How startup Koala Airlines hopes to take on Qantas

The airborne marsupial says it will fill “niches” left empty by Qantas and Virgin.

By David Flynn, September 30 2024
How startup Koala Airlines hopes to take on Qantas

“Another new airline?” That’s a predictable and understandable response to the emergence of Koala Airlines as the latest challenger to the entrenched two-airline duopoly of Qantas and Virgin Australia.

(Although Australia has three major airlines, Jetstar is of course an arm of Qantas and works in concert with its sibling to dominate the low-cost end of the market.)

After all, this year has already seen the collapse of Bonza and Rex as intercity jet competitors; behind them is a boneyard littered with the carcasses of Compass, TigerAir, Air Australia and OzJet, among others.

And while Koala has a cute logo and some mockup images showing 737 MAX jets soaring above Brisbane and Canberra, it doesn’t actually have any aircraft and has yet to even apply for the necessary Air Operator’s Certificate approval from Australia’s civil aviation authority.

That’s not stopping Koala Airlines’ CEO Bill Astling from taking a possibly quixotic tilt at the Qantas-Virgin behemoth.

"Our population is small, but the vast distances mean we can only travel by air,” the industry veteran reasons. “It can't all be done by two airlines.”

Speaking with ABC TV’s Four Corners, Astling says Koala will follow the lead of Aldi and IGA in Australia’s supermarket sector, filling “niches” left by the big two.

But that won’t necessarily mean ultra-low airfares.

Bonza and Rex adopted a strategy that “the only way they’re going to beat (Qantas and Virgin) is by lowering the fares. Well, that’s never worked, and it probably never will.”

What Koala will do is promise to give passengers a “guaranteed cash refund”, with airfares placed in a trust account until the flight is taken.

“If you don’t fly, you’ll get your money back,” Astling promises. “It's simple.”

However, that approach will only increase Koala’s reliance on deep-pocketed and patient backers, as airlines typically use forward bookings to fund their ongoing day-to-day operations. 

Koala Airlines: a cute brand, but no actual planes.
Koala Airlines: a cute brand, but no actual planes.

A “game-changing strategy”

Koala’s website trumpets  “a fresh approach to aviation, inspired by our passion for service, innovation and customer experience.”

“Our goal is to carve out a unique niche that enhances the industry landscape without disrupting existing standards by creating a lasting impact on the industry.”

The airline’s “game-changing strategy… will fundamentally differ from previous entrants in a domestic market which has been long dominated by two major airlines.”

“While many new low-cost carriers have entered the market since 1990 and focused solely on offering cheaper fares, almost entirely leading to unsustainable competition, Koala is taking a more innovative route.”

Yet Koala’s playbook would seem to have few options that haven’t been attempted before.

Bonza tried ultra-low airfares partnered with a fleet of modern fuel-efficient Boeing 737 MAX jets connecting Australia’s larger centres but deliberately avoiding the rich but cut-throat routes between the capital cities.

In a post on LinkedIn following the collapse of Bonza, the airline noted “once again, the promise of low fares has been unsuccessful. It appears they have been too low.”

“Unlike the previous collapses, Bonza can’t blame Qantas or Virgin for competition as most of their flights were to unserved destinations.”

Meanwhile, Rex’s attempt to leverage its regional network as a springboard onto the key intercity routes, taking advantage of Boeing 737 jets and staff let go by Virgin Australia, also failed.

While Astling and his Koala C-suite cohorts boast plenty of experience, the same could be said of Bonza and Rex – neither were helmed by neophytes.

Astling has yet to reveal when Koala will begin flying, on what routes and with what aircraft – if it’ll have lounges and business class cabins, or be more like low-cost US colossus Southwest.

Whichever path Astling and Koala choose, their definition of ‘winning’ might simply mean ‘not failing’.

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 387

Hopefully they have the receivers number on speed dial, that's if they even get off the ground.

26 Sep 2023

Total posts 32

I'm sure aircraft leasing, maintenance, fuel, ground services, staff, and crew will be absolutely fine with their payslips being held 'on trust' until the aircraft takes off.

QFF

12 Apr 2013

Total posts 1563

Unfortunately herd wanna fly for a dollar. Nothing else.

JJ1
JJ1

Qantas - Qantas Frequent Flyer

23 Sep 2015

Total posts 31

Hats off to them for giving it a crack and I hope they do well but gee ... will this be history repeating itself? Good luck to them

Qantas - Qantas Frequent Flyer

16 Jan 2018

Total posts 129

Agreed. Bonza was also filling the niches, as was Ozjet, and to an extent, Rex. They really need to make a dent on the Sydney-Melbourne-Brisbane triangle to be able to expand beyond that. While the duopoly is in full force, any competitor needs deep pockets and substantial investors ready for the long haul (no pun intended), before they see returns they are expecting. Regardless, here’s hoping they can make it work!

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 320

Good luck to them but with QF having the luxury of throwing the parasitic Jetstar at any new competitor they are on a hiding to nothing. If the govt was serious about competition they would ensure some of their own travel business was given to new players as well, at the moment it’s all QF and VA, gives them a healthy edge in the market.

Etihad - Etihad Guest

21 Jul 2019

Total posts 189

Everything is stacked against new entrants as long as our gov't keeps treating a certain airline as a 'protected species' which it will bail out whenever the 'need' arises whether or not we the taxpayers like it. I stopped my philosophical opposition to majority (or even fully) foreign-owned airlines operating domestically in Australia a long time ago. Nothing will change until the unfair restriction gets lifted because this industry is broken.

04 Sep 2019

Total posts 66

I would like to think the rage that the handout Qantas got for no equity stake by the government during covid will prevent it ever happening again

Qantas - Qantas Frequent Flyer

26 Nov 2012

Total posts 127

Oh please. Look at  other countries and you’ll see we fared pretty well. Any “rage” is misdirected. Just jealous we’re not having our airlines propped up by oil rich governments or national pride. For some reason we seem to think we’re different 

09 Aug 2015

Total posts 107

The same 'handout' that most businesses got? I agree there should have been some requirement to repay this, not sure about Government equity though, or the Government would have ended up holding stakes in Qantas, Harvey Norman and thousands or even 10s of thousands of other companies.

Qantas - Qantas Frequent Flyer

03 Jan 2013

Total posts 65

If the certain airline you refer to is Qantas, our government has never bailed it out. Further, with regard to foreign owned airlines operating domestically, we have exactly that with Virgin Australia (97.5% foreign owned). There was also Tiger Air (Singapore Airlines owned that one), which was a dud, sold to VIrgin Australia (mark 1) for $1.00, then soon after shuttered as a complete failure.

Husbear

09 Aug 2015

Total posts 107

Good luck Koala but I can't see any sense behind this. Sure there's a bit of anti-QF sentiment but people who are serious about that will fly Virgin, and most of them would still fly Qantas but grumble all the way if the QF airfares were lower. So where is the opportunity for Koala? Qantas has the full service end of the market plus all the rusted-on flyers due to QFF or business contracts or the need to take domestic flights beyond the cap cities. Jetstar has the budget end of the market. Virgin has carved out its own space in the middle. Rex and Bonza clearly tried different approached, both failed. I just can't see any way for Koala to differentiate itself.

22 Sep 2017

Total posts 96

My lettuce is looking confident

The federal government needs to regulate the routes that Koala wants to ensure Qantas can't do their usual thing of coming in and undercutting the competition at a loss until the competition goes bankrupt. Plus other regulations to assist a third airline and protect it from Qantas' predatory market dominance. And open up international routes to Australia to more competitiin too

09 Dec 2023

Total posts 1

The most recent ABC Four Corners episode "Flight Club" certainly provided some additional insights into our aviation market!

29 Jan 2012

Total posts 184

Yes, the herd does focus on the $ - what if instead Koala was to have a company based on service levels, a minimized schedule, and leg room allowing for passengers to fly with space and their knee's stretched out and not tucked up under their chins. Yes, it will not be discounted fares to achieve this but instead an experience that may or will draw clients looking for a fresh long term change. If we remember the 2 airline agreement, the fares were high, the schedules lean, no lounges or FF gimmicks but yet Australia happily flew. Ansett and TAA for example in the early 80's had only 4 nonstop flights per day from BNE to MEL (and a couple more via SYD) and yet it worked with service levels we now dream back on.

Let the herds fly Southwest, let the passengers with focus fly Koala. I believe it could work if the public is patient.

09 Aug 2015

Total posts 107

I think the 'herd' is focusing on $ because that's the main consideration of almost everyone. It's not all about the money of course, it's also 'value for money', and that is the angle Virgin has adopted and seems to have done pretty well.

"what if instead Koala was to have a company based on service levels, a minimized schedule, and leg room allowing for passengers to fly with space and their knee's stretched out and not tucked up under their chins. "

Well that all sounds great but all that extra legroom comes will come at a cost. And as for "how it was in the past" well that's is in the past, I think people now expect FF programs and lounges at a higher airfare. If you go ultra-low-cost like Bonza you don't need that, but Koala won't be ultra-low-cost.

It sounds like your model would have airfares closer to those of QF or maybe halfway between VA and QF, and if both of those have FF programs and lounges to start with, it's harder to justify the spend.

I would still love to see the Koala you talk of, but "I believe it could work if the public is patient" is more about if the companies which sink money into Koala are patient.

24 Nov 2020

Total posts 13

And back then those who couldn’t afford to fly took the Greyhound bus or Ansett Pioneer and others. For many, flying just wasn’t an option. Then deregulation and eventually the introduction of low cost carriers in Australia and now everyone can fly. Problem is now everyone expects low airfares but the reality is if you can’t afford to fly, like many years ago take the bus! Flying is expensive, it costs more to operate. Someone has to absorb those costs. That’s why ultra cheap fares are unsustainable.

22 Jul 2022

Total posts 4

Let dogs into the cabin with only a leash, that’s a huge differentiation with QF and VA, and the law now allows it!


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