Abstract
Due to the vast distances across the country as well as between urban centres, Australia is heavily reliant upon its air transport industry. Following deregulation of Australia's domestic air travel market on the 30th October, 1990, low cost carriers have entered the market. Australia's LCC market has had three discrete phases. The first wave occurred between 1990 and 1993 and was subsequently followed by a duopoly period in 1994–1999. The second wave occurred between 2000 and 2006 and the final wave has been in the post-2006 period. This paper examines the evolution of Australia's domestic low cost carrier airline market and finds that by 2010, low cost carriers had captured around 64 per cent of the market. Following the evolution of the “Virgin Australia” business model from a low cost carrier to a full service network carrier, commencing in 2011, the low cost carrier's market share has declined significantly and is now around 31 per cent. “Jetstar” and “Tiger Airways” are the two major carriers presently operating in this market segment.
Highlights
The vast size of the Australian continent, the country’s varied and rugged topography, and scattered population present significant transport challenges
Since the industry was deregulated, a number of low cost carriers have entered the Australian domestic air travel market – Impulse Airlines, Compass Airlines, both of whom subsequently collapsed, Jetstar Airways, Tiger Airways and Virgin Australia, though since 2011 the latter has moved to a full service network carrier (FSNC) business model
“Virgin Australia’s” business model is focussing on the expansion into smaller regional markets with lower levels of demand; increasing use of a hub-and-spoke network strategy; the introduction of business lounges and premium seating classes; code-sharing and/or interlining arrangements with domestic and international airlines, such as “Air New Zealand”, “Delta Airlines”, “Etihad” and “Hawaiian Airlines”), and a mixed fleet, including long-haul “Boeing 777” aircraft used to operate services to the USA (Knibb 2008a; Koo 2009)
Summary
The vast size of the Australian continent, the country’s varied and rugged topography, and scattered population present significant transport (and communication) challenges. In 1990, the Australian government commenced the deregulation of the country’s domestic airline market process, permitting private competition, and privatising its interests in existing airlines (Nolan 1996). Since the industry was deregulated, a number of low cost carriers (hereafter LCCs) have entered the Australian domestic air travel market – Impulse Airlines, Compass Airlines, both of whom subsequently collapsed, Jetstar Airways, Tiger Airways and Virgin Australia, though since 2011 the latter has moved to a full service network carrier (FSNC) business model. This paper examines the evolution of LCCs in Australia’s domestic air travel market. The paper is structured as follows: section 2 presents the low cost carrier business model, section 3 reviews the evolution of Australia’s domestic airline policy, section 4 examines the development of Australia’s low cost carriers and section 5 provides concluding remarks on the research findings
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