Grounded: Five of Australia's biggest airline failures
By Michael Gebicki
It’s tough operating an airline in Australia’s skies, as Bonza has found out. The airline has suspended its flights, as rumours swirl that some of the its planes have been repossessed.
After promising services starting in mid-2022, later revised to September that year, the airline finally carried its first passengers in January 2023. Since then, it has faced serious headwinds, cancelling some routes and reducing frequency on others as early as July last year.
Compass was hobbled from the time it took to the air in 1990.Credit: Bruce Miller
Australia's aviation industry is peppered with airlines that failed to survive in the long term, facing tough competition from the established players who from time to time have been aided and abetted by the Australian government to ensure that rivals are not allowed to prosper.
Compass, Australia's first low-cost airline begins operations, 1990
Until the early 1990s Australia had a government-mandated two-airline policy. The two domestic airlines – Ansett and Australian Airlines – operated a duopoly, charging the same fares, with similar sized fleets operating mainly on the same inter-city routes. East-West Airlines was an early upstart that tried to muscle in with cheaper airfares but the government stepped in and punted the carrier to regional routes.
In October 1990, the Hawke government deregulated the airline industry with the aim of offering passengers greater flexibility and allowing free market forces to set prices. That opened the door to low-price competition, and a month later Compass Airlines, Australia's first low-cost airline, commenced operations.
A successful low-cost competitor was a potential nightmare for the Ansett-Australian cartel and Compass was hobbled from the time it took to the air.
In Brisbane, Sydney, Melbourne, Perth and Adelaide, Compass was forced to use the terminals of its competitors, which consigned its aircraft to the Siberia of boarding gates. On routes on which Compass was competing, the major carriers simply dropped fares – and they could sustain losses far longer than Compass.
The nail in the Compass coffin was a dispute between the airline and the CASA over fees, and on 20 December 1991 Compass was grounded, immediately before the peak Christmas period. The revenue from that period might have bolstered the airline's war chest sufficiently to allow it to keep operating. The following year, an attempted re-start of Compass Mark II, originally Southern Cross Airlines, foundered after just six months, forced into liquidation by unsustainable losses.
Ansett hits the skids, 2001
Founded in 1935 by "Reg" Ansett as a sideline to his Victorian road transport operation, Ansett Australia was once Australia's largest domestic carrier, and the first to operate jet-powered aircraft on domestic routes.
Growth was steady. At its peak Ansett operated a fleet of over 100 aircraft, with services throughout Asia and the Pacific, but its demise came quickly.
Early in 2000, Air New Zealand took full control of Ansett, buying out News Corporation's share, having already acquired Peter Abeles' TNT share of the airline. The move was intended to shore up the NZ national carrier.
New Zealand had previously opened its skies to Ansett, which saw the establishment of Ansett New Zealand, but under pressure from Australia's domestic carriers the Howard government reneged on a deal to allow Air New Zealand to establish a presence in Australia's domestic market.
Ansett had boomed over the previous two decades, but the airline was facing headwinds. The Ansett fleet consisted of more than 15 aircraft types, from Fokker Friendships to DeHavilland Twin Otters to five Boeing 747s. As well as complicating maintenance, some of these aircraft, such as its 13 Boeing 767s, were well past their use-by date.
Competition from low-cost Virgin Blue was impacting its revenue stream, particularly on the lucrative Melbourne-Sydney route. A series of imprudent financial decisions made under the previous TNT-News Corp ownership – building Hamilton Island Resort, a multimillion dollar bid to become the official carrier for the 2000 Sydney Olympics – saddled the airline with debt. The general decline in air traffic following the attack September 11, 2001 terrorist attacks in the US was yet another blow.
Shortly after Air New Zealand took control, Ansett was losing $1.3 million per day, and its parent was unable to sustain the loss. With debts of $3 billion, Ansett was placed in administration on behalf of creditors in September 2001.
Tigerair Australia, a pandemic victim, 2020
Credit: Rebecca Hallas
Tigerair operated its first flights in Australia in November 2007 as Tiger Airways Australia, owned by a Singapore-based holding company behind several low-cost Asia-Pacific airlines. Tiger prospered on the strength of its amazingly low fares, operating up to nine flights per day each way between Sydney and Melbourne, although it engendered little love, introducing Australian travellers to ancillary charges such as a fee for checked luggage, concepts that had underwritten the profitability of overseas low-cost carriers.
Seeing the airline emerge as a competitor, Virgin Australia Holdings snuffed it with a takeover bid, becoming a majority shareholder in July 2013, after the airline had changed its name to Tigerair Australia. The following year Virgin Australia took full control, and Tigerair became Virgin's low-cost arm, the competitor for Qantas' Jetstar.
For a brief time Tigerair operated services from Melbourne, Adelaide and Perth to Bali and Denpasar. In February 2020 Virgin Australia announced its intention to downsize Tigerair's fleet from 13 to eight aircraft, suspend five loss-making routes and close its Brisbane base.
The following month, hit by COVID-19 travel restrictions, Tigerair suspended operations. Parent Virgin Australia was struggling for the same reason, and a few months later Bain Capital was announced as the preferred buyer for both Virgin Australia and Tigerair. In mid-2020 Virgin Australia announced that Tigerair would not be resuming operations, although it would retain its Air Operator Certificate in case market conditions should allow the resumption of the ultra-low-cost carrier.
OzJet, the brave business airline
Strictly speaking, Ozjet doesn’t qualify as a low-cost airline, yet in a sense that’s what it was. The Tullamarine-based carrier began flying in November 2005 with flights between Melbourne and Sydney aboard Boeing 737-200 aircraft with 60 seats in an all-business class configuration. Ozjet was aiming to expand to other state capitals, and carve off a small share of the business-class market from VA and Qantas, selling its seats at about the same price as a full-flexy economy-class fare aboard its competitors. It didn’t work. Within a short time Ozjet were discounting further, and just four months after its first flight, chairman Paul Stoddart announced the airline would cease all scheduled operations.
Want to start a new airline? What could possibly go wrong?
We’re affluent, our major cities and holiday hotspots are widely separated and unless you fly, there is no practical way to get speedily from one to another. Until the pandemic struck, the Melbourne-Sydney route was one of the world’s busiest, with Brisbane not too far behind. Also, Australia is the largest aviation market without an independent low-cost carrier. These metrics make Australia a tempting proposition for anyone in the aviation industry with access to funds and a little imagination.
You might think therefore that this would be prime ground for a low-cost start-up but time and again those who have tried have fallen on their face. Start a new route that proves viable and Qantas or Virgin Australia will muscle in. Offer ultra-low cost fares and the two majors will sacrifice revenue to undercut your prices, and they can hold their breath for a lot longer than you can. And they offer tempting frills such as frequent flyer loyalty points and partnerships within the two major airline alliances that help shore up a loyal customer base. Qantas in particular has the ear of the government, and although Australia has long since abandoned its two-airline policy, that’s what it has facilitated. If they don’t drive you to the wall, one or the other airline will open their mouth and swallow you whole.
Rex is an exception. Now serving all six states, the Mascot-based airline began in 2002 as a regional carrier, started by former Ansett employees who welded together Hazelton and Kendall airlines. Over that time Rex has morphed into a serious player with its own flight school, operating a handful of Boeing 727-800s and the world’s largest Saab 340 fleet. Having weathered the slowdown of the pandemic, now offering flights between Melbourne, Sydney and Brisbane, Rex looks like a stayer, although by its own admission it’s not a low-cost carrier.
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