Air Australia Grounded- Shock! Not.

Posted on: February 16th, 2012 by: Martin J Cowling

When I blogged about Australia’s newest airline in January,  I was not convinced it was a viable proposition. So many start ups have tried in Australia and failed/disappeared (East-West, Compass I, Compass II, Impulse, for example). More recently, we have seen Tiger Airways Australia in trouble.

Australia is a tough aviation market in a tough aviation world. Already in 2012, three airlines have collapsed including Malev that I blogged about last week. Air Australia is the world’s fourth airline to be grounded this year.

On the morning of February 17, Air Australia, after less than three months of operations, ran out of cash. The airline could not even pay for the fuel to get a jet back to Australia from Phuket. Most if not all of their staff were stood down immediately. 4000 passengers were stranded in Bali, Phuket and Honolulu.

Their Twitter account was closed and Facebook page deactivated immediately. Phones stopped being answered and on the website appeared the following message: “On February 17 2012, the Director of the Air Australia group of companies appointed John Park and Mark Korda of KordaMentha as voluntary administrators,” Korda Mentha, of course, started as a result of the Ansett Australia collapse in 2001 Passengers waiting at airports including a plane-load of Australians who had checked in at Phuket airport were handed the attached information from KordaMentha.

Virgin Australia Airlines has announced it will assist passengers stranded in Bali  with a special fare of USD $199 one-way  to Brisbane, Sydney and Melbourne.  Qantas is developing a rescue plan. In the meantime, they have said that passengers with a ticket for travel on Air Australia today are to report to the Qantas Sales Desks at their departure airport.

Passengers who have paid with Credit Cards have found they may have protection from loss. Passengers may see the value of their tickets are credited back. Paying by bank transfer and cash do not seem to have the same protections. This is also a good time to check on the level of travel insurance. Will your travel insurance company cover your replacement flights. In this climate this may be coverage that you might need.

In the meantime, my thoughts are with the lovely crew members from Air Australia, I encountered on my first (and last) flight with them in January.

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Tuesday Trip Report: Air Australia

Posted on: January 10th, 2012 by: Martin J Cowling

 

I blogged on Friday about Air Australia – the newest airline operating in Australia.  Today’s Trip Report is about my recent journey on board their only domestic flight: between Brisbane and Melbourne, the two hubs of Air Australia’s international operations.

Booking: 6 out of 10

As noted in my blog post, last Friday, the CEO of Air Australia, the newest airline in the country, has promised that the airline will bring “Simplicity”. Well that promise did not extend to fares, the booking process or to the website

There are five types of fares (Sale, Saver, Flex Saver, Flexible and Business). I have already said Air Australia needs to ditch business class. I would then collapse the remaining fares into two:  Saver and Flexible. Saver fares can be sold at sale rates. Air Australia was offerring $69 fares from Melbourne to Brisbane for February which indicates that they are not selling seats fast enough. They are now available for $89 each way. It is a really good deal, as a passenger, but it would seem to be unsustainable for the airline.

Seat selection starts at an additional $8 per passenger. I chose an emergency exit seat which Air Australia says on their website would cost me an extra $50.  This is way too steep! On this booking, they didn’t charge me any fee for the exit row – I just paid the airfare. I am not sure when those charges will actually come into play or of there is a glitch in their booking system.

The booking process has way too many steps. It starts off easily enough with a clear search engine on the front page. This takes you to a calendar page for month and you then select your day of travel. From that point on,  it felt all too complex. A simple airline needs a much simpler booking system.

The website (http://www.airaustralia.com/) needs simplification. It is a little too “messy”. It also needs more information marketing the airline or even showing where they fly e.g. a simple route map.

Check in: 9 out of 10

The website says “Online Check in is coming”, so I checked in physically at the domestic terminal at Brisbane.

Air Australia were a little difficult to locate at first. They are tucked between the Qantas and Virgin sections of the terminal,  marked with temporary signs. There were two lines for check in: a completely empty one for business class (I blogged on Friday, that I think Air Australia needs to get rid of business class- more on that later) and a much fuller line for economy check-in. There were two check in agents and an agent at the service desk which I think was focussed on the business class line.  The team were checking in the passengers very quickly, and efficiently.

At Check -In, Air Australia could be doing some up-selling. For example, offering business class upgrades or emergency exit seats, snack packs or rental cars to passengers. I think this is a lost opportunity for additional revenue from a captive audience.

Boarding: 8 out of 10

Security was straight forward. I got randomly selected for additional explosives checks. It happens to me so often, I am curious as to the percentage of passengers who are picked for this.

We boarded from an area which seemed to be largely for Jetstar. Our boarding was delayed by a few minutes which I had no anxiety over, as I was on holidays.  I have, however, read of some  horror stories about Air

Australia/Strategic delays.  I know the airline has little capacity for something to go wrong. If I was travelling for business, I would think many times before flying Air Australia.

The same team that did Check-in handled boarding. The Boarding passes had the old Strategic branding on them.

We boarded the plane via the tarmac which I personally love, as it makes you feel like you are really flying. The airport noises, smells and tastes vibrate around you.  I wasn’t in a wheelchair or on walking sticks or with small children, however. If you are in one of more of these situations,  tarmac boarding becomes a nightmare and I would recommend choosing another carrier.

The first crew member at the bottom of the boarding stairs was very friendly. The Cabin Manager checking boarding passes at the door,  was involved in a conversation with a tech guy and continued talking as he processed several passengers. I thought this  very rude. The flight attendant in the middle was quite startled when I greeted her and didn’t interact back.

On Board: 9 out of 10

Air Australia Airways  is using A320s on this sector. They are both older planes being 19 and 20 years old. Air Australia lease the planes from international leasing companies.

On board are eight business class seats and 144 Economy Class seats. Compare that to Jetstar operating same aircraft in Australia who cram 180 passengers on board. Business Class pitch is 38″, the same as Jetstar’s A320.

In economy, Jetstar have 28″ seat pitch. Air Australia say they offer a 29 inch seat pitch. This is only an inch more. On my flight, it looked like even more spacious. This could have been because the plane was less than a third full -with no passengers in business. I asked one of the crew if they got many business passengers and he said “none“, then added “we had two last Friday!” Ammunition for my campaign for Air Australia to forget about Business Class!

As mentioned previously, I was in the emergency exit and the leg room was of course, excellent. I was interested that the crew moved passengers into the emergency exits. While a very nice gesture, if I had paid $50 for my exit row seat, I would be annoyed less likely to purchase such a seat next time

Meals: 7 out of 10

You can pre order a cooked meal and buy a range of snacks on board.  The website says that breakfast is: Grilled Chicken Pattie with Sautéed Chat Potatoes and Mushrooms, Roma Tomato.  Lunch/Dinner is Roasted Chicken, Chat Potatoes,  Seasonal Vegetables. I hope they update these regularly otherwise some passengers would get sick of having only these meals to choose from.

There was no major push to sell items. This could be an important source of revenue for the airline and announcements drawing people’s attention to what is available and offerring deals could generate some helpful cash.

Entertainment: 3 out of 10

There was one movie for the whole plane shown on the small monitors through the cabin. Not enough in today’s age. Because we were late, the cabin crew handed out the headphones for free

Cabin Crew

The crew were very understated and low key.  They were highly professional and friendly. They took safety seriously checking for fastened seat belts, clearing bags from the emergency exist etc. Their uniforms look cheap though. As the flight attendant was making his pre-landing announcement, he dropped his folder scattering pages in the galley area. This came across with an “oops” and some giggling but he pressed on with the announcements nonetheless.

Landing and Takeoff: 10 out of 10

Both landing and takeoff were smooth and uneventful. We landed into Melbourne’s Tullamarine airport from the North.

My rating overall: 74% (3.7 out of 5= making them an average airline in my rankings)

Positives:  Check in,  Fares, legroom

Negatives: Tarmac Boarding, Website, fares, entertainment

Would I fly them again? As a leisure passenger for a fare of $69, $79 or $89 v $155 or $157 for Qantas or Virgin, then yes. The woman next to me on the plane had flown to Brisbane with Tiger and was flying back with Air Australia, purely on the basis of price.

At $504 their Business class fare is way less than the $799 and $949 the competition is charging, but comes with no frequent flyer status accumulation, no lounge and the risk that if your flight is severely delayed, you are screwed. As a Business passenger, overall, no, I would not choose this airline.

What amazed me was the complete lack of selling of Air Australia. This is a new airline. There was, however, no outlining of its advantages and features on board. I heard  no announcements encouraging people to tell their friends. There was no advising of their destinations or their offers.  No competitions to get people to sign up to mailing lists. Air Australia need to build a brand. To do it, they need to enlist every passenger at every opportunity.

 

 

Air Australia–Where does a new Carrier fit?

Posted on: January 6th, 2012 by: Martin J Cowling


Since the start of aviation , Australia’s domestic airline market has been largely composed of two major national airlines. From time to time the cozy duopoloy is challenged by a new entrant with a blaze of low fares.The latest such carrier is Air Australia.

2011 Background

Twelve months is a long time in aviation. Qantas the dominant domestic carrier suffered a series of rolling disputes in 2011 culminating in the dramatic three day grounding of the carrier’s services. Tiger Airlines Australia was also grounded be the safety authorities in mid 2011 for safety breaches. Virgin Blue the nation’s largest discount carrier has made a move to full service airline.

Brisbane-based Strategic Airlines

Operating as a full service charter airline since 1991, its biggest  client has been the Australian Defence Force  until last year . Strategic purchased Ozjet in 2009 along with its staff , Air Operator Certificate and the Perth-Derby  route.

On 15th November, 2011, Strategic retired its name, red white and blue brand and full service model. It became Air Australia, a new international and domestic low-cost carrier. Its route network expanded on December 15, 2011. The carrier has a mixture of A320s and A330s.   Why the shift? Simple. Air Australia, needs to make money. It lost that major contract with the Australian Defence Force last year amidst a police investigation. The airline is cash flow positive because of its charter business but made a significant loss last year. 

Services now include:

  • One domestic flight:  Melbourne to Brisbane
  • Melbourne and Brisbane to Phuket
  • Brisbane to Bali,
  • Melbourne and Brisbane to Honolulu
  • Brisbane-Port Hedland
  • Perth to Derby
  • The airline also plans to fly between Brisbane and Darwin. It has permission to fly to China and has applied to fly to Vietnam.
There is no competition on the Hawaiian routes.   This seems to be the strategy- to build an international network that is not Sydney focused and not in direct competition with the “big boys”. Jetstar/Qantas and Hawaiian all operate only from Sydney to Honolulu. I am interested to see if there is enough traffic on those sectors for Air Australia. Honolulu used to be a very popular destination for Australians but they have seem to moved onto other destinations no. Air Australia is a brand new carrier and have no US partnerships to feed traffic to or from.  From Brisbane to Bali via Darwin, Air Australia competes with both Jetstar and Virgin.

Unique Selling Points

CEO Michael James (who has been with the airline since 2002) said in contrast to Qantas and Virgin, the airline would offer: “Simplicity, value, operational integrity, genuine fares and service are our promise and all that we believe many Australian travellers want in order to get safely and enjoyably from A to B,” Air Australia are emphasising the following:

  • their 100 per cent Australian ownership
  • planes that are serviced in Australia (a dig at Qantas)
  • first bag free (a dig at Virgin, Tiger and Jetstar)
  • the option to buy a meal when booking and/or snacks on board (I am not convinced many people will take the meal option)
  • an eight-seat fully serviced business class (with no lounge,  no frequent flyer points and fares that are not much less than competitors)
  • an economy class with just 152 total seats on its A320s, compared with 180 seats on the same planes flown by Jetstar
They are believed to be considering introducing a frequent flyer program similar to the one Southwest Airlines had in the USA where a free trip is awarded after every ten flights.

Operational Integrity

This is a major issue.  Reading through the Trip Adviser’s discussion page on Strategic, there is complaint after complaint about the airline’s reliability. For example, Never again!!! 2 hour delay there, 9 hour delay on the way home!!!  In June, 2011, a “minor fault” on an A330 stranded several hundred people in Kuala Lumpur for four days.  The episode cost the airline more than $1 million in expenses to look after the people stranded. It has said that internal procedures have been overhauled and aircraft schedules changed to ensure there are always backup planes available.

The Big Question

Who will fly an airline that has no other significant domestic network, only flies twice a day on one domestic route and a couple of times a week on their international routes,  and offers fares that are not much different to the others?? If Air Australia tries to expand and directly compete on other domestic routes then it will be in a risky space. The CEO reassuringly has said: “Many of our staff and advisers have extensive airline backgrounds and we have seen it all before, we understand the challenges of the industry and we understand the market”  I don’t see enough differentiation to grab passengers, however and an emphasis solely on discounted fares will ultimately fail. Without a significant differentiation, I can’t see Air Australia filling their planes and therefore survival is at risk. There are a few directions, Air Australia could go with their model.

 The Allegiant Airlines model

At the moment, they seem to be following the Allegiant Airlines model. Allegiant is a US Carrier that is similar to Air Australia in that they operate charter and regular services. They have been doing so since 1997 and had their current business model since 2001. Some of the features ofAllegian’s model include:

  • Generating high ancillary incomes in addition to ticket revenue- they currently average  $33 per passenger in ancillary revenues
  • Selling 400 000 hotel rooms to their passengers (and receiving commissions)
  • Flying from from smaller airports which have limited regular carrier services
  • Flying only to to leisure destinations
  • Marketing to leisure passengers traveling to warm-weather destinations
  • A significant focus on  low operational costs
  • A “RyanAir” feel
  • profitability every year since 2003, unusual for an airline

 

An extended Jet Blue Model

I would like to see Air Australia go after the JetBlue model. JetBlue also a US airline aims to be low cost but in terms of passenger amenities and services, they outshine the big carriers. I think there is room for JetBlue to go really radical to attract passengers:

  • Market the legroom advantage heavily (modelled after JetBlue in USA)
  • Ditch Business Class and fill the space with one class seats (again JetBlue in USA) simplifying operations
  • Reduce their fare types from five to two
  • keep the one bag free (Southwest in USA markets this heavily)
  • Offer wifi on all planes at a fee (AirTran in USA)
  • Install seat back entertainment (to compete against other carriers) -possibly a couple of free options and the rest pay per view
  • Offer free Tea and Coffee in departure lounges (AirTran)
  • Offer free drinks on board (Southwest in USA)
  • Emphasise Australian snacks and drinks on board
  • Market the snacks heavily- offerring deals and options
  • Paint each tail as a different Australian animal (like Frontier in the USA)
  • Push the sale of duty free on board ensuring duty free is a significant part of revenue (following Korean Air)
  • Provide an Australian candy/sweet like a Minty upon landing and approach (Air New Zealand still provides candy in this situation)
All of this will require capital. Capital, I am not sure Air Australia has. Personally, I would be fairly pessimistic about their future but am ready to be surprised.

I will report on my first Air Australia flight next Tuesday.

Their website: http://www.airaustralia.com/

 

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