VIRGIN SHADOWS JETSTAR ON EARLY FARES, NEW STUDY REVEALS

Virgin is increasingly aligning its fares with Jetstar during the 28- to 60-day pre-departure window, but is less competitive for late bookers within 21 days, a new study has found.

Researchers from UniSA and China analysed booking data on four of Australia’s busiest domestic routes: Sydney to Melbourne, Sydney to Brisbane, Sydney to Gold Coast and Brisbane to Melbourne.

The results indicate a clear three-tier fare hierarchy, with Qantas at the top, Jetstar at the bottom, and Virgin positioned in between.

Jetstar, which operates with substantial autonomy from parent company Qantas, now holds 33 per cent of the domestic market share, contributing to Qantas’s 65 per cent market dominance.

All three airlines use dynamic pricing, with fares rising steeply close to departure and hitting business travellers hardest.

Lead researcher Professor Shane Zhang says that all three airlines use dynamic pricing, where fares climb steeply just before departure, hitting business travellers hardest.

“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,” Prof Zhang says.

“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.”

Conversely, in the short booking window of 1 to 21 days, the study reports Virgin does not attempt to track Jetstar’s fare movements. Instead, it aligns more closely with Qantas prices, prioritising loyalty and premium customers.

“Virgin is walking a fine line between cost and service differentiation. It follows Jetstar just enough to remain competitive with budget-conscious travellers, but not so much that it dilutes the brand with higher-yield business customers.”

The authors state that the hybrid carrier model has become central to Virgin’s strategy since Tiger closed in 2020, and Virgin transitioned from a full-service model to a mid-tier airline.

Since restructuring, Virgin has regained about one-third of the domestic market, intensifying competition with both Qantas and Jetstar.

However, the steep late booking fare increases seen across the board reflect limited competition.

“While not illegal, tacit collusion in Australia’s duopoly market is bad news for travellers, leading to inflated late-booking fares,” Prof Zhang says.

“It’s important that regulators monitor steep, last-minute fare hikes for signs of anti-competitive behaviour and misuse of market power.”

Looking ahead, the researchers suggest Qantas may need to reinforce its premium positioning as its domestic share declines, while giving Jetstar more autonomy to compete directly 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.”