JETSTAR chief Bruce Buchanan has revealed the budget carrier is making more from in-flight service than ticket sales such as such as cups of coffee, muffins, baggage and special seat charges which works out to being around $24 a passenger.

Mr Buchanan said ancillary revenues had increased from $2-$3 per ticket to the mid-$20s in the space of a few years and were growing “very fast”. This is the second-best result in the world when benchmarked against other carriers. This money goes straight to the bottom line.

“One way to look at it is that if we didn’t have the ancillary revenue we wouldn’t be making any money. We would be losing money,” Mr Buchanan said, in a likely reference to the hurt caused by the rocketing price of jet fuel.

So what does it cost?

Jetstar passengers are charged $4 for a muffin or a small container of Pringles, and $3 for a small bag of M&M chocolates.

A can of Coke costs $3 in-flight, but costs an average of $1.20 in supermarkets in Sydney and Melbourne. Coffee will set you back around $3 - below the national average of $3.20 - and a hot chocolate $4.

Meanwhile the cost of a window seat in the exit row can cost up to $60, while in-flight entertainment can cost $15 and extras such as blankets and pillow $7.

In other developments yesterday Jetstar parent Qantas rolled out its biggest gun - the 7.5 million member Platinum Frequent Flyer program - opening a new front in its war with arch rival Virgin Australia.

The Qantas loyalty program has been revamped to give Jetstar passengers the ability to earn and burn points, a move designed to appeal to the budget-conscious suits market.  A new alliance, like the one Qantas has with Woolworths, has been struck with Optus where its subscribers will be able to generate frequent flyer points.

Qantas chief Alan Joyce said the changes will give the airline a competitive edge on other carriers.

Under the changes Jetstar’s fare structure will change.

StarClass - the carrier’s equivalent of business - will be replaced with a full business product, a move that industry observers say is clearly aimed at Virgin Australia’s attempt to lure small and medium businesses.

And so the Airlines Wars continue.

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Qantas Airways has announced a new partnership Singapore Telecommunications Ltd subsidiary Optus as part of a revamp of the national carrier’s frequent flyer loyalty program.

Under the agreement, customers will be able to earn frequent flyer points through purchasing Optus products and services.

A number of Optus products and services will also be purchasable though redeeming Qantas frequent flyer points.

The expansion of the frequent flyer program will also see more points made available through Jetstar services, and the addition of a new, highest tier of frequent flyer recognition, “Platinum One”.

“We are delighted with the prospect of welcoming Optus to our stable of partners and are excited about the opportunities this presents…,” Qantas chief executive Alan Joyce said.

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The actual launch date and details of the rate at which customers will acquire points remains under wraps but Optus will be a key Frequent Flyer partner, alongside companies such as Woolworths. Four hundred brands in total are part of the program.

Qantas chief executive Alan Joyce said the company’s research had shown its Frequent Flyer members were looking for new ways to earn additional points.

“We think this will once again set our program apart from the rest,” Mr Joyce said.

The company also announced a new level of platinum membership, Platinum One, targeting ultra-frequent flyers of the ilk of the Ryan Bingham character played by actor George Clooney in the film Up in the Air, who fly at least three times as often as the Platinum average, or as much as 60 times a year.

Optus chief executive Paul O’Sullivan said Frequent Flyer members would be able to redeem Optus products for points as part of the alliance.

Marketing chief Mike Smith said the program was an extension of other transactional rewards arrangements the telco has in place, such as offering movie tickets.

“We believe that it’s vital that we find ourselves differentiated in the area of customer experience,” Mr Smith said.

Both Qantas, which has 8 million Frequent Flyer members, and Optus, which has 9 million customers, are expecting the alliance will attract new customers and well as encourage additional spending from existing customers.

“I think this will be one of the cornerstone pieces of work we’ll do this year in terms of talking about reasons you should come and join Optus,” Mr Smith said.

Others include marketing the FetchTV alliance to provide an internet protocol television service, which was announced last week.

Qantas Asian expansion plans on a crash course with unions

In what has come as a surprise recent development and cost cutting measure Qantas Airways is planning to launch a premium airline based in Singapore. The move is aimed at boosting Asian growth and circumventing staff costs putting the airline on a crash course with its Australian employment unions, according to a news report released by the Australian Financial Review on Friday.

According to the secretive plans, Qantas would base as many as 20 aircraft in Singapore to secure a lucrative Singaporean airline licence. The nature of the aircraft are said to be narrow body A320’s which suggests that the plan is to focus on servicing the short haul Asian market pitting the airline directly against Singapore Airlines and Cathay Pacific who currently dominate the premium sector. It is understood that the new venture is not allowed to be called Qantas but will have the same look and premium feel as the current International services operated by the Airline.  

Qantas has denied reports it had applied for an air operator’s certificate in Malaysia but said a range of options were on the table to try and recover its dwindling international market share.

However it has been confirmed that an internal team of employees has been set up to focus on how to reverse the airliner’s recent struggles, and have sought ways to duplicate the successes experienced by the low-cost carrier, Jetstar, that Qantas launched in 2003.

The new Asian airline would take direct aim at Singapore Airlines and Cathay for premium Asian market share, and risks inflaming strained relations between Qantas and its unions over the company’s plans to develop a lower-cost offshore base in Singapore with a local partner to increase flights to underserviced Australian hubs, such as Adelaide and Perth according to the AFR. The base could also be used to lunch an expanded European network.

“A project team has been established to look at Qantas’ international product and service, possible new routes and ways to reinvigorate our offering,” an airline spokesman said. “The team is considering a range of options but no decisions have been made about the direction Qantas will be taking at this stage. Recent media stories are purely speculation and based on rumour.”

The rationale behind the new offshoot is clear: Qantas needs to cut costs and expand into Asia without losing its high quality profile by damaging its brand. By moving its major International operations to Singapore it will be able to dramatically cuts costs, most notably in the area of staff where it is suggested that it will employ rotational regional crews. Flights for instance from Singapore to Bangkok would be staffed by Thai crew, where as a flight to Australia would be serviced by a Singaporean crew. This sets up an enormous battle with Australian unions and has even drawn the Prime Minister into the discussion.

The move has angered unions which were already threatening industrial action at the carrier. Aircraft engineers on Thursday called off plans to strike on Friday but there are plans for further industrial action next week.

Qantas says its international business has not been meeting expectations and market share had fallen in recent years but says it is too early to offer any details on what a taskforce has recommended to fix the airline’s ailing international operations “severe structural challenges”.

Qantas has a low-cost subsidiary Jetstar Asia which operates out of Singapore.

Look out for a more detailed report in the coming days.

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China’s growing middle class is leading to a scramble among airlines, airports and tour operators keen to cash in on this trend.

This year, China’s outbound departures are predicted to top 65 million after reaching over 57 million in 2010, according to a report from the China Outbound Tourism Research Institute (COTRI). The UN World Travel Organization (UNWTO) estimates that there will be 100 million Chinese outbound trips by 2020.

 International airlines that haven’t already established direct routes to China are rushing to do so such as Air Mauritius and South African Airlines which will become the latest to set up links with direct flights to Shanghai and Beijing respectively, as early as July.

 But airlines are not just targeting China’s major cities for direct routes. Australia and New Zealand are trying to encourage airlines to establish new links between tourist destinations in those countries and some of the China’s tier 2 cities.

 China’s largest carrier, China Southern Airlines, launched its first direct flight between the bustling business city of Guangzhou in the Pearl River delta and Auckland, New Zealand earlier this month. Australian cities Perth and Cairns are also in talks with airlines to create direct flights.

Speaking from the China-Australian Business Summit in Beijing, Tourism Australia Managing Director Andrew McEvoy told CNBC.com that Australian airports are actively seeking out new capacity to get more direct access to the fastest growing travel market in the world.

“It’s an important market, because there’s a lot of mix here — 167,000 students, a whole bunch of visitors, and business people,” McEvoy says.  “We’re in the time zone, so it’s terrific to be in a region that’s growing like that.”

In 2010, over 450,000 Chinese visitors spent $3 billion in Australia, which was 20 percent more than the year before.

Growing Travel Demand

Pacific Asia Travel Association’s (PATA) Director of Strategy Management, Kris Lim, says that in spite of a number of negative global events such SARS, the global recession, and H1N1 in the past decade, the demand for air travel to and from China has continued to grow at a rapid pace.

“What we’re seeing here is that for any destinations within Asia-Pacific, and outside of the region that is intending to build their tourism sector, the connection to China will be a very important element,” Lim says.  “Inbound is equally important — China has become a centre of commerce and business. There should be more capacities into China as their economy continues to improve.”

Globally, China has increased its travel market share to over 4 percent in the past decade. With some Chinese airlines betting big on Destination Australia.

Some airlines are testing the waters with charter flights before launching direct routes. Earlier this year, China Eastern Airlines launched the first-ever chartered flight to Hawaii. Two months, and three chartered flights later, the airline is now seeking approval from China’s aviation regulator for regular direct flights to Honolulu.

Europe and the Middle East are also trying to lure Chinese tourists with the promise of fashion, art and culture.

Dubai has become a hot spot for Chinese tourists after the emirate received “approved destination” status from the Chinese government in 2009. Hotels such as the world-renowned Burj Al Arab have hired a number of Chinese speaking staff, created brochures and programs in Mandarin and added Chinese cuisine to their menus. During this year’s Chinese New Year, almost 80 percent of the hotel’s guests were from China, says Burj Al Arab operator Jumeirah Group.

While last week, Air China announced the launch of a direct flight between Beijing and Milan starting June 15, along with a new service to Athens in May.

Large-Scale Group Travel

Executive Chairman of the Centre of Asia Pacific Aviation (CAPA) Peter Harbison says the industry has never seen group travel on the scale in which Chinese tourism operates.

“Some of those groups that go to Europe are 12,000 strong, and when you’re sending a group of 12,000 — you have tremendous buying power,” he says.

Tour operators can only send groups to countries that fall under China’s Approved Destination Status (ADS).

Meanwhile in Europe, academic institutions are offering courses on Chinese culture for tour guides and travel agents, Lim says.  But, he says it will take a bit more time before countries are better able to cater for Chinese tourists, like the Japanese before them.

So how will Destination Australia cope with this influx of visitors, are we ready?

What’s your take?

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In one of Australia’s worst kept airline secrets and as a part of John Borghetti’s attempt to transform Virgin Blue into a market leading Australian Airline, Virgin Blue Holdings Ltd., the Australian carrier backed by Richard Branson, will begin flying under the name Virgin Australia, as it tries to break Qantas Airways Ltd.’s hold on Australia’s business-travel market.

The new announcement comes today that the carrier will operate under the new name domestically from today and on international routes by the end of the year, it said in a statement. The Brisbane-based company, renamed Virgin Australia Airlines Pty, is also replacing its red-and- white logo with a largely silver one. The chief executive, John Borghetti, has made the strengthening of the airline’s brand one of his key priorities since taking over last year from its co-founder, Brett Godfrey. Shedding the Virgin Blue name, a reference to Australians calling redheads “Bluey,” highlights the carrier’s push to challenge Qantas’s 90 percent share of domestic corporate air- travel amid rising competition in its traditional budget market. Virgin Australia will offer onboard leather seats, a revamped inflight menu, new lounges and an overhauled frequent flyer program to win more lucrative passengers. While the staff have all new uniforms as well.

One of the challenges for the company had been to emphasise to consumers that its four brands – Virgin Blue, Polynesian Blue, Pacific Blue and V Australia – were one and the same. But despite today’s renaming of the domestic business, the airline may have to wait some time before it can use the Virgin moniker on its aircraft which fly overseas routes. The airline will still need to enter negotiations with joint venture partner, the Samoan government, to rename its offshoot Polynesia Blue.

“The only reason they would want to move away from the playful, joyful image of Virgin Blue is if the business market doesn’t like it,” said Stephen Holden, associate professor of marketing at Bond University in Queensland. “They might change, go more upmarket and become a lot more like Virgin Atlantic.”

Jetstar, Tiger Air

The Virgin carrier’s push to win business travelers has already seen it abandon much of the low-cost model it used when it began flying in 2000. The airline has moved away from the budget market as the growth of Qantas’s Jetstar unit and Singapore Airlines Ltd.-backed Tiger Airways Holdings Ltd. has helped push down coach-class fares in Australia. Discounted domestic economy ticket prices fell to a record low in January, according to Department of Infrastructure data.

That competition, along with natural disasters and rising fuel prices, has left the Virgin airline expecting its second annual loss in three years. The carrier may post a loss of as much as A$80 million ($87 million) in the year ending June 30, it said in March.  The airline’s shares were unchanged at 28.5 Australian cents at 10:30 a.m. in Sydney trading. They’ve dropped 46 percent in the past year, more than double the rate of decline for Sydney-based Qantas. Branson owns 26 percent of the carrier, while Air New Zealand Ltd. holds 15 percent.

The new name may also help Chief Executive Officer John Borghetti win customers from overseas as Virgin Australia works on expanding its international sales network through tie-ups with Delta Air Lines Inc., Abu Dhabi-based Etihad Airways and Air New Zealand.

“The Virgin brand has been underplayed, particularly internationally,” said Peter Harbison, managing director at Sydney-based industry consultant Centre for Asia Pacific Aviation. “I don’t think it’s going to lose anything by dropping ‘Blue’.”

Virgin Limits

The company was only able to use the Virgin Blue name on domestic flights because of restrictions linked to Singapore Air’s 49 percent stake in Virgin Atlantic. Its long-haul unit is called V Australia, while flights to New Zealand are flown by Pacific Blue. The carrier also has a venture with the government of Samoa called Polynesian Blue.

Qantas last year began a revamp of its business-class services, including lounges, cabins and food to help fend off competition. It’s also adding Airbus SAS A380 planes and boosting an alliance with American Airlines to help win international flyers.

The ‘Virgin Blue’ name was chosen after a radio competition, with the winner getting two return trips each year for life. Other suggestions included Rooted Airlines and Virgin Down Under, according to a press release. The carrier began flying the same year with a fleet of two planes and A$10 million of seed capital.

It’s been a very rough ride lately for Virgin will all sorts of issues and problems coming up, so it’s now time to deliver on the promise.

Do you think that Virgin Australia can take on Qantas?

See more about Virgin’s battle to reinvent itself:

http://urbanglobetrotter.posterous.com/virgin-blue-hits-week-long-turbulence

http://urbanglobetrotter.posterous.com/virgin-blues-overhaul-grounded

See more AIR WARS stories:

http://urbanglobetrotter.posterous.com/virgin-blue-on-the-money

http://urbanglobetrotter.posterous.com/tiger-takes-on-air-asia

http://urbanglobetrotter.posterous.com/coming-soon-to-a-plane-near-you-text-tweet-mi

http://urbanglobetrotter.posterous.com/australian-airline-wars-hot-up

What’s your favourite low cost airline?

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Gamers, it’s time to get excited. The prototype for a new aeroplane seat designed with you in mind has been revealed.

The concept seat, called ‘NFW’ (not for wimps), allows for serious tech-heads to have a 3D experience whilst plugged in (with seat belts fastened, no doubt).

According to British manufacturer Factorydesign’s director, Adam White, “NFW is designed to appeal to customers who would rather spend their time on long-haul flights locked in a gaming or viewing experience rather than dropping off to sleep.” Elaborating further: “NFW is a marmite seat – but love it or hate it it has created the stir required, and for us carries the important message about change.  It is time.  There is a new generation of younger Business/First travellers who relish a few hours uninterrupted time to play PS, eat a snack of sushi and chill with the latest AV content.”

Whislt the NFW hasn’t yet been snatched up by any airlines, so it may be a few years before you’re given the choice of cattle, business or Bioshock, but White hopes that “certain, more adventurous airlines” will strip out a few seats from their business class cabins to allow for these light-weight Kevlar contraptions. New seating like this does throw up an interesting point though. If it takes up more space but is pitched to younger travellers who want to only sit up, how will it be priced? Will you end up paying a premium to be seated?

What’s your take, are you game enough?

The design release was a part of the recent Aircraft Interiors Expo, which took place in Hamburg, Germany.

You can see more airline seating stories from Urban globetrotter right here:

All new Firstclass Air Beds v’s All new Cattle Class Seating.

See more articles like this in Getting There.

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