Yes Australia is about to get a brand new airline and it’s going to be called Koala Airlines.
But even before they’ve taken off the odds are stacked against them and I’m going to tell you why.
Koala Airlines have announced they’re launching soon in the historically challenging Australian aviation market with the objective of “redefining air travel”, which is great right? We need a shake up of the Australian aviation market to get away from the duopoly of Qantas and Virgin, to give customers better routings and fare options.
But will Koala Airlines provide that shake up? And what makes this attempt on the Australian market so unique? Where will they fly, and how will they compete against the big names like Qantas and Virgin?
Who are Koala Airways?
Koala Airlines is a Melbourne based airline and is hoping to succeed in the notoriously perilous aviation market here in Australia. It was formed in 2018 through the acquisition of charter and air tours company Desert Air Safaris Pty Ltd, a company founded in the 1970s which used to fly DC-3s on tourist missions around Australia. They’d been operating for over 50 years in Australia and the wider Pacific Islands region before being acquired by Koala Airlines.
A management team is in place with the founder of Koala Airlines Bill Asting running the company as CEO. The rest of the team is slowly being put together but includes Phil Le Liu on the Board of Directors and Sally Spring MBA as COO.
What routes will they fly, and with what aircraft?
Little is known about the routes that Koala Airways will fly but their website does mention flights between state capital cities and between capitals and nominated regional centres which is still pretty vague but does make you wonder if they’ll take on Qantas and Virgin for the major routes such as Syd-Mel-Bris, the same routes that Rex tried and sadly failed to deliver on.
According to the images on their website the aircraft they’ll be flying will be the 737 Max 8, the same as the Bonza fleet.
Why are the odds stacked against Koala Airways?
It’s long been evident that sustaining a competitive alternative to Qantas and Virgin in the Australian market is hard. Just look at two recent examples, Rex and Bonza. Both offering jet travel in Australia, both showed a lot of promise, but both struggled and eventually failed to maintain their foothold in the Australian market.
Rex, known for its strong presence in regional Australia with its fleet of Saab 340 turboprops, made a bold move by entering the major city routes in 2021. They leased Boeing 737s and launched services between key cities like Sydney, Melbourne, and Brisbane. This was a significant shift for Rex, aiming to compete directly with Qantas and Virgin on high-demand domestic routes. Initially, it seemed like a well-timed decision. Australia was coming out of the pandemic, and there was a pent-up demand for affordable air travel.
But the moment Rex announced these new 737 routes, Qantas and Virgin were quick to retaliate. They began aggressively cutting prices on the exact routes that Rex was targeting. We saw the emergence of an intense price war in early 2021, where one-way tickets between Sydney and Melbourne were released by Rex at prices as low as $49. Virgin Australia responded by matching the $49 fare but then Jetstar, owned by Qantas, came out with a $44 fares between some major cities.
Qantas and Virgin, with their deep pockets and established infrastructure, could afford to temporarily slash fares to defend their market share. Rex, on the other hand, struggled to maintain profitability at those rock-bottom prices. While customers enjoyed cheaper fares, it put enormous pressure on Rex’s bottom line.
Then there’s Bonza, which had an even more ambitious plan: positioning itself as a truly low-cost carrier focusing on underserved regional and leisure routes. The airline aimed to create a unique market by connecting cities that weren’t typically served by the major carriers. Bonza’s fleet of Boeing 737 MAX aircraft offered increased fuel efficiency, and the airline introduced a quirky, customer-centric brand that gained a lot of attention in our media at the time of launch.
However, despite its innovative approach, Bonza also faced hurdles. Australia’s aviation market is notoriously difficult for smaller, niche players to survive in, given its vast distances and relatively low population density outside of major cities. Bonza’s business model relied on tapping into an untested demand for regional connections, which didn’t materialise as quickly as expected. In addition, fuel price volatility and operational costs hampered Bonza’s ability to keep fares as low as they needed to be. In the end, the lack of consistent demand and competitive pressure from larger airlines led to their struggle.”
In both cases, Rex and Bonza were forced to reduce their ambitions. Rex has scaled back its 737 operations and focused once again on its regional routes. Bonza, meanwhile, is reevaluating its strategy and trying to regain footing in a very challenging market.”
So, what can Koala Airways learn from Rex and Bonza’s struggles? Well, it’s clear that entering the Australian market isn’t easy—especially when the legacy carriers like Qantas and Virgin have such entrenched advantages. The lesson from Rex and Bonza is clear: in the difficult world of Australian aviation their strategy and execution need to be spot-on, because Qantas and Virgin are more than willing to fight to protect their territory.
Will Koala Airways succeed in Australia?
History has shown that launching a new airline in Australia is no easy feat. Ansett Australia, Tigerair, Bonza, Rex’s have all tried. But Australia is massive, and we have a small population, meaning that operating costs can get very high with small passenger numbers. On top of that, Qantas and Virgin have well-established networks, large fleets, and powerful loyalty programs that make it difficult for new entrants to lure away their customer base.
It’s also a good thing that we’re seeing more companies coming in to challenge Qantas and Virgin. Monopolies, or even duopolies, aren’t good for consumers in the long run. More competition could push fares down, improve service, and give Australian travelers more choice. This pressure could force the bigger airlines to innovate and keep their fares competitive, which ultimately benefits passengers.
I for one am excited to see a new company throwing its hat into the Australian Aviation ring. Challenging the big players is a good thing and we’ve be at the mercy of two powerful airlines for a long time now. The road ahead will be a complicated and turbulent one for Koala Airways but I wish them luck and along with the flying Kangaroo we’re very used to, I look forward to seeing some flying Koalas in our airports one day in the future as well.