Qantas - Qantas Frequent Flyer
Member since 04 Nov 2017
Total posts 96
Like in the Qantas forum, I'll start this thread.
There's been many articles in the Media suggesting that VA may not likely survive in July. The Bloomberg article (27 March 2020 - Author: Anurag Kotoky) for example suggests Virgin Australia is 7th most at risk of filing adminisration in the next 12-24 months.
As we know, there is no "white knight" possibility for VA, despite the numerous "'so-called saviour' SQ to the rescue" fake news articles over the past 5 years.
As we know, HNA and EY were basically in 'bankruptcy' administration before the crisis hit, and SQ recently raised 'bailout' money from their government owned parent to pay off their rising C-19 debts. So for those shareholders, their priority is to keep themselves afloat (or avoid liquidation in HNA's case).
So what are the possibilities for a 2nd competitor in the Australian market post COVID-19?* will VA survive in a smaller form (e.g back to their LCC roots and being domestic only competing against JQ for example)* will VA file administration and interested investors pick up VA's assets (737s) at a 'liquidation sale' to form a new company?* or will it be largely a QF monopoly with independent regionals (REX, Alliance, AirNorth, etc) partially funded by government loans?
Member since 01 Nov 2016
Total posts 146
The current climate provides Virgin a perfect opportunity to re-shape, re-focus and re-align their business. A domestic only airline I feel is the best and safest choice. International routes can be served through their code-share arrangements with partners including Delta, Singapore Airlines, ANA and Etihad. The losses have been mounting and the history of short term international flights to Johannesburg, Abu Dhabi and most recently Hong Kong build a case to really knuckle down and focus on a core domestic business.
Member since 30 Mar 2020
Total posts 1
Do you think Velocity points are still safe? Should I transfer to Krisflyer? After losing hundreds of thousands with Ansett, I do not want the same to happen with VA.
Virgin Australia - Velocity Rewards
Member since 05 Sep 2013
Total posts 77
Firstly, I hope Virgin Australia survivors. There is a way, but, there will be a lot of work ahead for Virgin to stay in business. Let's straight away admit that Virgin is in a tough spot, it hasn't made a profit in a while, but it is crucial to the Australian economy that we have two competitive proffiable airlines.
I will breakdown my thoughts and hopes into categories under two key sections (Organisation and Consumer):
Business strategy: Firstly, I would expect Virgin to pivot toward a 737/777 only strategy. I would expect that we will see some international network flights disappear (particular to some pacific destinations like Port Moresby (I believe that its average occupancy is around 50%)). I would expect that Virgin will change focus to a “cost leader position” vs the 2011 policy of being a full fare flagship airline like Qantas to go after more corporate/government contacts.
Fleet: I would expect that Virgin will keep their Boeing 737 and Boeing 777. There Airbus fleet of A320 (TT & VARA) and A330 will exit their fleet. Virgin Australia Regional Airline's Fokker 100 could also exit there fleet and be transfer to possibly Alliance. Fleet simplicity is the main goal here.
Future Fleet Order: I would expect that there 737MAX will be postponed till later in the decade. There future widebody fleet and the replacement for there 777 will also be postponed. It will probably be the 787 if they keep the 737MAX i.e. one supplier of parts and aircraft. If they get rid of their 737MAX order, Virgin possible could order the A220 as a replacement for current 737's. It's the right size aircraft for Australia but high cost to switch group to new fleet type. And I am not shore that parts for the A220 are easy and reliable to come by i.e. the reason why the e190 left the fleet.
Next EBA: I would expect that the next Virgin Australia enterprise agreement will have two key focuses: 1) Simplicity (i.e. make a simple corporate structure) & 2) Cost cutting (i.e. pay cuts for curtain employees and less variance in pay scales)
International Network: We will see some short hall international flights be cancelled all together or reduce frequency and capacity to meet demand. New Zealand flights will continue but will be operated by cheaper New Zealand based crew. Some Kiwi routes will be reduced over the short term. Bali flights will be defiantly reduced in short term. Pacific Islands I would only say that Nadi (Fiji) is the only destination that will be guaranteed to survived, all other destinations will see capacity reduced if continued at all. I do not expect that Virgin will be launching any destination in Asia for a while. Tokyo flight will be trilled, if Virgin can see profits on the route I would expect that Virgin will buy/lease a second hand 777 for the route. If not their Aus rights at HND will go to Qantas and Brisbane will lose their HND flight and Qantas will operate HND flight from MEL and SYD.
Key Shareholders: I would expect that Singapore Airlines and Virgin Group (UK) will keep their stake, beyond that it depends on how thing go with COVID-19. Etihad's strategy of acquiring stakes in airlines has not proven a winning strategy, and with no Aussies in a leadership positing it's solely a business decision now. Chinese shareholders: who knows, HNA isn't in a good place and could be taken over by the state and Nanshan Group might change stratagy too. Delta might buy a stake but not unless they see a pathway to profitability.
Tigerair Brand: my thoughts are quite simple, it will be disbanded. There is too much baggage with the brand in Australia. The brand has ceased to exist in Singapore too (now a part of Scoot). To compete with Jetstar, Virgin will launch Basic tickets (i.e. nothing but a seat and tax fare) a la US airline strategy. Virgin hasn't let tiger grow, as it would take money from Virgin's mainline business. The two brand strategy (i.e. full fare and LCC strategy) hasn't worked for other airlines (besides Qantas) so it probably won't work for Virgin Australia too.
Reginal Network: being blunt it probably will reduced. I would expect that Virgin could continue Regional flights via a franchise system similar to reginal airlines in the US or Europe where smaller airlines operate flight at a cheaper cost to the parent airline could do in-house. This could be done by Alliance or other partner airlines. Alternatively Rex could become a feeder airline to Virgin. They already has an agreement but more cooperation and shared ticket sales with Virgin would be needed. Virgin would need to exit the regional market for Rex to come to the table and become a Virgin Exclusive regional partner airline. ATR aircraft could be transfer to Rex or Alliance to operate on Virgins behalf.
Contracts: Most key supplier contact will be renegotiated to get a better price for Virgin and contactors will probably want payment upfront due to all the rumours of Virgin's demise.
Business travellers: I would expect that most large companies will be looking to see if all current travel is necessary. With Covid-19 more people are working via web chat etc so some demand will be reduced. I am shore that some companies would be worries that Virgin goes bust and might be shifting contact negation to Qantas. Capacity cuts will be needed over the next 5ish years.
Leisure travels: like business travel will reduce and with capacity cuts costs per ticket will probably go up too.
Staff: simple: pay cuts or loose job. Hopefully most will keep jobs but non-essential staff might be outsourced too.
FIFO and other contacted flight: will be reduced as Fokker aircraft and A320 aircraft exit the group's fleet.
Foreign Crew: I would expect more foreign crew (in New Zealand and US) will be hired especially if cheaper than Australian flight crew for flight to and from the States and New Zealand.
Automation: It is inevitable that Virgin will be looking to reduce costs particularly from non-essential employees. I would guess that we could see Virgin transition to a completely self-service at check-in and bag drop model. In Scandinavian airports it's pretty common that the entire proses in automated from check in to boarding the aircraft. I would also expect that Virgin would create a way to print bag tags at home (at least for domestic flights shouldn't be a problem). Priority maned desk should be scrapped too, but a better strategy to identify priority baggage will need to be introduce. Additionally new self-service option could be introduced to self-manage guest problems. In times of disruption new self-service option could be introduced too i.e. cancelled flight and more.
Catering in flight: it's currently a mess, you get a free snack or meal on some routes, some drinks are free etc. There are three strategies that I can see Virgin moving into for its short haul fleet: 1) a buy on board menu with a voucher for selected airfares (i.e. Flex get $20 flight credit) with free water only for all. A improved menu would be needed (i.e. simplified with less boutique brands and at a cheaper price point). 2) A free on board model a la Southwest where all drinks are free but alcohol for a fee and only one sweet and one savoury snack are offered and no buy on board menu. 3) full fare meal option a la Qantas.
Lounge: I would expect some cut backs at existing lounges. I would expect that alcohol and food choices will be reduced over the short term. It wouldn't surprise me if they offered more paid entry options like priority pass. Also I could see a possible future where Virgin sold or contacted out there domestic lounges. I would not expect that Virgin will be opening new lounges (sorry Hobart) or conduct major refurbishment over the next few years.
Cleaning: Current improved cleaning due to Covid-19 will definitely continue as people will not feel safe over the short term without it.
New Fare types: I would expect that Virgin will create a new fare structure i.e. economy basic ticket introduced with no baggage.
Inflight entertainment: content could be reduced over the short term and new distribution deals will be renegotiated.
Inflight Wi-Fi: free Wi-Fi will be reduced but inflight Wi-Fi will continues as travellers shift to expecting it.
Star Alliance, Oneworld or Skyteam: Star alliance: is unlikely due to ANZ will veto Virgin joining Star alliance. OneWorld: Qantas will veto too. Skyteam: possibly but cost associated with joining might mitigate benefit to joining alliance.
I'm shore that there will be plenty of changes in the future let's hope that Virgin Australia survives. Stay Safe.
Member since 01 Mar 2012
Total posts 203
It's the perfect opportunity for the CEO to mould the airline faster than he could have dreamed. The hint was in the interview that he gave to/ was reported by AusBT, where he said that it will come back different. I expect a lean and mean carrier, it will be efficient, maybe Domestic only but also maybe with international that is underpinned by strong codeshare capacity agreements. I don't think it will go under, if they start to loosen the ropes for domestic travel in a few months time, they will be well positioned to get moving quickly.
Member since 26 Mar 2020
It will take a long time for confidence to be restored. Meetings, conferences now supplanted by work from home necessity. New methods of working suggest that supply will significantly outstrip demand well into the future unless consolidation takes place. Virgin Australia has no future. The 737 Max debacle does not help fleet renewal and creates another barrier for consumer. Gov't intervention unlikely. Any subsidy or loan arrangement needs to go to Qantas. There is no room for competition theory in this new environment. It becomes a pragmatic solution for Aussie air travel requirement where cost mechanisms will decide usage. VA must be allowed to go to the wall. There is simply not enough Govt cash to go round when whole of Aussie economy needs a bail out...
Member since 16 Dec 2016
While I agree that having 2 domestic airlines is good for consumers and the country, I do not want my taxes to go to bailing VA out. John Borghetti and his Senior Management team put ego ahead of fiscal responsibility and transformed in the wrong way. No one here should forget how disciplined Qantas has been in cutting its cost base and investing in the things that customers appreciate. Virgin Australia shouldn't have been responding to Qantas' actions but rather should have been doing this kind of disciplined restructuring before the next head wind. While no one could have anticipated this kind of world event, aviation is always impacted by crisis and a successful airline needs to be prepared for that. While it would make me sad to see VA disappear, if they cannot survive without the Australian Government injecting cash and taking a share then it should fold. It is essentially owned by the Governments of Singapore, UAE and China so if they can't find cash to save it why should the Government prop it up?
Member since 27 Jun 2013
Total posts 72
Perhaps Australia (and NZ) is just too small for two domestic airlines to operate profitably and sustainably?
How do you overcome that in my view? Open the skies to finally allow domestic operations and terminals between Aus and NZ, and allow both airlines to operate as domestic flights in each country. So Air NZ could fly from Auckland then to Melbourne, then Perth and Brisbane before going to Christchurch. Qantas can fly Sydney to Queenstown and then Wellington and to Adelaide. Typically unusual city pairs could become possible under this scenario.
Unfortunately VA has really had its day and likely will not survive too much longer, but the addressable market between two airlines and two countries may end up being something more sustainable in the longer term after Covid-19.
Member since 24 Jan 2020
Member since 23 Aug 2019
Originally Posted by adelaide
Member since 29 Feb 2016
Total posts 26
VA will survive, because the country needs the balance of 2 competing trunk route carriers, tho I dont want to guess what form that will take. Tiger to go ? Likely - Velocity sold off ? Possibly - Intl program scrapped ? Likely, but subsidised Pac Isls program to continue.
But first - before the govt steps in with a rescue package (indeed its holding back for this reason..) there needs to be a resolution of VA shareholders when they are called on to help VA. Either that or they join the creditors list, after which our govt will act..
Etihad and SQ each have 20.9% and might be judged the most liquid and unencumbered (despite EY's huge losses). So if they could buy more they might (subj govt approvl), and if they could sell with only minor haircuts they also might.. FIRB issues if they seek larger holding/s.
Then there's Nanshan with 19% and (apparently) Chinese govt supported, so it has deeper pockets than HNA Group, the other 19% shareholder and corp zombie thanks to a huge buying spree and thus huge debt.. Their VA holding could change hands cheaply, maybe to HNA ?
Branson is the last major holder with a shade under 10% and my guess is he would sell at anything close to a modest loss before he has to dig deep to help a rescue.
There will be solvency/financial experts able to explain the sequence of any credit call by VA, but I'd bet that shareholder negotiations are the first thing, and govt intervention is the last thing to happen in determining VA's future.
Yes, I do hv some VA status/points skin in this game.
Member since 15 Mar 2018
Originally Posted by ryanpst
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The future of Virgin Australia post COVID-19
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