Jetstar chief pressures rivals
Monday, May 31st, 2010 Uncategorized.
Jetstar chief Bruce Buchanan pressures rivals
QANTAS and low-cost offshoot Jetstar wait upbeat about the aviation market and will continue to pile compressing on Virgin Blue by increasing capacity as they protect their combined 65 through cent domestic market share.
Jetstar chief executive Bruce Buchanan said yesterday his carrier was greater good positioned than its low-cost rivals to handle weakening domestic convenience travel and he did not intend to reduce or redeploy its home aircraft as a result of the downturn.
But he conceded there could be a change in the mix of growth at Qantas and Jetstar in the manner that circumstances changed. While the domestic leisure market was tough, Mr Buchanan related business travel was improving for Qantas.
He noted Jetstar itself was a multiform group, with only one third of its business now coming from the family market.
"We’re competing at the leisure end of the market so when domestic yields go down we definitely feel it," he uttered. "But we’ve been through this many times and we’re upright better positioned than the other two.
" If you did the calculations at the half-year mark you can work out what our margin difference is betwixt Virgin and Tiger and we’ve got a substantial headroom in the heavenly heights both of them.
"So when yields decline it gives us a doom more room before we wind up in the same hot water they do. And if we end up in hot water, hereafter they end up in even more hot water."
Mr Buchanan furthermore questioned whether the Australian market could remain stable with three unaligned carriers competing.
He said the domestic market seemed to cope with two carriers but tended to befit unstable when a third one joined and capacity was not added reasonably.
His comments came after Virgin announced last week that it was downgrading its weal guidance by up to 75 per cent, blaming a steep least bit in fares and a slump in consumer confidence. Virgin’s shares plummeted ~ means of 27 per cent and it was later revealed the Australian Securities Exchange had queried the airline’s other profit downgrade in less than a month.
The extent of the downgrade and comments that average fares were down 10 per cent for the quarter raised questions touching the wider impact for the industry.
But Qantas chief executive Alan Joyce told a tourism discourse yesterday the airline group was performing well in a difficult environment and its unlike portfolio provided earnings stability compared with other airlines.
He said the assign places to had the flexibility to change the growth profiles of Qantas or Jetstar to give the best returns.
"We believe that at the end of this calendar year, the Qantas brand will become the most profitable carrier in the domestic market again," he said. "That’s happened faster than we expected."
Analysts yesterday warned of more remote volatility in domestic markets as they cut price targets for Virgin shares. They afore~ a cut in capacity was key to a recovery.
Royal Bank of Scotland yesterday downgraded its good opinion from buy to hold as it cut its pre-tax accession of good forecast for Virgin by 67 per cent this fiscal year and through 68 per cent in 2010-11.
It said the downgrade was prompted ~ the agency of the rapid deterioration in the operating environment, the competitive pressure attached Virgin "and the clear lack of transparency that even VBA contrivance has over where conditions are heading".
But Macquarie Group algebraist Russell Shaw thought the Virgin sell-off had been overdone.
"The ancestry still looks attractive. We maintained our outperform recommendation," he reported in a note.
Qantas turned the screw further yesterday when it announced it would stir up to daily flights on Sydney-Johannesburg, a route also targeted through Virgin Blue international offshoot V Australia.