As Tiger Australia launches, Virgin Blue adds premium economy and OzJet unveils plans to re-enter the scheduled market
Virgin Blue is moving further from its low-cost origins and OzJet is launching scheduled overseas service as the two airlines redefine themselves.
Virgin Blue's most dramatic shift to date is the decision to launch premium economy class next year. It is reconfiguring the first three rows of its Boeing fleet from 3x3 to 2x2 seating with the middle seat converted into a table. Premium economy fares will be fully flexible and refundable, entitling passengers to lounge access, more baggage, and inflight entertainment. Premium economy will also be offered in Virgin Blue's new fleet of Embraer 170 regional jets.
The first of its 20 E-170s have arrived, bringing Virgin Blue's next big change. It is using some of these small jets on existing routes during slower periods so it can redeploy 737s to the busy Sydney-Melbourne-Brisbane triangle. It is also adding routes too thin for 737s, including the key business route of Canberra-Sydney.
Virgin Blue is also forging more ties with carriers unaffiliated with Qantas. Skywest has joined its Velocity loyalty plan, thus expanding Virgin's influence in Western Australia. Virgin Blue is also forging interline agreements, which most conventional low-cost airlines avoid, with more overseas carriers. Etihad Airways is its latest interline partner, joining Malaysia Airlines, United and Virgin Atlantic.
The reasons for these moves are two-fold. Foremost, Virgin Blue hopes to attract more high-yield traffic. As Brett Godfrey, Virgin Blue's chief executive, has said: "If Qantas was going to target us [with Jetstar] at the discount end of the market, then we were going to come after them at their end of the market."
Virgin Blue also hopes to avoid the trench warfare underway between Jetstar and Tiger Airways. Even before Tiger launched Australian domestic flights in November, it and Jetstar were slugging it out on low fare offers. Qantas has unveiled plans to acquire at least 99 and up to 188 new narrow-bodies to help it and Jetstar defend their combined 67% domestic market share.
Virgin Blue's decision to postpone its ultra low-cost carrier, which was aimed at Tiger, illustrates this avoidance strategy. Instead, Virgin decided to launch in November domestic New Zealand service with Pacific Blue, where it thinks yields are better.
Virgin Blue is indirectly responsible for OzJet's planned entry into New Zealand. Pacific Blue's domestic New Zealand launch prompted Air New Zealand to fold its low-cost Freedom Air unit into the main airline. As a result, Freedom's flights to Australia from Palmerston North will terminate at the end of March 2008. Despite pleas from local leaders, ANZ has no plans to replace them.
OzJet has been seeking a new role since its failed experiment with all-business class last year. Since then it has been flying charters in the Pacific islands and recently to Bali. With Palmerston North, it plans a return to scheduled service with twice-weekly flights from Melbourne, Sydney and the Gold Coast. The flights will start at the beginning of April, just a couple of days after Freedom exits the market.
Source: Airline Business
