Virgin Australia eyes Airbus A350, Boeing 787 for next-gen fleet

Virgin's much-anticipated fleet review would streamline its mix of Airbus A330 and Boeing 777s into a single type of jet.

By David Flynn , February 27 2020
Virgin Australia eyes Airbus A350, Boeing 787 for next-gen fleet

Virgin Australia will weigh up the Airbus A350 and Boeing 787 Dreamliner as its twin-aisle flagship for transcontinental and international flights, with the airline confirming a "widebody fleet review" during today's presentation of its June-December 2019 financial results.

In a nod to the tide of red ink which continues to lap at Virgin's heels, the airline called out the "significant cost savings available from next-generation aircraft."

“We are doing an exploration at the moment,” Virgin Australia CEO Paul Scurrah said. “If the deal is worth doing we absolutely want to do one this year, but it is too early to speculate.”

Airbus and Boeing are both in the mix for what's understood to be a single jet to replace Virgin's current mix of Airbus A330s and Boeing 777-300ERs.

While a less prestigious contest than Qantas' Project Sunrise, which settled on the Airbus A350-1000, Virgin's order would be for at least 11 jets if the current fleet is matched on a like-for-like basis.

All six of Virgin's Airbus A330s, which dominate the nation's east-west corridor and will also fly the new Brisbane-Tokyo route from March 29, are leased. Four of the five Boeing 777s which serve Los Angeles from Sydney, Melbourne and Brisbane are owned, with one under lease.

Cost savings are the driving force

Former Virgin Australia CEO John Borghetti had many times stressed that there was no need to rush this replacement, especially given the fleet's relatively young age: the A330s rolled Virgin's hangars between 2012 and 2014, while the Boeing 777s arrived across 2009-2010.

“As we talk about widebody replacements, and when we do it and what we replace them with, that’s really a long way away,” Borghetti noted two years ago, following the airline's results presentation for July-December 2017. “Some time in sort of, let’s call it early- to mid-2020s, we will probably look at changing those when the leases coincide for replacement.”

Scurrah, who replaced Borghetti in March 2019 and is now about to notch up his first year in the corner office, is expected to align with the airline's preference for a single aircraft for east-west, Asian and US routes, as this lowers overall operating costs.

Airbus vs Boeing (again)

Scurrah has already committed to switching Virgin's low-cost domestic arm Tigerair from the Airbus A320 to the Boeing 737 – the same workhorse as Virgin's domestic and short-range international fleet – by October 2020, a move the airline described as "delivering cost savings and improved operating performance."

Virgin's "widebody fleet review" would primarily pit the Airbus A350 against the Boeing 787.

There's more of a question mark over the delayed Boeing 777-9, with launch customer Emirates not expecting to pick up the keys to its first Boeing 777-9 until close to the middle of 2021, while many other airlines – among them Lufthansa, ANA, British Airways, Cathay Pacific, Qatar Airways and Singapore Airlines – lined up in the queue behind the Gulf colossus.

The capacity of Boeing's big twin-engine jet could also prove too large for Virgin's unique mix of routes, which stretches from 4-5 hour cross-country dashes to the 12-14 hour trans-Pacific trek.

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.

24 Aug 2011

Total posts 616

The 777-9 would not be in any VA's considerations. It is too big to achieve good yields year round and has too much range for VA's needs. EK convinced Boeing to stretch the 777-9's range which added weight which has made many airlines leery about the plane.

I doubt VA will continue widebody domestic services once the A330s leave and will instead rely on the incoming 737-10s for trans-continental flying. Whether this includes lie-flat business class seats will depend on if the economics can work out. These seats use a lot of space compared with recliners so it has to be shown that the yield per seat has to improve.

Overall you would think the 787-9 would be favourite to win though Airbus won't want VA becoming an all-Boeing airline again so will put up a compelling offer for the A350-900.

23 Oct 2019

Total posts 4

Totally agree - this feels like Boeing's order to lose. 787-9 seems to slot in nicely for LA/Asia with options for growth down the line using -10 models in the Asian market (or maybe a future ER model that could stretch to the US West Coast) and potentially some -8 if they want a bit more flexibility.

Virgin Australia - Platinum

26 Jun 2011

Total posts 56

Makes sense to have a fleet that can handle both trans con and international though.

PER - MEL/SYD/BNE then onwards to LAX/HND.

Joe
Joe

03 May 2013

Total posts 418

Virgin should focus on a successful domestic operation. Bleeding money as they are doesn't bode well. They will never be anything significant internationally. Having a new CEO rearranging the deck chairs I don't think will help them.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

Considering Scurrah himself has singled LAX and the Delta partnership as one of the few (if not only) jewels actually making money for VA's small international network, closing international isn't very likely to happen anytime soon.

Taking into consideration that all major shareholders (including SQ/EY/HNA) have looked at selling out of VA at a loss, it opens the opportunities for the likes of DL or NH consider to have a go where SQ/EY/HNA (and NZ before them) had failed.

Joe
Joe

03 May 2013

Total posts 418

You can vote my comment down but their share price speaks for itself. Despite underdog driven friendlier service lets face it, they are no Qantas. Their international ops should be purely based on strategic partnership and give up their metal.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

For that suggestion to happen, a takeover is required to occur, which isn't likely to happen anytime soon.

With HNA soon to exit through liquidation, EY and SQ looking at selling out of VA, VA exiting International isn't likely to occur for the foreseeable future.

As argued previously, there is room for niche operations where it's supported by joint-venture business such as DL.

30 Aug 2019

Total posts 4

SQ looking to sell it's stake!? Highly unlikely. Where's your source?

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

SMH - February 14 (Author: Kylar Loussikan) had summarised that all 4 major shareholders (including SQ) had looked at selling out of VA at a loss.

Also the SIA group's financial reports (freely available to the public) clearly state that they were making a loss from their VA investment, and had not offered any excuses in that report. That suggests that SQ has had enough.

The "so called messiah SQ" should not be taken seriously as "VA's" rescuer. There has been rumours of a "SQ purchase/takeover" of VA every year and it's been "fake news" in every article for the past 5 years.

There's a better chance of a DL or NH takeover of VA then with the "so-called messiah" SQ, and that scenario isn't likely to happen either.

30 Aug 2019

Total posts 4

That article simply makes reference to speculation about the 4 shareholders selling their stake. Nowhere does it state that any of them 'looked at selling out'.

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 80

... and, 'Summarised' -v- 'surmised' - there is a difference, in both meaning and authority. The latter being to assume something is true without having the evidence to prove it. I have surmised, Dan, that the auto-correct function got the better of your device. :-)

06 Sep 2019

Total posts 4

I get the feeling there will be plenty of 2nd hand aircraft up for grabs as the year progress as airlines struggle to remain viable due to Coronavirus.

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

Hahahaha and it with money do VA plan on getting these new aircraft?

24 Aug 2011

Total posts 616

Can I introduce you to leasing? I don't think anyone expects an outright purchase.

Qantas - Qantas Frequent Flyer

08 Nov 2011

Total posts 114

Signing on the lease aircraft still requires the capital commitment of purchasing equipment, parts and maintenance etc. Things don't just materialise from thin air. Crew need to be trained and will have downtime not being able to fly. It's not cheap to introduce a new aircraft type.

They just spent a heap of money buying out the stake in velocity they sold not long ago. They also are still paying off ATRs sitting around doing nothing. Not to mention the cost of breaking Ejet leases early.

Virgin need to stop getting complicating their fleet mixture and finally sort their stuff out. All they've done is lost money for almost a decade since they became VA (there was one or two good halves from memory).

13 Feb 2015

Total posts 44

"Virgin need to stop getting complicating their fleet mixture and finally sort their stuff out."

Maybe read the article?

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

Indeed I did. If VA are considering aircraft on an A350 size (so equivalent 787-9/10), then that aircraft is far too large for domestic and trans tasman services. It would be a big capacity increase on their HK (soon to be defunct) and impending Tokyo flights. ATRs also don't serve them well for anything other than CBR right now.

Committing to a new aircraft type prior to leases ending or having a plan to transition assets like the 777 out of the fleet is adding to fleet complexity.

The current problem for VA is that while it is arguably a cheap time to get new planes, it is a terrible time to get rid of theirs.

13 Feb 2015

Total posts 44

You seem to have missed the comments about "early- to mid-2020s, we will probably look at changing those when the leases coincide for replacement" and "the airline's preference for a single aircraft for east-west, Asian and US routes, as this lowers overall operating costs".

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 80

Getting rid of leased aircraft is the problem and risk of the Lessor, not the Lessee (aka Virgin Australia). And if the aircraft being 'retired' are from the same manufacturer as the replacements being acquired ... as was once sung: "dirty deal$ done dirt cheap". :-)

QF

11 Jul 2014

Total posts 339

With 12 months under his belt, you can see where this is headed with the pick of aircraft

Etihad - Etihad Guest

19 Mar 2018

Total posts 19

Why would SQ sell VA? The airline has been wanting to own one of Australia's two airlines since it was born.

Qantas - Qantas Frequent Flyer

08 Nov 2011

Total posts 114

Ummm because they wanna stop losing money...?

QF

11 Jul 2014

Total posts 339

Nearly everyone is losing money now due to coronavirus but were SQ really losing money before that happened??

18 Jan 2017

Total posts 27

Why are SQ loosing by holding Virgin Australia shares?

They bought shares and aren't pouring any cash into VA.

SQ will only loose money if they sell their shares at a lower amount than they bought them as.

Due to accounting, they can put some lines in their profit and loss to appear to reflect a valuation loss on investment. Though in turn they reap some financial benefits such as paying less tax.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

In addition to the share price falling, The so called 'messiah' SQ has been more of a hindrance to VA than a benefit.

SQ in cahoots with EY and Borghetti all share most of the reresponsibility for the CAPEX blowouts over the years with little return. The capacity war (which NZ should also share some responsibility for) is just the sprinkling on the cake.

Etihad - Etihad Guest

19 Mar 2018

Total posts 19

Awww. You don't know them at all. They're not in this to make money. Australia is a strategic market for SQ. They'd rather lose money with VA than lose the thin high yield market share of Australia entirely.

Qantas - Qantas Frequent Flyer

08 Nov 2011

Total posts 114

Cute. In light of the current economic situation, I'm sure SQ has money to burn... at some point in time even a strategic asset has its limits in worthiness after losing a ton of money.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

Considering SIA has been up front in their financial reports by clearly stating VA has been losing them money overall, and NOT been offering excuses in the financial reports, this suggests that even SQ has had enough.

The fact that SIA has been investing in India's Vistara (also a money losing op) by buying planes for them also suggests VA is NOT a priority for SQ.

Don't be surprised if SQ does formally announce that they're looking at selling out of VA.

24 Aug 2011

Total posts 616

SQ owns 49% of Vistara and has effective management control. It is not the same as its VA's shareholding. Your comment that they have been looking to sell upthread has morphed into a belief by you that they may look to sell.

Etihad - Etihad Guest

19 Mar 2018

Total posts 19

I'm sure their PR people will be able to explain it better, but SQ's investments in Air New Zealand, attempts for Qantas, Ansett later, Virgin now... are all to keep oneworld alliance honest, and Australians connected to the world. It is part of their DNA - to rid the world of oneworld's world domination aspirations. You can read about it more of their history.

Qantas, for all its nostalgia and patriotism, has done little but talk talk talk about connecting Australians to the world. SQ is adding 5 daily flights to Perth, serves Sydney with 6 etc.

Virgin Australia - Velocity Rewards

24 Aug 2011

Total posts 745

Well said. Asians will happily play a long-game, or spend to keep others down.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

SQ had plenty of opportunities to buy out VA over the years, they chose not to do so. Leaving it to others.

At least once a year there's a "SQ wants to buy a larger VA stake" article which has turned out to be "fake news" every time in the past 5 years. In some years, it's also 'convienantly' timed when the occasional news articles on other rumoured suitors such as TK, NH or DL pops up.

It's probably time to automatically treat any "SQ" interest as "fake news" until there's a formal ASX announcement or there's pen to paper.
Chances are there will be the yearly "SQ wants to buy a larger VA stake" fake news article occuring later this year.

07 Oct 2012

Total posts 1245

This has been discussed before, but comparing the SQ frequency to QF's between an Australian destination and Singapore is not understanding the differences in businesses.

Singapore is single city / state and is geographically located in an area where it can fly passengers from cities to its hub in Singapore and then distribute them through its network. It does this well.

Australia is a vast country, with population spread out over a number of cities. QF flies multiple times daily and takes passengers from those cities to its main hub at Sydney. It will never offer 5 daily flights from Perth to Singapore, because it will not have the distribution network at Singapore of the home airline.

Etihad - Etihad Guest

19 Mar 2018

Total posts 19

SIA group serves Adelaide, Brisbane, Cairns, Darwin, Melbourne, Perth, Sydney, Canberra, Gold Coast... And Broome, Karratha, Busselton, Ballina, Newcastle etc are coming in the 2020s.

Qantas says they want to match SQ at SIN with frequency, but they'll downgauge all to 737 MAX and 321XLRs. Is that growing the market? And honestly, project sunrise isn't as important especially when the Asia Pacific rim cities SHOULD be the focus as it will be where the biggest population centers are.

Why would u wanna fly to London in 2030? It will be full of mixed White-Desi-Caribbeans speaking mostly French Why would Australia wanna fly to Chicago in 2030? Spanish will be the main lingua franca. If Qantas couldn't make Lima or Santiago or Buenos Aires or Madrid work, why is Chicago gonna work?

07 Oct 2012

Total posts 1245

@levinn - in the next 10years, something magically will occur that will see the demand for London flights drop? Yeah righto! Look forward to everyone speaking French their too!

The biggest population centres are already in the Asia Pacific rim and so are the biggest economies. But you understand yield management - flying a plane to big population centre does not guarantee you a profit (Beijing?). You don't think Qantas knows where it's corporate customers need to go? Considered how Perth to London is going?

Qantas currently flies to Santiago.

Chicago may or make not work, but you think Qantas doesn't have data about how many passengers they are popping onto AA plans for Chicago at SFO, LAX and DFW? You don't think they have those figures? They just point at a map and say fly here?

Thank you for letting is know where SQ will be flying their planes this decade. I look forward to their announcement.

As for the actual topic, I'd hope they go with the A350 as I find that airlines are able to fit it out in a more passenger friendly way than a 787. It will be interesting to see what they do with the premium economy seats when flying across the continent.

13 Feb 2015

Total posts 44

"in the next 10years, something magically will occur that will see the demand for London flights drop? Yeah righto!"

Um, actually yes. You aren't aware of a little thing called coronavirus?

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 80

Corona-virus, Heineken-virus, Becks-virus, Guinness-virus, IPA-virus. They come and they go. Brexit is a lock, its baked in, and if Boris Johnson gets his way, Britain will be open to the world for business in a way the EU will scoff at rather than admit was right. That's why, IMHO, if Virgin Atlantic and VA get their 'act' together and match direct flights with QF10/9, the in-cabin service will see VA/VS become very profitable indeed. Same with VA in LAX with Delta ('DL'). At the moment, connecting flights onto DL from VA arrivals/departures is a joke, especially those return DL flights from the East coast into LAX.

Virgin Australia - Velocity Rewards

24 Aug 2011

Total posts 745

Thanks for the popcorn post.

Qantas - Qantas Frequent Flyer

21 Mar 2017

Total posts 30

Sooo many armchair CEOs omg. This is how rumours begin!

Etihad - Etihad Guest

19 Mar 2018

Total posts 19

I will say however, I'm not sure how Tigerair got tangled in this mess. I know there was an intention to have Australia continue to have a ULCC, but it wasn't supposed to be them. China Airlines owns the Tigerair brand now, so ask them.

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

Tigerair Australia is wholly owned by Virgin Australia. It no longer has links with the now defunct Tiger Airways Singapore (rolled into Scoot) nor Tigerair Taiwan (partly owned by China Airlines)

QF

11 Jul 2014

Total posts 339

Airlines are a tough gig, knowing the VIP lounges of TAA , Ansett, Qantas and Virgin. Virgin gets top marks.

I feel sorry for frequent flyers who don't fly Virgin, those 8 free business upgrades a year (double platinum flyers).

Did I mention how good it is flying SQ First Class with VA points or walking into the Etihad First Class lounge in Abu Dhabi.

I could go on and on but anyone who knocks VA or doesn't fly with them just doesn't realise what they are missing out on.

Qantas - Qantas Frequent Flyer

08 Nov 2011

Total posts 114

Oh but also the joys of being gold and welcomed to the contract lounge in AUH. Or having to argue your way into a Hainan lounge (on everyone of your flights) because you're a nobody to them. Or the mish mash of partners and the varying levels of benefits (Air Canada anyone?). Or not having any partners inside Europe. Or standing at The Home lounge in Sydney and watch the Etihad and Virgin lounge attendant argue who's guest it is.

Airlines also need to make money. It's nice being so generous to your most frequent fliers. But if no one else flies you or is willing to spend money on you then it's good while it lasted.

QF

11 Jul 2014

Total posts 339

If Australia only had one airline, we probably wouldn't even have lounges so you wouldn't need to worry. Competition has given the consumers the current experience which is better then most of the rest of the world.

Some of those pig headed Q flyers who think they are getting a good experience should take there blinkers off and look at the better offer. Can I say it's like a Beetroot

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

I've evenly split my flying between both and have been both in the past few years Platinum and Gold with both airlines. I enjoy flying both airlines, however I would like to see a healthy and profitable airline first and foremost because that is what contributes to a healthy competition. A profitable airline is able to invest in its products and do things which up the ante against its competitors. An airline which doesn't live up to the image it likes to project (Virgin with the 'free food' anyone?) isn't one that encourages people to fly them often or choose them.

QF

11 Jul 2014

Total posts 339

What is "profitable", people / companies have the option of pulling out of businesses / shares that don't aline with their wants and needs. If VA didn't aline with my wants / needs I would pull out today not tomorrow and move on, do you really think the shareholders don't think the same way. Profit isn't a dirty word but what is the profit they see in VA.

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

Profitable means making money. They have lost well over a billion dollars since they rebranded as VA. They keep getting capital injections. Of their shareholders: NZ has walked away, HNA is about to fall over, SQ is annoyed, EY can't afford anything else, and who knows what state Nanshan is in. In such economic times, their shareholders don't have pockets to top up a money pit. Something has to change or something will eventually give.

QF

11 Jul 2014

Total posts 339

Profitable doesn't mean making money, I come from businesses that don't require banks to fund them, we fund ourselves. But we have products (like VA) that don't make money. You can't blame VA for a shareholders problem.

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 120

There really are no words...

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 153

Considering there's been newspaper articles of internal rumours of all 4 major shareholders looking at selling out of VA at differing dates, it suggests that they are only holding onto VA as an ongoing concern until they find a buyer.

Being a shareholder of a company doesn't always mean that they're happy with the company.

Considering that HNA has been trying to off-load their VA stake for ages and that there is no serious buyer suggests that VA isn't exactly a company worth "investing in" as of the moment.

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 80

As a VA flyer, I enjoyed brisk entry into DLs lounge in T3 on arrival into LAX and same into Emirates lounge in TB on return flight. Ditto VS Clubhouse in Heathrow. Though I can't remember which pair of lucky socks I was wearing.

Qantas - Qantas Frequent Flyer

26 May 2014

Total posts 414

Weren't VA looking at 737 MAX 10 for trans-continental ?

NT
NT

30 Apr 2013

Total posts 2

Eyes, eyes. Everyone eyeing everything.

Virgin Australia - Velocity Rewards

07 Dec 2014

Total posts 139

Just another armchair CEO but could the most economical solution be moving to 787-9 for Asia/US, and 737-10 for Transcon, reducing the total size of their overall widebody fleet while increasing flexibility (since the 787 could do all/any of their long haul routes)?

So instead of 11 widebodies (5x 777 and 6xA330) they reduce it to 7 or 8 (all 787).

Qantas - Qantas Frequent Flyer

09 Mar 2017

Total posts 20

Lol.... I'm yet to see VA have a strategy, let alone execute on one. They pretend to fly to international destinations, but really, they're a domestic carrier at best, and not much better than Jetstar (imo).

10 May 2018

Total posts 15

*puts on armchair CEO hat*

Even though I hate the 787, I believe the 787-9 is probably the best aircraft to replace the 777-300s. VA should really get the 737-(MAX) 10 and put lie-flat beds on these aircraft. They will be much cheaper to run compared to a widebody and you won't chase corporate flyers away because you're still offering a lie-flat business product. These planes will also have the added benefit of appealing to business class customers flying to Bali (especially on those overnight flight back), Fiji and even NZ!

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 80

I make it a point to never argue with the good Doctor.


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