Airfares too Cheap: VB's Geoff Godfrey

[Mrmaxwell]

'Something is wrong': Virgin chief hopes airfares will rise

"When you can get to the US for about $1200, when 15 months ago at this time of year you're were looking at $2800 to $3000, something is wrong.

"Clearly we’d like to see a return sooner rather than later (to pre-recession prices)."

I thought VA wanted to 'drive down prices'?

 

[Mal]

When V Australia launched, their "regular" fares were relatively high (compared to today - not to Qantas). IIRC, they were somewhere around $2000, vs $2400-$2800 that Qantas was charging.

Then the mass discounting started and competition heated up.

I find his quote a little weird, but assume it's in the context of "We'd like to see fares around the $2000-$2500 mark. Still cheaper than Qantas, but not loss (or nearly loss) making at the current figures.

Certainly PE on V Australia should rise quite a bit... it's remarkably underpriced IMHO for certain dates and during sales.

 

[Dave Noble]

or the prices were overly high in 1st instance.

these sorts of fares have been common on routes such as Europe-Oz in the past in pre-recession times; why were much shorter flights so much more expensive?

Dave

 

[NYCguy]

So put your fares up, "dude". Whaddya want here?

 

[Cyclogenesis]

Wot he said

Go to aa.com and have a look how cheap it is to get from chicago to anywhere in Europe!

We (Me, +1 and little tornado) are spending a month in the US over xmas... The lab who are sponsoring my trip shut down for a week over the holiday period... I can can fly the three of us to paris for xmas for around 3K... At a high demand time I am pretty amazed by that... and there are cheaper options (still undecided what to do... fly to Europe, splurge 3K in Chicago or find somewhere cheap to fly in the US and do some skiing...)

 

[Mrmaxwell]

We have always been ripped off on the USA route and just as fares come down to 'earth' here he is saying 'oh noooo too low'.

Load of cough.

Basically he is saying they want to charge a little bit less than the original crazy QF pricing.

 

[fortymilliondaggers]

$1200 is probably too cheap for them to make money on, but $2800/3000 is too expensive.

 

[JohnK]

Surely he is joking.

If anything airfares need to get a little cheaper. Australians have been payng higher airfares for many years.

 

[serfty]

I recently booked flights on AirNZ: LAX-xAKL-MEL-xAKL-LAX for two people - total cost AUD1950 (AUD975 each; USD890). These fares are still available for May departures.

Contrast this with similar flights MEL-xAKL-LAX-xAKL-MEL which are going for AUD1870.

 

[codash1099]

So having thrown the cat in amongst the pigeons, he now wants to get the cat out and hopes the pigeons remain largely unaffected.

Good luck.

 

[UP4014]

I guess he was directing that to shareholders.

But I'd love to just increase my prices to make more money for the same effort, how do you think my customers would like me saying that to them?

Perhaps some thoughts need to stay just that, a thought.

 

[docjames]

Not the greatest PR move of all time. He's leaving anyway, so any repercussion wont be his problem I guess.

 

[clifford]

$1200 is probably too cheap for them to make money on, but $2800/3000 is too expensive.

Then they should get out of the business and stop complaining, if they can't compete.

I've already bought and paid for 4 UK to AU return trips on UA (via LAX), mostly upgraded to Business, and the total cost is approx $5100. And don't try and tell me costs are lower in the UK than here!

The word ripoff comes to mind...

 

[tuapekastar]

And when did he change his name to Geoff?

 

[pauly7]

I guess he was directing that to shareholders.
.

Yes I agree, they are obviously working hard to get DJ into the black, there are some good steps, pulling capacity off the route and trying other destinations.

 

[oz_mark]

VA wanted to price at a discount to the QF fares, but probably heir financial modelling assumed a much higher QF price than what they are faced with at the moment.

 

[albatross710]

And when did he change his name to Geoff?

I think that it is a rebranding exercise - Geoff as in Dixon.

Over the next few months the surname will change to match what marketers might call a "repositioning of his brand."

 

[pauly7]

VA wanted to price at a discount to the QF fares, but probably heir financial modelling assumed a much higher QF price than what they are faced with at the moment.

Finance : Whoopsies! Sorry Brett, what about Thailand?

 

[fortymilliondaggers]

Then they should get out of the business and stop complaining, if they can't compete.

I've already bought and paid for 4 UK to AU return trips on UA (via LAX), mostly upgraded to Business, and the total cost is approx $5100. And don't try and tell me costs are lower in the UK than here!

The word ripoff comes to mind...

Well I think over the last year since increased competittion on the AU to US route began, people have been trying to predict which airline would get out of the business first and when. We've seen hints of it with Virgin and Delta reaching an arrangement.

The problem is - and I said this in my last post - current fares are probably too low to support the airlines on the route. The fares people are willing to pay is probably quite a bit higher than sub $1000, but not if the competition is deeply discounting. On the other hand, mid $2000 and over $3000 is far too high. We've seen how much this sort of discounting can stimulate demand, which shows probably how much the 'dualopoly' arrangement was dampening demand in the past.

Your point abo UK-AU fares is the same issue. Those sorts of prices aer probably unsustainable for the airlines as well. Put it down to the economy: it's been an amazing year to (book) travel!

The fare differentials depending on where the ticket is bought/departure port is a separate issue. I am confident that it will not last, particularly with low cost carriers increasingfly making true one way fares available. Just as the legacies are experimenting with charging for extras, they will have to alter this practice to remain competitive.

 

[tuapekastar]

I think that it is a rebranding exercise - Geoff as in Dixon.

Over the next few months the surname will change to match what marketers might call a "repositioning of his brand."

Aaaah! This one passed way over my head...