Can Tiger survive low-fare Aussie jungle?

The Straits Times, February 12, 2007


With Virgin Blue and Jetstar entrenched, S'pore carrier will need very deep pockets

By Roger Maynard,
Australia Correspondent




SYDNEY - THE battle for Australia's skies will be won by the airline with the deepest pockets, industry observers say.

Three days after Tiger Airways announced plans to launch a domestic Australian service, the Singapore-based airline is already looking for pilots, cabin crew and engineers.

But with Qantas-owned Jetstar and Sir Richard Branson's Virgin Blue established on many of the country's domestic routes, is there room for a third airline?

History suggests that when three operators enter Australia's domestic market, it usually ends in tears. Witness what happened when Compass Airlines launched its services on two occasions in the early 1990s in competition with Ansett and the government-owned Australian Airlines. Amid intense fare discounting, Compass collapsed just a year after its first flight. Relaunched by another operator, it also went under in less than a year.

In 2001, soon after Virgin Blue set up business in Australia, Ansett collapsed, leaving 16,000 staff unemployed.

The common theme in these failures has been an all-out war to attract customers by slashing airfares to ridiculously low levels. The question now is: Will Tiger Airways be able to cope with a long period of intense price-cutting?

Chief executive Tony Davis is clearly confident. In an interview yesterday with ABC Television, Mr Davis said his airline would look at flying to small centres rather than just major cities, similar to the operations of Ryanair in Europe and Tiger services in Asia.

While he did not reveal what Tiger's routes may be, he said five new Airbus A320s will be available by the end of this year.

Tiger is owned by four shareholders including Singapore Airlines, which holds 49 per cent.

Australia's media has welcomed Tiger's proposed arrival, with reports that it could mean A$10 (S$12) air fares between major cities.