There’s no end in sight to the craziness of Australia’s airline wars, which are beginning to resemble Monty Python’s ‘Life of Brian’ – “it’s only a flesh wound,” said the Black Knight after both his arms were cut off. Yesterday Rob Sharp, chief executive of Tiger Australia, which lost 60% owner Virgin Australia $18.4m in the six months to Dec 31, vowed to keep prices as low as they need to go.
He told The Australian that: “You will continue to see some pretty sharp fares out there”.
But the issue surely is that these sharp fares, while driving a recent 4.7% increase in Tiger’s aircraft loads to 88%, will never make the airline profitable.
History shows it just can’t happen.
The simple fact is that Tiger’s fares have to go up for it to make money, especially when it’s investing so heavily in infrastructure such as the carrier’s new Brisbane base, opened yesterday.
Low fares have also done nothing for Tiger’s share of Australia’s budget market, which now sits at 19% compared with 22% in 2010.
The problems through aren’t restricted to Tiger.
Rival low cost carrier Jetstar, owned by Qantas, may have 81% domestic share and claims to be profitable in Australia but its international operations are losing serious money.
Overall Jetstar lost $16m for the Dec half, tumbling from a $128m profit the previous year. The blame was pinned on Asia.
That may be the case but it doesn’t change the reality that the low cost business model, which was going to change the aviation industry, make it profitable, has a much higher cost than most originally realised.
Here in Australia both low cost carriers are losing money. Tiger has done nothing else..
Profitless volume is not a winning strategy.