Qantas, Virgin Slash Australia Fares For Jetstar Launch - 25th Feb 2004
(Credit: Airwise)

Australia's Qantas said on Wednesday it would flood the market with 100,000 seats at AUD$29 (USD$23) each for its new discount carrier Jetstar which it expects to turn a profit by its second year.

Arch-rival Virgin Blue quickly retaliated by putting 200,000 tickets on sale at the same price, but admitted the fares were unsustainable and stressed no price war would ensue between the country's main airlines.

"Our aim is in the first year to break even, or close to break even, and that we make money in the second year," Jetstar Chief Executive Alan Joyce said after a media briefing.

Qantas Chief Executive Geoff Dixon said initial start-up costs for Jetstar, set up by Qantas to try to fend off the challenge posed by Richard Branson's Virgin Blue, were about AUD$80 million, excluding aircraft.

Jetstar would initially operate around 600 flights a week when it starts flying on May 25, rising to 800 a week by August, said Qantas, which wants to draw a "line in the sand" at 65 percent of the domestic market in its fight with Virgin Blue.

Qantas, 17-percent-owned by British Airways, insists the cost base of its new venture was cheaper than its rival and Jetstar would not cannibalize its own mainline operation.

"What I do know is I believe that most of the low-yielding leisure market that Qantas now finds it difficult to make a profit margin on will eventually be covered by Jetstar," said Qantas Chief Executive Geoff Dixon.

"That doesn't mean Qantas is quitting all those routes. We're fully expecting quite robust growth in the domestic market."

The new airline would fly on Australia's busiest routes along the eastern seaboard between Melbourne, Sydney and Brisbane, as well as to some leisure destinations.

"Twenty-nine-dollar fares simply aren't sustainable if you sell all seats at twenty-nine dollars," Virgin Blue Chief Executive Brett Godfrey said.

"If we're not an airline, we're definitely a PR company, and we won't be outstunted. The 100,000 seats is a stunt," he added.

Qantas, which currently has about 66 percent of the domestic market, estimated the number of people flying has grown around 15 percent each month for the past six months, and tipped growth rates would continue at 10 to 15 percent for the next couple of years.

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