Is HNA the answer to Virgin Australia's fleet puzzle?

By David Flynn , June 30 2016
Is HNA the answer to Virgin Australia's fleet puzzle?

As Virgin Australia aims to spread its wings overseas, Chinese conglomerate and new partner HNA Aviation could step up to the plate with additional aircraft to expand Virgin's international fleet. 

Earlier this year HNA, which ranks as the largest private operator of airlines in China, bought a 13% stake in the Qantas challenger for A$159 million, with scope to extend this to almost 20% as part of an A$852 million capital boost from key Virgin shareholders.

Much of the discussion around HNA's involvement in Virgin has centred on the importance of the Chinese travel market to Australia and the opportunities this joint venture will open up.

Virgin Australia expects to launch daily flights to Beijing and Hong Kong from mid-2017 as part of the HNA alliance, although the airline is yet to confirm which Australian city (or cities) would anchor the two new services.

Read: Virgin Australia plans daily flights to Beijing, Hong Kong

Virgin's flights would run on an Airbus A330-200, which Virgin Australia CEO John Borghetti describes as being a perfect fit for the route.

Planning ahead...

"The A330-200 is perfect for China, particularly the northern part of China" Borghetti told Australian Business Traveller during a media briefing earlier this month.

"When we initially got the -200s for domestic we did so with a view that we needed them for transcontinental flights but at some point we would need international coverage in Asia, the best A330 for that would be the -200 because it has the range... the A330-300 can't quite make Beijing."

While Borghetti says that "yes, we will categorically fly to China with the Virgin brand," he allows that HNA – through its part-ownership of Hainan Airlines and Hong Kong Airlines – may chip in on one of the two routes.

"Whether it's all Virgin Australia aircraft or not, let's see how that works out. It will be a joint operation, and that's what's important."

Even so, there are obvious questions over the impact of effectively removing even one of Virgin's six A330s from the domestic roster.

The jets, which all sport Virgin's newest business class, are primarily dedicated to the competitive east-west routes of Sydney-Perth and Melbourne-Perth in a fierce battle against a re-energised Qantas and its own A330-200 jets, all of which will have been upgraded with a new lie-flat business class seat within the next few months.

A fresh fleet?

This is where the many arms of HNA Group comes into play.

HNA is the world's fourth largest aircraft leasing company, having earlier this year bought out international aircraft leasing firm Avolon Holdings in a deal worth US$7.6 billion to merge with its existing leasing business Hong Kong Aviation Capital.

This opens the door to Virgin Australia leasing aircraft from partner HNA, beginning with Airbus A330-200s, so as not to crucially reduce capacity on the competitive transcontinental route at the same time as Virgin expands into China.

Beyond a short-term boost to its A330 fleet, and further down the track, HNA's Avolon could smooth the path towards Virgin's choice of its next-generation fleet – a decision repeatedly cast as being between the Airbus A350 and Boeing 787.

"As you go into the 2020s you're obviously looking at what equipment can you bring on, and we haven't made that decision yet" Borghetti says, although he's spoken particularly well of the Airbus A350 in the past.

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David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

28 May 2016

Total posts 128

VA need to take quite a few of HNA's a330's should they wish to launch international services with their own metal AND stay semi-competitive on the domestic front with widebody flights.

At very least they should take the amount of aircraft required for the international flights so that they do not have to take any aircraft away from PER runs. 

It would be even better if they took additional a330's to add to the PER runs. While putting a330's onto MEL/SYD/BNE (triangle routes) didn't work for VA in the past I think that if they had more slack in the fleet it could work and make them a tad more competitive with QF.

Hopefully VA get some more a330's they need them 

31 Mar 2016

Total posts 644

"VA need to take quite a few of HNA's a330's should they wish to launch international services with their own metal..."

Not really.  Per current known VA int'l expansion plan, only a daily HKG and PEK frequencies will be added.  It means, e.g., no more than 332 x3 will be needed to maintain daily rotations on BOTH routes...possibly just a pair is needed if using a W-rotation pattern e.g. Airframe 1=HKG->SYD->PEK->SYD->HKG(Total time just under 48hrs) + Airframe 2=PEK->SYD->HKG->SYD->PEK(Total time same as Airframe 1).

"At very least they should take the amount of aircraft required for the international flights..."

Which can be as few as 2 airframes to cover both HKG and PEK daily.

"..so that they do not have to take any aircraft away from PER runs."

Which is precisely what VA has already done with EXISTING 330 fleet size by using its offpeak/wkend surplus capacity for PER runs to fill peak/wkend capacity gap for NAN route.


Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

I would see removing A330s from the trans continental routes as disastrous for VA, seeing as this was a major part of their rebranding from Virgin Blue.

 

06 Jan 2015

Total posts 69

Would need more a330 frames I would suggest. If they did remove them from the Per routes then that would be reason enough for me to switch back to Qantas, I'm sure many others would agree.

22 May 2015

Total posts 13

I would be the first to jump ship. Even the old A330 business seats, whilst not perfect, did provide good comfort and privacy. I would not be flying trans-continental in business class on a 737 considering it costs the same as flying in the ‘business’

31 Mar 2016

Total posts 644

"I would not be flying trans-continental in business class on a 737."

An outdated notion which conveniently ignored the increasingly common practice for carriers outside AU mkt to install J on 757/737NG/320Ceo families with the same/similar stds(e.g. flat beds...sometimes even with direct aisle access for every seat) as the J on longhaul widebodies.  A few examples which may be relatively unknown to AU domestic J pax:  JetBlue's Mint J product on 321, UA's J on Trans-Atl 757, BA's J on some 321 for Central Asian routes, NH's J on 737 for NRT-BOM, QR's J on 320, etc.

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

FLX, please... 

We are not in North America, we are talking Australia.

Compared to the A330 business product, I too would be very reluctant to fly business on a 737.

31 Mar 2016

Total posts 644

"We are not in North America..."

Did not know LHR-Central Asia by BA or NRT-BOM by NH or DOH-Europe by QR has anything to do with "North America"....interesting geog perspective.

"...we are talking Australia."

And therefore J innovations in narrowbody ops occuring elsewhere cannot be applied in Australian domestic mkt?  When VA invented the idea to put flatbeds in J on widebody for AU transcon trunks, did U also think VA was inspired by existing J products only WITHIN Australia @ that time?

Chris_PER, please........outside-the-box thinking often drives innovations in this industry.

20 Feb 2012

Total posts 65

While I would love to see QF/VA to install better business class on their narrow bodies, I dont think anyone has flat bed horizontal seats on a 737.

NH's 737 mentioned above is angle flat, QR's A320 is wider and only 1 of the configurations has flat bed seats. All other's are A321/757 which are wider airframes and neither QF or VA use.

I certainly think that it would make commercial sense on the longer routes such as PER-SIN but obviously that would make interchange of aircraft much harder.

31 Mar 2016

Total posts 644

"I don't think anyone has flat bed horizontal seats on a 737."

Absolutely correct but it doesn't mean technically, it can't be done.

"NH's 737 mentioned above is angle flat..."

Not even that.  It's just a recliner with very deep recline(i.e. more recline than the last J designs on QF/VS domestic widebodies)

 "QR's A320 is wider..."

Than a 737 cabin...by less than 7in.  Too small a diff to prohibit installation of flatbed in J customized for Boeing narrowbody dimensions such as those already in service for yrs @ UA's Trans-Atl 757 fleet.  757 and 737 hv exactly the same cabin width.

"..only 1 of the configurations has flat bed..."

But that 1 configuration dominates 320 fleet @ QR especially those deployed on EU routes.  Anyway, the point is that flatbed in J for 320 family already exist and therefore possible for easy adoption by other 320 operators.

"All other's are A321/757 which are wider airframes..."

"wider" may be only in your mind/visual perception which often fool unsuspecting pax.  May be helpful if U check their actual cabin width specs again.  Shortcut to tech fact:  Max cabin width of 321 /757 exactly equal that of 320 /737.

"...would make commercial sense on longer routes such as PER-SIN but obviously that would make interchange of aircraft much harder."

"harder" in what sense?  Not sure what do U mean by "interchange" but I assuming U meant fleet rotation across the network, how about a 24hrs rotation pattern for each 737 airframe such as MEL->PER->SIN->PER->SYD in which every domestic or int'l sector already has mkt demand for flatbed J?  In fact, I suspect that's more or less how QF has been rotating its current 737s on PER-SIN route.  Besides, neither QF nor VS ever has a problem with specific cabin config on part of their fleet dedicated only on transcon trunks to/fm PER.

31 Mar 2016

Total posts 644

"If they did remove them from the Per routes....sure many others would agree."

Agree: If removing all 330 fm PER routes.

Disagree: If removing only some of all 330 fm PER routes.  Capacity dumping depressing yield & load factor on domestic transcon trunks has been a major problem for both QF & VA. 

Virgin Australia - Velocity Rewards

25 Jul 2013

Total posts 56

I am a little confused about all the subsidiary companies within HNA Group... can someone clarify? There's aircraft leasing and airline operations, anything else? Thanks!

PS- Yes would be great to see some more A330s in the Virgin Aus fleet

22 May 2015

Total posts 13

Their website states their main businesses are leasing, insurance and trust etc. It has traditional and innovative financial services such as securities, banking, futures, fund, investment banking, insurance and wealth management. They also own hotels and manage a dozen airports too.

They are huge in every way.

Virgin Australia - Velocity Rewards

25 Jul 2013

Total posts 56

Thanks for this

31 Mar 2016

Total posts 644

HNA Aviation, 1 of 5 main divisions within HNA Group, fully or partially own 19 airline brands(Each with its own AOC) worldwide:  11 in China, 2 in HongKong, 1 in France, 1 in Turkey, 2 in Africa, 1 in Brazil and VA.  Among them are 2 cargo carriers and 4 LCCs.

The aircraft leasing biz(4th largest in the world) is under HNA Capital, another division within HNA Group but naturally, work closely with HNA Aviation.

31 Mar 2016

Total posts 644

"..also own hotels and manage a dozen airports too."

In the travel-related sectors, HNA Group also fully or partially owns a whole bunch of large travel ageny networks across mainland China which can easily serve to suck in loads of Chinese travellers heading to AU....

United Airlines - Mileage Plus

29 Jan 2011

Total posts 159

WIth VA planning on operating to HK next year, I wonder if it will then allow travel to LHR via HK by connecting to the daily Virgin Atlantic service

31 Mar 2016

Total posts 644

"With VA planning on operating to HK...wonder if it will then allow travel to LHR via HK by connecting to....Virgin Atlantic."

Theoretically, how can this be not "allow" to happen?  I don't think anyone can stop U from doing it even if it means, e.g., hanging around @ the departure/transit zone of HKG for 12-18hrs between 2 'Virgin- branded' longhaul flights.

On the other hand, it's a completely diff story whether any codesharing will exist between VS and VA or if their flights will be timed for reasonably short connection @ HKG.  My bet is negative re both.  1st of all, AU mkt is no longer a strategic focus for VS ever since DL own a large chunk of VS.  2ndly, VS and VA each will hv only 1 daily @ HKG so unless they Arr+Dep @ almost exactly the same time slot @ HKG, a reasonable transit/layover duration will be impossible in both directions.  Besides, I bet U VA's schedule priority @ HKG will be chosen to, if possible @ all given slot situation @ HKG, match a wide array of HX/UO flights to/fm China & N.E.Asia.

31 Mar 2014

Total posts 334

*you, not U. Why put in so much effort to your post but then continually be lazy with one word

Singapore Airlines - KrisFlyer

17 Nov 2014

Total posts 98

If HNA starts providing planes for VA for their Hong Kong and Peking route, then how about for SIA to provide some of its retiring A330s to operate their Singapore route too?

Looks like Virgin Australia is running into a bit of a mess with so many major shareholder playing with it.

I think SIA's A330s are A330-300s, and all of them are leased so SIA can't simply turn them over to Virgin.

31 Mar 2016

Total posts 644

"...SIA's A330 are A330-300s, and all of them are leased..."

Absolutely correct on both counts.  In fact, these leases are  designed to begin to expire precisely when 359 in regional config + 78J start to enter service with SQ per SQ longterm fleet  plan.

333 fleet in SQ has always been a stop-gap /bridge between 777 Classic retirement and 350/787 service entry.

31 Mar 2016

Total posts 644

"...how about for SIA to provide some of its retiring A330s to operate their Singapore route too?"

Must be news to U that SQ strategy/intention re VA has been precisely the biggest obstacle for VA itself to launch SIN....

Do remember that Virgin has 40 737-8 MAXes on order. Are they all going to replace 737-800s? I don't think so (40 isn't enough to replace Virgin's whole fleet, and Virgin didn't take any options). I think some of them could be used as A330-200 replacements on the Transcon and Pacific Islands/NZ routes if they were stocked with a proper widebody-grade product. Use a modified version of BE Apex for "The Business" (8 suites should be enough), maybe put 8 or 10 Premium seats if there's a market, and the rest goes economy.

This would generally free up the A330-200s for use on Asian routes, and allow more frequencies with The Business on transcon routes.

31 Mar 2016

Total posts 644

"...Virgin has 40 737-8 MAXes on order.  Are they all going to replace 737-800s?"

U bet.

"I don't think so (40 isn't enough to replace Virgin's whole fleet..."

May be the CapEx budget/funding @ the time only allowed VA to place initial deposits+progress payments later for 40 to replace the oldest 40 in VA 737NG fleet?  Last MAX delivery to VA is scheduled to be completed by End 2021...precisely 10yrs after VA signed up for MAX which is also a typical major CapEx  budget plan duration for large corps.  On the other hand, there're 737NG x74 in VA fleet today.  34 of them are under 4yrs old and will still be under 10yrs old by 2022.

"..and Virgin didn't take any options"

I doubt it.  VA has never used-up all of its options+purchase rights for 737NG which no doubt hv been converted to cover MAX now.  Besides, U've forgotten that VA can lease MAX if desired just like it has been doing for yrs for some NGs in its fleet today.

"...some of them could be used as A330-200 replacements...if they were stocked with a proper widebody-grade product."

Following worldwide trend re premium cabin on narrowbodies, I predict @ least some of VA's MAX fleet will be configured with flatbed in J in 1-1 abreast layout mainly for transcon trunks.

Qantas - Qantas Frequent Flyer

10 Apr 2012

Total posts 304

While i'm majority QF when flying international, i do hope VA do take up more metal and fly international to provide some competition, as competition is great for the consumer.  What i hope doesn't happen is they become a "virtual" airline, just only codesharing on other airline's metal... nothing annoys me more than codesharing.. If i wanted to fly a certain airline, i would book them direct.

31 Mar 2016

Total posts 644

"What I hope doesn't happen is they become a virtual airline, just only codesharing on other airline's metal"

Which is precisely what SQ has always wanted VA to be in terms of int'l ops...VA codeshare on SQ metal for all routes to/fm SIN and beyond.  It's also precisely the opposite of what HNA Group needed fm VA....HNA brands codeshare on VA metals for key routes between Greater China and AU.

"..nothing annoys me more than codesharing..if i wanted to fly a certain airline, I would book them directly."

Sounds great in theory but often complicated+limiting for consumers in practice.  Unfortunately, a single operator alone often cannot take pax to every destination worldwide they need to go or for the departure timing /connection time reduction they prefer.  If an itin involves multiple carriers /connections, codesharing save consumers from the time-consuming process of booking+managing multiple independent tickets.  It may be annoying for some but a necessary evil to enhance customer convenience+choice  especially for complex itins.

Qantas - Qantas Frequent Flyer

10 Apr 2012

Total posts 304

Understand the economics of codesharing, just wish some airlines did a better job at displaying and acknowledging a codeshare flight... have had flights where even the display boards dont show the codesharing flight and staff unaware their flights were codeshared... makes it really hard to find which flight/gate you are suppose to be at...

31 Mar 2016

Total posts 644

"just wish some airlines did a better job at displaying and acknowledging a codeshare flight...."

Clearly, not all code-shaing ops are created equal @ least in terms of the pax experience aspects.  Naturally and from what I hv observed personally, code-sharing tend to work far better under a JV than when it's not.  E.g., this is why when some folks here claim they can book a QF ticket to Europe by connnecting on a codesharing flight operated by EU carriers @ SIN(instead of the dreaded EK+DXB combo), I always hv doubt about how  smooth such itin works against a QF+EK JV itin....

31 Mar 2016

Total posts 644

Ever since the VA+HNA tie-up were annnounced and folks on this website questioned how VA will find airframes to launch HKG+PEK, I've already commented wks ago, on essentially the same prediction stated on this article today.  I even included detailed explanations on how & why HNA can help VA in terms of fleet.

My comments were probably considered off-topic @ that time by the comment section administrator though.....

31 Mar 2014

Total posts 334

Good for you...

Removing the A330 metal to only international and away from a lot of domestic routes will make Virgin less of a desirable option. The A330 product they have on refurbished planes is sublime but reverting them to a 737 for a 4-5 hr journey from Sydney to Perth or a Melb to Perth will make Qantas an easy winner. I'm not one for a 5 hour cramp :S

08 Aug 2013

Total posts 14

The distance between Sydney and Beijing is 8943 kilometers. The A330-300 has a range of 11,300 kilometers. Therefore the 300 has the range to fly the route. 

 

31 Mar 2016

Total posts 644

"The distance between Sydney and Beijing is 8934 kilometers"

That's the straight line or great circle distance which often differ fm the total mission distance planned by operator per the actual established airway/corridor+enroute way points being assigned by ATC.  Worst of all, significant portion of SYD-PEK involves a section of Chinese airspace that is among the most congested in N.E. Asia. and prone to detours often instructed by the Chinese military @ last minute notice....in PRC, over 95% of the airspace is effectively off-limits to any civilian traffic so in reality, Chinese ATC only has few civilian corridors to play with.

31 Mar 2016

Total posts 644

"A330-300 has a range of 11,300 kilometers."

1.  That range is known as the manufacturer's nominal range(a.k.a. brochure/catalogue range) based on manufacturer's nominal cabin config/seat count with zero Rev$ cargo in the belly.  All these hv little to no relevance to the actual route/mission planning by an operator re the range limit of a 333 with a cabin config actually used by a real airline intending to carry real payload.

2.  11,300km range is only applicable to the latest 333 weight variant(MTOW=242ton) which debuted in commercial service only fm May 2015(1st airframe was for DL).  SQ fleet has 333 x28 and only 3 of them were delivered after May2015 but I doubt even these 3 airframes are built per 242t specs because SQ fleet plan never envisioned 333 to go beyond 8.5hrs sector....let alone 12hrs for SYD-PEK.

"Therefore the 300 has the range to fly the route."

Yes, it can in theory but not in practice....don't we all wish actual airline mission planning for a type is as simple as comparing the distance on a map against the airplane specs on a mkting brochure?

When a 333 operator start to load Rev$ cargo load into the belly to make a flight actually econ sustainable(Common these days for widebody ops), it must also start to ditch fuel load fm the maximum limit.  As a result, actual range limit will start to drop dramatically per its technical payload/range chart.  At full pax+cargo load, the general rule-of-thumb is that a twin engine widebody will loose @ least 30-35% of its brochure/nominal range.  For a 242t variant 333 @ full payload, it'll run out of fuel well over 1,000km before it reach PEK fm SYD.

Qantas - Qantas Frequent Flyer

28 Feb 2014

Total posts 146

I could be wrong but I dont think the flights would be coming out of SYD, it's definitely got enough frequencies between SYD-HKD but PEK could happen. BNE could work as CX has a pretty terrible non-stop depature time of 11:30pm and doesn't have a direct flight to PEK which a flight with an Australian carrier could attract some customers... maybe? MEL could work for both HKG and PEK (More PEK, as QF 29 has become a 747 on certain flights). ADL I just dont see happening. PER... Hard to say.

Air New Zealand - Airpoints

21 Jan 2016

Total posts 195

I would say, that VA will  use A332 to HKG/PEK leased from HNA aircraft leasing company., since they are using the A332 on SYD/MEL/PER routes. 

By doing this, it is part for VA fleet 'standardisation' policy anounced some time ago, to reduce operating costs. 

I am still of the opinion the route structure is going to be SYD/HKG/PEK, as SYD is VA major hub for domestic, trans tasman and pacific services.

22 Jun 2016

Total posts 16

As as mentioned, BNE to HKG and PEK seem the best option for Virgin, slotted at respectful times of departure and arrival would take a lot of pax from CX and also QF on the HKG route, and open a new BNE to PEK option.

FLX, do EWE see an opening for an A332 Neo for VA? A good low cost replacement for their wide body fleet me thinks.

Virgin Australia - Velocity Rewards

26 Feb 2016

Total posts 101

BNE has a far distance between domistic and international terminals, which is always frustrating when I transfer at BNE. The free shuttle doesn't help too much.

VA runs the same-building transfer at ADL, PER and MEL, which are much more convenient than transferring at SYD or BNE.

31 Mar 2016

Total posts 644

"...an opening for an A332 Neo for VA?"

There's no such thing as an A330-200 Neo.  The 330 Neo program in development now contains 2 main variants:  330-900(1st to enter service) and 330-800.  I believe U're talking about the 338 which has exactly the same dimensions as the 332 Ceo except wingspan.

"A good low cost replacement for their widebody fleet."

The good re 338 @ VA:

a) Likely the cheapest nex-gen widebody by far not only for customer to buy(i.e. deep discounting) but also for Airbus to develop(i.e. relatively low development cost which enable deep discounting in the 1st place).

b) Except engines+wing tips, huge commonality with 332 already in VA fleet.  Little transition cost.

The not-so-good re 338 @ VA:

c) Doesn't really resolve the 77W part(Nearly the same fleet size as 332's) of the VA widebody fleet  replacement question.  Lesser payload/range than 77W and a far smaller usable cabin floor area even if VA accept a degree of  downgauging.  Larger sister 339 is closer in size to 77W but won't hv anywhere near Trans-Pcf nonstop range.

d) Commonality advantage with 332 easily neturalized by going with a single 787 or 350 family which include variants closer in size+payload/range to replace both 77W AND 332 in VA fleet today.

c) 338 is much more fuel efficient than 332 @ VA today but still less efficient than the LEAST efficient 787 or 350 variant.


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