Virgin Australia will revisit its orders for the Boeing 737 MAX as the airline seeks to right-size itself out of administration and back into the air.
"Our future fleet considerations going forward will be something that's hotly discussed through the administration process," remarked CEO Paul Scurrah, who will remain at the helm of the challenger airline while a team of appointed administrators chart a new flightpath for a clutch of cashed-up suitors.
Virgin has signed up for 25 of the top-end 737 MAX 10 with deliveries from July 2021, and 23 of the entry-level 737 MAX 8s from February 2025, in a deal worth US$6.17 billion at current list prices – although airlines typically enjoy a steep discount of 40-60%.
One of Scurrah's first calls in taking over from John Borghetti in March 2019 was to push back hand-over of the first Boeing 737 MAX from November 2020 to July 2021.
Over 12 months on, the Boeing 737 MAX remains grounded by global authorities worldwide while the coronavirus has decimated demand for air travel, causing airlines around the world to park almost two-thirds of their fleets.
"My view is that you're going to see a fair lull in the world for the demand for narrow-body aircraft for some period of time, so we are watching that closely," Scurrah said in a press briefing following the airline's move into voluntary administration, which is an Australian equivalent of a US Chapter 11 bankruptcy.
"We have indicated to Boeing that we want to talk to them about that. They've got a lot on their plate at the moment as you can imagine, but our future fleet considerations going forward will be something that's hotly discussed through the administration process."
Virgin's back-and-forth on the Boeing 737 MAX
Virgin Australia has already rejigged its Boeing 737 MAX book five time since placing the initial order in July 2012.
The airline planned to use the 737 MAX 10 on "slot-constrained airports" such as the packed Sydney-Melbourne corridor, which rates as the world's second busiest domestic route, as well “important business routes” like the premium-heavy 4-5 hour transcontinental trek between Australia's east and west coasts.
The 737 MAX 10 was most recently seen as launchpad for Virgin's next-generation business class, reportedly a fully-flat bed which Borghetti promised in July 2017 would deliver a "quantum leap in domestic business class", replacing Virgin's fleet of Airbus A330s when those jets spearheaded an ambitious but now-aborted expansion into Asia.
"I'd say everything we've done product-wise has not been half-baked, and we would not put a product on transcon that was not up to scratch," Borghetti told Executive Traveller at the time.
Incoming CEO Scurrah put Borghetti's 'Perth product' on the back-burner and by some reports sent it back to the drawing board.
“We will have very capable aircraft coming into the fleet with the MAX 10 and we will be considering what the cabins will look like, and have the balance of great seat, great service and great economics,” he told Executive Traveller in December 2019.
Leased Airbus A330s could be sent back
However, Virgin's Airbus A330s could also be for the chop. All six of the twin-aisle cruisers are leased from US firms at what's said to be overly-expensive rates, and the administrators are empowered to break those leases.
Four of Virgin’s fleet of five Boeing 777s are owned by the airline, but could be sold off or mothballed until the airline was ready to remount international flights.
However, Scurrah – like former CEO John Borghetti before him – has also voiced his belief that the airline should move towards a single model of twin-aisle jet rather than split its relatively small fleet across two types, noting in February this year "there are far better options out there which we are exploring at the moment."
The airline's report for the July-December 2019, published in February 2020, stated that a wide-body fleet review was underway, with "significant cost savings available from next-generation aircraft."
However, the shape of the new-look Virgin Australia which will be paraded to potential buyers is far from in sharp focus.
For the Virgin Mk II fleet, everything's on the table
Addressing speculation that Virgin Mk II could have a vastly reduced fleet and headcount, fly to fewer destinations, or axe international routes to become an entirely domestic airline, appointed administrator Vaughan Strawbridge of Deloitte said "all of those things will be put on the table."
"What we are focussing on during this process is to create as much optionality as possible," Strawbridge explained.
"Obviously we will look through the operating structure of the business, the asset structure, the lease structure and see what we can do to help position the business to be more profitable going forward. That's what we will do, but we want to create as much optionality for interested parties as possible."
Scurrah still sees "a role for some international flying", as done by some A330s and all six Boeing 777s
"One of the things that we did learn through the process of talking to our existing shareholders, through them doing the assessment on us and potential new shareholders, is that the plan we had going into COVID-19 was the right plan. We didn't trade our way into this problem, we had our oxygen supply completely cut off."
"So that is the plan that I've put to Vaughan, but ultimately what we do in the future will be a decision for those who buy us."