What is the future of Virgin Australia?

41 replies

DownSouth

Member since 23 Oct 2014

Total posts 5

Nice piece CityRail.

Some points
1) No new service (HKG) will make money from day 1, especially when the big guys react as they have time and time again, new entrant = dump capacity.
QF = 330-380, CP 330-777. Not the only factor driving decision but no doubt it’s part of the intent.
70% LF from startup is extremely good ESP considering the VA 332 has close to the 333 seat count of northern airlines. Similar pax loads then.

2) Its not all about pax loads, freight contracts could be extensive (and they prob are with HNA investors)who knows..

3) transcon they may go 737-10 and have 10-14business sleeper beds to replace 330, the varient has don’t been disclosed.

4) Skyteam and ANA tie up ideal.

5) domestic onboard catering in Y VA have stated is there focus to improve.

JBL

Member since 01 Jun 2016

Total posts 27

My best guess, as I've said before, is the following

Trans Tasman/NZ


Following the NZ breakup, once the 737 MAXs start coming VA will put TT on the lower yield trans-tasman routes and potentially domestic with the old VA 737s. They will likely also develop a relationship similar to JQ/QF with lounge access, at least across the Tasman. There are gaps for VA/TT to exploit. For example, WEL has no intl budget flights except to the Gold Coast.


I could also see VA cooperating with partners to fill the widebody gap. They already have SQ flying MEL-WEL. Perhaps EY could be convinced to fly a fifth freedom to AKL with the planes they have on the ground all day on the east coast.


East-West


VA are going to pull more A330s off. I know from that the flatbed 737 seats are in the works, but have been delayed. I'm imagining they will come with the 737 MAXs. I could also see these flatbed MAXs go trans-tasman also, as a long-haul narrow body subfleet.


Hong Kong/China


There have been suggestions by CAPA that with HX entering the London market it will be likely that an agreement will be formed between HX/VS and possibly even VA. I could see a Virgin Kangaroo Route developing, with a comprehensive schedule between Australia, Hong Kong and Europe. HU would potentially also be incorporated into the agreement. VA will commence BNE-HKG and possibly PER-HKG. HX will possibly serve secondary Australian destinations. There's talk of them flying to CBR atm.


Considering VA intend to fly to (most likely) Beijing, this would provide a two hub model where passengers connect through HKG for the primary destinations that HU can't get into, and through PEK for secondary European destinations. The only problem I see with this is SQ and EY will likely object, but they do not form a majority shareholding.


Were this to happen, VA could potentially be pulled into closer cooperation with Skyteam and the massive agreement between VS/DL/AF/KL which would be pretty big for intra European connections. But this point is much more speculative than the rest.


*WLG


And there is no way Etihad will start fifth freedom flights to Auckland. Emirates have pulled off the highly competitive Tasman, bar SYD/CHC and Etihad are stripping back routes overall.


Emirates pulled off for a number of reasons. While the yields were too low, there were also the factors that the A380 was too much aircraft, they now operate a direct DXB-AKL service and I imagine QF wanted a bigger piece of the trans Tasman pie.


Conversely Etihad is the only one of the ME3 with no direct service to AKL, they have 787s sitting at MEL and BNE which are much more appropriately sized than the A380, and I'm sure that VA would be appreciative of widebodies to pad out their schedule.


You're right that Etihad are cutting back at the moment, and it was only a speculative comment. But it does also meet the strategic needs of VA, which now only have a widebody codeshare MEL-WEL.

Last editedby JBL at Jul 31, 2018, 01:50 PM.

StuParr

Virgin Australia - Velocity Rewards

Member since 01 Mar 2012

Total posts 201

So many variables here, so much also depends on the new CEO and also the shareholding of HNA plus SQ and EY. I think that VA needs to go 'private' and take itself off the ASX and into 100 percent private ownership, which would not be hard to to because the free float is tiny and the share price is a pittance. This reduces some costs and eliminates the exposure of reporting and all the related coverage. In a perfect world I would like to see SQ take over VA, with VA wound back to being a domestic airline apart from LAX flights, and VA joining Star Alliance.

Problem is that VA has since made enemies of NZ and UA in Star.

NZ and UA would use their veto to block VA's application into the Star Alliance. SkyTeam is Virgin Australia's only Alliance option available to them. SQ is going to have to live with it should they chose not to exit VA, as SQ and UA aren't exactly best buddies either.


Also there's the DL elephant in the room and they haven't ruled out buying a stake in the future (and basically turn VA into a feeder for DL & SkyTeam with the only Int'l being USA and NZ).


VA and DL have been BFFs since the late Virgin Blue days.



What I have learnt is that when you have a change of CEO there is a change in relationships with your partners. While at the moment the relationship with UA and NZ is bad, it could always be rebooted. Commercial opportunity usually trumps egos ( well it should), so anything is possible.

BJ01

Virgin Australia - Velocity Rewards

Member since 07 Dec 2015

Total posts 56

So many variables here, so much also depends on the new CEO and also the shareholding of HNA plus SQ and EY. I think that VA needs to go 'private' and take itself off the ASX and into 100 percent private ownership, which would not be hard to to because the free float is tiny and the share price is a pittance. This reduces some costs and eliminates the exposure of reporting and all the related coverage. In a perfect world I would like to see SQ take over VA, with VA wound back to being a domestic airline apart from LAX flights, and VA joining Star Alliance.

Problem is that VA has since made enemies of NZ and UA in Star.

NZ and UA would use their veto to block VA's application into the Star Alliance. SkyTeam is Virgin Australia's only Alliance option available to them. SQ is going to have to live with it should they chose not to exit VA, as SQ and UA aren't exactly best buddies either.


Also there's the DL elephant in the room and they haven't ruled out buying a stake in the future (and basically turn VA into a feeder for DL & SkyTeam with the only Int'l being USA and NZ).


VA and DL have been BFFs since the late Virgin Blue days.



I just can't get excited about VA in SkyTeam. Am I the only one? They just don't have a group of member airlines (apart from DL) that I travel with or have a huge desire to travel with nor is it an alliance I have ever 'connected' with unlike Star and One World.


If VA went to ST and that resulted in the alliances with SQ and EY being significantly watered down or removed, I am not sure I'd stay.
For me, Star bring much more to the table but can see the challenges there too.

If Star was off the table, I'd prefer they absolutely nailed the alliances they have to deliver a more consistent, simple and reliable experience for their FF base. If that meant removing some of them to do this, so be it. 

Jon W

Member since 25 Feb 2013

Total posts 6

I hope they move into an alliance. I think the relationship with SQ (which would probably be the only block) is solid enough to survive a SkyTeam move (at least in the sense SQ wants a non-QF partner in Australia it has some control of, unless it is allowed to operate domestically which is not on the cards). ST would offer some real decent options, I think ST get a bad rap. I think having DL on board would help make VA presence in ST stronger than VA presence in *A could ever be.

One thing I think VA has done poorly is work on its non-capital routes. It had great reach in many places, but has palmed them off to Alliance (they should have at least required VA branding for the Alliance contract, the current arrangement gives no VA presence at all). It had a great USP in the WA regional sector, but it let that slip. It had great and unique routes like SYD-MKY that no-one offered, were immensely popular but it let that slip (they claimed low numbers - but I never saw a flight anything less than chockers - I suspect it was a casualty of getting rid of the Embraers).

I get the bigger capitals and the golden triangle is where the numbers are, but it is also where the competition is. I hope that moves like the new PER-HBA are the sign of things to come and they will develop an interesting and comprehensive domestic route map.

VA have an incredibly strong Pacific network compared to most. I'm honestly surprised that they never leverage this more than they do. If I were VA I would strengthen this and build a hub out of AKL to service partners on these routes (e.g. DL, HNA, SQ etc) as well as build business from Australia.

xtfer

Virgin Australia - Velocity Rewards

Member since 14 Mar 2017

Total posts 158

Skyteam.

It has a great network, generally pretty good airlines, excellent availability for rewards et al, and VA would slot right in.

Madhatter49

Virgin Australia - Velocity Rewards

Member since 11 Dec 2016

Total posts 73

Skyteam.

It has a great network, generally pretty good airlines, excellent availability for rewards et al, and VA would slot right in.

Hopefully. So long as the QF tie up with AF doesn't cause a problem with Skyteam. Should be interesting.

14AspenDrive

Member since 19 Jan 2018

Total posts 5

Dont discount Qatar...If HNA & Branson sell...which is very very likely...to the Qatar Sovereign Wealth fund which owns half of London...Harrods,The Shard..then Etihad will jump at the chance to get out and not have another Alitalia on its hands...then SQ will get out but codeshare. Qatar has realised their vulnerability after UAE/Saudi blockage. That they have amazing hard/soft product and heaps of dosh should scare the hell out of Qantas.Syd/Mel/Bne to Perth on a A350-900 in a Q Suite anyone?????

moa999

Qantas - Qantas Frequent Flyer

Member since 02 Jul 2011

Total posts 835

I think delisting is difficult as it removes some of the 'grandfather' structure that enable VA to operate internationally (while not being majority Australian owned).


Personally i think a rebranding of both VA (remove Virgin and it's royalty payment) and Tiger (given it no longer exists in Sing) would be sensible. Virgin no longer has cachet in my view.

While I don't think an alliance is necessary they do need to do more to make things more consistent (lounges, SC earn and points redemptions)

Red Cee

Member since 15 Feb 2018

Total posts 151

Virgin have a great Pacific Islands network, serving locations that Qantas doesn’t. They also have a much better service to NZ than Qantas. They should utilise and expand on these.

aklrunway

Qantas - Qantas Frequent Flyer

Member since 09 May 2011

Total posts 176

Virgin have a great Pacific Islands network, serving locations that Qantas doesn’t. They also have a much better service to NZ than Qantas. They should utilise and expand on these.

Much better service to NZ than Qantas?


Qantas has widebodies on the Tasman, has more flights, has a fully lie flat business product (A330), offers full service in economy to all customers and has Jetstar to feed from other NZ cities and soon Air NZ. Please explain how Virgin has a “much better service to NZ”?

nix584

Virgin Australia - Velocity Rewards

Member since 10 Jan 2012

Total posts 106

IIRC, Virgin operated domestically in NZ in the past, when they were Virgin Blue.

That flopped, as did QF domestically in NZ, so they rolled back to JQ because nobody needed premium on a flight that was no longer than 1:20 (AKL-CHC), realistically. JQ have only just moved in on the Regional routes, and other competitors in the regional domestic space have flopped as well, from Ansett, and Qantas NZ,

I think someone pitching for CEO, pitching Domestic in NZ will guarantee their future not being behind that desk.

But I could be wrong.

AKL-ZQN is scheduled at 1:50, flight time can be longer due to WX in both AKL and ZQN, though I get the gist of what you're saying.

DanV

Qantas - Qantas Frequent Flyer

Member since 04 Nov 2017

Total posts 84

Dont discount Qatar...If HNA & Branson sell...which is very very likely...to the Qatar Sovereign Wealth fund which owns half of London...Harrods,The Shard..then Etihad will jump at the chance to get out and not have another Alitalia on its hands...then SQ will get out but codeshare. Qatar has realised their vulnerability after UAE/Saudi blockage. That they have amazing hard/soft product and heaps of dosh should scare the hell out of Qantas.Syd/Mel/Bne to Perth on a A350-900 in a Q Suite anyone?????

Etihad is in debt themselves due to the failed Alitialia and Air Berlin investments. If EY sells out, it'll be to pay down their ballooning debt.


There's no party that's indicated that they are interested in any VA stake as of the moment, but again there are the normal two suspects mentioned due to their past comments in recent years. (SQ and DL)

CityRail

Singapore Airlines - KrisFlyer

Member since 17 Nov 2014

Total posts 78

I wonder whether SkyTeam is the preferred alliance suitable for Virgin Australia.

If Virgin Australia is to be in SkyTeam, then China Eastern, China Southern and China Airlines will need to cut ties with Qantas, so as Air France and KLM.
Would that make HNA unhappy with Virgin getting close with China Eastern and China Southern?
I think Star Alliance would be more sensible should VA is to enter an alliance, for the following reasons:
1. NZ might not veto entry of VA. From 28th October, VA and NZ still maintain some kind of interline, and if VA joins Star, then NZ wins 2 Australian airlines to feed itself.
2. UA might veto the partnership, however we might see this is unlikely to happen due to pressures from European/Asian carriers wanting access to Australian customer base. VA might still get close to DL just like how LH group ditch TG for CX Group for Australia.

charlie18

Member since 01 Aug 2018

Total posts 4

I know some of these thoughts will probably just get shut down - but I feel it is time that someone tried something drastic/out of the box. Virgin used to be pretty good at pioneering out of the box ideas (think: pay per use lounges, jets on Coffs Harbour, ADL-BME sectors in the early days?!)


Capital City Shuttle:
All 'domestic style' business class seating on the 737 back to the exit rows, with a basic economy food offering, but sold at economy prices. Aft of the exit rows, high density low cost/budget economy seats (no food, no bags etc). Incorporate Tiger into mainline, get rid of duplicate management structures etc.
Traditional Business class pax can upgrade to the first few rows for the full business silver service. Offer basic refreshments at the gate lounge (like Bangkok Airways).

Use Alliance Airlines more:
Having worked for both, theres just no question that Alliance is a cheaper beast to run. Put Alliance on all the secondary runs within that range - CNS, HTI, HBA, LST, etc
They could sell their existing Fokker/a320 fleet to alliance while they're at it - QQ seem to be keen to get their hands on every Fokker they can... Simplify their fleet at the same time.

Buy or invest in Rex:
As someone else suggested - it makes sense to me. They could transfer all their remaining ATRs to rex for a genuine turbo prop division, and slowly replace the SAABs with '42s.

Ditch long haul - ditch the widebodies:
This has never been a winner for them - its a prestige project gone bad. They're far better focusing those resources on their domestic division.

Join SkyTeam:
Star Alliance is out of the question as alluded to by others. SkyTeam has no representation here - they'd be keen I reckon.

Sort out the economy food offering:
This has long been a joke. 50c piece sized museli bars have to go. They've let the accountants run rampant here. Free soft drinks (not just tea, coffee, water, juice!). The biggest sin they've committed is marketing themselves as full service yet being so stingy.

Transition to an all A321 neo fleet:
This will give them the long haul regional capability to utilise the fleet on 1hr flights as well as se Asia.

Do more with less is what I am getting at.

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