Virgin Australia has stepped up its push for market share on the Hong Kong route with an eye-catching return fare of less than $400.
The airline started flying five times a week between Melbourne and Hong Kong on July 5 with Airbus A330-200s filled with 20 business and 255 economy class seats. The route is operated in partnership with Hong Kong Airlines as part of an alliance between Virgin and HNA Group affiliated carriers.
Figures from Virgin indicated its entry on a route dominated by Cathay Pacific and Qantas had led to fares dropping by about 30 per cent. Indeed there have been sales from Qantas of $499 return between Australia and Hong Kong.
However, Virgin’s sub-$400 Melb0urne-Hong Kong return fare, albeit available only for 48 hours via the Fly Buys travel website and with restricted dates, represents what is believed to be a new low for full-service airlines offering non-stop or one-stop itineraries between Australia and Hong Kong.
The only airlines with cheaper fares on that route have come from low-cost carriers.
Flight Centre Travel Group corporate affairs manager Haydn Long said these types of prices were typical of a new airline on a route seeking to gain market share.
“That would certainly be about the lowest that I can remember,” Long told Australian Aviation on Wednesday.
“It’s a very cheap fare. It’s a fraction of what that fare would have cost historically.
“Virgin is a newcomer to that route obviously, they’ve got planes they need to fill the seats on so one of the best ways to do that, to get attention, is to have a cheap fare.”
Long said it was a similar situation when Virgin, then flying as V Australia, and Delta Air Lines launched nonstop flights to Los Angeles in 2009, with fares dropping to about $800 compared with lead-in fares of $1,600 on offer from the incumbents Qantas and United at the time.
And like what has happened in the trans-Pacific market, Long said he expected those sub-$400 fares from Virgin won’t be around forever.
“When you get an airline that starts flying on a particular route you tend to see some really attractive pricing,” Long said. “We’ve seen that countless times over the years.”
“It’s good news for travellers. You never know how long it is going to last so normally the best advice is get in as quick as you can.”
Speaking to reporters in Hong Kong the day after his airline’s inaugural flight touched down, Virgin chief executive John Borghetti said the huge demand for the new service, even considering the short, three-month launch, indicated competition was desperately needed on the route.
“That gives us heart to believe it is going to be successful,” Borghetti said.
“The airfares were very high and I think that competitive advantage doesn’t just stop at price. It also comes with service and product and we can match that and better it.”
Figures from the International Air Transport Association (IATA) showed yields, an industry measure of average airfare per passenger, globally were about 4.5 per cent lower compared with a year ago, when measured in constant exchange rate terms
“There is no sign of any upward trend yet,” IATA’s airlines financial monitor report for May/June said.
“Nonetheless, signs that yields have bottomed out are consistent with an easing in the upward pressure on the breakeven load factor seen during 2016.
“With achieved passengers loads remaining close to all-time high levels, this is underpinning investors’ confidence about airline financial performance over the year ahead.”
Meanwhile, IATA estimated the average return fare in 2017 of US$353 was five per cent lower than US$371 in 2016.
(Read more about Virgin Australia new Hong Kong route in the August edition of Australian Aviation, on sale Thursday, July 27.)
Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.