Qantas May Have A New Rival Airline

Qantas may soon have a new competitor in Australia to deal with, and not from Koala Airlines or another start-up, but rather a Vietnamese low-cost carrier.

VietJet, according to AFR reporting, is looking to launch a locally based airline in Australia, positioning itself as a direct domestic competitor to the established carriers here.

The proposal, revealed by the Australian Financial Review, is still in its early stages and thus has every chance of not progressing; industry analysts already see this as the most likely outcome, but it nevertheless highlights ambition and fuels discussions.

What Is Being Prorposed By VietJet

According to AFR, VietJet is looking to the Australian market for its next subsidiary or joint-venture carrier, with a view to offering domestic and even short-haul international routes to and from Australian shores.

Instead of just flying Vietnam-to-Australia legs as is typical, this would be a totally new entity based in Australia, with local staff employed and tickets sold for domestic routes.

For Qantas, this is a threat to the market it has long dominated. At the same time, Virgin Australia holds a slice of the cake; it’s the Qantas Group that reigns supreme and has forever meant that any possible competition is incapable of coming in and thriving.

Details on the proposed deal remain sketchy, with no Air Operator’s Certification or even partners confirmed, and city pairings. Further details on this being an Australian-based operation are key, as it is widely believed that the airline would fly with Australian crews.

The idea is to leverage VietJet’s ultra-low-cost model in its home country and across Asia, with low base fares, heavy ancillary revenue, high seat density, and positioning as a cheaper alternative in the Australian market. It comes amid the collapse of TigerAir in Australia years back, and the failed Bonza, which has left options scarce.

VietJet’s Role In Australia Grows

VietJet’s Australian brand is one thing, but in recent years, for its own operations, it has built out a network from Ho Chi Minh City with its Airbus A330s, even adding Hanoi services.

Over the years, it has ramped up flying, with peak-season capacity opening the door to new ports in the future. This means that in a short time, the number of capital cities covered has increased tenfold, driven by demand.

Australia is viewed as a core market, alongside existing locations. The airlines’ executives have committed to fleet expansion, and as such, will see many more jets arrive soon, making expansion possible. This aligns with deals signed with Australian airports to penetrate the market, not just for now but for the long term.

With that in mind, the view to offer a competitor to Qantas, the flag carrier, is bold and ambitious, and says a lot about where this business wants to head. However, this is still in its early stages and would need a lot to go right for this prospect to ever make it off the ground and past the drawing board, where it may still fail.

A Qantas Rival Will Never Come?

The AFR points out in its report, flagging the news of the already existing obstacles that VietJet, and any company attempting something like this, faces: foreign low-cost Group ownership, which may work elsewhere but fails in Australia.

The political and regulatory policies in place mean that VietJet’s proposal clashes head-on, and, as a result, Qantas and the broader Qantas Group are, more often than not, treated as a national symbol and champion of the industry.

With this title, the Federal Government protects Qantas, and not all agree with this stance. In the past, and especially following Qatar Airways’ pursuit of service expansion, the Government came under harsh criticism for its protection and handling of competition within the country.

Therefore, for VietJet, there would need to be foreign ownership pillars satisfied, controlling rules in place, and safety and financial vetting. Ultimately, the need for this plan would not undermine the stability of the domestic market and Qantas.

That is, before heavy lobbying from Qantas, Virgin, and even the ACCC could come in out of fear of what VietJet and a new competitor could do to the landscape. In the past, warnings of high concentration and fragile competition would be harmful to the domestic scene and would be a reminder of concerns.

While ambitious and reflecting some companies’ view of Australia, many factors need to go right, which, in other endeavours, have not. As a result, this is unlikely to get past the early stages, even with careful structuring.