Issues & Trends – November 2011

Michael James: Air Australia is the first agent-friendly LCC

AIR Australia founder Michael James depicts his fledgling air-line as the first agent-friendly low cost carrier (LCC).

“On the trade front, we do things differently from other LCCs,” he said. “From day one all our inventory is accessible to agents through the GDS and we pay retail commissions on bookings (a base five per cent).”

Speaking in the wake of this month’s launch of Air Australia, formerly known as Strategic Airlines, James told travelBulletin that he now has deals in place with both JTG and Flight Centre and, unusually for a low cost carrier, over 60 per cent of bookings come from travel agents.

He added that Air Australia is not just dealing with the “big boys” and pointed to the inclusion of regional and independent categories in recent rewards for booking volumes.

The airline also has whole-sale deals in place with operators including Creative Holidays and Infinity who are packaging its international services.

Air Australia has adopted a LCC business model because, it said, passengers flying with the full-service Strategic ex-pressed a preference for paying a low basic fare and purchas-ing ancillary services such as meals, drinks and inflight entertainment on board. (travelBulletin, August).

The carrier makes its debut on the Australian aviation scene with a fleet of three A320-200s and an A330-200 flying to international destinations Bali, Phuket and Honolulu plus some domestic services.

The carrier is scheduled to take delivery of a second A330 in December in May and it is planning to add China and Vietnam to its destinations in the second half of next year.

On the domestic front, Air Australia will continue to fly a number of mining-related routes, such as Perth-Bali, established when it was operating as Strategic.

It will also enter the Brisbane-Melbourne corridor on December 15 with an opening offer of $69 fares.

But James said the primary purpose of this service – double daily Monday to Fridays and once a day at weekends – is to provide connections for Air Australia’s international services out of both cities.

For example, with three services a week to Phuket ex Brisbane and the same number ex Melbourne, the airline is effectively offering six services a week from both cities if it can provide connections.

James is excited by the size of the markets in Australia’s second and third largest capitals and at this stage Air Australia has no plans to fly out of Sydney.

For example, Strategic’s twice weekly services to Honolulu ex Brisbane and Melbourne (possibly increasing to three times a week) have obvious appeal to clients in both cities who would otherwise have to travel to Sydney to join Jetstar or Hawaiian Airlines flights.

James added that there is also potential to attract regional traffic which has traditionally joined inter-national flights out of Sydney.

He said it makes more sense for Cairns-originating passengers to link up with an international departure from Brisbane rather than Sydney; ditto for Adelaide-originating passengers out of Melbourne.

At this stage Air Australia has no plans to expand its domestic operations further.

James said connecting inter-national traffic will provide between 10 per cent and 30 per cent of Brisbane-Melbourne passengers and underpin the route’s viability – “but we have no ambitions to extend our domestic network”.