Airline offers $1 seats as price war hots up

news.com.au

QUEENSLAND will be the key battleground for an airfare price war in which customers will pay as little as $1 to fly interstate.

The opening shots were fired yesterday when new budget airline Tiger Airways announced it would start flying to the Gold Coast, Rockhampton and Mackay from Melbourne in November, selling seats on Gold Coast flights from as little as $49.95 one-way.

Tickets on the other routes will start from $59.95 one-way.

Qantas subsidiary Jetstar immediately responded by releasing 10,000 $1 seats to destinations including the Gold Coast, Rockhampton, Mackay and Hervey Bay.

An aviation analyst predicts the price war will hot up. Virgin Blue is expected to launch a low-cost offshoot within weeks.

"Tiger's entry is going to stimulate the market very significantly and everyone will be winners – consumers, the tourism industry and the economy," said Peter Harbison, chairman of the Centre for Asia Pacific Aviation.

Tiger, part-owned by Singapore Airlines, announced it would start its new services from November 23.

Launching the Queensland services at Dreamworld's Tiger Island, Tiger Airways chief executive Tony Davis said his rivals Jetstar and Virgin were "running around like headless chickens".

"You've got to ask who's reacting to who?" he said. "Anyone can offer a gimmick fare for a couple of hours to a selected group of users.

"I think the Australian consumer is very savvy and what they really want is lower fares on a sustained basis. The fares we've announced today are regular fares, there's lots of them available and they're less than half the price of the incumbents' equivalent fares."

Mr Davis said Tiger was injecting 500,000 seats into the Queensland market and would be "here for the long haul". He said Tiger was able to offer cheap fares and still make money because of its low-cost business model.

"If you're looking for a lounge with a free glass of wine before you get on the plane then, no, we're not going to do that," Mr Davis said.

Tiger Airways customers will pay a small fee for allocated seating and will pay only $10 to change their ticket. Mr Davis said Tiger was confident of surviving a fierce competitive onslaught from Jetstar and Virgin.

Qantas has signalled a "whatever it takes" attitude to defending market share. Chief executive Geoff Dickson said his group's 65 per cent market share was "a line in the sand that won't be crossed".

But Mr Harbison said he did not believe Tiger would be squeezed out.

Printable Version | published Jul 09, 2007

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