Welcome to the jungle

WHEN I ask Tony Davis what he thinks about Virgin Blue’s plans to consider launching a new low-cost domestic airline, he begins to laugh.

“A low-cost airline - what are they today then?” the Tiger Airways chief executive says. “The fact that Virgin had to come out and say they might have to come clean and confirm they are not a low-cost airline by launching a low-cost airline as a subsidiary of Virgin is a huge acknowledgement that Tiger Airways is right - there is a gap in the market.”

And this gap is exactly what Davis is stalking. The Singapore Airlines-owned carrier has set about redefining the nature of “budget airline” in Australia. Based on the highly successful European airline, Ryanair, it has attacked the inflated fares Australian travellers have become used to. Where in Europe, you could on any given day get a flight from say London to Portugal for £10 including taxes, in Australia even the cheapest fare for the same distance flight would cost around 30 times that.

Davis argues that the fact that so-called low-cost airlines like Virgin Blue and Qantas subsidiary Jetstar are now having to slash their fares to compete with Tiger is a sign that there certainly is a gaping hole in the airline market for a truly no-frills domestic carrier.

“The incumbent carriers were talking low-cost but not delivering low fares and we have now established a firm foothold in that marketplace,” Davis says. “By linking our Australian domestic services with international services to Asia, around China and India, we are really offering consumers fantastic opportunities across the whole region. 

“We will also leverage our economies of scale across the whole network. This is fantastic news for consumers – finally a true low-cost airline has come to Australia and Tiger is committed to delivering those low fares on a sustainable basis.”

It is little wonder then that Davis has come under intense attack from his archrivals over at Virgin and Jetstar. He was only slightly short of heckled by both Alan Joyce of Jetstar and David Lloyd of Virgin when he took to the stage recently at a major aviation conference. 

In a panel discussion, Lloyd took a shot at Tiger’s funding levels and Joyce hit out at its links with the Singapore government. Jetstar and Virgin have also gone on the offensive to counteract Tiger’s airfare specials, which have included Melbourne to the Gold Coast for $49.95 including taxes. As soon as Tiger has announced a special, Jetstar in particular has quickly matched the deal.

But if Davis was worried about coming under fire from his competitors, he’s certainly not letting on. And he is not letting himself be swept up in the tit-for-tat game with his rivals. “We have been pleased with the response from consumers,” the 40-year-old says from an office in Sydney. “We are very heartened by the support we are getting from our customers. That is why we are not going to respond to the gimmicks and rhetoric 
coming out of our competitors. We are just focussed on delivering a really good product for our consumers.”

Davis is well-versed in the intricacies of setting up and running a budget airline. He was the founder and managing director of BMI Baby - the British low-cost carrier - from 2002 until 2004. In this time, he built the business from scratch to an operation with 14 aircraft serving 26 destinations across the UK and Europe. And he is used to pressure from competitors having worked in the tough western European airline market.

His experience in Europe - and close ties with Ryanair - has also given him an insight into how the company can cut costs and pass on those savings to passengers. One of 
the more novel strategies he has employed is to have staff uniforms sponsored by 
clothing label Giordano. He is vying to have almost all bookings made online and is exploring co-branding opportunities to further reduce costs.

The strategy seems to be paying off. Tiger now operates 18 routes across seven countries and territories and has attracted more than 3 million passengers. It has recently added three new routes from its Melbourne base, to Rockhampton and Mackay. 

Davis says it all comes down to filling a lucrative gap in the market. “Consumers in Australia, to be frank, are getting sick and tired of gimmicky promotions the incumbent airlines have been offering,” he says. “For a couple of hours on a certain day for a few people there is a promotion, but generally most people are paying very high air fares. We are changing that. We are offering low fares on a sustainable, consistent basis - not as gimmicks but real fares available to customers. That is the gap in the market, that has been successful for Ryanair in Europe and that will be successful for Tiger Airways.”

So what plans does he have on the horizon? Well, more routes from Melbourne for a start. Tiger has committed to having five aircraft based in Melbourne by the end of this year. It has also completed an order for another 50 aircraft, which means Tiger’s fleet will grow to 70. 

Tiger will also be expanding its presence in China, India and south east Asia - giving it access to a market of 3 billion people.

So what about trying to tackle Virgin Blue by offering long-haul flights to places like the US and UK as well? Davis is not so sure. “We think you should stick to your knitting as they say,” he says. “We operate short haul airplanes on short haul networks. If you look at our network, we are the largest international carrier offering low fare services into mainland China. We recently went on sale with our first service to India from Singapore. 

“So really people can get around the whole of the Asia Pacific region with Tiger Airways. And because we only use one type of aircraft – the Airbus A320 – we can do that much cheaper than our competitors and we pass those savings on to our customers.

“We would rather stick to the proven business model. That is what people like Ryanair and South West Airlines have done – the most successful low fare airlines in Europe and North America. That is what we will do in the Asia Pacific and that’s why we will succeed.”