Without Tiger, Australian fares 'will soar': Goldman Sachs

Goldman Sachs stated that the departure of LCC Tiger Airways Australia from the domestic market would likely push up domestic airfares by as much as 15% (Sydney Morning Herald, 30-May-2011). The LCC in Apr-2011 announced it would suspend its growth plans for the Australian markets and announced a review of its network. Tiger, however, stated it has no intentions to withdraw from the Australian market. Goldman stated that Tiger's entry into Australia was one of the main reasons airfares had declined in real terms in recent years. The broker expects that if Tiger pulled out, Jetstar and Virgin Australia "would raise airfares in response to a reduction in the competitive pressures that have driven domestic real air fares to their all-time low". "Based on this, if Tiger exits the market and prices return to pre-2008 levels, arguably domestic passenger numbers could drop by about 5%." Tiger has a 6% share of the domestic travel market.

You may also be interested in the following articles...

• Australian aviation market shows signs of slowdown just as airlines were enjoying yield premiums
  04-Apr-2012

  There are now clear signs the Australian aviation market is entering a light slowdown, with carriers adding capacity ahead of demand while airfares decline marginally. This will affect the region's carriers differently and they should all fare better than counterparts elsewhere in the world; notably, the market in Australia is still growing, but not as fast. Most exposed are Qantas mainline and Tiger Airways Australia. The former has been slowly losing some corporate business to Virgin Australia and competes with a higher cost base.

  Tiger is suffering from group-wide over-capacity and would not be able to redeploy capacity as readily. Unlike Tiger, Jetstar has a healthy and rapidly growing pan-Asian network that can absorb any surplus capacity and at a higher margin even than in Australia. Virgin Australia is seeing yield growth from its transition to a business carrier, growth that should overcome any weakness in the more leisure-exposed areas of its business.

• Sydney Airport divides terminals along alliance lines but risks alienating new carriers
  05-Dec-2011

  Sydney Airport will narrow its competitive disadvantage of having separate domestic and international terminals with a plan to split its terminals by 2019 into two alliance-based precincts: one for Qantas and its partners and one for Virgin Australia and its partners. The two groupings will account for 81% of all movements. Leftover international carriers will in most cases use the Virgin terminal while a plan is underway to address leftover domestic and regional airlines, notably Tiger Airways and Regional Express. While the plan may placate the two big airline groupings in Australia, Sydney airport may face a shortfall of placement options for new carriers looking to offer their passengers onward domestic connections.

  Sydney airport expects to formally begin stakeholder consulting with the aim of including the proposal in its 2014 master plan, which will be drafted in late 2013. Qantas and Virgin Australia, Sydney's two largest occupants based on movements and seats, have already given their support with the signing of a non-binding memorandum of understanding. The proposal will critically increase gates but not change slot restrictions, the airport's curfew or noise regulations.