A new low-cost airline will revolutionize Australia’s competitive aviation market, but one expert warns there are no guarantees the airline will last.
Koala Airlines is laying the groundwork for its launch, aiming to disrupt Qantas and Virgin’s long-standing duopoly in the Australian aviation market.
CEO Bill Astling has not yet confirmed when Koala will launch, what routes the planes will fly or who its investors are, but he is confident it will be successful.
By contrast, industry experts are skeptical of Astling’s optimism, especially given the failures of other airlines, including Rex, Bonza and Ansett.
“At the moment, we don’t know much about their business model, so it’s a little early to understand what differentiates them,” explained aviation expert Keith Tonkin.
‘Personally, I don’t have high hopes given the recent history with Rex and Bonza.
“It seems like a lot of people are relatively skeptical and reluctant to book tickets, but we certainly wish them every success, because we like competition and we like people to try out the industry.”
Koala Airlines lays the foundations for its launch that aims to break the duopoly in the skies that Qantas and Virgin have enjoyed for decades
Aviation expert Keith Tonkin was not very optimistic about Koala’s survival, but added that if it did, the competition would never be bad.
“We’re hoping to see where they want to fly and how often and how they serve as a customer, and that will really help understand whether their business is going to be sustainable,” he said.
‘There is a very strong presence of Qantas, Jetstar and Virgin, and they own around 90 per cent of the market, so it is quite a big barrier to entry for airlines.
‘And the other barrier for them is that those two airline groups have a very significant proportion of frequent flyers on their books, I think Qantas has around 16 million frequent flyers and Virgin has around 12 million.
“That’s a very large customer base to overcome.”
Tonkin said that if Koala learns from Bonza and Rex’s mistakes, then he might do better.
Koala has stated that it is interested in flying larger 737-type aircraft, which Tonkin says suggests it is considering popular routes between capital cities, which can be very profitable for airlines.
If Koala wanted to compete here it would have to operate rigorously, reducing prices and staying on schedule, Tonkin said.
“If a new airline wants to operate on those trunk routes, then it needs to have a product that is the same or substantially different from the others at a better price, and make sure the planes take off and land on schedule.” publish, so that people have confidence in their service,” he said.
A unique selling point for Koala is its flight cancellation policy, where passengers whose flights are canceled will receive a full refund of their money instead of airline credit.
Astling said the customer’s fees will be deposited into a trust account until their plane takes off, and if it doesn’t, the money will be returned directly to the customer.
Tonkin said the biggest hurdle for Koala is that nine out of 10 passengers currently fly on Qantas or Virgin and these airlines’ frequent flyer programs keep them coming back.
Koalas CEO Bill Astling has not yet confirmed when Koala will launch, what routes the planes will fly or who its investors are, but he is confident it will be successful.
Astling’s work in aviation began in 1977 and he said watching other companies try and fail to get a foot in the door has taught him a lot.
“They think they can beat both airlines… and (that) the only way to beat them is by lowering fares.” he told ABC.
“Well, that has never worked, and probably never will.”
As for details about what Koala will do to penetrate the market, Astling said it will fill “niches,” but declined to specify what those might be.
“We’re just not willing to reveal what our strategy is and allow competitors to think, ‘Okay, well, we can work on this or that.'”
Nine in 10 domestic passengers currently fly with Qantas and Virgin and their most profitable domestic routes are between Sydney, Melbourne and Brisbane.
Rex attempted to enter the “golden triangle” in 2021 but faced immense challenges until it was forced into administration with around $500 million in debt in July.
A similar fate befell Bonza in May when insufficient cash flow and financing prevented it from continuing to compete, its manager said at the time.
More than 300 employees were laid off overnight and thousands of travelers were left stranded after the shocking news was announced in early May.
As for details about what Koala will do to penetrate the market, Astling said it will fill “niches,” but declined to specify what those might be.
Tonkin told Daily Mail Australia he doesn’t have “high hopes” Koala can survive, but if it did, increased competition could lead to lower domestic airline ticket prices.
