QF and DJ strategies - analysing the numbers

[markis10]

CAPA out out a good article on what the majors are doing and a close look at some numbers, a good read:

Qantas and Virgin Australia pursue different, but equally logical, strategies to grow domestically | CAPA

The Australian market has recently started paying close attention to the growth strategies of the country's two largest airline groups, Qantas and Virgin Australia. It has concluded, erroneously, that their domestic growth strategies are perhaps incompatible, since Virgin Australia, buoyed by its move up-market, wants to take grow in its new position but any new capacity will be matched by the Qantas Group, which wants to maintain a profit-optimising 65% market share.
But that view simplifies the complex equation – as well as its implications. To grow, the two must each pursue their present strategy, although that does not mean that for every new flight Virgin puts into the market Qantas will replicate in a tit-for-tat move. Instead the two are largely pursuing low-profile but high-yield markets, stimulating new traffic and also serving regions previously neglected.

 

[eastwest101]

Yes that graph in the article was interesting.

Source: Qantas

What was particularly interesting was the comment that:

In the same period, Jetstar Group achieved a 9.4% margin. In Qantas' sample explaining its 65% strategy, Jetstar-only routes (red square) typically had a disproportionately lower return on revenue than routes (red circle) served by Qantas and Jetstar. (Curiously, there was no information on Qantas-only routes.) While Jetstar brings in less revenue than Qantas, its lower cost base can potentially see it post a disproportionately higher profit, which is why some services (such as those to and from the Gold Coast) have shifted from Qantas mainline to Jetstar. Market share is not reflective of profit or margin