest step towards evolving the group strategy, but a significant precedent as Tigerair shows its first international stripes.”

Tigerair was on track to be be profitable in 2015/16, its first full year profit since beginning operations in Australia in 2007, and representing a significant turnaround from the heavy losses it suffered prior to being acquired by Virgin.