Issues & Trends – September 2010

DJ warns QF: our A330-200s will trigger trans-continental price war

VIRGIN Blue chief executive John Borghetti has signalled that his airline will unleash a price war for corporate travellers between Perth and Sydney/Melbourne once it has taken delivery of new A330-200 aircraft.

Scheduled delivery date of the wide body air-craft is May 2011 and observers anticipate they will showcase Virgin Blue’s much-heralded new business class cabin.

Addressing a Financial Services Council Deloitte Leadership lunch in Sydney earlier this month, Borghetti claimed the new aircraft “will provide additional capacity and flexibility, dramatically enhancing our offering for leisure, corporate and government travellers on the transcontinental routes”.

Then he quoted figures that invited his audience to conclude Qantas is currently ripping off business class travellers on those routes.

“Let me illustrate why the timing is right for us to enter the corporate market,” he said. “Today in economy class, you can pay $120 for a Melbourne-Sydney and $245 for a Sydney -Perth trip. That works out at about 17 cents per kilometre on Melbourne-Sydney and 7.5 cents on Sydney-Perth. Understandably Sydney-Perth is less than half the cost per kilometre given the sector length.

“Now let’s compare the same routes in business class. Melbourne-Sydney is $541 (76 cents per kilometre) and Sydney-Perth is $1761 (53 cents per kilometre) – nowhere near less than half the price per kilometre.

“Our Airbus A330s will change that.”