Why Rex Doesn’t See Jetstar As A Competitor

With Australia’s domestic airline industry recovering and a new player crowding into the marketplace, it is an interesting…

Why Rex Doesn’t See Jetstar As A Competitor

With Australia’s domestic airline industry recovering and a new player crowding into the marketplace, it is an interesting time to be watching the Australian airline scene. One way or the other, Rex’s new Boeing 737 services will shake up and maybe, shake out the industry. Rex’s new Boeings means new market forces are at play. One of the airlines keeping a close eye on what Rex is up to is local low-cost carrier, Jetstar.

What do Rex’s new Boeing 737 services mean for Jetstar? Photo: Rex

Rex helps open up a new competitive playing field in Australia – the middle market

Australian domestic aviation is now seeing a third level of competition – the middle market. Previously, Australia did premium (Qantas and Virgin Australia) and low-cost (Tigerair and Jetstar). But the middle tier sat vacant. Now it is a relatively crowded space. Virgin Australia has altered its course and moved mid-market. And then there’s Rex, firmly pitching their new Boeing 737 jet service as middle market as well.

That leaves the Qantas Group of airlines flying solo in their own market segments. Qantas stays a premium airline, charging accordingly, and seems as happy as a pig in mud, having the premium space all to itself. With Tigerair now only a memory, wholly-owned Jetstar has the low-cost market space to itself as well.

Rex is joining Virgin Australia in a new competitive sphere in Australian domestic aviation – the middle market. Photo” Andrew Curran/Simple Flying

Both Rex and Jetstar say they are chasing different customer bases

Nobody ever really thought Rex’s jet services would put the squeeze on Qantas. With its millions of rusted-on loyalists, corporate accounts, and government business, Qantas seemed to view Rex’s move to jet services with the bemused detached of an older brother watching his smaller sibling setting themselves up to fail.

But there was a bit of speculation Rex might be eyeballing a slice of Jetstar’s cost-conscious, often airline brand-agnostic customer base. But neither Rex nor Jetstar believes that’s going to be the case. Rex’s Deputy Chairman John Sharp told a CAPA Live event last week;

“I think Jetstar sees itself as a different product to what we’re offering. We’re offering a full-service experience and they’re not.

“I don’t see them, seeing themselves, as a competitor to Rex. They see themselves as a unique product in the marketplace, different divergent, different direction. They see themselves as riding above what we do.”

John Sharp is right about that. Speaking at a previous CAPA Live event, Jetstar’s CEO Gareth Evans said a new airline competing on the busy trunk routes would introduce a new market dynamic. And while saying he would be keeping a close eye on Rex, Gareth Evans agrees with John Sharp that the two airlines are not directly competing.

“They’re middle of the market,” Mr Evans said about Rex. “They are going for different customer pools.

While admitting there will be some overlap, the Jetstar CEO said, “For us, we’re going to be what we were before – low fares, low-cost, and choice.”

While there will be some overlap, Jetstar says Rex is operating in a different market space. Photo: Jetstar

The Qantas Group lands in a competitive sweet spot in Australia

Whether by accident or design, things are working out quite well for the Qantas Group. The two Qantas Group airlines own their respective market spaces in Australia. The two other operators, Virgin Australia and Rex, will duke it out in the middle market. Qantas CEO Alan Joyce has long maintained there isn’t room for a standalone third major domestic airline operator in Australia. Mr Joyce has predicted a corporate casualty, but he is confident that casualty won’t be one of his airlines.

At the edges of any airline’s customer base, there will be a percentage of customers migrating to and from the airline. They will be lured to or from the airline by factors like price, convenience, and timing. That’s the overlap Gareth Evans talks about.

But as far as domestic flying in Australia in 2021 goes, the competitive heat won’t be between Rex and Jetstar. Instead, all eyes will be watching the fight for customers in the middle market segment between Virgin Australia and Rex.

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Recent Trends Bode Well For Airlines Hoping For A European Summer

The US-Europe transatlantic market is one of the most lucrative markets in the world. Airlines typically see excellent…

Recent Trends Bode Well For Airlines Hoping For A European Summer

The US-Europe transatlantic market is one of the most lucrative markets in the world. Airlines typically see excellent performance on routes in this market during the northern summer months. Capacity is also typically higher in this market, with the addition of seasonal leisure flights. Now, as Italy is welcoming Americans, airlines could be in for a better-than-expected summer for transatlantic travel.

US and European airlines could see a better summer if

Italy joins the list of reopenings

For Americans looking to go to Europe, four countries are now welcoming Americans. This includes Iceland, Greece, Croatia, and Italy. For travel to Italy, passengers have to be flying on one of the COVID-tested designated flights. The two US carriers currently running such flights are American and Delta.

Meanwhile, Iceland, Greece, and Croatia are relying on vaccinated passengers or, in the case of the latter two countries, those with negative test results to take a vacation. In all four of these countries, tourism is important to the local economy, and Americans have shown a willingness to travel to these destinations.

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Italy’s flag carrier, Alitalia, will benefit from the new relaxation of travel restrictions on American visitors. Photo: Getty Images

For airlines transporting passengers between these countries, the reopening presents an opportunity to reclaim a European summer. Between family, leisure, and business links between the US and Europe, the reopenings can be a big boon for airlines while reuniting passengers with family, culture, or business deals.

The EU is expected to open

Just a few weeks ago, the head of the European Union stated that she would like to see uniform guidelines to welcome Americans for tourism to Europe. June has been floated as the likely month for when much of Europe opens up for Americans.

However, these four countries are coming out ahead of the game and welcoming Americans. This could lead to some big rewards for those destinations. With June just around the corner, and Americans seeking to book getaways that are more certain to happen than others, countries that announce reopenings sooner rather than later are set to benefit.

Air France KLM Airbus
Airline groups have been turning to governments for support, but a European summer could alleviate these airlines’ financial pressures. Photo: Getty Images

Take, for example, Croatia, Iceland, and Greece. Shortly after it was clear all three countries were opened up for Americans, United Airlines announced new and resuming routes covering those destinations. The carrier, on the first day of announcing those routes, saw over 3,000 bookings. Passengers, showing a strong willingness to fly to Europe for a vacation, appear to reward destinations that have come to the front of the pack in reopening.

The longer other countries wait, the greater the possibility that Americans will vote with their wallets and secure travel to already open destinations. This could have ramifications in other countries that also rely heavily on tourism to power the local economy.

If more countries open up, then US and European airlines have a strong chance of reclaiming the summer transatlantic market. This could lead to a huge financial boon for airlines. With a chance to actually earn some revenue, this could also help save airline jobs and stimulate other sectors of the economy. Seeing other countries open up could be the incentive other European countries need to open their borders.

TAP Air Portugal
Portugal, a country that is also heavily dependent on tourism, could benefit from a reopening. Photo: Getty Images

The holdouts: US and UK

There are two holdouts, however. The United States and the United Kingdom were expected to provide some good news for international travel this month, though neither has largely materialized. Airlines have pushed – and will continue to push – for a broader reopening.

The US was expected to relax some travel restrictions from mid-May. This currently has not happened. However, given the abrupt public health guidance shift last week on face masks for vaccinated people, it is still possible that the US starts to relax its European travel bans.

British Airways Boeing 777 landing at Heathrow
British Airways’ CEO has also been pushing for more travel. Photo: Getty Images

The virus situation in Europe has been improving in the last few weeks. Coupled with increasing vaccinations, Europe does not show the same risks or signs as India, for example, and is far from the overwhelming surge in cases the continent saw a year ago. The US also has a policy mandating a negative test result for entry, even if passengers are fully vaccinated.

The UK also was expected to put the US on its Green List, enabling travel between the two countries without quarantine restrictions. That also did not materialize, and the UK chose to go with a more limited list of destinations.

Virgin Atlantic Airways Airbus A350
Virgin Atlantic has been lobbying hard for a US-UK travel corridor. Photo: Getty Images

The longer the UK and US hold out, the more likely it is that both countries will see more muted summers for air travel. This would be a huge disappointment for airlines looking to come back after over a year of near devastation.

Are you planning a European summer vacation? Let us know in the comments!

Source : Simple Flying More   

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