Koala Airlines aims to compete with Qantas and Virgin

A new budget airline is set to disrupt Australia's competitive aviation market, but an expert warns there is no guarantees the carrier will last.

Koala Airlines is laying the groundwork for its launch, aiming to disrupt the long-standing duopoly of Qantas and Virgin in the Australian aviation market.

CEO Bill Astling has not yet confirmed when Koala will launch, what routes planes will fly, or who his investors are, but he is confident it will succeed.

In contrast, industry experts are skeptical about Astling's optimism, especially given the failures of other airlines, including Rex, Bonza and Ansett.

'At the moment, we don't know a lot about their business model, so it's a bit early to understand what's setting them apart,' explained aviation expert Keith Tonkin.

'Personally, I don't have any high hopes given the recent history with Rex and Bonza.

'It seems as though a lot of people will be relatively sceptical and hesitant to book tickets, but we definitely wish them every success, because we like competition, and we like people to have a go in the industry.'

'We look forward to seeing where they want to fly to and how often and how they serve as the customer, and that will really help to understand if their business will be sustainable,' he said.

'There's a very strong presence of Qantas, Jetstar and Virgin, and they own about 90 per cent of the market so that's a pretty big barrier to entry for airlines.

'And the other barrier for them is those two airline groups have got a very significant proportion of frequent flyers on their books, I think Qantas have around 16 million frequent flyers and Virgin has about 12 million.

'That's a very large customer base to overcome.'

Mr Tonkin said if Koala learns from Bonza and Rex's mistakes, then it might fare better.

Koala has stated that it is interested in flying larger 737-type planes, which Mr Tonkin said suggests that it is eyeing popular routes between capital cities, which can be highly profitable for airlines.

If Koala wanted to compete here it would need to run a tight ship, cutting prices and keeping on schedule, Mr Tonkin said.

'If a new airline wants to operate on those trunk routes, then it needs to have a product that is equal to the others or substantially different at a better price point, and make sure that aeroplanes are taking off and landing on the schedule that they publish, so that people have confidence in their service,' he said.

One unique point of sale for Koala is its flight cancellation policy, where passengers whose flights are cancelled will get a full money-back refund instead of airline credit.

Mr Astling said the customer's fares will be put into a trust account until their plane takes off, and if it does not, then the money is sent straight back to the customer.

Mr Astling's work in aviation began in 1977 and he said that watching other companies try and fail to get a foot in the door has taught him a lot.

'They think they can beat the two airlines ... and [that] the only way they're going to beat them is by lowering the fares,' he told the ABC .

'Well, that's never worked, and it probably never will.'

As for specifics on what Koala will do to penetrate the market Mr Astling said it will fill 'niches' but refused to specify what they might be.

'We are just not prepared to give away what our strategy is and allow competitors to be able to think: "Right, well, we can work on this or work on that."'

Nine out of 10 domestic passengers currently fly with either Qantas and Virgin and their most profitable domestic routes are between Sydney, Melbourne and Brisbane.

Rex tried breaking into the 'golden triangle' in 2021 but faced immense challenges until it was forced to go into administration with about $500million in debt in July.

A similar fate met Bonza in May when insufficient cash flow and funding prevented it from continuing to compete, its administrator said at the time.

More than 300 staff were sacked overnight and thousands of travellers were left stranded after the shock news was announced in early May.