Qantas Airlines Long Battle With Virgin
I don’t think Qantas expect to see Virgin go the wall, but Ansett Mark II is a DOA, and it will take some time for Virgin to build infrastructure in the smaller destinations. It is an opportunity, and QF would be stupid not to try to exploit it. as for AN Mark II, I suggest a quick work of the numbers reveals that based upon current plans, it is doomed. They hope to start at 20% of the market. That’s about half where they were a year ago.
They want to keepy half the staff. Maybe I have missed something but half the market and half the staff says their costs per Seat Mile aren’t going to change much. You rip out the premium seats and you get some more bodies on board, however that tends to reduce the revenue per revenue passenger mile. If you sell 12 business class seats for MEL-SYD at about $400 each each way, that is the same revenue as 48 economy class seats at $100 each.
The old AN had an ASM cost of about 30 australian cents per mile, so if you fill the aircraft, you need a fare that averages 120AUD each way for Syd Melborne or Sydney Brisbane to break even. Having removed the big revenue slug from the front of the aircraft, this becomes a more difficult problem, especially in the face of the Virgin Blue and QANTAS discounts. QF can afford them because they are still selling very expensive seats in the front of the aircraft to cover their high costs.
Virgin doesn’t need the expensive seats in the front of the aircraft because their costs are much lower. That leaves Ansett without the high revenue seats, but with the high costs. Bad Bad combination. If AN want to fly half of it’s old schedule, and be viable, they need to find a way to do it with not half the old staff, but a quarter. Things like maintenance, and IT functions including reservations, need to be contracted out. AN wasn’t big enough before, and certainly isn’t big enough now to make those operations efficient.
It is interesting to note that Southwest Airlines in the USA, with almost 360 737’s does none of their own heavy maintenance. It is contracted to Tramco (a unit of Goodrich), and there are Southwest teams of QA inspectors/supervisors on site at Tramco to make sure the work is done to WN’s satisfaction (as opposed to contracting it out and hoping for the best)…. Watch.. Once the election is over, the Government will pull the guarantees, it won’t take long after that…
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Filed under: Aviation News
