Brett Godfrey, Virgin Blue's chief executive, says the Australian low-cost carrier is considering whether to create an ultra-low-cost carrier in addition to the long-haul unit it plans to launch for flights to the USA. "We think it's quite prudent to consider whether Virgin Blue should establish its own ultra-low-cost carrier," he says.
His remarks follow the announcement by Singapore-based Tiger Airways to enter Australia and compete with Virgin Blue and Qantas low-cost subsidiary Jetstar. Virgin Blue says it does not intend to reverse its strategy of pursuing higher-yield passengers in competition with Qantas and will still offer such amenities as a loyalty plan, seat assignments, baggage check-through and interlining with select foreign airlines, all of which distinguish it from traditional low-cost carriers.
But the airline also recognises that it could face the brunt of Tiger's assault because it is the only lower-cost incumbent on the busiest routes, especially the Sydney-Melbourne-Brisbane triangle.
Jetstar does not fly these routes because Qantas avoids competition between the two brands. Virgin Blue is more vulnerable in these markets to a low-cost rival that would compete for price-sensitive passengers. Tiger already has government approval to launch an Australian carrier later this year.
Source: Airline Business
