Budget carriers pledge no increase

[Clarke P]

Discount air fares remain steady despite the rising cost of fuel, writes Clive Dorman.

Australia's budget airlines say they'll continue to offer ultra-low fares despite the rising price of fuel, which now accounts for nearly half their running costs, up from about 20 per cent 18 months ago.

Jetstar and Tiger are the kings of the below-$50 cheapies (although Virgin Blue occasionally joins them in sale periods) and they're not about to alienate bargain hunters.

Jetstar spokesman Simon Westaway explains that the ultra-cheap fare is "core to our business model and it'll remain".

"Jetstar's whole existence has been in an age of increasing fuel prices and our profitability has steadily grown," he says. "We've continued to put out lead-in fares at those headline levels. It's part of what we do and you'll continue to see that."

Jetstar has been as good as its word, resisting the temptation to increase discount fares after recently introducing charges for check-in baggage. The airline has dropped regularly available fares by $10 one-way on routes such as Sydney-Gold Coast and Melbourne's Avalon-Sydney for passengers with carry-on luggage, so fares are now as low as $49 one way. Fares for those with check-in baggage are $10 more.

Jetstar's only concession to soaring oil prices is that, along with the wider Qantas group, it is dropping three relatively infrequent routes (Adelaide-Sunshine Coast, Sydney-Proserpine and Brisbane-Hobart) that have gone into the red because of the fuel bill. Other growth plans (chiefly from Avalon) will be delayed; in the next financial year, Jetstar will grow by "only" 9 per cent, as opposed to the originally budgeted 24 per cent.

Westaway explains that even as the oil price heads north, Jetstar's other costs are falling because of the airline's growing economies of scale.

"We're four times our original [2004] size," he says. "So we're obviously operating a lot more ASKs [capacity is measured in 'available seat kilometres'] and flying more aircraft. And we actually fly the aircraft further and longer per day than we ever have before."

However, in the next few months, in a move that passengers are unlikely to notice, Jetstar planes will begin flying 10 knots (18kmh) slower to marginally lower the fuel bill.

Westaway concedes that will make it even more crucial that planes get away on schedule, so Jetstar's on-time performance, which has suffered in recent months, doesn't deteriorate further.

Tiger Airways, still less than a year old in Australia and operating flights only to and from Melbourne's Tullamarine, says its pricing won't change, although, like Jetstar, Tiger said last week it would begin charging for checked luggage ($5 for the first 15 kilograms, $40 for 30 kilograms).

"We'll continue to be able to do consistently low fares because our cost base is much lower than everybody else's," says Tiger spokesman Matt Hobbs.

"We're very, very dogmatic about keeping fares down. If fuel goes up to $200 a barrel, we'll re-evaluate some of these things, some of the routes as well. But the fundamental fact of the matter is we're doing well. We fill our planes."

"Fuel is a cost of business and we'll have to deal with it, whether it's $30 a barrel or $200 a barrel, a bit like everyday people have to. But, being a low-cost carrier, we can deal with it much better than legacy carriers [such as Qantas] can."

theage.com.au