Virgin Australia CEO: alliances are no 'silver bullet'

Newly-minted Virgin Australia chief Paul Scurrah takes a measured approach to the question of joining Star Alliance or SkyTeam.

By David Flynn, September 5 2019

Virgin Australia CEO Paul Scurrah says that the option to sign up for a global alliance such as Star Alliance or SkyTeam remains on the table for the airline’s “future international network strategy”, but is far from a cure-all for the troubled airline.

“There’s a lot that’s good about our airline (and) a few hurdles we need to get over to make us as profitable as we know we can be,” Scurrah tells Executive Traveller.

“In terms of priorities for me, I think it's important that we acknowledge the headwinds that are coming at us, and we right-size to make sure that cost base is more suitable to a profitable airline.”

There are, Scurrah admits, “pros and cons” to the alliance proposition, and points to a recent customer survey on airline alliances as part of a broader sweep “to assess the strengths and weaknesses of joining or not joining.”

“I think the obvious upside is that there is a branded network, it’s a little more obvious about who you’re aligned with,” he reflects. “So not having that Star Alliance, SkyTeam or Oneworld brand on our network makes it a little harder for a customer to understand who we are aligned with.”

Vigin's bespoke alliance approach

But inking an agreement with any of those three – or more realistically two, given that rival Qantas is a cornerstone member of Oneworld – could put an end to Virgin’s looser and more diverse web of partnerships with the likes of Singapore Airlines, Delta Air Lines and Etihad.

“One downside for us is the disruption it would cause to our current alliances, whether that would be worth the investment.”

“We have the advantage of being able to strike bi-laterals with individual airlines that can help make the biggest and strongest network, regardless of alliances.”

“We've got an amazing partnership with Delta, with seamless and reciprocal recognition of our high-value guests, access to the lounges, everything you'd expect if you were flying those routes on an alliance.”

“We have a wonderful relationship with Singapore Airlines, and we've now got the technology to have automatic recognition of high-value guests without the manual processes we used to have, and lounge access is a part of that as well.”

“So we can actually pick and choose the very best option for us to all destinations.”

If anything, Scurrah is interested to see if Virgin’s DIY alliance model can be fine-tuned within its existing framework. “What is it (our customers) like about alliances that we think we can replicate, without being in one?” he ponders.

“I do think that we've got a uniquely better offering at the moment by not branding as a member of an individual alliance” he circles back.

“But if at some point in time it seems better for us to be part of an individual alliance, then we would make that call.”

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.

Ryan K

Ryan K

Qantas - Qantas Frequent Flyer

30 May 2013

Total posts 303

Qantas were still able to form an alliance including codeshare services with Emirates, all the while being a member of Oneworld. Can Virgin achieve a similar outcome?

reeves35

reeves35

24 Aug 2011

Total posts 552

Lots of airlines are "marrying out" of their alliances. As well as the EK alliance, QF has also entered into a codeshare/limited FF partnership with KL (Skyteam). NZ (Star) has done similar with CX (Oneworld) whilst SQ (Star) now has a route-sharing arrangement between SIN and Indonesia with GA (Skyteam).

EUTraveller

EUTraveller

Aegean Airlines - Miles & Bonus

16 Jul 2019

Total posts 2

Delta own a major stake in Virgin Atlantic and have a JV over the Atlantic. They're almost the same airline now.

Therefore it makes sense for both Virgin Australia and Atlantic to join Skyteam. SQ may resist but are they really willing to give away their rights to the Australian market by ditching VA?

As for Etihad, they could also join Skyteam to help with their own network feed problems.

Sadly, Skyteam have never had the same profile as oneworld or Star because the perception is that the quality of carrier is lower, especially in Asia. This isn't really the case these days as airlines like Vietnam Airlines, Garuda, China Eastern, Air France and KLM up their game.

Mjudd

Mjudd

Qantas - Qantas Frequent Flyer

14 Dec 2016

Total posts 41

Qantas are have an alliance with Air New Zealand

reeves35

reeves35

24 Aug 2011

Total posts 552

It's a long way from an alliance. It is a limited codeshare with some restricted lounge access and points rights. Due to competition restrictions, it is unlikely to grow much beyond this for the foreseeable future.

samueljones561

samueljones561

17 Oct 2017

Total posts 13

I agree complete with the two prior comments but I think it may be easier for Qantas as they have a lot more weight to throw around in Oneworld than virgin would have as a new member.

LatteLaptopLoon

LatteLaptopLoon

25 Oct 2017

Total posts 22

Think they would have joined an alliance by now if they thought it was worth it.

Pcoder

Pcoder

14 Oct 2016

Total posts 50

Considering their 7 years of losses, I don't think you can chalk up their decisions as being wise.

The problem is they have too few virtual alliance partners to be a viable alternative to Qantas. You just have to look at North Asia to see the big gaping holes.

thibault

thibault

Air France - Flying Blue

07 Nov 2018

Total posts 1

Interestingly Mr Scurrah do not talk about EY, which still feeds the VA network.

Libertyscott

Libertyscott

Qantas - Qantas Frequent Flyer

19 Aug 2011

Total posts 154

The real issue is the rules around alliance membership. e.g. you can't join Star and have such a close relationship with Delta because United would object, whereas joining Skyteam and there might be objections about the Singapore Airlines relationship. However, there is a growing set of very close relationships appearing across alliances, because they suit. See Cathay with the Lufthansa group (and Air NZ). Given Skyteam's woeful presence downunder, it would seem more likely that it might be keen, but what would VA gain from this? It has DL already. From Asia, Vietnam, Garuda, Korean and China Eastern are nice to have, but QF already has a tight relationship with the last of those than dilutes the value of this. It's difficult to see much value at all from the European Skyteam members for VA. So, for now, it's probably fine as it is. SQ might like it to join Star Alliance, which would open up basic alliance level reciprocity with Air NZ, but it's hard to see United not demanding the Delta partnership ending, and again what does VA really get out of join Star Alliance?

DanV

DanV

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 123

In addition, Star Alliance isn't like Oneworld/SkyTeam where only the founder members have the veto. Star Alliance applications If I Recall Correctly require all full members to unanimously agree to the application (in other words, any full member can exercise veto).

Just like there are some remnants of "Team Borghetti" at VA, there are still some the remnants of "Team Luxon" which are possibly likely still of the alleged view that that VA "give up all international", "Dump Delta" and feed into them and VA's "mortal enemy" UA.
Unless if that alleged view changes and/or major ownership changes happens at both VA and NZ occur within the next 12 months, NZ and VA are likely tor remain "enemies".

As long as NZ and UA are in *A, they will continue to exercise their veto rights to block any (unlikely) VA application.

11sjw

11sjw

11 Mar 2012

Total posts 293

Converting Velocity Points to Kris Flyer Miles is a nasty experience. Perhaps this would improve under the correct alliance.

THR

THR

20 Sep 2012

Total posts 58

Perhaps you can inform us how many other airline programmes even permit you to transfer your points to another airline's programme? Pretty much none (except for Avios).

Yes, the rate isn't great but it's a great way for us Australians to earn KrisFlyer miles.

The process itself is seamless.

xtfer

xtfer

Virgin Australia - Velocity Rewards

14 Mar 2017

Total posts 127

The “measured approach” of custom alliances has manifestly failed. What was a good mix three years ago is unravelling fast. VA should join A* or SkyTeam as fast as possible.

UpUpAndAway

UpUpAndAway

QF

11 Jul 2014

Total posts 294

VA has bigger problems then Alliances whether it's branded or not. The bigger issues are Life Time Gold and not being able to get reward seating on international flights.

kimshep

kimshep

Qantas - Qantas Frequent Flyer

11 Oct 2014

Total posts 492

Whilst Paul Scurrah's comments seem very 'customer-centric', I am somewhat bemused that he fails to mention the major benefit that being in a Global Alliance should bring ie: feed and bums on seats within your domestic market.

Forget lounges, redemption and levels, the real money is in the in-bound 'feed' element. Unlike Europe, Latin America, Asia and North America, Virgin is in the very fortunate position of having only one national competitor across a large and distributed continent. Both Virgin and Qantas replicate the majority of their routes. Whilst QF has the 'pull' of oneworld, it would be unwise to underestimate the value of Virgin's disparate partnerships and the coverage that they can provide to multiple alliances.

They have the benefit of Delta (SkyTeam) feed, United indirectly (Star, because it's an indirect fit with Star partner SQ), Etihad - the EK equivalent of QF's tie-in, Alitalia and Virgin Atlantic (also SkyTeam).

It's not perfect. HNA is somewhat problematic. Perhaps this may result in a revision of Asian strategies with possibly Air China (Star) or China Eastern (Skyteam). One could also look at South Africa for Virgin partnerships (particularly ex Perth) which might involve SAA or Kenya Airways? Europe could be wide open, if some A330's were based in Singapore and or Hong Kong ie: make the SQ partnership work in terms of connectivity for VA rather than having SQ exploit all the SIN-Australian routes.

South America remains a problem for VA. However, Air New Zealand's Luxton won't be around forever and with the change in Virgin's CEO, there is a possibility of some co-operation with Air New Zealand once Luxton leaves. There is also the possibility of a revitalised Aerolineas Argentinas (Skyteam) with a new re-fleeting program re-examining it's need to expand back into the Australia / New Zealand markets.

I'd like to think that Paul Scurrah's future vision for Virgin is based on more than Australian customer benefits and that the intrinsic value of inbound feed is recognized as a primary revenue driver / builder for Virgin. There would be some tricky calisthenics, but it could be done with the 'right' agreements and without having to stretch the fleet and CAPEX too much.

Felipe

Felipe

Qantas - Qantas Frequent Flyer

18 May 2017

Total posts 17

World airline alliances were quite good when they started, but they have lost some of their gloss. Some carriers in the alliance only provide a basic service.... almost like a low cost carrier, particularly in the North American market, while others still offer the superior service you would traditionally expect. I think Virgin Australia should just stick to bi-lateral agreements with various airlines that serve their interest best. For example, a small airline in any given alliance operating regionally in Africa may not be that useful, whereas having one in Asia or the Pacific, much closer to us here in Australia, would be much more beneficial. By not being in an alliance, Virgin Australia can pick and chose. May be one day in the future, an alliance such as Skyteam or Star Alliance may be right for them, but for now, just stick to the bi-lateral agreements.


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