Low Cost Airflight in Australia

Introduction

With the growing market trend and increased popularity of low cost carrier airline, the market for no frill airline is growing at a rapid rate. From an airline industry perspective, Australia is a large country with many domestic destinations that allows Airline companies to take advantage of the demand for domestic travel either for business or for pleasure. As one of the largest and dominant players in the airline industry, Qantas which was founded in 1920 provides both international and domestic air services while Ansett which was founded in 1936, function mainly as a domestic carrier (Gregory J. Bamber et al, 2006pg 3).. The introduction of low cost carrier started in the year 2000, with the launch of Impulse and Virgin Blue airline has affected the airline industry drastically with their low fares as compared with the normal fare (Gregory J. Bamber et al, 2006 pg 3). In order to counter this new threat, Qantas and Ansett responded by reducing their fares to match up with the current market price for domestic travel (Gregory J. Bamber et al, 2006 pg 3). However with higher operating overhead, Qantas and Ansett faced many challenges resulting in the loss of profits and the collapsed of Ansett in the year 2001 (Gregory J. Bamber et al, 2006 pg 3). Qantas managed to sustain itself with competitors such as Virgin Blue and impulse during the price war and eventually led to Qantas taking over Impulse and relaunched as the newest low cost carrier Jetstar to counter Virgin Blue dominant of domestic market share (Gregory J. Bamber et al, 2006 pg 3). Currently Jetstar and Virgin Blue dominate the domestic market. This paper will discuss the economic impact that occurred with the introduction of low cost domestic airflight in Australia.

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http://www.press.uillinois.edu/journals/irra/proceedings2006/bamber.html

Competition

With the increase competition between the low cost carrier in Australia, Jetstar and Virgin Blue continuously employs strategies in attempt to dominate the domestic market for travel. Strategies such as providing consumer with ridiculously low fares at random and providing more domestic travel routes benefits consumers are normally employed in Jetstar and Virgin Blue. The fierce competition between these low cost carriers in Australia has made airflight fares cheaper than ever, which benefits price sensitive traveller around Australia (Virgin Blue, 2001 pg 7). Example of unique strategies employed by Virgin Blue is that Virgin is the first airline to use “carbon neutral” to promote Greenhouse friendly thus reducing pollution of airflight emission (The Hon Malcolm Turnbull MP, 2007). This would improve the brand image of Virgin Blue while stimulating demand for consumers who are eco friendly. Another strategy that is employed due to the fierce competition is that Jetstar has acquired a fleet of Airbus A320-200 and A330-200 to increase the domestic travel routes (Airbus, 2003). Due to fierce competition between these low cost carrier airlines, it is expected that this would result in more efficient use of resources available and cost reduction, more employment opportunities, effective management system and strategies to maximise revenue (Air New Zealand, et al 2006 pg 12, 18, 27, 49-51). With new entrants such as Air Asia X and Tiger Airways coming into Australia domestic airflight market, the competition would be fiercer than ever.

Employment

Another economic impact would be the more employment opportunity available to the population. With the increase of low cost domestic air flight available to the public allows the building of the low cost airport terminal to cater to passengers who frequently flies with low cost domestic airline (Gold Coast Airport, 2007 pg 12). Even though the low cost airport has fewer facilities as compared with the main airport, it still needs a lot of employees and staffs to run the airport. This in return would provide more employment and job opportunities for the population, increasing the population quality of life while decreasing the percentage of low unemployment rate in Australia (ABS, 2007). In relation with the economic impact that low cost domestic air flight provides, the employment has three different types of categories which would benefit and affect the quality of life of the country. First would be the direct employment by the airports and low cost carrier airlines. For example of direct employment, the building of the low cost airport allows more employment opportunities to be created (Gold Coast Airport, 2007 pg 12). Another example of direct employment would be the increase of low cost domestic air flight

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