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Bonza chief Tim Jordan has acknowledged that bigger, more established airlines could attempt to encroach on his startup airline’s planned future routes, however he remains unphased at the idea.
The team at Bonza has consistently argued that the “vast majority” of its planned network map is made up of routes that no other airline in Australia currently serves, which has raised questions around the demand and feasibility of such routes.
Speaking exclusively with Australian Aviation, Jordan said despite this assertion, he doesn’t expect to see a “significant response” from other airlines once Bonza announces its initial route network.
“Most of these markets are currently unserved by any carrier,” he reiterated. “I guess that suggests that, from a market perspective, certainly for incumbent airlines, that the markets are not sufficient to support their existing cost basis.
“But we are going to be bringing a very low-cost product to the market which won’t allow other operators to drive the same degree of demand.”
Jordan has previously suggested that Bonza’s ticket costs could, on average, come in at around 40 per cent below the fares of other existing carriers.
The Bonza boss said that once Bonza is up and running, other airlines “may well” decide to service the same routes as the newest entrant, however noted that should any rival attempt to cross into too many of Bonza’s routes, then the ACCC might get involved.
“There may be some [Bonza routes] that other airlines decide to service – but that’s just market growth,” he said.
“If that became many, many [Bonza] markets, then at that point, the competition authorities may take a different view of that, and question whether someone is taking a different strategic intent towards those particular markets.
“I think any airline operating a market has to be able to validate that the fares that they’re offering are actually in line with their cost base. And whether that’s the case, time will tell.”
Jordan noted that Bonza’s model will vary quite significantly from the likes of Virgin and Qantas, which therefore makes it even more unlikely that they will all be fighting for the same customers.
“The other thing to remember is we’re not talking about markets which are flown two, three or four times a day. We’re talking about markets, which are flown two or three or four times a week.
“Even if someone did enter the market, the chances of them actually operating on the same days, at the same time [as Bonza] are very unlikely.
“And if they did, then, you’d imagine that would also be a bit of a red flag to any competition authorities.”
Since Bonza was unveiled to the world in October, rivals Qantas, Virgin and Rex have all announced major network expansions in line with easing domestic border restrictions, including many possible would-be Bonza regional leisure routes.
In November, Qantas announced new regional routes connecting Adelaide and Newcastle, as well as Wagga Wagga and Brisbane, serviced by regional subsidiary QantasLink.
Meanwhile, this month, Virgin has officially launched a number of new direct routes to the Gold Coast, including from Cairns, Hobart and Launceston, while Rex has reinstated its own Boeing 737 operations connecting Adelaide and the Gold Coast.
Jordan’s comments were made just days before the fiery comments by Qantas CEO Alan Joyce, which suggested that the Flying Kangaroo would not shy away to “defend” its market share.
Joyce said while the airline would operate within the ACCC’s framework, that didn’t mean his business wouldn’t actively take on Australia’s newest airline. “This is the most competitive market in the world,” he said.
Speaking on Tuesday at the CAPA aviation conference, Joyce said, “I think the ACCC are one of the most effective competition authorities in the world.
“But at the same time, it doesn’t mean you can’t be competitive, of course you can.
“And are we going to be competitive, to defend our turf, and make sure that we offer the most competitive product and service and airfares? Of course, we are.
“I’m sure Bonza assumes that [given that] this is the most competitive market in the world.”
Joyce specifically noted that Qantas has continued to expand its network into new markets, particularly new regional routes, over the last 18 months and sees little routes left that are currently untouched by existing carriers – as Bonza claims.
“We’ve started nearly 50 new domestic routes. So I would have thought we have most of them covered, but maybe we don’t.
“So that’s great if they find a unique value proposition that they can make money on. Fantastic, fill your boots up on it, and shame on us if we’ve missed it.”
Rod Pickin
says:Bonza sure know how to talk; for their sake I hope their walking skills are as good
Ashley
says:So many words, but is there future substance in them?
Love it how he keeps saying 40% cheaper airfares.
If NO other airline is flying on the route currently, then 40% of it is nothing, as there’s no comparative pricing competition.
Funny way to do ‘business’.
Peter
says:QantasLink just ordered another 6 A320’s…. Clearly getting ready to fight!
Rod Hodgins
says:It is laughable for Alan Joyce to say this is the most competitive market in the world. If it is why does the government let them price gourge customers in school holidays, Easter and Xmas. Just compare the highest price charged to the lowest and average price and you will see that the standard price is a fallacy. A few years ago I paid $1800 one way LA to Sydney in the first week of January where the “normal price” during the year would have been around $1200 return.