Qantas CEO bullish against new challengers Rex, Virgin Australia 2.0

Qantas expects to retain the lion's share of the domestic market, and says uncertainty over Virgin is working in its favour.

By Chris Chamberlin, December 3 2020
Qantas CEO bullish against new challengers Rex, Virgin Australia 2.0

Competition for Australia's domestic travellers will ramp up in early 2021, with Virgin Australia continuing its shift to a more value-driven approach while Regional Express launches Sydney-Melbourne and Sydney-Brisbane flights on its new Boeing 737 fleet.

But Qantas Group CEO Alan Joyce sees little reason to worry, and expects that Qantas and its low-cost arm Jetstar will retain the lion's share of the market.

“We think our market share will be above 70%, and that is sustainable going forward,” Qantas Group CEO Alan Joyce said at a wide-ranging media briefing this morning.

Although Regional Express has grabbed travellers’ attention this week with $300 business class flights between Sydney and Melbourne, Qantas doesn’t see too many of its own passengers jumping across to the competition – despite charging fares from $715 on similarly-timed flights.

“We believe for the business market, Rex’s network is extremely limited,” Joyce elaborates.

“The business corporate market is still going to be very attracted to the proposition Qantas has.”

Also read: Rex mounts business class battle against Qantas, Virgin

Businesses making the move

Uncertainty over the future shape of Virgin Australia as a mid-market carrier has also been to Qantas' benefit, Joyce says, with many corporate travel accounts decamping from Virgin.

"Some 25 large accounts have come across this year, and in the last few months in particular there’s been an acceleration of that," Joyce noted. “I haven’t seen anything of that scale ever."

Membership to Qantas' Chairman's Lounge could be a lure for Virgin's corporate clients.
Membership to Qantas' Chairman's Lounge could be a lure for Virgin's corporate clients.

The appeal of the invitation-only Chairman's Lounge to many heavyweight corporates can't be discounted, especially as Virgin is yet to commit to retaining its equivalent of The Club.

Qantas' ongoing ‘status challenge’, primarily aimed at giving Virgin's Gold- and Platinum-grade Velocity frequent flyers a fast-track to Qantas Gold status has also enjoyed significant uptake, raking in "several thousand high-tier members."

Read more: Qantas swoops on Virgin frequent flyers with 'Gold fast track'

Virgin's business class offering remains “under review” until early 2021, while its Boeing 737 fleet has been downsized and its lounge network almost halved, further widening the gap between it and Qantas.

Almost all of Qantas' domestic airport lounges are once again open.
Almost all of Qantas' domestic airport lounges are once again open.

By comparison, “Qantas is opening up 30 of its 35 lounges domestically before Christmas. (Virgin) has only six lounges – and there are question marks over (Canberra, a seventh),” Joyce jibes.

“We know the corporate market is moving towards Qantas – and with Tigerair removed from the market, that the low-cost market is moving towards Jetstar as well.”

Bringing out the big guns

As state borders open up, Qantas is capitalising on increased domestic demand – and Virgin's retirement of its leased Airbus A330s – to swing some of its biggest aircraft back into action on domestic flights.

Qantas' Airbus A330s are back between Sydney and Melbourne.
Qantas' Airbus A330s are back between Sydney and Melbourne.

The large twin-aisle Airbus A330, which boasts international-grade Business Suites in business class, will be a fixture on the Sydney-Melbourne route from next week.

On Mondays through Thursdays until at least Christmas, the A330 will take over from the Boeing 737 on Qantas’ peak Sydney-Melbourne morning QF409 flight, which departs Sydney at 7am to reach Melbourne at 8:25am.

The same days see the A330 return from Melbourne to Sydney on the airline’s final flight of the day, departing Melbourne at 7:30pm as QF490, arriving into Sydney at a pre-curfew 8:50pm.

Qantas will also add 18 Boeing 787 Dreamliner flights to Sydney-Perth and Melbourne-Perth to keep up with east-west demand once Western Australia allows visitors from New South Wales and Victoria from December 8.

Chris Chamberlin

Chris Chamberlin is the Associate Editor of Executive Traveller, and lives by the motto that a journey of a thousand miles begins not just with a single step, but also a strong latte, a theatre ticket, and later in the day, a good gin and tonic.

but what share of golden triangle will Qantas be left with ? That's where the money is.

Doubt if Rex will be rushing jets onto thin regional routes except maybe in non-peak Mon-Fri, Sat & Sun am.

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 317

Great to see some larger aircraft back on domestic routes, I was a regular on the 767 DRw-BNE for many years, hopefully routes like these can have some larger aircraft, even if it’s just for a while. 

Virgin Australia - Velocity Rewards

24 Aug 2011

Total posts 795

Nice work AJ, putting widebodies out and about. Make hay while the sun shines.

QF

11 Jul 2014

Total posts 669

I'm a number 2 guy, I never normally go with the market leader. The issue with Qantas is they don't always fly where I want to go weekly and they put you on a Jetstar flight which is late or they give your seat to holiday makers when you need to make a meeting. Talking to a lot of Virgin regular flyers that was the main reason they flew VA rather then Qantas. 

17 Jun 2020

Total posts 241

So I am assuming in due course there will be an along the lines of Virgin/Rex CEO bullish against incumbent Qantas?

11 Jul 2020

Total posts 75

Like I have said in a previous post if Rex thinks Qantas is going to do nothing about the competition they are gravely mistaken, they have the ability to raise more capital, have vastly more capacity, and different aircraft to put onto this or any sector if the need arises than Rex and we all remember the all-out war several years ago with Virgin and Qantas flooding the market place with extra domestic seating capacity and sharp pricing that was insane as the two Ceo's had a pissing contest to see who could outdo the other for the most passengers. So I think Alan Joyce will want to retain the same percentage of capacity in the business class market and market share or slightly improve it.  The next year or two is going to be a wild ride as all four domestic carriers go to battle to win our dollars and our backside on their aircraft's seat. Will Rex survive this challenge as it enters the capital city market?

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

Alan might be confident .. but, for me, a little too confident. Remember, Virgin forced the QF group to a nominal 66% share, which was in some respects, closer to 63-64%.

Rex has already declared it's Business fares - and has been canny enough to market 3 highly visible J Class fare buckets - all of which are significantly below QF's mainline J offering. QF has been content to actively market their full retail J product for years, but discounted domestic J promotions have been thin on the ground for years. 

Why is this important? For a few reasons.

1. Rex has effectively trapped QF into the high-end, corporate fares market.

2. The corporate. high end J market is usually on contract-negotiated discounted J fares, which are different to and lower than full retail. ie: lower yield than full (QF) business.

3. Rex has the advantage here - it has attacked QF's SME market quite cleverly. Small businesses without the scale to sign corporate contracts. That will pull loyalty through lower, affordable J Class fares, lounge entitlement and fresh service.

4. Jetstar suddenly looks a little bare, in the domestic J market - as a Rex J non-competitor.

5. It will be difficult for QF to try predatory tactics with REx. since the ACCC has already stated it will be watching the market and QF intently. Rex won't grab a huge share of the J market initially, but every mainline destination it can add will certainly nibble some percentage points away from QF. And with lower costs, it can capture a reasonable J Class share.

6. Virgin has been left at the starting gate, with punters wondering if it has a J Class strategy. Once again, REx has shown it's hand early and limited where Virgin can sit in the J market (midway between Rex and QF, but closer to QF so far). The fact that Virgin thought it was being strategic, by taking it's time to announce / reveal it's J product pushes it into the irrelevant basket, for the time being.

7. Clearly, Tiger and Jetstar (domestic) were not a factor in the old QF/Virgin J class scenario. But now, March will present the start of a new J Class era - with Rex, Virgin and QF all vying for J market share. About to get really, really interesting.

To me, Rex has played its hand extremely well and has clearly moved to define the J market. REx's product might not be quite as polished and shiny as the QF product, but if Rex J is half way decent (as I believe it will be), it will prove that a good 'basic' J product can win market share and respect on the sub-3 hour routes, without extortionate pricing. And with a new / revamped Rex FF program to reveal, it will keep the market engaged. Now, let's see what Virgin will announce for J.

you seem to forget there's a much bigger market on triangle than business - full fare economy.

Plenty of last minute tickets have been sold on Qantas for $499 SYD/MEL. Even with a corporate discount of 5 or 10%, that's still expensive.

Qantas - Qantas Frequent Flyer

31 Mar 2016

Total posts 24

We are seeing QF taking on Rex on more regional routes-  it unexpected -  it Rex needs to be careful - QF could go for its regional base which will make it very difficult for Rex to return to if their capital city adventure fails.... 

esquire

most of profits are in the triangle.

Qantas & Virgin are not going to be getting any connecting traffic from Rex regional anymore.

Every % Qantas in particular loses will be worth millions & Qantas costs are extremely high.

Qantas

19 Apr 2012

Total posts 1368

Regular Qantas gets connecting traffic from Qantas link which might expand routes to more match and therefore squeeze Rex and virgin/alliance

ozpeke

Rex will take market share from both Qantas & Virgin on the triangle.

Don't think Rex will even want to fly to Cairns or Townsville etc.

Rex is not going to compete with unreliable Jetstar.

17 Jun 2020

Total posts 241

Qantas needs to be a bit less arrogant. Looking at some of its pricing in Business reflects this. For most flights in December, Sydney-Perth on a 737 is $3771 ONE way. 

Cannot wait for Rex to start flying and Virgin to declare their hand to bring some sensible pricing in Business back.

Qantas

19 Apr 2012

Total posts 1368

KW do you think those Qantas prices will remain when they are matched by virgin. Rex won’t compete on that route. Qantas is filling up its planes at the highest price following the WA border closure. Yield management is what is happening.

Virgin Australia - Velocity Rewards

06 Mar 2015

Total posts 229

VA have been effectively emasculated in the Business Class market and all caused by their indecisions regarding the standard of service, even AJ has said that this is a big reason for Corporate Customers jumping ship and believe me as a private individual I will be doing the same thing as will many others.

Bain and co. whilst not gaining full control until mid November have had many months to work out a strategy and type  for their Business Class Service  but as one poster has said " they have been well and truly left at the starting gate " due to their procrastinations.

Losing 25 +large corporate customers to Qantas is catastrophic for VA's Business Class and will be regretted for as long as VA's Business Class  survives which may not be too long unfortunately. If their current wiz kid cant make decisions until next year on J class service then there's something very wrong with her capability and judgement. Not a very good start at all!!!

AJ must be overjoyed for the gift VA has handed him!! Fancy being handed so much business due to the ineptitude of your rival- very sad indeed.

Why would anyone fly on a B737 transcontinental with an unknown service standard when one can soon fly on a B787 Dreamliner with full top service.

RIP  VA Business Class Previously High Class Standard.

XWu
XWu

09 May 2020

Total posts 432

There are enough commentators here who seemed to want to stay with VA even though it is clear the business class product will never be anything like 2019, and probably not like QF J class even in the pandemic mode; any excuses and hope just to avoid using QF and conceding to AJ.

But corporate doesn’t take this kind of emotional self deception, and they sure weren’t going to pay any premium for a product that is still not well articulated by its CEO nor inspire confidence in the lack of communication. In the meantime VA Mk II attempt to attract more economy class business by all these rolling sales, where the regular punter is not much wiser and is more price sensitive than care about the experience, and assume the new VA mantra will not affect them that much (and they are largely correct in that expectation)

What is surprising is that the new VA corporate don’t seem to have done enough to stop the haemorrhaging and if that is partly intentional then it doesn’t loom well for those what still want a decent J class product.

Not dancing on VA Mk 1 grave here since QF product did improve because of competition and certainly the premium support services cutback bode future realignment of standards for QF product in absence of a full service competitor.

QF

11 Jul 2014

Total posts 669

Pretty spot on, but how long does a CEO last if the business crumbles and consumers will decide the fate of the company and CEO, so basically they need to get there stuff together quick smart. Private Equity businesses is all about the money and they will knife anyone if they don't get the return.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 365

i am hoping sydney-adelaide services even if only temporary get an upgrade to a330's.they ran those and before that 767's when the adelaide to singapore services existed for many years as basically a domestic sector of an international flight.better than what the competition was offering even if the schedules did not always work in ones favor for qantas.i am not sure what kind of model the new virgin is going to look like but basically they need to be more like australia's version of america west(when they existed)amongst others.

Virgin Australia - Velocity Rewards

06 Mar 2015

Total posts 229

This beggars belief that an Airline can advertise and sell a Business Class seat yet have the gall to to present their Business Class Passengers with such an appalling and disgraceful offering that they call a meal!!

Are the new VA management so arrogant that they won't address this issue now before too much more damage is done or don't they care at all?

There is quite a lot of adverse publicity about the atrocious so called snack box so why don't they try and provide a far better meal option until they make up their minds???

Surely VA Management or their staff would read comments such as these and make it known to the Bosses of the considerable disquiet amongst what was Loyal VA customers .

Maybe it's a cunning ploy of VA to ditch Business Class in January by saying it's all too hard and we have lost too many Business Class people so it's no longer viable so bye bye J Class VA.

Either way the damage has been well and truly done but some of it could be saved by improving meals until the final decision.

There is very little or NO loyalty left for VA by it's once happy Business Class Flyers and this disgraceful service or lack thereof is the final nail in the coffin!!

A once very proud and high service Airline is now reduced to a service standard below that of economy train travel.

The new Management have only themselves to blame as they have had plenty of time whilst the takeover was being finalised to at least draw up a decent contingency plan but they have failed miserably!


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