Air Transport World

Survival of the fittest? The Australian and New Zealand markets have taken on the trappings of a Darwinian struggle for survival.(Competition)(Industry overview)

WHEN CHARLES DARWIN WROTE THAT "IT IS NOT THE STRONGEST of the species that survives, nor the most intelligent, but the one most responsive to change," he could not have been thinking about the airline industry. Yet the liberalized and deregulated Australian and New Zealand aviation markets have become an enormous petri dish in which change is constant and survival will belong to those best adapted to their constantly evolving local environment.



In the dominant corner is Qantas, whose CEO, Alan Joyce, etched a place in corporate history as the first man to build and maintain a successful low-cost carrier under the umbrella of a full-service legacy airline and who now finds himself defending the virtues of Qantas, its business class product and all its legacy trappings. Pitted against him in the underdog role is new Virgin Blue CEO John Borghetti, who developed what is unquestionably the world's finest domestic airline product when he was GM of the Qantas brand and who now sings the praises of the "lower-cost" model of the Virgin Blue Group, which is caught between QF and even lower cost Jetstar and Tiger Airways. Playing a guerilla role is Air New Zealand CEO Rob Fyfe, whose airline continues to challenge the industry with innovation.

Adding to the twists and turns is Joyce's aim to retain QF's full-service product while giving it a much leaner edge. Borghetti, meanwhile, intends to add class--a new business class to be precise--as he brings Virgin Blue significantly up-market.

The battle will be at its fiercest within Australia. At stake are the high-yield passengers of the booming Australia and New Zealand economies who are returning to the air in droves. For Blue, every 1% increase in corporate market share equates to a 1% lift in yield, according to Borghetti. And he is not greedy, he insists; he only wants to double Blue's share of the corporate market from just below 10% to 20%. But QF will not cede that 10% or so without a fight. In fact, it does not want to lose even a fraction and its domestic business class passengers are going to take considerable convincing to move to the rival.

Working in QF's favor are its airport lounges, frequent-flyer program with 7 million-plus members and, on longer flights, its fleet of A330s and 767s, types that are favored among business travelers for reasons of comfort and their larger number of premium seats that make upgrades a "reasonable" reality. …

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