Business-Class Startup Offers Sydney-Melbourne Flights

Australian all-business-class startup airline OzJet debuted on Nov. 29, 2005, amid controversy that its debut during Australia's slowest business travel season would be a debacle.

Chairman Paul Stoddart insists the launch date was a calculated risk that allowed time for the company's kinks to be worked out and the airline to be 100 percent ready when the travel season is in full swing again.

"We launched in two of the quietest months in Australia and received a lot of criticism for this," said Stoddart, "but we knew it was the right decision. We worked out our teething problems and worked with our highly qualified workforce to mold them into a team."

OzJet, which is based in Adelaide, offers flights between Sydney and Melbourne in its Boeing 737 aircraft, which have just 60 seats instead of the standard 130. The airline operated three jets on Australia's peak-time route and announced that a fourth would be added in February. According to a release by OzJet, all 173 of its flights on this route between Dec. 16, 2005, and Jan. 15 had departed on time.

Stoddart said the airline received glowing testimonials from its passengers, but while the risk paid off from a public relations standpoint, it hurt the company's bottom line. "Nobody wants to start a business with losses on day one and debuting at this time cost us dearly, but it also gave us the time to get the product right," said Stoddart.

Its local success will not translate into a bigger marketplace for OzJet—at least not at the moment. Currently the company has no plans for international expansion due to the limitations of its fleet.

"The planes are not really long-haul planes; they only have a four- to five-hour maximum range," said Stoddart. "That would allow us to expand to New Zealand if we wanted to, but that's a territory that's already over-serviced. We need to get the routes right to match the consumer demand we expect—and that might mean expanding to key markets such as Perth, Brisbane or Canberra—but we don't have aspirations to go beyond the Australian shores."

OzJet touts itself as the business service airline with economy flights, structuring its pricing to offer fully flexible all-inclusive fares of A$325 (US$244.55). OzJet also offers lower fares with some restrictions, including a A$305 semi-flexible fare. "We're driven by the flexible fares of Virgin and Qantas airlines, which for fully flexible for economy varied from A$377 from Qantas and around A$325 to A$350 for Virgin," said Stoddart.

"Those airlines offer cheaper flights, but with restrictions and as many found out, in early days of Virgin and Jetstar Airways, it was 'use 'em or lose 'em,' " said Stoddart. "What if a passenger's flight is at four, but they can't make it until five, those tickets are of no value to them—that's why we made ours as fully flexible economy."

During its first two months, Stoddart confirms that OzJet received approximately 500 sales per day—which he called modest and quite encouraging.

To increase its visibility among consumers, OzJet has been working diligently with travel agents, offering to pay a healthy commission. "We provide a commission of 5 percent to 10 percent, depending on what the fares and deals are," said Stoddart. "In addition, our Web base is growing as well where customers can book their own flights."

Eager to establish a relationship with corporations, Stoddart explained that one of OzJet's goals for the first half of this year will be to approach the top 1,000 companies, government corporations and any other large users of air travel and negotiate private fares to their travel departments and coordinators based on travel volume.

Promotions during the intro period included a buy-one-get-one-free round trip ticket and a $249 introductory fare. OzJet passengers can carry on three pieces of hand luggage to be brought on board. OzJet's other amenities include hot meals on fine china and complimentary beverages.