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 or even 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.

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’.