A recent study has taken a look at how Virgin’s restructure in 2020 to a hybrid airline has influenced domestic airfares in Australia While Virgin Australia emerged as a hybrid carrier, the study found a quite interesting pricing strategy,
We know that Virgin Australia pitched itself somewhere between Jetstar and Qantas. However, at a simple level, you would think that the pricing would sit somewhere between those two airlines.
However, the results show Virgin seem to take a different approach to pricing depending on how far away the flights is. The further out from the flight you are, the more they seme to compete with Jetstar. Get closer to the flight, and they seem to switch to Qantas level pricing.
What the Researchers Looked at
Researchers from UniSA and China analysed booking fare data from four of Australia’s busiest domestic routes:
- Sydney-Melbourne,
- Sydney-Brisbane,
- Sydney-Gold Coast and
- Brisbane-Melbourne.
The findings highlight a clear, three-tier hierarchy of fares: Qantas at the top, Jetstar at the bottom, and Virgin positioned in between..Jetstar – given substantial operational autonomy from its parent company Qantas – now has 33% market share of domestic travellers, helping Qantas Group to cement its 65% market dominance.
What they found
Lead researcher Professor Shane Zhang says that all three airlines use dynamic pricing, where fares climb steeply just before departure, hitting business travellers hardest.
According to Professor Zhang
Our research found that Virgin adopts a selective pricing response to Jetstar. For travellers booking early (28 to 60 days in advance), Virgin’s fares tend to shift closer to Jetstar’s,
This reflects Virgin’s strategy to compete for price-sensitive early bookers by simplifying some services while still leveraging its full-service offerings – such as frequent flyer programs and business class options – for less price-sensitive travellers closer to departure.
On the other hand, in the short booking window (1-21 days) Virgin doesn’t try to match Jetstar’s fare movements. It instead moves more toward the Qantas fares, focusing on loyalty and premium travellers.
The researchers say that Qantas may need to reinforce its premium positioning as it faces a declining domestic market share, while granting Jetstar more autonomy to compete head-to-head with Virgin.
“We’re seeing the start of a more complex competition pattern,” Prof Zhang says. “Hybrid carriers are no longer just adapting to low-cost competition; they’re reshaping how fares are structured in the entire market.”
Final Words
As someone that watches fares closely, I find that these are some very interesting observations. I had noticed fares tick up substantially as the departure date approaches but hadn’t thought about the change of strategy as departure approaches.
