Tigerair to join transcontinental fight for passengers
Analysts warn that Virgin Australia, which has a controlling stake in the budget airline, risks losing passengers to Tigerair because its customers are more sensitive to ticket prices than those who fly on Qantas.
The latest route to be launched by Tigerair will also put pressure on its arch rival, Jetstar.
Tigerair will operate up to six weekly return flights using A320 planes between Sydney and Perth from December 19, which will compliment its existing Melbourne-Perth services.
Dampening concerns about too much capacity on the transcontinental routes, Tigerair chief executive Rob Sharp said he believed its entry to the Sydney-Perth route would encourage more people to fly. "We believe we will have a stimulatory effect. Our growth is going to be driven by where we see demand," he said.
Tigerair and Virgin are now able to co-ordinate flights after the latter received approval to buy a 60 per cent stake earlier this year, and Mr Sharp said his airline would not be flying routes if it cannibalised its controlling shareholder's market. "We have quite a different product [to Virgin] and the capacity from east to west is largely wide-body aircraft [in contrast to Tigerair's single-aisle planes]," he said.
The battle between Qantas and Virgin over the last year has been the fiercest on transcontinental routes, with both flying larger twin-aisle aircraft such as Airbus A330s. But analysts have warned that an oversupply of flights in the Australian market over the next year will be greatest at the low-cost end of the market as Tigerair embarks on plans to double its size by 2018. Jetstar has promised to "protect its position" in the domestic market.
Commonwealth Bank analyst Matt Crowe said he was slightly surprised by Tigerair's decision to enter the Sydney-Perth route, given the slowdown in the Western Australian economy.
"It fits with Virgin's original claim that they were going to put Tiger into new markets but from an industry point of view we would like to see less capacity come into the market," he said. "It makes it a little bit tougher."
Mr Crowe said there was greater risk to Virgin of it losing customers to Tigerair than Qantas passengers deciding to fly with Jetstar. Virgin's passengers tended to be more price sensitive.
Tigerair will take delivery of two more Airbus A320s in coming months, which will boost its fleet to 13 aircraft in Australia.
Frequently Asked Questions about this Article…
Tigerair Australia will begin Sydney–Perth services from December 19, operating up to six weekly return flights using Airbus A320 aircraft. This route will complement its existing Melbourne–Perth services.
Tigerair’s expansion will add capacity to an already saturated transcontinental market. Tigerair’s chief executive Rob Sharp expects a stimulatory effect that could encourage more people to fly, but analysts warn the extra seats may contribute to oversupply—especially at the low‑cost end of the market.
Yes. Virgin Australia received approval earlier this year to buy a 60% stake in Tigerair, allowing closer flight coordination. Tigerair’s CEO said the budget carrier won’t operate routes that cannibalise its controlling shareholder’s market, but analysts note there’s still risk Virgin could lose price‑sensitive customers to Tigerair.
Analysts say Tigerair could put pressure on both rivals: it’s likely to attract price‑sensitive passengers away from Virgin Australia, and its entry into Sydney–Perth also increases competition with Jetstar. Overall, the greatest oversupply risk over the next year is expected at the low‑cost end of the market where Tigerair is expanding.
Tigerair will take delivery of two more Airbus A320s in the coming months, which will increase its Australian fleet to 13 aircraft.
Over the past year Qantas and Virgin have fiercely competed on transcontinental routes using larger twin‑aisle aircraft like Airbus A330s. Tigerair’s strategy is focused on single‑aisle A320s at the low‑cost end, which is expected to change the capacity balance and intensify competition for price‑sensitive travellers.
Commonwealth Bank analyst Matt Crowe said he was slightly surprised by Tigerair’s move given the slowdown in the Western Australian economy. He noted the decision fits Virgin’s plan to put Tigerair into new markets, but from an industry point of view he would prefer to see less capacity added to the market.
The article says Tigerair has plans to double its size by 2018, reflecting an aggressive push to expand capacity and routes in the Australian domestic market.
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