Low Cost Carriers of Australia

Presented to: Gp. Capt. Waseem Shaukat Zaidi Presented by: Aasmaan
Muhsin Azhar Shah Saqib Mehmood Saad Shoaib Arslan Aslam Ibrahim Tariq BAM-9205 BAM-9207 BAM-9210 BAM-9234 BAM-9239

Low Cost Carriers of Australia

OVERVIEW Australia is a country, an island, and a continent. It is located in Southern Hemisphere between the Indian Ocean and the South Pacific Ocean It is the 6th largest country in the world and the world's thirteenth largest economy. Its Capital city is Canberra. Its major cities are Brisbane, Sydney, Perth, Melbourne, and Adelaide. It has population of 17.5 million. Australia is considered a developed nation. Australia is home to many animals like kangaroos and koalas, sharks and thousands of different types of tropical fish. It is known for high life expectancy, its education, quality of life, biodiversity and tourism. Australia is a continent so except air transport; any other source of transportation is not reliable or suitable for intercontinental journey, so air travel is more important for this region to move to and from. In November 1990 Australia's domestic airline markets were deregulated. One month later a sole new entrant, Compass Airlines, began carrying passengers in competition with the two incumbent major airlines (Ansell and Australian). There ensued a series of price wars which ended abruptly when Compass was grounded by its creditors on December 20, 1991. In August 1992, Southern Cross Airlines, who had waited in the wings while Compass tested the waters, purchased the remnants of Compass and began carrying passengers under the revived Compass (mark II) logo. Despite apparent public support, their public float was only 54% subscribed, (thus involving the underwriters, including the Queensland Government, as stockholders). It seemed that the new management had learned from the mistakes of Compass (mark I). Initially pricing was orderly, but within months Compass was forced to match discounts of the incumbents, and by March 11, 1993, Compass had ceased flying and a new round of lawsuits had begun. New Castle based Impulse Airline was established and started operations in 1992 as a regional airline. It was acquired by Qantas in 2001 and later formed the basis of Qantas's low-cost airline Jetstar (Rebranding). The airline had its head offices on the grounds of Sydney International Airport in Mascot, City of Botany Bay, New South Wales. In April 2001 Impulse and Qantas came to an agreement where Impulse would wet lease all their services to Qantas with Qantas to market the routes and give Impulse a cash injection with a further option for Qantas to buy out the company, Second largest low cost airline of Australia is Virgin Blue which was rebranded with the name of Virgin Australia Airlines and Virgin Blue was established in 2000 with two aircraft operating on a single route and it is still in operation in Australia. Jetstar Airways is a third largest low cost carrier in Australia by market share and it is fifth largest airline in the world by capacity share. It is headquartered in Melbourne, Australia. It is a subsidiary of Qantas, created

in response to the threat posed by low-cost airline Virgin Blue (now known as Virgin Australia). The airline operates an extensive domestic network as well as regional and international services from its main base at Melbourne, using a mixed fleet of Airbus A320 family and Airbus A330 aircraft. Tiger Airways Australia Pty Ltd, operating as Tiger Airways Australia, is a low-cost airline which commenced services in the Australian domestic airline market on 23 November 2007. It is a subsidiary of Tiger Airways Holdings, a Singapore-based company, which is owned partially by Singapore Airlines. The airline is based in Melbourne, Victoria, with its main base at Melbourne Airport. After deregulation of Aviation industry of Australia in 1990, the following five low cost carriers or budget airlines were established to transport passengers and freight within the country at different places and outside the country: 1. Compass Airlines (1990) 2. Impulse Airlines ..(1992) 3. Virgin Blue Airlines (2000) 4. Jet Star Airways ..(2003) 5. Tiger Airways Australia. (2007)

THE DEREGULATION EXPERIENCE IN AUSTRALIA Airline deregulation in Australia occurred during a severe recession, which would have caused passenger volume to fall; it is estimated, by 20-30% during 1991, other things being equal. But passenger volume quickly surpassed the previous-record year of 1988 and by September 1991 was 37% above 1988 levels, despite the recession and due almost entirely to the vigorous price competition following the entry of Compass Airlines.8 Revenue-Passenger Kilometers flown in the year ended September 1991 were 45% greater (at 16.1 billion) than RPKs in the preceding year.9 In October 1990, the incumbent firms leapt into action, provoked by the opening of bookings for Compass flights. They offered mild discounts on some routes, and simultaneously launched a non-price battle for the business flyer, upgrading their cabins and stressing the features of their members-only clubs at major airports. Compass began flying on December 1, 1990, and faced many problems in the first months. Aircraft deliveries were delayed, requiring flight cancellations and rescheduling. Aircraft were delivered with 'inferior' seats but had to be used to convey passengers prior to being refitted up to the standard of the "best economy class in Australia" claimed by Compass. The impact of these problems was inevitably negative. Deregulation was announced on October 31, 1987 to begin three years later, such notice being required by law. Well prior to this, deregulation was foreseen by the incumbent airlines and they took significant steps to strengthen their competitive position.

Mergers and Takeover Activity Ansett Airlines acquired East-West Airlines in July 1987, as the first strategic response to imminent deregulation. I Australian Airlines then acquired Eastern Australian, Sunstate Mildura and Sunstate Queensland airlines. Each one of these mergers was given the green light by the Trade Practices Commission. Continuing into 1991, Ansett established Ansett Express as a regional airline and Australian similarly launched Australian Airlink.

The Pilots' Strike

The third significant setback for Compass Airlines followed the abortive Pilots' Strike of 1989. Anticipating that deregulation would be accompanied by salary rollbacks and pilot layoffs, as in the US situation, the pilots union called a nationwide strike that lasted five months. Immediately, the Government provided Air Force troop transports to move stranded passengers, and permitted international airlines to carry passengers between Australian cities. As the strike dragged on, the airlines gradually increased their ability to move passengers by hiring new pilots. Then, in a brilliant tactical maneuver, the two airlines began proceedings simultaneously against every striking pilot under section 45D of the Trade Practices Act (whereby an employee can be sued if he/she causes loss to the employer by industrial action). This forced the pilots to choose between returning to work or resigning to protect their personal assets. Their abrupt resignation en masse was a cost-saving boon for the incumbent airlines. Only about half of the 1,647 striking pilots were ultimately re-employed, allowing the airlines to restructure their operating budgets, both in terms of average pilot salaries, pilot workloads, and the number of pilots on their payrolls.

COMPASS AIRLINES (1990)

Compass I was Australia's first low cost airline. It was established following deregulation of the Australian airline industry in 1990. Previously Ansett and the government owned Australian Airlines had operated under the 'Two Airlines Policy', which was in fact a legal barrier to new entrants to the Australian aviation market.

Compass Mk I
Compass Airlines, later referred to as Compass Mk I was established by Bryan Grey, who had previously run regional airline Airlines. At its peak Compass Mark I operated four leased Airbus A300 (VH-YMA, VH-YMB, VH-YMJ, and VH-YMK) and a single A310 aircraft (VH-YMI). Three further Airbus A300 aircraft on order in 1990 (VH-YMC, VH-YMD, VH-YME) were not taken up as a result of the failure of finance negotiations. Alternatively VH-YMJ and VH-YMK aircraft were leased from British charter carrier Monarch Airlines. Compass Mk I collapsed little more than a year after its first flight, with the reasons being portrayed as undercapitalization, sustained fare discounting by the competitors and failing to make use of its potential to also carry freight.

Compass Mk II
Compass Mk II was originally conceived as Southern Cross Airlines but chose to trade under the Compass brand, which seemed to have popular support. This may have been a commercial error as many suppliers insisted that Compass Mk II purchased items and paid up front, rather than lease the same items as would normally be the case. It commenced operations in 1992 with three McDonnell Douglas MD82 and two McDonnell Douglas MD83 aircraft. It collapsed less than a year later in 1993. Two further MD83 aircraft on order were not delivered following the final demise of the Compass brand. Southern Cross chairman Douglas Reid was convicted in 1997 of theft and false accounting amounting to $10 million in relation to the collapse. He received a record 10 year jail sentence.

The Failure of Compass Airlines

The failure of Compass has been attributed to a variety of major causes: Lack of a Defined Competitive Strategy Compass (mark I) seemed to be launching a cost-leader airline, planning to operate a one-class service at fares 20-50% below the listed economy fares of the incumbent airlines. The founding Chairman, Bryan Grey, emphasized that only Compass could afford the lower fares because of the lower operating costs associated with a single type of aircraft, the fuel efficiency of the Airbus, and leaner corporate structure. Compass appeared to be following a cost-leadership strategy, several subsequent decisions were not in accord with that strategy, and the strategic positioning of Compass was probably never clearly articulated. They lacked the flight frequency, airport lounges, and frequent flyer programs necessary to attract the business flyer. Choice of Aircraft and Fit outs There were four main problems with the aircraft, when seen in the context of a cost leadership Strategy. 1. Aircraft were too expensive to lease and too expensive to fly if projected load factors did not materialize. There were hundreds of planes idle worldwide, and it seems unlikely that all other companies servicing aircraft in Australia would have been unwilling to service Boeing or McDonnell-Douglas aircraft. 2. The aircraft were of higher quality than necessary for a cost-leadership strategy. Widebodied aircraft attract a premium, as do more youthful aircraft. 3. The refitting of the Airbus A300-600R aircraft after their arrival in Australia (with 288 higher-quality seats in eight-across configuration, in place of 360 'hard' seats in nine across configuration) was an expensive mistake. Compass might well have crowed about the better seats and legroom, but refitting the cabins to a standard much higher than its rivals appears was surely a costly diversion from its strategy of cost-leadership.

4. The aircraft were too large. Bryan Grey stated many times that the limited availability of terminal facilities forced him to choose larger aircraft. But larger planes also take longer to turn around, as loading and unloading times increase commensurately. Forecasting Errors Given the gates constraint, and the choice of aircraft, Compass apparently chose its seat configuration on the basis of its estimates of demand. They apparently expected that airfares 20% below the incumbents' full economy fares (50% below on curfew flights) would expand the market sufficiently to fill their large aircraft. Thus Compass appears to have overestimated the price elasticity of demand for air transportation. Alternatively, Compass failed to predict the severity of the recession, and/or their planning did not include sensitivity analysis to alert them to the impact on demand of a severe recession. Compass also failed to predict that incumbent firms would match its lower fares and be prepared to accept severe losses in an attempt to hold market share. One-class Service The single-class configuration of Compass aircraft was claimed as a cost-saving feature avoiding the expense of more lavish food and beverage services en route, as well as additional terminal services. Without airport Club Lounges to match those of the incumbent airlines, Compass would have had to offer a compensating price differential (that is, cheaper business class fares) but the additional in-flight and terminal service costs are surely less than the price premium that can be extracted from the business flyer. By eschewing a business class cabin, Compass locked itself into a vulnerable situation whereby the major airlines could cross subsidize discount fares in economy class with higher prices from their business class passengers. It seems more likely that the underlying reason for a single-class airline was Bryan Grey's personal philosophy of egalitarianism, and his judgment that most people would happily fly economy class, particularly if it was the "best economy class" in Australia. Thus, the decision to refit the cabins at a higher standard, and the decision to go one-class were apparently intertwined. In recognition of this error, Compass had been seating business travelers ("suits") in the front of the aircraft since about mid-year and announced in December 1990 that they would soon offer 'Corporate Class' service. Insufficient Yield Management Compass (mark I) consistently offered discounted fares without restrictions or with lesser restrictions than applied to the fares of rivals. Ticketholders were allowed to make flight bookings (using tickets previously purchased) at short notice and/or at peak travel times when many of them would have been willing to pay more. Because many of these tickets were initially purchased at deeply discounted rates (through sales of ticket booklets, bulk purchases, or twoand three-far-one sales), Compass in effect forfeited the additional revenue that it might have captured. This led to a downward spiral, in effect. Load factors were relatively high but cash inflow was relatively low because many passengers were flying on tickets purchased months before. Given the lack of anyone willing to provide new debt or equity funding, Compass was forced to reduce fares still further to induce a new round of cash inflows.

In their attempt to practice yield management, Compass was hamstrung by an inadequate reservations program that allowed only five different ticket classes. One of these classes was reserved for stockholders, leaving only four separate ticket classes to be utilized for yield management, which was insufficient to handle the variety of different fare categories an airline would need in a sophisticated yield management system. Given the ten years of yield management experience in the US airline markets, the failure of Compass (mark I) management to implement a better yield management system was a serious error. A better yield management system was to be acquired in 1992. Compass (mark II) implemented a better system, but in response to an apparent public preference for a few simple fare categories, adopted a simple fare system with only six basic fares on each route - these being peak and off-peak fares for business and economy class, and 7-day and 14day APEX fares. Compass stuck to these four months, ignoring discounts offered by the incumbents until forced to match them in January 1993 to maintain load factors in the low-traffic period between Christmas and Easter. By March, their cash reserves were dangerously low, and they were desperately seeking additional loan funding at the time of their demise.

Insufficient Initial Capitalization

The most popular verdict for the failure of Compass (in each of its lives) was that they were undercapitalized. They needed, it is said, a larger initial cash balance to tide them over the early losses they must inevitably make until they became accepted by the flying public as a viable third airline. But this is too simplistic: at the rate Compass (mark I) was losing money, another $50m of initial capitalization would have kept them solvent for only a few more months. Compass (mark II) built planned for sufficient initial cash reserves to withstand two years of losses, but these were depleted by higher than expected deposits required for the aircraft leases, and lower than expected penetration of the business class market. Unfair Competition from the Incumbent Airlines Ansett and Australian moved to protect their market shares with aggressive pricing and other marketing strategies. Compass only contested a subset of the city pair markets, and it is evident that prices did not fall by very much into some non-Compass cities (such as Canberra and Hobart). The incumbents emphasized their differentiation in terms of their extensive route networks, their greater flight frequencies, the comfort of their business class cabins and airport clubs, their frequent flyer programs, and so on. They utilized the travel agent commission overrides (TACOs) and corporate accounts/discounts to great effect to minimize switching of the business flyer.

IMPULSE AIRLINES (1992)

Impulse Airlines was an independent airline in Australia which operated regional and low cost trunk services between 1994 and 2001. It was acquired by Qantas in 2001 and later formed the basis of Qantas' low-cost airline Jetstar. The airline had its head offices on the grounds of Sydney International Airport in Mascot, City of Botany Bay, New South Wales.

History Impulse Airlines was established in 1992 and started operations on 18 December 1992. It commenced regional airline services in March 1994 following the acquisition by the Impulse Transportation Group of Port Macquarie based Oxley Airlines. Impulse Airlines was based in Newcastle. The Airline's Managing Director was Gerry McGowan until the McGowan family sold the airline to Qantas in 2001. The airline operated a network of regional routes throughout New South Wales. The network initially included routes to Armidale, Brisbane, Canberra, Coffs,Harbour,Coolangatta, Cooma, Kempsey, Melbourne, Ne wcastle, Port Macquarie, Sydney, Tamworth and Taree. The airline operated a fleet of Beechcraft 1900 aircraft. It was affiliated with the Ansett frequent flyer program and its flights had designated AN flight numbers.
In August 1994, Impulse Airlines expanded its fleet and became the first Australian operator of the BAe Jet stream 41. In late 1997, Impulse acquired two of Irish multi-millionaire Max Grieve's Bombardier Dash 8s, however they were grounded after only four flights due to irreparable toilet blockages, amongst other technical problems. Impulse used the aircraft to pioneer non-stop services between Newcastle and Melbourne but was soon met with competition from Qantas who utilized the much larger BAe 146 on the route. Impulse was forced to discontinue the services and withdraw the Jet stream 41s from service. After Qantas lost interest in the route following Impulse's withdrawal, Impulse eventually re-entered the route with Beech 1900s in February 1997. In June 2000 the airline acquired Boeing 717 jet aircraft and commenced operations as a lowcost airline on Australia's trunk eastern seaboard routes in direct competition with Qantas and Ansett. The airline had ceased its previous affiliation with Ansett. Services initially operated between Sydney and Melbourne and quickly expanded to include Brisbane, Newcastle and Hobart. The airline gradually began to phase in a catchy blue livery with a cockatoo on the tail of its aircraft. In April 2001 Impulse and Qantas came to an agreement where Impulse would wet lease all their services to Qantas with Qantas to market the routes and give Impulse a cash injection with a further option for Qantas to buy out the company. Qantas exercised that option in November 2001, and Impulse was absorbed into the Qantas Link group of subsidiary airlines. Impulse Airlines ceased operations on 24 May 2004 and was used as a vehicle upon which Qantas' low-cost airline Jetstar was launch ed. Jetstar started operations on 25 May 2004.The Impulse brand was replaced with Jetstar. The airline was a major sponsor of the Newcastle Knights rugby league team. The Newcastle base which was developed by Impulse Airlines continues to be the base for Jetstar.

VIRGIN BLUE AIRLINES (2000)

Virgin Australia Airlines,(now transitioned into Full service airline or legacy airline) formerly Virgin Blue Airlines, is Australia's second-largest airline as well as the largest by fleet size to use the Virgin brand. Now based in Bowen, Brisbane, Queensland, Australia, the airline was co-founded by British businessman Sir Richard Branson and former Virgin Blue CEO Brett Godfrey. It was established in 2000 with two aircraft operating on a single route, and suddenly found itself catapulted to the position of Australia's second airline after the collapse of Ansett Australia in September 2001. The airline has grown to directly serve 29 cities in Australia from hubs in Brisbane, Sydney and Melbourne, using a fleet of body Boeing and Embraer jets; and Airbus and Boeing wide body jets. After several years operating as a low-cost carrier it improved its services to become a so-called (self-described) "new world carrier" essentially a business model with aspects of the "no frills" approach of low-cost carriers but offering services more in line with full-service airlines in order to compete more effectively with Qantas in the business travel market. In 2011 it took the strategy further with new uniforms; new catering on board; new wide body aircraft to compete with Qantas on Perth Sydney services; and the concurrent introduction of business class; together with a new livery and a renaming to Virgin Australia

History Virgin Australia was launched as Virgin Blue in August 2000, with two Boeing 737400 aircraft, one leased from then-sister airline Virgin Express. Initially offering seven return flights a day between Brisbane and Sydney, this has since been expanded to cover all major Australian cities and many holiday destinations. The Virgin Blue name was the result of an open competition; it was a play on the predominantly red livery and the Australian slang tradition of calling a redheaded male 'Blue' or 'Bluey'.
The timing of Virgin Blue's entry into the Australian market was fortunate as it was able to fill the vacuum created by the failure of Ansett Australia in September 2001. Ansett's failure allowed Virgin to grow rapidly to become Australia's second domestic carrier, rather than just a cut-price alternative to the established players. It also gave Virgin access to terminal space without which growth would have been significantly limited. Delays in negotiating access to the former Ansett terminal at Sydney Airport however forced Virgin to use its original terminal therea collection of prefabricated buildings without aerobridgeslonger than was needed. As the airline grew, it acquired new equipment, enabling it to phase-out its older 737-400s in favour of 737-700 and 800 series aircraft with modern glass cockpits, winglets and greater fuel efficiency.

Low Cost Practices

Virgin Blue previously used a familiar formula pioneered by airlines such as Southwest Airlines and Ryan air eliminating costs such as included in-flight meals and printed

tickets in favour of selling food on-board and using telephone and internet booking systems. It also cut costs in the past by limiting the number of airports serviced And by operating one type of aircraft, the Boeing 737. This strategy changed with the introduction of a second type into the fleet. The airline ordered 20 Embraer E-jets, in a mix of six E170s and 14 E190s.These were ordered specifically so that the airline could re-enter the SydneyCanberra market that it abandoned in 2004, and to fly to less populous areas. The flights to Canberra and the regional centers signified an effort to compete more directly with Qantas and its subsidiary Qantas Link operation, which flies to all three cities, and with independent Regional Express Airlines. Virgin Blue gained extra revenue (and publicity) by painting two aircraft as "flying billboards". One promoted a brand of men's razor, the other a Queensland Government campaign to attract businesses to the state.

Differentiation Strategies
In 2008, Premium Economy Class was introduced throughout its entire fleet. The premium product offered priority check-in, larger baggage allowance, lounge access, priority boarding, increased legroom and all-inclusive in flight entertainment and meals or beverages on board. The product was aimed at business and corporate customers. To capture a share of the business traveler market, Virgin decided to provide a members' lounge facility for travelers. Originally this was called The Blue Room and provided facilities to members and guests on a pay-as-you-go basis. In 2006, Virgin revamped the lounge facilities and re-launched the product as The Lounge, which offered all-inclusive facilities on a membership fee or casual fee basis. Upgraded facilities provided included buffet food and refreshments, newspapers, showers, computers, and WiFi internet access for travelers. In December 2006, Virgin Australia announced a partnership between Australian cable television providers Foxtel and Austar, to introduce a "Live2Air" service on most flights by mid 2007. The Live2Air system is only available on selected Boeing 737 aircraft, and is in the process of being phased out.

Fleet
As of December 2012, the Virgin Australia fleet consists of the following aircraft: Current Virgin Australia fleet Aircraft Airbus A330-200 Boeing 737-700 Boeing 737-800 Boeing 777300ER Embraer E-190AR Total In Fleet 5 4 58 Passengers Notes J W Y Total 278 279 128 176 176 361 2 + 2 business class seating, only four of the eight business class seats may be booked 1 + 2 business class seating, all aircraft will be reconfigured to this seating configuration Changing to 279 seat plan Aircraft will be phased out by the end of 2013 27 251 24 255 8 120

8 168 8 168 33 40 288

8 18 6 91

96 92

104 98

Developments In 2008, Premium Economy Class was introduced throughout its entire fleet. New seating was installed in the first three rows of the cabin. These could be converted from three seats in Economy configuration to two seats for Premium Economy. The premium product offered priority check-in, larger baggage allowance, lounge access, priority boarding, increased legroom and all-inclusive in flight entertainment and meals or beverages on board. The product was aimed at business and corporate customers. The airline began charging Economy Class passengers for checked baggage in September 2008.
Early in 2011 it was announced that Virgin Blue had signed a ten-year deal with Perth-based regional airline Skywest Airlines, for Skywest to operate up to 18 turboprop aircraft leased by Virgin, in order to better compete in east coast regional markets served by Qantas Link and Regional Express Airlines. The turboprops would supplement the existing Embraer E-190s and replace the E-170s, which would be phased out due to their being uneconomical on the routes operated by Virgin. On 20 January 2011, Air New Zealand announced it would take a shareholding stake of between 10% and 14.99% in Virgin Blue. Air New Zealand chief executive Rob Fyfe described the investment "as part of Air New Zealand's strategy to develop scale and reach in this region" but said the airline had no intention of making a full takeover. On October 30 2012, Virgin

announced that Singapore Airlines has bought a 10% stake in Virgin Australia. Singapore Air will spend A$105m ($108m; 68m) on the deal, Virgin said in a statement. In a slew of announcements, the country's second-biggest airline after Qantas also said it was making a A$98.7 million (US$101.9 million) takeover offer for Perth-based Australian regional carrier Skywest. Virgin has also agreed to pay A$35 million (US$36 million) for its holding in Tiger, the loss-making subsidiary of Singapore's Tiger Airways. If the Tiger and Skywest deals receive regulatory and shareholder approvals, Virgin will expand its fleet to 139 aircraft and employ more than 9,000 workers.

Rebranding Following the arrival of John Borghetti (former Qantas senior executive) as the CEO of Virgin Blue, there was much speculation regarding a forthcoming rebrand of the airline. A number of key Qantas staff moved to Virgin Blue while key Virgin Blue staff departed the airline.[28] The airline further announced its intention to operate Airbus A330 aircraft between Perth and the East Coast, starting in May 2011.
In February 2011, the re-brand was confirmed when the airline announced that the word 'Blue' would be dropped from its name as part of a campaign to attract more business travelers away from rival Qantas. This came shortly after the unveiling of new crew uniforms and business-class seats. The airline stated that the re-brand would proceed in stages and would reportedly include a new fleet livery and the renaming of the other Virgin Blue Group airlines as well. On 4 May 2011, the former Virgin Blue revealed its new name, Virgin Australia, as well as its new livery. In addition to the new name, branding and livery, the airline also showed off its new flagship the Airbus A330 with new domestic business class. Boeing 737 business class seating was also revealed, to be introduced on all of Virgin's jet aircraft by the end of 2011.

Marketing and Sponsorship

Since its inception, Virgin Blue had sponsored many sporting teams in a bid to promote its brand. In February 2007, Virgin Blue signed a two-year sponsorship deal with NRL team the South. The Rabbitohs are the first rugby league team Virgin Australia has sponsored. Boeing 737800 VH-VUA has slight changes to its livery to commemorate this sponsorship. The Australian flag held by the "Virgin Girl" is replaced by the Rabbitohs' flag. Virgin Australia is also the official sponsor of the National Basketball League (NBL), and the title sponsor of NBL team the Brisbane Bullets. In 2007 Virgin Blue introduced an advertising campaign with the slogan "Get What You Want". The television commercials used in the campaign featured a song of the same name by Queensland band Operator Please. In 2009, Virgin Blue introduced an all new advertising campaign entitled "Now there's an idea". In 2011, with the airline's rebranding as Virgin Australia, the airline's slogan was changed to "Now you're flying".

JETSTAR AIRWAYS (2003)

Jetstar Airways is an Australian low-cost airline headquartered in Melbourne, Australia. It is a subsidiary of Qantas, created in response to the threat posed by low-cost airline Virgin Blue (now known as Virgin Australia). The airline operates an extensive domestic network as well as regional and international services from its main base at Melbourne Airport, using a mixed fleet of Airbus A320 family and Airbus A330 aircraft. We are Australias low fares carrier, operating around 800 domestic return services per week to 17 Australian destinations and around 170 weekly return services to overseas destinations. Parent company Qantas also has stakes in sister companies; 1. Jetstar Asia Airways 2. Valuair in Singapore, 3. Jetstar Pacific Airlines in Vietnam 4. New upcoming carriers in Asia Jetstar Japan and Jetstar Hong Kong. Jetstar is currently the third largest domestic Australian airline (by market share) and fifth largest international airline (by capacity share) serving international routes to-and-from Australia. Jetstars Australian and New Zealand based fleet comprises around 60 aircraft. Jetstar Airways Pty Limited is a wholly owned subsidiary of the Qantas Group. Jetstars Australia & New Zealand business is led by Chief Executive Officer, David Hall. Jetstar provides employment to around 3,000 people in Australia. Jetstar shares its parent's strong competition with Australia's biggest low-cost carrier Virgin Australia. Both Tiger Airways Singapore and Tiger Airways Australia are also major competitors to Jetstar in the low-cost market.

History The airline was established by Qantas in 2003 as a low-cost domestic subsidiary. Qantas had previously acquired Impulse Airlines and operated it under the Qantas Link brand from 2001 onwards, but following the decision to launch a low-cost carrier, re-launched the airline under the Jetstar brand. Domestic passenger services began on 25 May 2004, soon after the sale of tickets for her inaugural flight in February 2004. International services to Christchurch, New Zealand, commenced on 1 December 2005. Although owned by Qantas, its management operates largely independent of Qantas through the company formerly known as Impulse Airlines an airline acquired by Qantas on 20 November 2001.
Originally the airline was headquartered on the grounds of Avalon Airport near Melbourne, and started flying out of Avalon Airport in mid 2004, but has since relocated its registered office to the Melbourne CBD.

The first flight of sister airline Jetstar Asia Airways took off from its Singapore hub to Hong Kong on 13 December 2004. This marked Qantas' entry into the Asian low-cost market and signified its intention to battle key competitor Singapore Airlines on its home ground. Qantas has a 42.5% stake in Jetstar Asia's ownership. On 1 December 2005, Jetstar commenced operations from Sydney, Melbourne, Brisbane and the Gold Coast to Christchurch in New Zealand. On 7 December 2005, it was announced that Jetstar would establish the world's first global low-cost airline. At the end of 2005, it was announced that Jetstar would fly to Perth, Western Australia, from Avalon Airport. In July 2006, Jetstar and Jetstar Asia were brought together under the Jetstar brand. Online bookings for both carriers were integrated into Jetstar.com.In July 2007, Qantas acquired 18% stake in Vietnam's Pacific Airlines, to increase to 30% by 2010. The airline was relaunched on 23 May 2008 as Jetstar Pacific. In August 2011 Jetstar's parent Qantas announced that it will set up a new airline to be called Jetstar Japan, a joint venture of Jetstar Japan Airlines, and Mitsubishi. The airline was expected to start operating in December 2012, but now plans to launch ahead of schedule on 3 July 2012. In March 2012 another Asian Jetstar branded airline was announced, Jetstar Hong Kong, a strategic partnership between the Qantas Group and China Eastern Airlines, which is expected to commence operations in 2013.

Fleet
As of October 2012, the Jetstar Airways fleet consists of the following aircraft:
Jetstar Airways Fleet Passengers Aircraft Total Orders B Airbus A320-200 Airbus A320neo Airbus A321-200 51 6
Note 1

Routes E Total 177 180 Australia, New Zealand, and Asia Sydney to Nadi 177 180

Notes

Note 1

TBA 214 214 Australia and Asia 220 303 International 42 268 310 2 operated for Jetstar Asia Airways To be transferred to Qantas when 787s are delivered Deliveries starting in 2013; replacing A330

220 38 265

Airbus A330-200

11

Boeing 787-8 Total

68

15 26+Note 1

TBA

330

International

Route Map
Jetstar Airways Australia is serving many domestic destinations like Canberra, Perth, Darwin, Adelaide, Melbourne, Sydney, Brisbane and other cities as shown in the domestic route map. Most of the routes are determined form its base Melbourne.It can be estimated that this airline is using hub and spoke model for operations of flights. Jetstar Australia is also serving some near by countries like, New Zealand, Philippine, Malaysia, Thailand, South Korea and Hawaii where Honolulu Airport is located.

Marketing and Sponsorship From 2004 to 2006 the airline's mascot, Julie The Jetstar Girl, was played by actress Magda Szubanski. The advertising slogan of Jetstar is "All day every day low fares". In 2006, the jingle "Let's Fly Jetstar" and the use of Szubanski ceased and was replaced with "It's All About Choice / Fly Away" (later "Low Fares, Good Times").
Jetstar Airways is the major sponsor of the National Rugby League team, the Gold Coast Titans. In July 2008 Jetstar Airways was named the Official Airline of the Australian national rugby league team. One of its A320s was decorated with special decals to advertise the relationship. Jetstar Airbus A320-232 VH-VQH has special decals to advertise the Kangaroos Australian Rugby League team and its participation in the 2008 World Cup as shown in the picture.

Low Cost Practices

On all domestic routes Jetstar has a buy on board single class service offering food and drinks for purchase. Jetstar using same type of fleet; Aircraft of Airbus Company. Using Hub and Spoke model for the operations of flights.

Differentiation Strategies
On 4 October 2006, Jetstar became the first Australian airline to allow customers to select their seat upon booking. In November 2011 Jetstar became the first airline to offer passengers, iPads provided by bluebox avionics for use as in-flight entertainment devices. The units, which are pre-

loaded with movies, games and magazines, are provided on flights over two hours duration and are available for a fee in Economy Class but are complimentary in the international Business Class cabin, although some aircraft have seat back entertainment screens.

On all domestic routes Jetstar has a buy on board single class service offering food and drinks for purchase and on all A330 international routes, Jetstar offers a two-class service.

Business Class
Jetstar offers Business Class on its A330-200 aircraft. The Business Class cabin is fitted with 38 or 42 leather premium class seats in a 2-3-2 configuration, similar to Qantas domestic Business Class or Qantas international premium economy class. The service is inclusive of all meals and beverages, in-flight entertainment, and includes an increased baggage allowance of 30 kg. Business Max fares also include Qantas Club lounge access where available, and earn Qantas Frequent Flyer points.

Economy Class
Jetstar offers either pre-purchased meals on board or buy on board service with food and beverages. Following table represents a simple comparison of Jetstar and other airlines fare in case of checked baggage. It is shown that in other airlines, they charge checked baggage allowance between 0-19kg checked baggage or they charge baggage allowance for at least 20kg but Jetstar does not charge allowance for 0-19kg checked baggage and start to charge after 20 kg checked baggage. It means that Jetstar is giving fare relaxation to its customers. Other Airlines Fare Does not include checked baggage allowance or Includes between 0-19kg checked baggage allowance Includes at least 20kg checked baggage Comparable Jetstar Product Jetstar Starter fare (no checked baggage allowance)

Jetstar Starter fare plus20kg checked baggage allowance

Jetstar has been the undisputed low cost leader in recent times.

TIGER AIRWAYS (2007)

Tiger Airways Australia Pty Ltd, operating as Tiger Airways Australia, is a low-cost airline which commenced services in the Australian domestic airline market on 23 November 2007. It is a subsidiary of Tiger Airways Holdings, a Singaporebased company, which is owned partially by Singapore Airlines. The airline is based in Melbourne, Victoria, with its main base at Melbourne Airport. After the 2011 CASA grounding, the airline has shut down its bases at Adelaide and Avalon and initially only operated out of its Melbourne base since returning to the air. Tiger Airways is one of Asia's leading low cost carriers. First established in 2003 with Tiger Singapore, it rapidly grew its paw print with Tiger Airways Australia in 2007, and associate airlines, Mandala Airlines in Indonesia and SEAir in the Philippines in 2012. Operating from Singapore and Australia (Melbourne and Sydney), Tiger's network extends to over 30 destinations in 13 countries in the Asia Pacific region. Tiger is committed to offering customers great value fares and friendly service while maintaining the highest standards of safety, security and reliability. The airline has won several awards, including the Low Cost Airline of the Year Award at CAPA's Aviation Awards for Excellence in 2010.

Regulations Australian government policy and legislation currently permits airlines that are 100% foreignowned to operate domestic airline services within the country. The change in regulations originally applied only to New Zealand-owned airlines in 1996, but was later relaxed, resulting in the establishment of Virgin Australia. Australian international airlines are still subject to ownership rules that limit foreign ownership to 49%. Tiger undertook the final stage of Australian regulatory procedures on 20 November 2007, successfully performing two proving flights from Melbourne to the Sunshine Coast and Launceston. Each carried officials from the Civil Aviation Safety Authority as well as Tiger crew. Tiger received its Air Operator's Certificate on 22 November. History The Australian Foreign Investment Review Board gave approval for Tiger Airways to establish its wholly owned Australian subsidiary in March 2007 without any special conditions. On 16 March 2007 Tiger Airways Australia Pty. Ltd. was incorporated in the Northern Territory, although the company is based in Melbourne, with Melbourne Airport being the airline's major hub. Five aircraft and A$10 million were committed to start the subsidiary. The aircraft used by Tiger Airways Australia have the same livery as its Singapore sister company. The airline projected initial traffic of 2 million passengers annually.
Tiger Airways Australia's first scheduled flight was TT 7402, which departed from Melbourne for the Gold Coast on 23 November 2007.On 31 May 2008 the airline announced that passengers would be charged a fee for checked-in luggage. The fee was A$10 (for 15 kg of luggage) at booking or A$20 at check-in. Tiger announced on 3 April 2009 their intention to launch in the

MelbourneSydney market, the fifth busiest passenger route in the world, signaling an end to its operational policy of avoiding expensive airports. On 5 November 2009 Tiger Airways announced its intention to launch into the Brisbane market with services to Melbourne, Adelaide, and Rockhampton. Tiger celebrated these routes for A$2 during their Second Birthday sale, along with all Tasmanian routes and the popular Melbourne to Sydney route. Tiger Australia announced in February 2010 that the airline was now profitable. On 16 July 2010 Tiger Airways announced its intention to cease flying from Launceston Airport. The AdelaideHobart route was also to be suspended. Communications manager Vanessa Regan said the cuts were due to seasonal demand. On 16 September 2010 Tiger commenced services to Cairns, operating a late night daily service from its Tullamarine base. Tiger announced on 25 October 2010 its intention of completing the 'golden triangle' by expanding onto the busy SydneyBrisbane route, offering double daily frequencies.

Fleet
As of October 2012, the Tiger Airways Australia fleet consists of the following aircraft with an average age of 4.3 years:
Tiger Airways Australia Fleet

Aircraft

Total Orders Passengers

Airbus A320-232

11

180

Route Map
Tiger Airways Australia is an low-cost airline based in Melbourne, Australia. As of December 2012, it operates to eight destinations in six states across Australia. Tiger Airways Australia has operated flights to 17 destinations in Australia, but majority of these destinations were discontinued after the grounding of the airline's entire fleet by CASA in July 2011. The airline has its main base at Melbourne Airport, while a second base was opened in Adelaide Airport in March 2009. Tiger Airways operations in Adelaide were shut down in August 2011 due to commercial reasons. Sydney Airport was opened as a smaller "virtual base" on 29 October 2009.

Business Model The airline's business model is based on that of sister airline Tiger Airways, which attempts to increase the total market size (number of passengers), control operating costs, and maximize the number of sectors served.

 One way it planned to keep costs low was by avoiding expensive airports. (Using Secondary Airports for operations)

Onboard services
The airline provides the free Tiger Tales inflight magazine and a buy on board program serving snacks, soft drinks, beer and wine for purchase. In June 2010, Tiger implemented a "cashless cabin" environment, in that it only accepted Visa or MasterCard for onboard purchases. This new method was later dropped.

Competitors' reactions The arrival of Tiger Airways Australia in the market resulted in varied responses from its primary competitors, mainly Qantas (and its subsidiary Jetstar Airways) and Virgin Australia. Jetstar was particularly vocal, with its then chief executive Alan Joyce quoted as saying "Tiger and what they have done have come across as a joke, and will probably continue that way. He claimed that Tiger was losing over SGD$60 million over the previous two years of operations out of Singapore.
Air fares began to drop as special offers and other promotions were launched, such as Jetstar's announcement that it would "double the difference of any competitor's fare that is cheaper than its own fares". This was soon followed by a bonus system to entice its customers to stay with the airline. Jetstar immediately matched Tiger's Melbourne to Darwin fare upon its announcement. Tiger Airways Australia had previously been quoted as planning to offer "single digit" one-way fares when it began service. The announcement of A$79.99 flights from Melbourne to Darwin was met with criticism from Jetstar. When Tiger released its first routeMelbourne to Darwinat a price of A$79.99, Jetstar immediately undercut the price, offering fares of A$79 on the same route over the same period. When Tiger released its second routeMelbourne to Gold Coastat a price of A$49.95, Jetstar again undercut the price, offering A$39 fares on the route over the same period. In response to Tiger's announcement of Melbourne to Launceston flights for A$39.95, Jetstar offered A$29 flights over the same period, except for a holiday blackout. Virgin Australia considered the possibility of establishing a low-cost offshoot to fend off Tiger Airways, but decided to focus on its new trans-Pacific carrier, V Australia, and on increasing their business travel share by introducing a Premium Economy service. In a bid to increase its share of low-cost traffic, Melbourne Airport announced plans to cut usage fees soon after Tiger's announcement of establishing a hub there. Tiger's mention of New Zealand as a potential market raised concerns in that country. Just days before the launch of Tiger Airways Australia, Jetstar offered 5,000 seats on 21 November 2007 for the price of five cents, inclusive of taxes, on seven domestic routes, costing the airline $25.00 per seat. Jetstar claimed that the sale has nothing to do with the Tiger launch, while at the same time referring to them as "competitive". The airline's spokesman, Simon

Westaway, was quoted as saying that they "are a good airline in their own right. We are not going head to head. We respect them for the competitor that they are going to be". On 23 November 2007, the airline criticized Qantas for being unable to provide ground handling services to the airline at Alice Springs Airport, forcing it to delay its launch to the city by three months to 1 March 2008. The airline had promised to pay any cost to Qantas, but services were still denied. Qantas executive general manager John Borghetti responded by saying "assisting competitors is not part of my job description". Tiger Airways Australia CEO Tony Davis reminded Qantas that Tiger's parent, Singapore Airlines, provides ground servicing at Singapore Changi Airport for both Qantas and Jetstar, and it wasn't unreasonable for Qantas to provide Tiger the ground staff at Alice Springs. Tiger commenced service to Adelaide from Melbourne on 10 January 2008. Fares of $9.95 oneway between Melbourne and Adelaide were offered a few days prior to the launch. Tiger Airways Australia celebrated its first anniversary on 19 November 2008 with a "Free Seats" campaign, which resulted in 100,000 seats on sale, of which half sold out within the first few hours. The airline celebrated its second birthday on 23 November 2009 with thousands of seats on sale for A$2.

Company Ownership Tiger Airways Australia Pty Ltd. is a wholly owned subsidiary of Tiger Airways Holdings Limited, which is publicly listed on the Singapore Exchange. On 30 October 2012, Virgin Australia announced it had purchased a 60% stake in Tiger Airways Australia for $35 million. Tiger and Virgin said they would spend up to $62.5 million on Tiger Australia to increase its fleet from 11 aircraft to 35 by 2018. Tiger would continue to operate as a low cost subsidiary of Virgin Australia for 20 years. Performance The latest airline statistics for the 2011-2012 year show that of the major Australian domestic airlines (Qantas, Jetstar, Virgin Blue, Tiger Australia), Tiger Airways achieved the highest level of on time departures for 2011-12 at 89.5%. Tiger Airways also achieved the highest on time arrivals among the major domestic airlines at 87.8% according to this report. Furthermore, of the major Australian domestic airlines Tiger Airways had the lowest cancellation rate for the 20112012 year, at 0.5% of flights cancelled.
Marketing The Air Ways TV series created by the Seven Network follows the day-to-day operations of the airline. It has a similar premise to the successful UK factual television series Airline. The series, while not always portraying Tiger in a positive light, does much to promote the airline. Tiger Airways launched a new advertising campaign in December 2009 named "The Low Fare Revolution".

Future Prospects On 7 March 2012, Tiger Airways announced that it will reopen a second base at Sydney Airport On 4 September 2012 Tiger Announced they were resuming flights from Melbourne to Adelaide, beginning from 1 November 2012. On 18 December 2012 Tiger began direct return flights from Mackay to Melbourne and Mackay to Sydney. On 22 October 2012 CASA

announced they were issuing a new safety certificate and lifting all restrictions placed on Tiger Airways Australia, as they were now satisfied they were no longer needed. On 15 February 2013 Tiger will begin its first interstate route from Sydney to Coffs Harbour. .Recommended Practices for Pakistani LCCs Most of the practices that are being implemented in the Australian LCCs can be practiced in the Pakistans environment. The LCCs in Australia preferred to use airports with fewer service charges; the same should be practiced in Pakistan, i.e. using secondary airports. Differentiation strategies that should be adopted include introducing the concept of more than single class, like introducing Premium Economy class. Another strategy that should be adopted is providing in-flight meals and lounge services on demand with additional charges.