A taste of things to come at Ansett

Old Feb 3, 02, 7:10 am
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A taste of things to come at Ansett

A taste of things to come at Ansett
Monday 4 February 2002

The passengers on board two Ansett flights between Melbourne and Sydney expected nothing more from the airline's cash-strapped administrators than a glass of water. Instead they were treated to a preview of the meals that Ansett's prospective new owners plan to serve their passengers.

In business class there was a choice of ciabatta rolls filled with beef, marinated eggplant and peppers, or green Thai chicken pita wraps, all served with boutique beers, wine and champagne and followed by fresh fruit, tea and coffee. In the main cabin there was no choice, but a full bar service accompanied the pita wraps.

It was done 10 days ago without fanfare and most certainly without media attendance, lest the details or the recipes should prematurely reach the lunchbox operators at Qantas.

According to the crew on board AN flights 722 and 741, the passengers gave their approval, with rounds of applause at the end of the journeys.

For 265 people it was a gourmet meal. For a public starved of information it is but a tasty morsel; evidence that the new Ansett will be serving food and a sign that it will be offering its customers a service.

So far little has been revealed about the airline that the Tesna consortium, headed by businessmen Lindsay Fox and Solomon Lew, will operate. But as negotiations over the Ansett lease at Sydney Airport turned nasty last week, early signs emerged that a fierce dogfight will erupt in our skies.

For example, there was the rumour that the A320 Airbuses Tesna is leasing from Airbus Industrie in Toulouse are not new but the left-overs from Sabena, the recently collapsed Belgian airline, and America West, where a Tesna backer, Bill Franke, was chief executive.

The rumour, which Tesna has denied, came from an unnamed airline source. It is typical of the sandbagging that is a hallmark of a highly competitive industry, which fights over every bum on 18 million seats a year.

In the tumultuous months since the Ansett collapse, the business of actually flying passengers to and fro has been relatively straightforward. Once Qantas managed to cobble together sufficient aircraft to carry the excess of passengers, its market share grew to 80 per cent and held steady. Virgin Blue and the Ansett skeleton operated by administrators Mark Mentha and Mark Korda were left with the scraps.

But as soon as Tesna completes its $514 million purchase of Ansett's intercapital business, the battle for market share will resume. And there is no reason to assume that it will be any different from the take-no-prisoners affair it has always been.

Expect announcements to come thick and fast from all three players. Expect many of these to be targeted at the 2.7 million people still angry at the loss of 70 billion Global Reward points - enough to keep Ansett flying between Sydney and Melbourne for 65 years.

Tesna has promised to release details of its new frequent flyer program this week, although there are unlikely to be any surprises following last week's leaks to the media indicating how huge first-flight bonus points would seek to lure former customers on board the new Ansett.

Qantas concedes that it will lose some of its present market share but, by dint of his aggressive political lobbying during the Ansett administration, managing director Geoff Dixon has demonstrated that the airline will not give ground without a fight.

Aviation consultant Peter Harbison, managing director of the Centre for Asia-Pacific Aviation, estimates that Australia's domestic market has room for 110 jet aircraft. But once the new Ansett becomes fully active with its new Airbus fleet, there will be a minimum of 130 aircraft plying between capital city airports.

By this time next year Qantas will have 72 aircraft in its domestic fleet; Virgin Blue expects to have 23. Both airlines will still be building on their fleets while Ansett hopes to be on its way to 29 new Airbuses.

With the equivalent of 20 empty aircraft flying the southern skies, the dogfight will become ferocious. Aviation is about yields - the percentage of passengers per aircraft - and to win those yields the airlines are likely to resort to a price war. And that could be crippling. Remember the fate of the two Southern Cross airlines of the early 1990s and more recently the swallowing by Qantas of Impulse.

There is already evidence of a shrinking domestic market. In November, 2000, the domestic airlines carried 1.723 million passengers. A year later this had dropped 12.5 per cent to 1.507 million, due perhaps more to economic conditions than any fear of flying brought about by the September 11 terrorist attacks in the US.

Harbison predicts many vacant seats at the price-sensitive end of the market, where Virgin Blue and Qantas are slugging it out. "It's primarily about passenger numbers, not quality. They need the yields," he said.

Qantas has started taking delivery of a new fleet of 15 Boeing 737-800 aircraft, all configured for economy class only, which it will use in this battle with Virgin Blue. Harbison says Qantas took the decision to import these aircraft because it miscalculated the market two years ago and found itself exposed when Impulse and Virgin Blue arrived.

Qantas controls the market from top to bottom, with Virgin Blue competing for the lower end leisure and holiday travellers while harbouring ambitions of a move upmarket to budget-conscious business travellers.

The new Ansett plans to move against Qantas at the lucrative top end of the scale, with a two-class airline where economy class will be redefined as main cabin.

Fox and Lew served notice on Qantas at a press conference in November called to announce their intended purchase of Ansett. Fox said he was a bit of a street fighter and he was going to claw back market share.

However, this week Tesna's media spokeswoman, Heather Jeffery, revealed a modest target of 25 per cent market share, but nearly all of it top-drawer.

Ansett is mainly interested in corporate flyers and frequently-flying leisure travellers, the types who regularly take short-stay trips to the Queensland sunshine.

Jeffery says the target is modest because Tesna has it focus on yields and quality as much as fares.

She says sales teams in the capitals have been recruited and trained on the new products.

They have started contacting former Ansett customers and other big companies which they believe have yet to sign contracts for their business travel this year.

"Our total concentration is on quality. Solomon Lew and Lindsay Fox are very particular about what they serve their customers. They want the business class to be first class. They use the term main cabin rather than economy."

She says the meals experiment was a good example. Tesna's caterers have studied the modern cafe/food hall scene in Australia and overseas. "We have looked at what our sort of customers want to eat and our meals will reflect that. We are going in the opposite direction to the others. The foods will be gourmet, the portions will be generous and in business class there will be silver service."

Jeffery says the new Ansett will throw its emphasis on service. It will concentrate on schedules, punctuality, swift baggage handling, valet parking, ease of movement through airports.

The name Ansett will stay and for the moment so will the livery. If there is to be any new paintwork it will be unveiled when the new Airbuses arrive from France. The new Ansett will start by serving five cities - Melbourne, Sydney, Brisbane, Adelaide and Perth - over eight routes, but it will increase the number of flights from 424 a week to 530.

Jeffery says their planning is at an advanced stage: everything will be in place before the ink is dry on the contracts.

However, the industry rumour mill would have the public believe that Tesna's planning is behind schedule, just like its contract negotiations, which were seen last week to be jeopardised by their failure to reach agreement with the Sydney Airport Corporation over the assignment of the all-important Ansett terminal lease.

The opposition would have everyone believe that they were minding their own business and not worrying about Ansett.

Virgin Blue's head of commercial operations, David Huttner, said: "Since late September we have adopted a policy of not reacting to the Ansett situation. We did not plan to change our strategy on February 2 when we expected the new Ansett to start flying, and I suspect we won't be changing if they start flying on March 1."

He says Virgin Blue is profitable. It made $8.2 million in the half year to September and it retains its $11 million seed capital. This shows the airline has developed a strong and profitable niche, he says.

The start of February heralds Australia's return to work and the airlines are refocusing their marketing effort from holiday to workday traffic.

Virgin Blue has begun a new advertising campaign that emphasises service.

Qantas is taking care of business, too, by extending its CityFlyer service to Brisbane. It is also moving on the other end of the market with the arrival of the one-class 737-800s.

RichardMEL, UA 1K
A Star Alliance Member.
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Old Feb 4, 02, 11:33 pm
Join Date: Oct 1999
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Yes... I can't wait to fly AN again. When this AN goes well, maybe I will come "down under" this summer (winter) again.

About QF, I hope it has learned its lessons from its American and European partners about launching a low cost subsidaries. Seeing the demise of "Go," "Shuttle by United," "Continental Lite," and "Metrojet." So far Delta Express seems to be the sole survivor. Good luck, QF! Personally, I will rather fly Virgin Blue than QF!

Carfield http://www.flyertalk.com/forum/smile.gif
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Old Feb 5, 02, 12:30 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Carfield:
Seeing the demise of "Go,"... </font>
Is BA's "GO" shutting down? I thought that was doing quite well?
MilesDependent is offline  
Old Feb 5, 02, 3:14 am
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"GO" are indeed still going strong. In fact, they are expanding further with new bases and new routes. The only thing they have done recently is drop EDI-DUB as the price war with Ryanair was hurting too much. GBP2.50 each-way? Nobody can make money at that price.

The article was interesting, if a little inaccurate:-

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Aviation is about yields - the percentage of passengers per aircraft</font>
I thought that was load factor!! Yield is the amount of cash you get per seat!
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Old Feb 5, 02, 3:25 am
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But Go is no longer owned by BA, right? I remember a while ago that they were looking at selling the subsidiary.
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Old Feb 5, 02, 9:38 pm
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Yes, that is what I meant....

BA no longer owns "GO," due to whatever reason, but BA seems to be working on another low fare attempt again.

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