Monday, July 24, 2006

Webjet's big numbers - profits up, charges too

SMH is reporting on the latest announcement from Webjet. Expecting full year profits in the A$3.2-3.4 range and cash reserves of A$23.1 (mainly for the S8 option sale). I am not impressed by the claim that "this is 330% above last year" as happiness is a low base. However I am impressed with their focus and profitability and even more impressed that they continue to attract customers even though they are charging more than A$20 in service fees on domestic fares. Their TSA technology is great at aggregating different carriers into a screen but it is still based on the same pricing and availability as going direct to the supplier or any of the other aggregator technology sites (travel.com.au and flightcentre.com.au for instance), none of whom charge anywhere near $22.75 (service charge on today's search on Webjet). The airlines charge nothing beyond credit card fees and travel.com.au and flight centre are in the A$6-7 range. I don't begrudge Webjet charging whatever they want but am impressed/amazed that customers are paying it.

2 comments:

Carl said...

Nice post Tim.
I personally, have given up on Webjet. My reasons are threefold:

Why pay $A20 when I don't have to? Ok, Webjet is convenient (the airline matrix is pretty cool) but with a little time and research, the same flight can be booked directly with the airline 'for free'.

I thought I was getting a good deal on the fare by booking through Webjet...
In fact, the two flights I booked (Qantas) were exactly the same price as what Qantas were offering i.e. there was no discount to be had by booking through Webjet.

Webjet fees to change a flight really hurt...
If I had booked through Qantas, it would cost $A44 to change a flight. Webjet charge $A68 for the same service. So, having two one-way flights to change will cost me A$136 (plus the fare difference, if any).

At the end of the day, what I am looking for is 'Budget travel'. Mr. Clarke, Webjet's MD has been quoted as saying that "People don't care about service charges...". Well, I do.

Tim Hughes said...

Carl

Thanks for your comment - I agree with you. Webjet should be congratulated for sensing the need for a aggregator model with Qantas, Virgiblue and Jetstar switching so much of their inventory out of the GDS and onto web only channels. They did this first and they did it with good technology. However they woke up to find that there was no commission to be earnt from this model so kept ratcheting up fares - it seems without limit or planning. So far it has worked, the customers keep booking. But I expect that all customers will eventually react as you have done, especially as Travel.com.au, Expedia and Flight Centre (and maybe Zuji but they are out of the race) continue to improve their aggregator engines and charge a third less. Just like they spotted the need for an aggreator first Webjet need to spot this coming wave of customer unhappiness and change their approach.