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23/11/2005

Hong Kong dogfight
Ria Voorhaar

he sustained price war on the Sydney-Hong Kong route has forced Virgin Atlantic to restructure its pricing and encourage agents to use published rather than net remit fares.

Virgin pricing and reservations manager Amanda Swallow said competition on the Sydney-Hong Kong route was as fierce as that on the trans-Tasman.

“I don’t think we expected it to be as competitive as it has been,” Swallow said. “Everybody’s been releasing tactical fares every week with really short validity, which means agents are getting confused about what fares are out there, and we just wanted to simplify it for us and them.”

In an attempt to stabilise the market, the airline will reduce the number of tactical fares it issues and has dropped the price of its lead-in published fare to $765 plus taxes, down from $1688.

Upper class and premium economy published fares have also been reduced.

Swallow said the new published fares were “more reflective of current market value”, and agents would continue to earn 9 per cent commission on them.

The airline would still sell a limited amount of net remit fares but was urging agents to sell published fares, which were “easier to use”.

Cathay Pacific sales manager Derek Morris confirmed that the airline had also seen a drop in yield following the introduction of the new competitor, and an increase in capacity from both CX and Qantas amounting to 800 extra seats a day.

“The reduction is quite concerning,” he said, “and some of the activities we’ve seen out there couldn’t be sustained at a profitable level – and you don’t last if you’re not profitable.”

However, he said Cathay Pacific would not follow Virgin’s move towards pushing published fares.

“We’ll make sure we’re always competitive,” Morris said, “but we will not follow a move like that.”

A Qantas spokeswoman said the airline was reviewing its pricing on the “very competitive” Hong Kong route and it was likely that the fares would take on a simplified structure like the one QF adopted on its UK and Singapore routes.

As part of Virgin Atlantic’s restructuring, the carrier has also reduced its five-day minimum-stay requirement to three days in a bid to attract a bigger share of the weekend market.

“Australians will travel nine hours for a weekend,” Swallow said. “The Hong Kong Tourism Board has targeted that segment for growth.”

Virgin Atlantic claimed its loads on the route were between 60 and 70 per cent.

“We are where we wanted to be eight months down the track,” Swallow said. “The code-share with Virgin Blue will help boost loads further as travellers from other capital cities can now get to Hong Kong for the same price as Sydneysiders.”

23 November 2005

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