How Qantas vs Virgin created the world's best domestic business class

This retrospective shows how hard-fought competition made Australia's business class travellers the winners.

By David Flynn, April 13 2020
How Qantas vs Virgin created the world's best domestic business class

Much has been written and said in recent weeks over the plight of Virgin Australia and its pitch for for a billion-dollar government bailout.

Both Qantas and Virgin Australia have been hammered by the coronavirus and related travel restrictions – between them, the two airlines now offer only a handful of flights – and are now in discussion with the government regarding a subsidised minimum domestic network.

When it comes to surviving a prolonged CVOID-19 shutdown, Qantas has deeper pockets to draw upon: almost $3 billion in available cash balance, boosted by a recent $1bn loan against several of its new Boeing 787-9 jets, with another undrawn $1bn on tap.

Virgin Australia, having struggled through seven straight years of losses, went into the coronavirus crisis with only $900m cash on hand – an amount which some analysts believe it could burn through in three months.

And in the context of a taxpayer-funded lifeline, Virgin also suffers from the unpopular optics of being 90% foreign-owned.

Virgin Australia CEO Paul Scurrah continues to lobby for government support, arguing that it's essential to keeping competition alive in Australia's skies and invoking the spectre of a Qantas monopoly.

Qantas CEO Alan Joyce, predictably, rails against such largesse unless it's proportionally split between the two airlines, to the tune of $4.2 billion for the Flying Kangaroo – either both airlines get something, or neither airline gets anything.

It's a complex and divisive issue, and one which Executive Traveller has not and will not weigh in on. Our editorial perspective is largely one of reporting a story and letting readers decide for themselves.

And there's a story we can report on, and reflect upon, which arguably showcases the benefits of competition.

It's the story of how the premium travel experience on Australia's busy east-west route was transformed in just a handful of years, when the arrival of Virgin Australia sparked a transcontinental turf war between challenger and incumbent.

May 2011: Virgin Australia touches down

On a crisp Autumn morning, a new airline makes its mark at Sydney Airport.

Almost a decade on from launching as a low-cost carrier, and with 36-year Qantas veteran and executive John Borghetti at the helm, Virgin Blue rebrands as Virgin Australia to go head-to-head with Qantas.

Virgin Blue's premium economy cabin is ripped out and replaced by a full-service business class to tackle Qantas’ monopoly on the Australian corporate travel market – especially the motherlode of high-end flyers shuttling between the east coast capitals and Australia's resource-rich west.

Spearheading this are the airline's first Airbus A330s, previously leased to Emirates and now decked out in not only Virgin's new livery but plush lay-back business class recliners with twice the legroom of Qantas' own A330s.

Marketed under a new ‘Coast to Coast’ brand, business travellers also enjoy limousine transfers, a coat-check service, amenity kits and premium inflight meals from Aussie chef Luke Mangan.

(Virgin's Boeing 737 business class proposition is not far removed removed from that of Qantas – in 2011, there wasn't much more you could do in a single-aisle aircraft.)

June 2011: Qantas rolls out the big guns

In response to Virgin's east-west assault, Qantas rosters one of its international Boeing 747-400 jets with many more seats – including angled flat-beds in business class – onto the Sydney-Perth route.

It's a four-hour sprint for the mighty jumbo which usually heads to Asia, Europe or the USA, with Qantas CEO Alan Joyce trumpetting “our competitors can simply not match the service that Qantas offers, particularly the Skybeds, which provide increased comfort on the longer routes between the eastern states and Perth.”

Within months, however, Qantas pulls the fuel-guzzling jumbos off the transcon trek, leaving it to a melange of Airbus A330s and Boeing 767s which have domestic-grade reclining seats.

By January 2012, barely six months into the pitched Qantas-vs-Virgin battle, average business class fares across all domestic routes have tumbled by 27 per cent.

April 2012: Virgin's A330 business class goes flat-out

Virgin Australia takes delivery of the first of six new Airbus A330s boasting even better business class seats, propelling it well ahead of Qantas' best domestic premium proposition.

The seats offer extra storage for carry-on kit, large video-on-demand screens plus AC power points and USB sockets for every passenger.

July 2012: return of the red-tailed jumbo

Qantas reintroduces the Boeing 747 jumbo jet onto its Sydney-Perth roster as a temporary bulwark against Virgin Australia's all-new A330 jets, while also moving to increase the number of its own A330 services on east-west routes.

"A range of changes, including aircraft upgrades and additional frequencies, will be made to provide greater choice and convenience for customers," Qantas says as it wheels out the big birds and the big guns. 

September 2012: A330s rules the east-west skies

Virgin Australia announces a rolling upgrade of all Sydney-Perth, Melbourne-Perth and Brisbane-Perth flights to exclusively Airbus A330s, consigning the smaller Boeing 737 jets to the remainder of its domestic network.

Shortly after, Qantas announces that will upgrade Sydney-Perth and Melbourne-Perth flights to an exclusive A330-only service by mid-2013.

November 2012: Qantas' new A330 underwhelms

A factory-fresh Airbus A330 rolls into the Qantas hangars, but the airline is hit with a barrage of criticism when it's revealed to have the same business class seat as its predecessors.

The only concession to improved passenger comfort is a plastic shroud covering the middle seat, to provide what the airline calls an 'inflight workspace' for use by passengers on either side.

Stung by the criticism, Qantas CEO Alan Joyce pledges at the airline's then-annual Christmas drinks with media that an all-new A330 business class is on the way, tipping the possibility of fully lie-flat beds.

February 2013: Qantas promises "world's best business class"

Joyce confirms that Qantas will upgrade its entire fleet of domestic and international Airbus A330s with lie-flat business class from the end of 2014.

The all-new design seats are “very exciting, there's plenty of legroom and we're very confident that they will get an amazing reaction” Joyce tells us at the time, joking that "I certainly swim in the seats given my size!”

“They'll be the best domestic product anywhere in the world, and it leapfrogs anything our competitor's doing.”

August 2013: introducing the Qantas Business Suite

Barely two years after Virgin Australia's A330 launch, Qantas reveals concept images of its all-new A330 Business Suites, which Joyce proclaims "will leapfrog anything the competition is doing, and will be the best domestic business class anywhere in the world."

The 1-2-1 layout gives every traveller direct aisle access, while the seats can adopt in a reclined position for taxi and take-off, before going into fully-flat mode.

Creature comforts include extra-large video screens, a spacious side table plus a nook for stowing tablets, laptops and magazines, and a pair of noise-cancelling headphones.

However, with the new seats not due to fly until 18 months later, Virgin Australia CEO John Borghetti hints to us that he has something even better up his tailored sleeve. "We're certainly not sitting on our hands. This is now business as usual. Product life-cycles are getting shorter and shorter and you have to plan faster and faster."

September 2014: Virgin's new business class is 'The Business'

As the official launch date for Qantas' A330 Business Suite approaches, Virgin Australia pulls back the covers on its own premium cabin power-play.

To be marketed simply as 'The Business', Borghetti touts the seat as being closer to first class than business class.

In common with the Qantas Business Suite and other next-gen business class designs, Virgin's pointy-end pew is generously proportioned: the wide seat converts to the long flat bed, surrounded by plenty of storage space, and every passenger is just one step away from the aisle.

October 2014: Qantas launches the Business Suite

Qantas officially unveils its Business Suite, ahead of a domestic debut in December 2014, with flights to Asia to follow from early 2015.

Modified, redressed and finessed by designers in the journey from drawing board to departure gate, the Business Suite will go on to adorn the business class cabin of Qantas' Boeing 787 Dreamliners and its Airbus A380 superjumbo fleet.

"This will be the best (business class) travel experience between Australia and Asia, and probably the best domestic travel experience anywhere on the globe," Joyce espouses.

August, 2015: Virgin launches The Business

Virgin Australia's flagship business class arrives on the Airbus A330, with the US-bound Boeing 777-300ERs to follow.

If the swish seats and upmarket Luke Mangan meals weren't enough, the A330s even sport a customised Nespresso machine capable of serving real coffee above the clouds, while the Boeing 777 goes one step further with an inflight bar.

Within a little over four years, fuelled by fierce competition, Australia could arguably lay claim to the world's best domestic business class.

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.

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1236

Collins Aerospace Super Diamond > Thompson Vantage XL

Virgin Australia - Velocity Rewards

08 Jul 2014

Total posts 58

A great summary, David, and I agree with your conclusion that we have (had?) the world's best domestic business classes - both QF and VA are vastly superior to most US and European carriers, in both hard and soft product. The role of competition in achieving this outcome (and in cheaper fares more generally) cannot be understated. Here's hoping that an equitable and fiscally sound solution to preserving this competition can be crafted sooner rather than later.

23 Oct 2014

Total posts 186

This article demonstrates Qantas history of putting very large wide bodies from the international fleet (747's twice) in response to competition and competitors improving hard product, and is exactly the reason a new start up entrant won't withstand a monopoly Qantas if Virgin are not supported. The market will be degraded without Virgin and for the sake of all Australian passengers no matter which major airline VA or QF - 2 strong Australia wide Airlines are essential. Without Virgin the J seats to Perth would still be the recliner Grey Plastic separator QF 330 seats at best.

If anything the article confirms that Australia cannot support 2 full service domestic airlines - Virgin strategically have made profit killing decisions and trying to compete in business class is just fools gold. Throwing tax payer money at a company that cannot even protect its shareholders money is a ridiculous proposition.

Qantas - Qantas Frequent Flyer

10 Jul 2016

Total posts 7

I'm a Qantas flyer. However, if it were not for a healthy opponent, Qantas would be much dearer and it's product no where near as good. Competition is essential. I support any competition to QANTAS.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

Spoken like an envious, if not upset, Qantas executive?

29 Jan 2015

Total posts 37

You have the completely pathetic Business Class offering of dominant airlines like British Airways in Europe as a perfect example of what you guys in Australia are in for if someone doesn't support VA. A reason has to be found. Commercial terms at some level have to be applied.

If not, then indirectly over not many years, Australians will be giving the same money it would cost to do some commercial support to Virgin now, in Business Class costs for a service that's pretty much economy with the ability to use the middle seat tray table for your drink to make room for your laptop that's jammed up against your knees.

Even the LCC Ryanair has bigger seat pitch than BA has in Y and Business on short haul in Europe now. This is what you've got coming if you let VA go. As another poster says, it will be too many years before someone else can overcome the huge barriers to entry to challenge QF domestically. So a way has to be found on vaguely commercial terms so the taxpayer is not completely ripped off.

So you either pay Vurgin now - or you'll be paying Qantas forever and for worse.

29 Jan 2015

Total posts 37

PS this also matters to families. What do you think Qantas will do to domestic Y prices for everyone as soon as they don't have anyone to compete with? Qantas prices especially close in are already eyewatering even for people needing tickets in Economy.

Yes lets throw government money at Virgin so that they can keep business class comfortable for those that end up there - the simple fact is that the Virgin chasing of the business customer is why they have become an 8 cent per share company - it was the beginning of the end and if they do somehow manage to get through this they will not be able to maintain either the business class as you see it today or the full cabin service, I'm surprised you do not understand this.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

A remarkably 'hollow' response from you. Surely you can do better?

Joe
Joe

03 May 2013

Total posts 521

Let's face it...Virgin will always be the underdog, financially and otherwise. I really don't see the point when they are bleeding money just to compete with Qantas as per the above article. Virgin need to kill off international and focus on a sustainable and profitable domestic full service fleet and service. The market is big enough. Elsewhere they are doomed. They are foreign owned so lets be fair and just; if their sponsors wanted to to save them they would / could have by now. That they haven't is telling. Sometimes I wonder if Borghetti's strategy was a teeny bit based on revenge.

Borghetti's strategy was all based on personal ego and it does prove that Australia cannot support two full service domestic airlines.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 251

Have to agree with Mitch and abr. The question whether Australia can support two full service airlines was borderline due to the Ansett era from the 80s and 90s, despite Ansett also being mismanaged over the years by US (News Corp) and NZ (Air NZ) interests.
Post C-19, it's likely Australia may not support two full-service airlines.

Can Australia support two airlines? highly likely. It's happened with Godfrey's Virgin Blue (LCC) and Dixon's Qantas (a FSC).
But can Australia support two full service airlines, post COVID-19? Sources provided so far suggests that's highly unlikely.

SQ, HNA, EY et al are more worried on their own finances and should I suggest VA's shareholders may be checking if VA isn't "trading while insolvent", because if that was the case, SQ, EY et al may get into trouble and potentially get banned from managing or being on a board of an Australian company for a number of years.

@Joe, you might get your wish of VA downsizing to a domestic carrier, but that scenario is highly likely to happen IF VA files Voluntary Administration, and re-emerges as a "VA Mk II" as a LCC. The "mk II" airline from the assets of VA may not necessarily carry the Virgin name to save $$ on licensing fees to Mr Branson.

08 Feb 2018

Total posts 97

what sources?

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

Rubbish, it does not. The article lays out a timeline of each airline competing against the other. Only you seen to resent this. I do wonder why?

23 Oct 2014

Total posts 186

I don't see your point, Qantas is over 35% foreign owned, and they sold aircraft recently to raise funds, does that indicate current Qantas foreign owners (fund accounts) have indicated they won't participate in capital raising in Qantas?

I'd say no, and nobody can say what Virgins investors have said without them saying so themselves.

I think it's best to assume the behind closed doors capital raising for BOTH airlines remain behind closed doors. And for now that's where they should stay, rather than debated in public forums.

abr
abr

Etihad - Etihad Guest

03 May 2019

Total posts 10

@Joe

Let's face it, Australia can't support two full service airlines for a long while when COVID-19 subsides. VA are a high chance of filing Voluntary Administration.

You may get your wish of the assets of VA being downsized to a domestic airline, but likely as an domestic only LCC for the foreseeable future, like how the short lived AN Mk II was an LCC.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

What rubbish! You go fly Sharp and then come back and say the same thing again. I dare you !!

Does anyone honestly believe that a company that has been throwing away shareholder money and value for seven years will suddenly spend tax payer money with fiscal responsibility? It is absurd. Virgin have been a wonderful airline for service and approach - the problem is they cannot seem to do it within a financial window. This does show just what a well run airline Qantas is because imagine if they took the Virgin approach to disregarding the bottom line and just threw money at getting loss making passengers ... they would have not only destroyed Virgin they would have destroyed the shareholder value.

23 Oct 2014

Total posts 186

That's what they did in 2011-2013

Joe
Joe

03 May 2013

Total posts 521

If you wanted to be really fair and just you'd support Qantas 65% and Virgin 10% in proportion to their Australian ownership. Virgin have lost money for 20 years. Would anyone here honesty invest a cent in them?

Equity in an airline is not an investment, any more than is buying a car.

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1236

What an absurd statement to make. Try telling that to the shareholders of any company.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

The Government can do what it likes, and be damned AJ's hissy fit if he doesn't like it. After all, he too is free to run for office in a federal election.

23 Oct 2014

Total posts 186

When does the government invest based on fairness, they invest funds in terms in need.

Qantas - Qantas Frequent Flyer

02 Sep 2018

Total posts 144

Exactly. When they bailed out Holden time and time again until they finally stopped even tho it was clear they weren't an Australian company anymore, just one of the many brands of GM. Holden wasn't making a profit and yet we bailed them out anyway.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

GMH, Ford and Toyota were never 'Australian' companies during my lifetime - using the Qantas-touted benchmark.

13 Apr 2020

Total posts 4

Qantas generally provides premium service to the level dictated by direct competition on a particular route, rather than being a genuine "game changer" or offering the same level of service across all comparable routes. And yes, we have a great domestic business class but it's probably also the most expensive in the world, particularly for those not subject to a corporate discount to offset the inflated fares. Competition in some form is required to keep Qantas honest.

Qantas - Qantas Frequent Flyer

02 Sep 2018

Total posts 144

I think this article perfectly sums up the fact that, no matter how you feel about either airlines, having both together in the market has done nothing but good for consumers, bringing lower prices, better products and higher standards. Without Virgin, we could still be where we were almost 10 years ago. But because of Virgin bringing competition, we now have fully lie flat, 1-2-1 configured, widebody aircraft flying between those routes. I personally have to commend Virgin for putting up a fight when Qantas is flying their 747 compared to Virgin's small 737 or a330. It is further prove that Qantas knows it is too big and too essential to fail yet will pull out all stops to protect its monopoly of the domestic travel market. We can argue all we want, but the truth is, no matter the financials, Virgin has not costed consumers a single dime, but rather saved them. If it were to fail, it might cost a lot more for us in the future than if we were to fund it temporarily whilst it is finding its feet. Those who argue about mismanagement simply does not understand that Borghetti is now gone, what he has done was execute his vision for the airline to be competitive in lifting the standards of the product and now it is up to Scurrah who is much more financially responsible, to bring it back firmly into the black.

23 Oct 2014

Total posts 186

djtech perfectly put

QF

11 Jul 2014

Total posts 505

I'd like to see a forensic auditor check the foreign ownership of Qantas and also how much tax has both Qantas and Virgin paid in the last 5 years? I'm sure everyone would be surprised at the results.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

Not me, I'd expect Qantas direct and indirect foreign ownership to be circa 75%. But that degree of scrutiny is never applied, nor ever will be.

I haven't tried it but the JetBlue Mint and similar cabins look all right, with full flat seats. Neither Qantas nor Virgin has yet rolled out a really good narrowbody business class.

Rxm
Rxm

Jetstar Airways - Qantas Frequent Flyer

14 Jan 2017

Total posts 51

I would challenge the notion Australia needs two full service airlines. Australia has never sustained 2 full service airlines over the long term. If as a nation we wanted a nationalised carrier we could have stuck with TAA / Qantas and not merged it then sold it off. We have set up a system of private for profit airlines and airports. That means these businesses have private individuals who take the risks and the rewards. There is no room for public to relieve them of the risk and allow them to be rewarded. Someone else mentioned Holden. This is a great example of putting tax payers money into a private company beholden to its foreign interests not the national one.

Qantas - Qantas Frequent Flyer

02 Sep 2018

Total posts 144

And yet we have not had a market with less than 2 independent airlines in the past decades that air travel has been available to the masses. Are we ready to accept the consequences of a monopoly in the air travel market? I could care less if Virgin folded but the problem is how hard it would be for a new airline to start after this with the travel lull that will exist for at least a year after the pandemic is over and Qantas being the monopolistic goliath that seemingly cannot be taken down no matter what!

23 Oct 2014

Total posts 186

mitchsydney

Qantas was founded on government money, debts (taxpayers $$) were forgiven at the float. Qantas has the lions share of Current government travel accounts which are taxpayers money. I would say Qantas has and continues to have the majority of government support. If they want to assist the industry it's not Qantas's or their staffs call.

It's about the industry not Qantas, and not fairness, it's about Australia, Australians and the BROAD economy.

The current market is not a free market, the government has shut boarders and distorted the market.

Not sure what your point is. My point is Virgin now have over $5 billion in debt, yes $5 billion - they have assets worth $700 million ...... they are still losing money even before the virus ..... my point is fairly simple - those running Virgin do not know how to run an airline and giving them taxpayers money is throwing good money after bad and ultimately regardless of what we as taxpayers give them they will still go out of business.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

Bit of a CPA are we MitchSydney (or more like a CFA loyally supporting an employer). Apologies if I'm wrong.

QF

11 Jul 2014

Total posts 505

People have to remember 1 point here, we aren't currently operating under a Capitalist environment, if we were everything would come falling down around us like a Jenjo game and VA is just one piece that could pull the rest down if not supported.

Qantas - Qantas Frequent Flyer

29 May 2013

Total posts 50

Interesting comments from everyone on this. Opinions are like bottoms, everyone has one. Now I will put my 2 cents worth in (maybe that should be $1.4 billion for Virgin). Whether or not Virgin should get any funds to help them is a complicated argument and I can understand the government's reluctance to provide Virgin with assistance. For me personally, I think Australia needs 2 domestic airlines (for quality & innovation) but also that it can actually support 2 domestic airlines. Now I know mitchsydney won't agree with me but that's ok. Virgin are now headed by Paul Scurrah who really seems like he has a plan to get the company profitable again (like it was when it was Virgin Blue). I believe he will trim Virgin back to a domestic only (or with Fiji & LA if profitable as only international routes). Shuttering Tiger was a good move. For me is was just a money wasting sideshow that Virgin didn't need (just trying to copy Qantas). By getting Virgin back to a domestic only airline it will allow it to concentrate on building that profitability. Now should the government give money to Virgin? Been tossing that up for a while. Full disclosure, I have a truckload of Velocity points so from that perspective yes I would like them to get the cash to survive for my personal gratification. But on the other hand, why would the government handover money to a business losing money year after year? I think this is where the argument becomes muddied. Some people are saying it is a bailout some a loan. For me I would be happy for the government to provide a loan which is repayable over whatever applicable period but with a few obligations that are non negotiable. They would be that the there would be no dividends payable to shareholders until loan is repaid and there be no bonuses to management until half of loan repaid. I think if Virgin went back to domestic only that would only help in this regard too. For me I think it is in the national interest to have 2 healthy airlines and if that means the government has to step in and loan Virgin the money for a period of time then so be it. I understand Alan Joyce's opposition to Virgin receiving anything because as a competitor it is in his interest that they don't get any help but I think that in some small way having Virgin has pushed Qantas to become a better airline than it would've been without them. Lets just hope that whatever happens we are back travelling and having fun again soon!!

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 349

... that Bar in Business Class on Virgin's Boeing 777-300ERs. Talk about a party at 38,000 feet !! No business done on those flights. Great read, Mr Flynn.


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