Virgin challenges Qantas on US route

I believe the entrance of DJ to the AUS-USA market will be a very good thing for Aussies. But I do not expect it to result in the huge fare savings being touted. Yes there will be opening specials, and some seats generally available at good discount levels. But DJ's operating costs will not be so much less than QF that they can sell fares that are consistently 1 third lower than the current QF ticket sales.

From time to time you can purchase a SYD/MEL/BNE-LAX return fare for around $1300, and at the right time of the year that can also include a few night's accommodation and a day at Disneyland. If DJ enter the trans-Pacific market, I expect we will see more availability of these low fares, but not much in the way of even lower fares.

Qantas is already able to sell their seats at a premium price compared with UA, so a once-daily flight carrying 350 seats (such as a 777-300ER) is not going to make a huge hole in QF's operations. But it will mean that 350 more people per day could potentially find cheaper fares to the USA. My expectation is that DJ's entrance to that market will help to grow the number of people flying the route rather than take much of the demand from QF. And that would be good for DJ and good for travellers. I think it would be neutral for QF.

So I believe Qantas would like to see DJ start trans-Pacific flights as it would remove some of the pressure for government approval for other airlines like SQ and EK from starting on that route, and Qantas is more concerned with SQ's and EK's ability to undermine their trans-Pacific ops than they are concerned about DJ's entrance into that market.

 

This is the big debate. There are only three types of aircraft that can currently operate the mission - Boeing 747-400, Boeing 777-200LR or 777-300ER, and Airbus A340-500 or A340-600. Of course some new type will be capable in the future including A380, A350XWB, and 787.

The 777 options require ETOPS certification and this is costly and time consuming to obtain for a new airline or type operator.

My best guess is that Virgin Blue could wet lease from VS the A340-600 and operate under the Pacific Blue name in VS colours and with VS codeshare. That would allow VS to position the aircraft using their current LHR-HKG-SYD services, and to operate a true ATW schedule using the VS codeshare on the Pacific Blue service.

 

I do not think there is any doubt that will be the case. I certainly expect them to do something innovative if and when they commence such services. So I would think a premium economy product is a certainty and probably a VS-style business class product. In fact, that would be another good reason to wet lease from VS as their aircraft have the right mix of cabin/seating to make some standout differences with QF.

 

Not much different to the multitude of ATW specials put together between various airline partners. The big problem with this is the flexibility and restrictions for intra-region flights in places like North America and Australia. For example, how would you cover places like Perth and Sydney in the same ticket, or LAX, DFW and JFK in the same ticket, or LHR, FRA and FCO in the same ticket. In most cases you can pick one destination in each region and maybe a maximum of two. So yes they can do it cheaper, but if they don't hit the places you want to go then they might as well be selling ice to Eskimos.

 

indeed there are some great deals to be found, especially when they include the places you need/want to travel.

 

More media speculation

From news.com.au

 

Apparently (according to a report in Australian Aviation magazine) Virgin Blue has issued an RFT to Boeing and Airbus for five 777-300ER or A340-600 size aircraft to be used on Trans-Pacific and Asia routes.

 

Keep in mind the restriction that any new-comer to the Aus-US route may operate a maximum of four weekly return services for the first 12 months, and we see that 5 aircraft will permit them to launch more than just trans-Pacific routes. So expect to see some new services in Asia. One possibility is that they codeshare with VS on the HKG-SYD route since VS has not had great loads on that part of their LHR-HKG-SYD service.

But they will want to maximise the utilisation of such expensive aircraft, which means we could be in for some interesting new routes and perhaps some interesting fares.

I suspect they will not be able to codeshare with VS on the trans-Pacific route since VS do not have route authority. But they could perhaps codeshare with Virgin America, who were recently established in the USA as a paper airline with their head office at SFO. So Virgin Blue and Virgin America could perhaps share the operating costs by way of a codeshare agreement and hence offer a Virgin ATW service.

All very interesting options and only time will tell what they chose to do. I suspect they will be keen to ensure the timing is right as many good airline products fail due to the timing of their introduction.