Virgin rejigs Boeing 737 MAX order, delays delivery to 2023

Virgin ditches the smaller MAX 8 but says the MAX 10 is the right size for both domestic and short-range overseas flights.

By David Flynn, December 9 2020
Virgin rejigs Boeing 737 MAX order, delays delivery to 2023

Virgin Australia will go ahead with adding the troubled Boeing 737 MAX to its fleet, but has slashed its order for Boeing's next-gen jet by almost half and pushed back the first delivery by another two years.

The smaller Boeing 737 MAX 8, for which Virgin held 23 orders with deliveries from early 2025, has been scrubbed from the list.

However, Virgin will go ahead with its order for 25 of the larger and more flexible Boeing 737 MAX 10, which was unveiled only in late 2019 – although its original July 2021 delivery timeframe has been reset to mid-2023.

The combined deal for the MAX 8 and MAX 10 was worth US$6.17 billion at list prices, although airlines typically enjoy a steep discount of 40-60%.

Virgin's new timetable sees Boeing 737 MAX deliveries from mid-2023.
Virgin's new timetable sees Boeing 737 MAX deliveries from mid-2023.

Where Virgin will fly the 737 MAX 10

The MAX 10 has seating for around 200 passengers in a standard two-class layout, and Virgin intends to roster the jet on high-density domestic and short-range international routes, as well as routes facing "constraints due to slot availability limitations."

Sydney-Melbourne is perhaps the best example of this: in normal times, this corridor rates as one of the world's busiest domestic routes, with some 150 flights per day shuttling between the two cities, so larger aircraft trump smaller ones.

"It will do a great job for us transcontinental, it’ll do a great job for us in more traditional short-haul (than longer) international routes," Virgin Australia Group CEO Jayne Hrdlicka said today at a CAPA Centre for Aviation event.

"We have already moved to simplify our mainline fleet and committed to the Boeing 737 aircraft as the backbone of our future domestic and short-haul international operations," Hrdlicka said in a previously-issued statement.

“The restructured agreement and changes to the delivery schedule of the Boeing 737 MAX 10 gives us the flexibility to continually review our future fleet requirements, particularly as we wait for international travel demand to return."

Last week saw Boeing CEO David Calhoun rule out ditching the MAX name from the jet family, saying "there is no rebranding going on. There’s nothing cute going on.”

Front-page coverage of two deadly crashes involving the 737 MAX and its subsequent worldwide grounding has raised questions of how safe passengers will feel in setting foot onto a Boeing 737 MAX flown by any airline.

After being grounded for almost two years, aviation authorities are now approving the Boeing 737 MAX for take-off once again.

Also read: Boeing's 737 Max is ready to fly, but maybe not passengers

Virgin's back-and-forth on the MAX

Under long-time CEO John Borghetti, Virgin 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

However, one of the first calls by Borghetti's successor and recently-ousted CEO Paul Scurrah was to push back hand-over of the first Boeing 737 MAX from November 2020 to July 2021.

Virgin Australia has now rejigged its Boeing 737 MAX book six times since placing the initial order in July 2012.

Borghetti also saw the Boeing 737 MAX 10 as launchpad for Virgin's next-generation business class, reportedly a fully-flat bed which in July 2017 he said would deliver a "quantum leap in domestic business class", replacing Virgin's fleet of Airbus A330s when those jets spearheaded an ambitious but since-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.

Scurrah put Borghetti's 'Perth product' on the back-burner and by some reports sent it either back to the drawing board or into the rubbish bin.

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

07 Aug 2013

Total posts 236

If Virgin deploy lie flat on these jets which I believe was their original intention, Qantas will need to re strategise - a b737 is less costly to fly then the A330 - and if VA keeps to their promise of a value fares this would make them very competitive again in the market where they brought competition intially. 

When's Qantas getting their A321s? I don't think QF would have expected VA to make a new fleet annoucnent so early....probs weren't expecting VA to come out of admin either tbh.

24 Aug 2011

Total posts 952

I tend to guess that the new VA will probably not go with the lie-flat J class on the 73Js and instead use the extra space offered by the larger plane to increase the overall seat count principally in Y.  Lie-flat sounded great but, unless you can get J class pax to pay a higher price for the extra real estate used by the larger seats, it doesn't make business sense.

08 Feb 2018

Total posts 125

agreed, lie flat is only really needed for the red-eyes and their plan is to be mid-market (which is a good plan IMO) so I don't expect to see this on VA. Yes it sounded great but I don't see it working financially. 

QF

11 Jul 2014

Total posts 660

And so they start writing the story of the future which looks promising for a consumer like me. Life Time Gold, Life Time Platinum would make the crazy enthusiasts happy, maybe a business lounge for double platinum as well.  

05 Mar 2015

Total posts 316

Please, Virgin and especially Bain are not about to go back into Full Borghetti mode and put lie-flat seats onto these MAX 10s. Some people need to stop indulging their avgeek armchair CEO fantasies and get back into the real world.

We might see a better business class seat, maybe at best something that is more angled-flat if the MAX 10s are meant to dominate east-west, but given Virgin's remarks about high-density domestic routes and short-range international routes, I think they are more talking about the 'triangle' and NZ, and nobody on those flights needs a flatbed or even angled business class seat. Bain and JH certainly won't indulge that if it means fewer seats as that reduces yield and drives up fares, they are trying to undercut Qantas and be a 'value' airline, not compete with Qantas in terms of business class.

Qantas - Qantas Frequent Flyer

29 May 2013

Total posts 59

I agree for triangle and NZ, but if they get back to Fiji, angled flat could make sense on these flights as they are of similar time frame to east-west. Even then though is it really needed? Would be nice, but would it be economical? Would people pay the premium?

XWu
XWu

09 May 2020

Total posts 431

Agree with what you think and the no one knows what business class traffic is going like in 2023

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

Not sure that I understand Virgin's philosophy on putting 200 seat single aisle frames on the busiest routes. Gonna take longer to turn these birds, whoever you are.

If you happen to be travelling on 'best fare of the day' and in economy, you will want to plan carefully. It's going to take a factor or two longer to board / de-board an extra 20 or so passengers. You certainly wouldn't want to be in the last 4-5 rows.

Let's see if Bain & Co. actually stump up for these frames in mid-2023, or whether this is just a delaying tactic? If 'international' is to return (meaning LAX and HND), then surely the purchase of the B737-MAX10 frames will ensure that the purchase of longhaul widebody frames will be pushed back a long way.

Etihad - Etihad Guest

21 Jul 2019

Total posts 84

You inadvertently answered your own question. Just why wouldn't 'Bain & Co.' put the highest density 737 on the 'busiest routes'??

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

1. because it would prioritize capacity in lieu of frequency on the world's (pre-Covid) 2nd busiest route.

2. mark my words, those extra 20+ seats WILL increase turnaround times. Extra luggage to be loaded /unloaded as well as extra passengers. Extra catering to be loaded etc. QF found this out years ago.

3. if you have irregular ops' ie: a malfunction or cancelled flight, it will be harder to reallocate affected passengers on the canx flight to other subsequent flights 

4. for both VA and QF management, when things get back to normal - there will be certain union 'enmity' and less co-operation in areas like ramp handling, where previous staff members have been laid off / out-sourced. Unions have elephant memories and won't forget these moves. 

Qantas

19 Apr 2012

Total posts 1367

Kimshep QF and VA tend to exit and board front and back now except when it is raining, to get a fast turnaround..

24 Aug 2011

Total posts 952

VA has boarded by both front and rear doors for ages so the extra few rows won't be too much of a delay overall.

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 236

You make it sound as if this is so hypothetical and no chance yet you critisice armchair CEO's....

My take on it - JetBlue do it successfully well, they are a hybrid value carrier up against the legacy premium carriers. How do you suggest this wouldnt work for Virgin? Because they went up against QF with widebodies previously and made losses? The costs of bringing VA to fruition from Virgin Blue are now obsolete. The have the lounges, rebranding done. It's literally just a new seat on a large plane that can accommodate it.

05 Mar 2015

Total posts 316

Re: JetBlue, yes that's a very valid yardstick for the new mid-market VA2 and one I have used myself. The only problem with citing JetBlue vs US legacy carriers is the sheer size of the US market compared to the Australian market. If JetBlue' and Virgin each held 20% of their domestic market, JetBlue's 20% would be massive, probably larger than the entire AU market. I just think that Bain is so focussed on the bottom line that it won't see enough of an advantage in putting flatbed seats into these MAX 10s. Again, maybe they could do recliners but they would make most sense on east-west routes and I'm not sure that is the focus here.

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

and bear in mind Dan22, that the JetBlue "Mint" cabins only apply on specific routes in the JBlue network. I'm in agreement with QFP1 here. 

Due to Virgin's scale /size, while a single aisle frame with lie-flat seating might be the competitive edge that Virgin needs on transcontinental routes between PER and SYD/MEL/BNE, do they seek to dedicate such frames on these routes only? As said elsewhere up thread, they would be a useless and unnecessary extravagance on short east coast routes. 

17 Jun 2020

Total posts 240

Makes sense. Good to see that Virgin have maintained some form of fleet renewal. 

Qantas on the other hand has a 737 fleet so old that hairline cracks keep being found in the 'pickle forks' of the aircraft. No clear commitment that the 321 will go to Qantas either and may all end up at Jetstar. 

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

@KW72 - "Makes sense. Good to see that Virgin has maintained some form of fleet renewal."

Something tells me this doesn't make sense, at all. First off, you have Virgin shedding half its existing fleet, prior to coming out of administration. Oldest B737 frames were retired and disposed of. Leases cancelled etc, leaving Virgin with a current (post-Admin emergence) B737 fleet age of approximately 7 years.

This was the stated "desired fleet size" for the future. 

Now, the new Bain management - who has been involved with the acquisition of Virgin Australia since administration began,  suddenly sees the need for a whole new fleet of 200 seat frames - that apparently didn't exist previously. Not exactly 'visionary' management, IMHO.

If you have a fleet that has an average age of 7 years, then fleet renewal (beginning delivery 2 years hence), shouldn't be a high priority. One would think that the resumption of your previously profitable US route would be a higher priority for new - or any - frames, within the next few years?

Part of me thinks this is a bit of a parlour trick by Bain. Cut the order in half, push back the delivery by another couple of years, but still make all the sounds as if you are committed to the airline's future because you are investing in fleet renewal etc. But come late 2022 Bain could say "Oh, market hasn't fully recovered as we had hoped, need to delay the MAX delivery a bit more, maybe back end of 2023 or early 2024". After the way Bain lied about Paul Scurrah's future and Jayne Hrdlicka's role, basically embracing Scurrah so they could stab him in the back, I have no trust in Bain and I would not be surprised if the day comes when they flip the airline for sale and walk away having lined their own pockets with many many millions in consulting fees along the way. Bain could easily be doing this Boeing 737 MAX order just to make people think they care about the longer term future of the airline.

24 Aug 2011

Total posts 952

The MAX10 had to be deferred; Boeing won't be able to deliver it next year anyway given program delays and the need to modify and clear the existing MAX8 backlog.

I have no doubt that Bain will eventually look to exit; that's what private equity businesses do.  But they need to make the business profitable so they can sell it for more than they paid.  Administration has stripped out most of the assets so Bain can't do a simple asset strip and flip routine.  They need to make the business profitable; if they can't do that, no one will be will to pay them enough so they make a profit on the overall deal.

Even so, certainly no accident that Bain and JH have two days left to settle negotiations with unions over reduced and capped wages for the coming years?

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 303

"Administration has stripped out most of the assets so Bain can't do a simple asset strip and flip routine.  They need to make the business profitable; if they can't do that, no one will be will to pay them enough so they make a profit on the overall deal."

There wasn't many unencumbered assets at Virgin Australia during the administration process. 
To be honest, VAH's Frequent Flyer subsidiary; Velocity, is one of the few (if not only) unencumbered asset that would be of any value to Bain.

Per Deloitte's October 2020, all of their "owned" 737 and 777 aircraft except for VARA's Fokkers and a single A320 (the legacy Skywest A320) were 'encumbered' (asset stripped) and were used as collateral to the banks in exchange for Bank Loans/Capital.  

Apart from the Fokkers and the Single A320 that are 'unencumbered assets', I'm not sure if  737 Aircraft Parts are considered unencumbered 'assets'.

The remaining 'owned' 737s that are still in the Virgin Australia will still remain encumbered to the banks post-administration, whilst the oldest owned 737s alongside the 4x 777s are in the process of being disposed to the encumbering banks.

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 648

Surely, it is not Virgin's responsibility to assist with re-organising Boeing's MAX10 delivery schedule? LOL

I would think that if Boeing was having delivery problems, that it would be in Virgin's interest to stand their ground on delivery ~ which would, in turn. force Boeing's hand into financial negotiations and/or delayed delivery compensation. It might have been a 'bluff' on Virgin's behalf but - hey - Virgin would be holding the trump card in this instance.

09 Aug 2015

Total posts 88

I can see the case for something better than today's VA Boeing 737 business class on east-west flights, especially to close the gap against the Qantas A330 Business Suite, although I think that's all Bain would want to do, not compete directly against Qantas in product. So I can see that something with more comfort, recline, legroom etc would make some sense. But if that was the plan for the 737 MAX 10 then it would really need to be a sub-fleet of VA, just like JetBlue has some A321s with Mint business class and many without. In that case you would then have the 737 MAX 10s flying most if not all all east-west routes and maybe also some of the triangle for positioning and also to show off a bit, maybe to also give VA an edge on the longer triangle sector of BNE-MEL, especially as BNE is its home ground and where VA should be putting its best foot forward. The east-west MAX 10 subfleet with some triangle flights was pretty much Borghetti's plan, maybe Bain might resurrect that but without the flat beds.

22 Sep 2017

Total posts 49

Transcon on a lie-flat bed is still only 3 hours sleep, it's just not healthy.  

Now that we are all more flexible about work hours, when travelling eastbound it's better to take an afternoon flight, catch up those last few hours' email on the plane, get to a hotel before midnight and have a full night's sleep ready for the day on the east coast.

Going to Sydney this might be one for WSA, to allow a scheduled 11pm arrival.

I did a series of Sydney-Perth flights last year, very quickly learned to avoid the return red-eyes! There is just no way you can do a flight at that time when it's only four hours long, even if you manage to sleep from start to finish by the time you allow for getting up to level flight so you can recline the bed, and then allow for lights on and breakfast served before landing, you are very lucky to get three hours, I timed it once and it's more like 2.5 hours. So the most you need to help you sleep on this route at this time is a really good angled seat like some of the old SQ regional business class seats. Cathay's regional business class is another good example. This is the most that VA needs for the MAX 10.


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