Tigerair plans for 'sharp' fares in battle of the budget airlines
Analysts have warned that an oversupply of flights over the next year will be greatest at the low-cost end of the air travel market as Tigerair embarks on plans to double its size by 2018. In response, Jetstar has promised to "protect its position" in the domestic market.
Tigerair Australia chief executive Rob Sharp said the airline is looking to expand again after a gradual return to services after its forced grounding in 2011. But the former Qantas executive made clear that the budget airline would not be sacrificing yield - or return on fares - just for the sake of filling seats.
"We are growing but we will do it in a sensible way," he said at the CAPA Australia Pacific Aviation Summit in Sydney on Friday. "The aim, at the moment, is to get a sustainable domestic business."
After buying a majority stake in Tigerair last month, Virgin said it wanted the budget airline to become profitable within two years. It is an ambitious target for an airline that has had losses of more than $226 million in Australia since launching services here in 2007.
Mr Sharp will present his long-term plan next week to Tigerair's board, which includes Virgin CEO John Borghetti as chairman.
Since the start of the year, Tigerair has begun flying to new destinations including Alice Springs and Coffs Harbour. However, Mr Sharp was coy when asked where the budget airline was set to expand to over the longer term, citing commercial reasons.
"Competition is good," he said. "This is not just about putting in $99 fares for the sake of it. It will be market driven."
The budget airline will take delivery of two more Airbus A320s over the next six months, which will boost its fleet to 13 aircraft in Australia.
Tigerair intends to better co-ordinate the arrival and departure of flights with Virgin on domestic routes but both were mindful of not "blurring the brands".
Mr Sharp said better timing of flights could make a "massive difference to yields" - or returns on fares.
Jetstar chief commercial officer David Koczkar said there was plenty of room for growth at the low-cost end of the market and its focus was on "offering sustainable low fares".
Frequently Asked Questions about this Article…
Tigerair Australia has vowed to offer “sharp pricing” to attract budget-conscious travellers, but management says fares will be market-driven. CEO Rob Sharp emphasises they won’t sacrifice yield or return on fares just to fill seats, so investors should expect competitively low fares that aim to remain profitable rather than unsustainably cheap ticketing.
Tigerair plans to double in size by 2018, a move analysts say could increase flight supply at the low-cost end and intensify competition with Jetstar. Jetstar has signalled it will “protect its position” in the domestic market, so investors should watch for increased capacity and pricing pressure between the two budget carriers.
After buying a majority stake, Virgin said it wants Tigerair to become profitable within two years. That is ambitious given Tigerair’s history of losses — the article notes more than $226 million in losses in Australia since launching in 2007 — so investors should monitor progress against that target closely.
Tigerair will take delivery of two more Airbus A320s over the next six months, increasing its Australian fleet to 13 aircraft. For investors, additional aircraft support capacity growth and route expansion, but also raise the importance of achieving sustainable yields to cover operating costs.
Virgin recently bought a majority stake in Tigerair and has set profitability targets. Virgin CEO John Borghetti is listed as chairman of Tigerair’s board, and the two carriers plan better coordination on domestic schedules while being careful not to “blur the brands.” This suggests closer commercial ties but distinct market positioning.
Analysts warn that an oversupply of flights over the next year will be greatest at the low-cost end of the market as carriers expand capacity. For everyday investors, oversupply can lead to fare pressure and lower yields, making airline profitability more challenging.
Tigerair’s CEO says better timing of arrivals and departures with Virgin on domestic routes can make a “massive difference to yields.” Improved schedule coordination can increase aircraft utilisation and reduce overlaps, helping to protect ticket revenue and margins — a key point for investors focused on operational efficiency.
Since the start of the year, Tigerair has started flying to new destinations including Alice Springs and Coffs Harbour. CEO Rob Sharp was reluctant to detail longer-term route expansion for commercial reasons, so investors should expect selective, market-driven network growth rather than broad, speculative expansion.
Call 1300 880 160
Start a chat
Schedule a call
