KEY POINTS:
Jetstar is banking on budget-conscious travellers to support the airline as it expands in New Zealand and moves towards superseding some Qantas services.
The low-cost carrier carrier yesterday announced it would fly once a day from Auckland to Sydney and once a day to the Gold Coast from
next April, subject to regulatory approval.
Jetstar says it has overheads about 40 per cent lower than parent company Qantas, which set it up in 2004.
Jetstar chief executive Bruce Buchanan said that as people were forced to tighten their belts the appeal of lower fares grew.
"The interesting thing will be how much the current economic climate changes the demand profiles."
Jetstar started flying across the Tasman from Christchurch three years ago and the establishment of a base in Auckland and application for a New Zealand air-operator certificate is a significant step in its expansion.
It will give the airline more capacity and flexibility to both expand its transtasman services and also move into the domestic market and fly long-haul from New Zealand to Asia or North America with Boeing 787s.
Buchanan said the flights announced yesterday were complementary to Qantas' four daily Sydney flights but if passengers demanded it, Jetstar could play a bigger part in the overall Qantas mix.
"It works well for Jetstar, it works well for Qantas so we can both concentrate on our respective niche.
"Where we go from here really depends on what the customers prefer, they'll decide and buy the product they want and we will adapt as we choose to best service different segments of the market."
He said he did not doubt "we'll modify the mix of business here in relation to what the customer needs".
Decisions on plans for next year would be made around February or March.
"We'll need to make a call on whether we do some more Tasman flying or whether we do some New Zealand flying or whether we put our aircraft up to our Darwin hubs or further Asian expansion."
Rivals reacted coolly to Jetstar's announcement.
Pacific Blue will start Auckland-Sydney services today as part of its expansion from New Zealand.
Commercial general manager Adrian Hamilton-Manns said Jetstar's standard fares were no better than those offered by his airline. "Imitation is the sincerest form of flattery," he added. He expected Qantas would gradually scale back its presence in New Zealand, starting with one of its four daily Auckland-Sydney flights next year.
Air New Zealand operates 150 return services a week across the Tasman and believes the big loser from Jetstar's expansion on transtasman routes could be Pacific Blue.
"With another budget airline operating, Pacific Blue will find it even more challenging than they are today and will struggle as these two battle it out for the low-yielding market," said Air New Zealand's group general manager of short-haul airlines, Bruce Parton.
He estimated the services unveiled yesterday would add less than 2 per cent to the total transtasman market.
"Qantas has been struggling on the Tasman and domestically including poor on-time performance and poor customer satisfaction so therefore we're not surprised they have been forced to introduce a new brand."
Parton said Jetstar credit card and baggage charges added to overall fares.
"Their pricing is anything but low cost and by the time you add in the user-pays approach it almost becomes uncompetitive."
Jetstar has about 20 per cent of the Australian market, flying mainly Airbus A320 aircraft, and from Australia runs services to Japan, Hawaii, Thailand, Singapore, and Indonesia.
In Vietnam and Singapore it also has joint-venture stakes with local regional operators.
Of most concern to other airlines is Jetstar's long-term aim of using additional capacity it will get with Boeing 787 Dreamliners to fly through or out of Auckland.
"With the 787s that we've got coming it will give us the opportunity to look at some innovative options to operate out of New Zealand to a variety of markets in Asia and North America," Buchanan said.
Jetstar hopes to get the first of 65 Boeing 787s in November next year, although the aircraft has been plagued with delays.
WHAT THEY SAID
[Jetstar's] pricing is anything but low cost and by the time you add in the user-pays approach it almost becomes uncompetitive.
- Air New Zealand's Bruce Parton
Imitation is the sincerest form of flattery.
- Pacific Blue's Adrian Hamilton-Manns
