14 September 2000
The Australian domestic airfare war has developed into a game of high stakes poker.
Around the table, James Strong of Qantas – ‘Cool Hand Luke’ – plays with his colourful bow-tie, looks at his pile of chips – the biggest of those on the table – and studies his hand.
It looks impressive. The dude has the most flights, the largest fleet, the best-developed distribution system, topped off by the biggest share of the domestic aviation market. Strong decides to stick on 17 for the moment.
Across the table is a less experienced player who has powerful new friends. Garry ‘Maverick’ Kingshott, is general manager sales and distribution for Ansett International. He survived the Gunfight at ANZ Corral, then moved over to join the Kiwi Boys gang when they successfully stormed the Ansett barricade. Kingshott is perspiring. He knows he doesn’t have a great hand. Ansett has been losing domestic market share, its management structure is still under review and there are worries about the compatibility of its fleet.
The best he can offer is 110,000 deeply-discounted seats on Ansett domestic routes around the period of the Olympic Games.
True, he’s holding another impressive card: Latest results show Ansett International profit rose 146 per cent to A$8.1 million (US$4.6 million) with load factors increasing to 71.5 percent.
Ansett also has Singapore Airlines – an accomplished poker player – among its backers while new owner Air New Zealand has just announced a 33.6 percent rise in its after-tax profit to NZ$177.9 million (US$77.1 million) on a 10 percent lift in revenue.
Kingshott sticks on 16 and wonders whether he should take another card. It would be a high-risk move.
On Kingshott’s right is the English toff, Sir Richard Branson, a high roller who has cleaned up around the globe.
Sir Richard’s dress is unorthodox for a poker player. He wears a big grin and patterned pullover but he has been known to play in other guises: an Indian prince, an airline captain, a pirate, even a blushing bride.
Enemies know that the toff fights hard to defend his reputation as the sharpest card player in the west. The other players, however, are not fooled by the big toothy smile. Branson is bluffing... they hope.
Rivals smirk that the toff’s European budget operation, Virgin Express, has been hit by the steep rise in jet fuel prices and his Australian operation, Virgin Blue, was late getting into the air.
Sir Richard chuckles to himself, looks up from his cards and stares at the other players, defying them to dispute that Virgin Blue sold 14,580 seats during a 48-hour launch sale Down Under – the equivalent of 90 Boeing 737s.
The toff fingers his chips, indicating he wants to up the stakes. He is holding 14 – he needs to take a fifth card – but he risks the lot if he draws eight or higher.
The fourth player is a local, Gerry “The Kid” McGowan, well known for cleaning up in minor games in country towns. Now he’s elevated himself to the big league thanks to powerful backers, who include an investment arm of the Singapore Government.
The Kid is goading his rivals. He’s cocky after beating the Englishman to the draw and wounding his pride. The Kid’s Impulse Airlines lifted into the air before Virgin Blue, and grabbed the spotlight by offering rock bottom fares. He brags that a recent extension of the online fare initiative comes as the level of sales flowing through Impulse’s website exceeds 50 percent of total bookings – almost 20 percent above the target originally set by the airline.
The Kid says Impulse’s penetration of the Internet market is now comparable with airlines in the US and Europe, including Southwest Airlines and Ireland’s Ryanair.
Sir Richard stiffens. What’s The Kid holding? And who is the joker?
McGowan adds up his cards. Like the toff, he’s holding 14. He also must take a fifth card. Strong stays cool. After all, Qantas recently posted a record A$517.3 million profit on A$9.1 billion sales. And it covered the latest move by Ansett to cut fares with discounts up to 85 percent across Australia during the Olympic Games period.
Behind the quartet of gamblers, others look on, including some of the big guns from the lands to the north. They know they could face a shoot-out of their own if deregulation spreads beyond the Snowy River and other nations stop protecting their national carriers.
All eyes scan the players.
Who’s bluffing? Who’s got the cards that count?
It’s an enthralling game. And it’s not over yet.