How Virgin Australia 2.0 plans to win back business travellers

The new Virgin Australia business class experience will seek to deliver greater value driven by a lower price point.

By David Flynn , August 7 2020
How Virgin Australia 2.0 plans to win back business travellers

Virgin Australia is gearing up to re-engage Qantas in a battle for business travellers, but this time the challenger will do so on its own terms.

Gone is the approach which critics – and there were many – termed ‘Qantas Lite’.

Instead, the new Virgin will seek to define itself not against the yardstick of its foe but on what airline itself stands for: and that, says CEO Paul Scurrah, will centre on ‘value’.

It’s a welcome message for those who feared that Virgin Australia 2.0 would turn out to be more like Virgin Blue 2.0, with a relentless focus on price to appeal to the bottom-half of the market.

Instead, and ironically, Virgin Australia 2.0 seems to be more like Virgin Australia 1.x: a bug-fix with added features, if you will, rather than an all-new version.

Virgin Australia CEO Paul Scurrah: give the business travellers what they want, and strip out what they don't need.
Virgin Australia CEO Paul Scurrah: give the business travellers what they want, and strip out what they don't need.

“We’ll make some minor adjustments, but that’s based on customer feedback about what they did and didn’t value,” Scurrah said during a media briefing following this week’s effective relaunch of the collapsed airline with the backing of presumptive owner Bain Capital.

“One thing Bain are exceptionally good at is data analysis, and it’s come out supporting this business approach. When you look through the data about the profitable opportunities, that’s where they came up.”

Rebuilding a better-value business class

For Scurrah, and for Virgin’s high flyers, this means the essentials will remain in place. “We will have a strong corporate offering, a two-class cabin, a network of lounges and the tiering and perks that come with tier status will continue and be enhanced.”

“Our problems weren’t about the investment that we’ve made in that part of the business,” he reflects.

“The problem was about onerous contracts and a complicated fleet – and when you look through the data about where the profitable opportunities were, that’s exactly where they showed up.”

Simplifying that fleet to the workhorse Boeing 737 – even if it means giving up on the Airbus A330’s superb business class and handing Qantas a massive advantage in the east-west market – is the lead-in to a lower cost base, which will, along with other cut-backs, provide Virgin with more flexibility in sharpening its overall business class package.

Scurrah has sacrificed the Airbus A330s, and their flagship business class, in the name of a simpler Boeing 737-only fleet.
Scurrah has sacrificed the Airbus A330s, and their flagship business class, in the name of a simpler Boeing 737-only fleet.

“We had the opportunity to reset some of the onerous costs we had on us, which gives gives us the opportunity to significantly lower that cost base without bringing the product down-market,” Scurrah says.

“We’re not doing that – we’re going to have a very low cost base, with a very strong high-quality value offering to corporates – a very good value but good-quality product."

It’s that price-versus-product ratio where Scurrah wants to find the sweet spot, although inevitably it means undercutting Qantas, which in turn brings the risk of sparking price war if Qantas – always dominant in the business and corporate travel space –  chooses to defend its own line in the sand.

It also means there’ll be some changes in the Virgin Australia business class experience, too.

"We will be making some changes to the product that we have own board,” admits Danielle Keighery, Virgin Australia's Chief Experience Officer, “but we will be focussed on things that people really care about… we think some of them will be changes for the better for customers.”

Why Virgin needs the business traveller

Business travellers won’t lose out on lounges, business class cabins or the frequency of flights on all-important and highly-profitable Brisbane-Sydney-Melbourne triangle, and it's not just because, as Scurrah put it, "we were not about to create a business airline monopoly" by giving Qantas sole access to that segment of the market.

As it turns out, Scurrah will need business travellers, because – as was argued by his predecessor John Borghetti, when he rebooted the leisure-focussed Virgin Blue as the full-service Virgin Australia – the leisure market alone is not enough.

“Having a base load of business traffic where you’re covering capital cities at a high frequency is very important… it’s high yielding and it’s more reliable (than leisure traffic).“

"If you look at where it made money, it was in the domestic network, particularly driven by corporate travellers."

Most of Virgin's lounges will re-open as demand returns, the airline says.
Most of Virgin's lounges will re-open as demand returns, the airline says.

But on the long slow road back to normal – or whatever the new normal will look like – those business and corprorate travellers will be more driven by price, and hence 'value', than before.

"In the post-Covid world we know the economy is going to take a while to recover, particularly business travel budgets will be impacted, and people will be looking more than ever for value in their business travel as well," Scurrah predicts.

"So our lower cost base and a stronger balance sheet gives us the opportunity to provide the best-value business option in the country."

“We all know coming out of COVID every single business is going to be looking at value, where they can ensure costs remain low and we’re going to be the best value airline," Keighery echoes. "That’s the positioning we’re taking, being the best value.”

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.

19 Jun 2020

Total posts 13

finally some sense, it was always about the bad contracts and never about business class or business customers - by providing a reasonable offer to business clients who travel frequently as do their staff, Virgin will get my custom and for all those who seem to want to see the club closed down , hopefully Virgin will see this segment of their market as essential in keeping regular business bums on seats

QF

11 Jul 2014

Total posts 488

Did you always say that was common sense

26 Jul 2015

Total posts 52

I was always a fan of VA Business class (well, except for the food, which sometimes left a bit to be desired), especially the flight attendants. I found them just about always to be amongst the best in the world. So, I'm looking forward to getting back into the air with them.

P1
P1

24 Apr 2017

Total posts 57

the hard product is what could have been the differentiator for them. Sticking with an old/tired B737, especially for business class, makes them a NOGO for me in the future, regardless of how good the attendants are.

05 Mar 2015

Total posts 108

I'm curious, P1, what sort of B737 business class do you think Virgin should have? And do you really think the cost of having those seats tested and safety certified, fitting them and all that, would make sense when the busiest VA route will be SYD-MEL which is 90mins and the second busiest SYD-BNE will be about the same? I'd rather Virgin keep its current B737 business class seats, although it'd be nice if they all had AC power sockets, and work to get the price down and keep it down, not just do a one-off sale at $400 and then slowly jack the price back up again.

09 Dec 2015

Total posts 8

Why not throw a 777 Or two out there on the east west route... would make it a little more interesting!! Full international class seats in all classes etc .

20 Jun 2020

Total posts 11

You'd never get the load factors to be economical

There's no way you could get enough passengers to make the economics of that work. If it was economical, I'm sure Virgin and Bain would already be all over it like a rash.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 241

As mentioned by others, won't work for the same reasons why QF putting an A380 on TransCon doesn't work.

Qantas - Qantas Frequent Flyer

21 Jul 2014

Total posts 144

Remember when they ran the 747 Transcon that was fun

Qantas - Qantas Frequent Flyer

31 Jan 2016

Total posts 79

Yep, good fun the first few times upstairs in J, then the pain struck, stuck next to a drunk American, on the red-eye...yay...!!!

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

Is that comparison appropriate DanV or are there other reasons? Just curious. Thanks.

After reading ET's excellent wrap-up on Wednesday and now this more business class focused story, I am becoming cautiously optimistic about VA2 and it's approach to the business travel market. As much as I liked the Luke Mangan meals for example you simply don't need the overhead of a 'name' chef. I'm sure there is a lot which Virgin and Bain can do to further bring costs down, along with the airline itself being 'right-sized' as they say, and also without distractions like Tiger and with the cost benefits of a smaller single-type fleet. If Virgin can keep the basics of business class and successfully translate 'value' into a much cheaper price than Qantas, eg $500 SYD-MEL instead of $800, they will win my business.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

I think if they open The Club Lounge to Platinum and Business Class flyers (maybe give VFF Gold 4 access passes per year), they can then leave Qantas to the corporates and worker ants who have to fly with whom their P1 bosses tell them to fly. That way, those of us who retain discretion over who we fly with will go with the better value proposition.

But this is certainly exciting news David, thank-you.

20 Oct 2015

Total posts 69

The Club's not large enough to be the Virgin equivalent of a Qantas Business Lounge, it couldn't handle business class passengers and Platinums. I'd make it business class only, maybe give Platinums a few lounge passes each year. But if Virgin keeps The Club as a VIP tier then there won't even be room for Platunums with a lounge pass.

QF LTG

29 Feb 2016

Total posts 21

Virgin Club for Plats who are flying Biz... thats how to narrow that one down !

AT
AT

Qantas - Qantas Frequent Flyer

14 Sep 2012

Total posts 310

Your airline would be bankrupt on day 3.

30 Aug 2018

Total posts 9

I am glad Bain is providing some insights that VA executives didn't seem to grasp in the past. While I am very sorry to see one-thrid of employees will be asked to leave, I look forward to an energised VA 1.x and fly with them again.

05 Mar 2015

Total posts 108

I agree, Virgin used to seem driven by Qantas, now it seems to be looking at sensible business decisions and what makes sense for Virgin and its target audience.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

Hopefully Bain will seek out and fire 'dead wood' and 'empty shirts' in VAs executive ranks.

Qantas - Qantas Frequent Flyer

25 May 2017

Total posts 74

Interesting announcement. I do hope it works for VA. It sounds like Star Class is what we will end up with. As long as it is appropriately priced it will be successful. QF has the jump all over VA re how they reward and value Platinum QF Members, VA will never come close to the offering. Interesting times when the borders are relaxed. I suspect the competition will come from JQ as it has been rumored for some time they are looking at introducing a domestic business class. Good luck to VA!

Qantas - Qantas Frequent Flyer

21 Jul 2014

Total posts 144

A domestic J would make sense for their plans for the A321LR

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 241

Jetstar already announced the A321LRs will be all-economy, only with extra legroom seats for some Economy rows (mainly the exits and bulkheads)..

Qantas - Qantas Frequent Flyer

22 Nov 2019

Total posts 39

Very much looking forward to a possible status match for QFF Gold and Platinum/ 1's, I will certainly take up the offer, I think this is exciting, if Business class fares are capped at $399 each way Melb - Sydney / Sydney - Brisbane they have a new customer here.

A bonus would be Star Alliance membership.

05 Mar 2015

Total posts 108

Virgin did a very popular status match against Qantas back when it relaunched as Virgin Australia, I wouldn't be surprised to see this repeated, although I think it would make more sense for Virgin to offer a 'status challenge' where you might get Gold or Platinum for a short period but you have to fly with Virgin Australia to keep it for a full year.

20 Oct 2015

Total posts 69

Actually Virgin has something just like that right now, it's called Pilot Gold. They could just add a Platinum version. But I think Virgin could actually ignore Qantas Golds for a status match, the ones who fly a lot of domestic business class would be Platinums and those are the people Virgin wants.

Fully agree. I'm a reluctant QF Platinum FF and would jump across to Virgin if they offered.

Thai Airways International - Royal Orchid Plus

15 Jan 2013

Total posts 303

250 people is a lot to get off one aircraft on any shorter sector.to quote ansett from the 80's when it was targetting the then taa a300 airbus but modified virgin has wisely chosen to go with a bunch of smaller boeing 737's.our planes get the number down to as little as 180.

But the disembarking time problem shouldn't be about the aircraft....it's about using front AND rear exit which some airports don't seem to allow ?

Virgin Australia - Velocity Rewards

24 Aug 2011

Total posts 762

Absolutely. QF tried this in early 2000s, remember the "Cityflyer" A330s which were supposed to own the triangle? Didn't work , they couldn't turn it around in 30 minutes. BNE/SYD/MEL/ADL combinations need to be turned in around in 30 minutes or less for best utilisation.

Get used to 737s for the near to mid future. The world has changed.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

As I recall, the Cityflyer service was very, very good. Particularly on the BNE-MEL sector which I flew at least on a monthly basis over circa 2 years (within 1999-2001).

20 Oct 2015

Total posts 69

Virgin should look at trying to attract regular business travellers by selling a 'flight pass' of say 10 SYD-MEL flights for $5,000, that works out to $500 per flight, much cheaper than the usual business class fare and they get the money up front and they also stop that person flying with Qantas because they have already 'bought' the tickets with Virgin.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

I think it's a bit premature for Virgin 2.0 to be asking for that much trust. Better to keep their eyes low and make tomorrow's flights a truly pleasurable experience, from the moment of arrival at the terminal door (i.e. check-in), through the lounge, onto the plane and out the other end.

QF

11 Jul 2014

Total posts 488

Good idea from the old days, buy 10 tickets at a time.

Qantas - Qantas Frequent Flyer

31 Mar 2016

Total posts 9

At the moment it is all speculation and selling the dream of how it is going to be returning to normal. I think there are delusions with the VA Execs and their recent press statement which is just full of head in the cloud management speak. Slowly they will keep cuting away behinds the scenes. It is time for a big clean out of the top.

Maybe I'm being glass half empty but I suspect many of us are in for a big re-adjustment of the flying experience for the next year ot two...

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

All right then gents .... Oh my , look at the time, why it's Beer O'Clock. Who's shout ?

QF LTG

29 Feb 2016

Total posts 21


'whose'... shout. Sorry, occasionally I turn into apostrophe man..

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

Come in Spinner (there's always one in the crowd) ... get your wallet out - you're buying!! :-)

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 174

Finally happy to hear about company's direction straight from the source. Puts a lot of the armchair warriors on here these last few months to shame. I.e. VA can't compete with QF, back to virgin blue, VA the will be the ghost of ANSETT MKII. Get everyone's entitled to an opinion and heres my final say - stick to what you know, caus clearly some of you have no idea..and still don't.

17 Apr 2020

Total posts 4

Virg8n ticketing is all electronic. Hard to see how that could incorporate the book of 10 tickets into their automated revenue accounting. It's good in theory but would be a retrograde step to start accepting paper tickets.

22 Nov 2019

Total posts 3

As only an occasional recreational traveler, I would like to see Virgin business in the air irrespective of the doo-dah. I don't care about a Luke Mangan meal or whatever. Wife and I fly to Hobart twice yearly and just want to have comfortable seating. I'm sure we can survive for a couple of hours without a feed. Used to fly Qantas but found the Virgin experience on the last couple of lights to be better. It may be a little while before we can get down to Tassie but it's likely we'll use Virgin again.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 328

You're quite right about celebrity chefs being paid HUGE bucks just to compose a menu thats then left to ESs and SCs to implement. I'd rather they engage last 3 placegetters from Master Chef TV series and have them rotated each month. They'd be cheap(er) and keener to impress you and I. Coupled with occassional ad hoc appearance in J Class to discuss their meal selection, wine matching, feedback - would be truly special and well received. Best publicity imaginable.

Virgin Australia - Velocity Rewards

30 Oct 2015

Total posts 57

Until they reopen lounges, this little VA platinum is off to Qantas...... VA have a very long way to earn my trust back. Still have $9K credits that was for US flights - while they are only domestic, forget it.

Virgin Australia - Velocity Rewards

24 Aug 2011

Total posts 762

VA2 will need some new stock photos.

22 Sep 2017

Total posts 35

Business volumes (travelling for business, not necessarily business class) won't go back to anywhere near pre-covid levels. The big corporates are revising their travel policies to save money and the environment and promote more family-friendly and flexible work practices. Smaller businesses now have the tools to have productive remote meetings, whereas many never got around to looking into the technology previously.

Because the virtual alternative has become so much better and widely accessible, the physical option of flying needs to be more convenient and comfortable than ever before. The old single-day trip between east coast cities seems strange in retrospect. Who would get up at 6am and spend 7 hours in total travel time, just to attend a couple of hours of meetings?

The whole process needs to be comfortable and productive, with minimal time shuffling around and queueing. WiFi needs to work from the moment you sit down in the plane. As mentioned above, boarding and deplaning needs to be efficient. Carry-on baggage has to be priced to avoid overfilling, and enforced for hassle-free boarding.

22 Sep 2017

Total posts 35

I'd also like to see someone try a 5-across premium economy in the 737, but I know I'm dreaming there.

21 Apr 2019

Total posts 1

From my experience Business Class in VA and QF has been consistently very good. The service in VA and promptly getting your food is smooth and sophisticated. QF style is cumbersome and antiquated by comparison.I hope VA does not go over to USA style nothing in J/C. Although Virgin America had a tiny tasting plate on short haul and was pleasant and probably lower cost.

XWu
XWu

09 May 2020

Total posts 94

All quiet on the bondholders revolt and court actions. 

Probably will not affect Bain’s ownership of VA at the end, but considering so many ET articles in the past 5 months were written on so little known, it is surprising not much hadn’t been written so far 

Perhaps a VA-ownership news fatigue?

24 Oct 2010

Total posts 2405

Hi Xwu: we've actually written some coverage of that today, you'll find it at https://www.executivetraveller.com/news/virgin-bondholders-head-to-court-to-keep-airline-in-australian-hands. 

Virgin Australia - Velocity Rewards

17 Nov 2017

Total posts 2

Would love to see a synopsis of the research that they keep alluding to.  I participated and it would make interesting reading to see how they have interpreted the results.


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