Virgin Australia to relaunch business class in March

Virgin's new business class experience will spearhead a 'soft reboot' of the airline.

By David Flynn, February 12 2021
Virgin Australia to relaunch business class in March
Executive Traveller exclusive

Virgin Australia will reveal the new shape of its business class proposition next month as the spearhead of a sweeping reset for the airline under CEO Jayne Hrdlicka and owners Bain Capital.

The ‘Virgin Australia 2.0’ package will also include the launch of a buy-on-board menu in economy class to replace free snacks and drinks; a decision on inflight WiFi, which has remained switched off while Virgin re-evaluates the service; and potentially the fate of The Club, Virgin’s invitation-only tier created by former CEO John Borghetti to rival the Qantas Chairman’s Lounge.

Aesthetic hints of the new Virgin Australia vibe will be on display at the airline’s Adelaide lounge which opens later this month and introduces a fresh, more relaxed look which will eventually be rolled out to other domestic lounges.

A spokesman for Virgin Australia confirmed to Executive Traveller the airline wants a March launch to ensure the new offering is in place ahead of the Easter school holidays.

Executive Traveller understands that the impact of rolling state border closures, especially on business travel, has added to the complexity of Virgin’s planned rollout. 

Virgin Australia is currently flying around 40% of its domestic capacity, with corporate travel still well below expectation.

Virgin Australia CEO Jayne Hrdlicka has her eyes on the 'value' market.
Virgin Australia CEO Jayne Hrdlicka has her eyes on the 'value' market.

Having completed an ‘end-to-end’ review of its business class experience – covering everything from meals to pricing – Virgin intends to realign the premium cabin towards what Hrdlicka has repeatedly described as a “value-conscious” segment comprising both business and leisure travellers.

“We know that leisure travellers, small and medium businesses, and many corporates are now emerging from COVID-19 wanting better value,” she says.

“They are hungry for flexibility and choice, a trusted brand that resonates with their values, and great prices, along with the premium features they value most.”

Also read: Virgin Australia's future is more JetBlue than Jetstar

However, the rebooted Virgin will soar into newly-competitive skies again not only incumbent Qantas but newcomer Regional Express, which will launch its own Sydney-Melbourne flights – replete with cut-price business class – on March 1.

Virgin is no longer the underdog, with Rex launching its own Boeing 737 capital city network.
Virgin is no longer the underdog, with Rex launching its own Boeing 737 capital city network.

Rex kicked off its assault on the ‘golden triangle’ with Sydney-Melbourne business class fares at $299 – the same as Virgin’s entry-level Business Saver tickets – but this week unleashed a slew of seats across March at $199, a rate Virgin Australia quickly matched.

Not only is Rex’s mid-market position the same as that adopted by Virgin Australia, but it will fly six Boeing 737s previously leased by Virgin Australia and thus sporting the exact same seats.

Regional Express plans to add Brisbane to its nascent jet network in April, which will further crowd the east coast corridor as Qantas, Virgin and Rex embark on a fierce dogfight for a slice of what’s now a much smaller business travel pie.

Also read: Can Rex win the business class battle against Qantas, Virgin?

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.

Before Rex entered the 'triangle' market I would have said that Virgin is in a very good place going value-oriented mid-market, and I probably did say that plenty of times. But I think the biggest threat for Virgin now isn't Qantas but Rex. If they are both mid-market and value-oriented without being low cost (JQ), is there enough room for both Virgin and Rex to be profitable? Maybe Rex is also competing against Jetstar to some extend. Virgin will still have a clear advantage over Rex because it's got a rusted-on base of flyers and fans, it's got much better lounges, it's got Velocity for the frequent flyers, but if I was JH and Bain I would still be worried about having Rex running around and nipping at my heels.

think biggest threat is to qantas & their extremely high costs

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 153

Except Qantas don't have particularly high costs compared to VA...

tm_s

aah

don't think so.

Virgin staff seem to be about to paid roughly 30% less than Qantas staff or possibly higher %, although new EBA hasn't been finalised, but longer stupid state lockdowns go, the great will be the %.

Surely Virgin 738 aircraft leases will be a small % of what qantas is paying.

qantas will have a hard time with unions if they try to reduce staff numbers & pay anymore.

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 153

LOL, you have no idea how high VA's cost base has risen since they became VA. They used to have a similar cost base to JQ, but over the years the cost advantage they have over QF has reduced to a couple percentage points - this is while QF have a significant revenue advantage. Why do you think VA went under?

VA have to pay leasing costs as they have a larger proportion of their fleet leased... QF don't have high fixed costs associated with aircraft because they own most of theirs.

TM

think you are talking about the old Virgin, not the new Virgin.

Not sure you statement about VA vs QF leasing aircraft is correct.

How many aircraft do VA & QF actual lease vs own ?

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 153

Unless they've carved out huge costs in their restructure, it's unlikely they'd have reduced it that much. This is at the same time QF have also been taking significant chunks out of their cost base. My point is before they were sold, VA's were negligible, if not higher than QF's. 

Since the restructure, both airlines own a similar percentage of planes. VA don't have any equity left in their planes having put them out for cash on loans with banks, while most QF planes are unencumbered (they don't owe anything on them and if anything they sit as an asset). They still gotta pay those planes back now. The Deloitte report when they delisted and were sold off details the position of VA. 

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 295

QF's 787s are now encumbered as of mid last year, they were taken out for loans against the banks to survive the pandemic, a number of the newer A330s are also encumbered. 

The A380s value and older 737s were written down to 'zero' as they would have little value if they were either to be encumbered or sold.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 474

With all due respect tm_smile, writing this as one who has purchased two (2) aircraft (Gulfstream's, not Boeing/Airbus) for a former employer, whether an aircraft is leased or purchased has nothing, NOTHING to do with operating costs.  Unless its a 'wet lease' (i.e. an 'Operating Lease'), any other lease (i.e. a 'finance lease') is purely a financing decision, with the aircraft capitalised onto the balance sheet and payments split between an interest component (expensed to the P&L) and a principal reduction (debited against the total lease liability).  In ordinary (pre-Covid) times, the finance arm of a manufacturer (aircraft, prestige PMVs, etc.) enjoys access to a 'deeper resale market' and can price in less risk than a regular financier such as, say, 'ZNA Bank', and can afford to offer lower implied interest rate in the finance deal.  

VA's leasing problems were actually due to the poor negotiation on the original price paid that became the principle for the aircraft when leased, NOT the lease finance interest rate.  

But the Administrator was in a unique position to either (a) break the lease and return leased aircraft to the Lessors or (b) renegotiate a reduction of lease payments.  I have no idea which was adopted for the 737-800 retained in the fleet, but if they were leased aircraft I'd wager a bottle of Scotch the leases were re-negotiated deeply (i.e. 'from 40,000 Ft down to 15,000Ft', so to speak), because every financier on this planet knew that a returned plane was destined to a desert parking ground with any unpaid principle fully written-off (i.e. EXPENSED) in that financier's accounts.   

I'm guessing here, but I suspect VA's operating costs are now at least as low as QF, perhaps lower?  And their renegotiated EBA probably has more flexibility now that that enjoyed by QF (I've had 'some' secondary experience negotiating an EBA for a workforce of 5,000, but that was 20 years ago now).  

Exciting times ahead for Virgin 2.0, if (big IF) they're smart.  We'll know when the business class service offering is rvealed in 2 weeks time.

Etihad - Etihad Guest

21 Jul 2019

Total posts 75

It's quite refreshing to hear from someone whose opinion has been formed by ACTUAL experience in aircraft financing (how many posters here have purchased aircraft?), as opposed to partisan sniping disguised as (shoddy) knowledge of aircraft economics!!

Qantas - Qantas Frequent Flyer

12 Jun 2011

Total posts 153

@sunnybrae Ah yes, because you don't have to pay back a loan...

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 307

Sounds like Virgin like other businesses that has been having a sleep and collecting jobkeeper and now that is coming to end will actually have to start offering up some product and services for the market. 

09 Aug 2015

Total posts 87

I might fly Rex to try it out but I would rather fly Virgin especially if the prices are close. My Velocity Gold gets me into the Virgin lounge when I'm in economy but for business class at some of the prices being offered I would definitely upgrade, it will be interesting to see what Virgin does for business class meals but I keep coming back to the fact that on SYD-MEL and SYD-BNE most of the time you don't need a meal, unless you are flying at actual dinner time, maybe your flight is in the air between 6-8pm. I wonder if Virgin is simply going to let business class passengers choose a few items from the economy buy on board cart?

20 Oct 2015

Total posts 168

I reckon if WiFi comes back, and that's a big IF, it will be free only for text messaging apps, everyone else will pay but it will be free in for business class. As for business class meals you can actually get some great boxed meals, it all comes down to the catering company and what your budget is, but I also think maybe giving passengers a free selection of a meal, a side or snack and a drink or two from the economy cart would be an easy way to go, at least on the triangle.

There's an easy way Qantas could weaponise Jetstar to make its low economy fares more appealing than those of Virgin and even Rex, and that would be to make Qantas Points and Status Credits available on more JQ fares, even as a very low-cost 'add-on' instead of the whole Max package. There's a risk of leakage from Qantas itself of course but anybody who cares about points and status credits is more likely to be Gold or Platinum and so they'd more likely care about loyalty perks they get on QF like lounge access, which you don't get at SYD or MEL due to JQ using a different terminal, seat selection etc. But even if this did cost QF some passengers their money still stays within the Qantas Group, and I think for every one QF passenger who went to Jetstar several would go from Virgin and maybe even Rex too. Virgin and Rex really won't be competing as much with Qantas especially at the top end of the market as much as they'll be competing with each other and at the larger lower end of the market, Jetstar.

Jetstar have a terrible reputation for mishandling cancellations & delays. Business types are very rarely going to fly jetstar.

If you can fly Rex SYD/MEL & BNE/SYD in peak hour Mon-Fri for $200 less return, than Qantas & $100 less than Virgin, then they will get business. Things are tightening up with a lot of businesses right now & with jobkeeper ending in just over 6 weeks, many small business flyers will be watching every penny.

Catch with Rex is they need more aircraft ASAP. Maybe with covid dragging out, BNE/SYD launch maybe delayed & more aircraft put on SYD/MEL. To do this, they have to sell some seats at high yield, which might not be hard in peak hour. Feel any regional flights like to CNS, might be a long way off & only be middle of the day, late at night or weekends, excluding busy Sunday nights.

Qantas - Qantas Frequent Flyer

30 Mar 2018

Total posts 15

Virgin will be Australia’s Easy Jet or Frontier ,even with a relaunch J it will be more like Premium economy. If you want a premium experience fly Qf or Rex.

What the..? Rex is flying the exact same seat as Virgin because its 737s used to be leased by Virgin. Rex will offer a boxed meal, Virgin will probably do that or a little better. So just on the basic hard & soft product how can you say Rex will be a more premium experience while Virgin will be premium economy? That makes NO sense!

Qantas - Qantas Frequent Flyer

30 Mar 2018

Total posts 15

From my understanding of people implementing the 737 at Rex the service will be similar to Va previous full tray and tablecloths etc where as Virgin will most likely continue with boxes don’t know about you but tray service is premium .So whilst the hard product is Va the soft product is upgraded to near Qf.

05 Mar 2015

Total posts 292

Flyer86, well if that is the case then Rex is going to be very impressive, but the airline has previously said that business class passengers will be served "a specially crafted meal box", so either Rex has changed its mind and gone up-market or your source is very wrong. Until we have something more firm I would stick with what Rex has said but I will hope you are right.

flyer86

QF is hardly ever premium. You need to get out more. Must be dozen or more airlines that are far better than QF.

05 Mar 2015

Total posts 292

This article is about domestic airlines, Reg, which of those 'dozen or more airlines that are far better than QF' will fly you SYD-MEL or even SYD-PER?

20 Jun 2020

Total posts 29

Does anyone have photos of the new ADL lounge?

24 Oct 2010

Total posts 2503

Yes, but not ones we can share.

QF

11 Jul 2014

Total posts 629

I’m going to get heaps of negatives on this one but youfoodz would work I think for buy onboard and business. 

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 474

My worse fears - I think that all they're going to do is 'Cut, copy and paste' JetBlue over the top of 'Virgin' product and service delivery.  It now seems their 'Back-of-House' systems have been copied, or licensed, directly from JetBlue - and they haven't even made any attempt to hide the JetBlue references.  Had to cancel a flight, was given travel credits and when I checked the TravelBank account, all references were to 'My JetBlue TravelBank'., even down to the copyright logo on the bottom.  

No original thought/creativity (explains the massive retrenchments in Southbank HQ), just copy JetBlue (in preparation for sale to . . . . ??? )    So much for Bain's 'Turnaround' expertise.  Evidence available upon request.

QF

11 Jul 2014

Total posts 629

I was at Brisbane airport yesterday, VA made me wait 3 hours for a connecting flight, VA terminal was dead I walked down to Qantas and it was hive of activity? Seriously they better get there act together or people will just start booking Qantas. 

Boeing-tragic, what’s wrong with emulating a successful business model?

I’m fairly sure Virgin haven’t just copy/paste from JetBlue, so I’m intrigued as to what you would want to see for Australian domestic travel, a monopoly or duopoly where one airline has to go bankrupt every 5-10years, whilst the other one just treats customers with indifference and relies on baked on loyalty from an increasingly ageing customer base .

As far as Virgin business class product relaunch goes, yes it will be difficult for them, the market has changed and there is more competition for fewer customers, so I’m personally glad they have taken their time reviewing their end to end offering, incorporating the best elements of the previous J class product, ditching the costly parts that don’t add value to the paying customer and trying something new.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 474

Dear travelgourmet, as a Platinum VFF, I'm unashamedly 'gagging' for VA to have a successful business model.  But I respectfully disagree regarding the degree of difficulty with re-launching their business class service, I think it presents Ms Hrdlicka (let's just call her Jayne before I accidently mis-spell her last name) with a golden opportunity to catapult past Qantas and Rex.  

My fear is that Mike 'Mr Corporate' Murphy lives too far removed from micro-businesses (revenues of less than $1M), small businesses (revenues of $1M - $10M) and medium sized businesses (revenues $10m - $20m).  As the owner of one of those sized businesses, I've always been 'value focused' because it's MY MONEY being spent.  I can establish a business case to fly J-Class on most work-related flights, but I always fly Eco-X when on R&R (interstate AFL football) or with the family (much to their chagrin). I don't think I'm alone.   

In the USA, JetBlue has a great business model (their 'Mint' class even beats Delta One).  But I can assure you that doing a 'copy-paste' of a US business model into Australia rarely, EVER works.  And Virgin 2.0 has no wriggle room to make any mistakes.  

Hope my clarification helps, but for the avoidance of doubt, I just say "Go Richmond Tigers !!  Go Virgin 2.0".  

And Scott Morrison, if you're reading, all airline industry personnel (check-in, baggage handlers, boarding, cabin crew, pilots, even Jayne and her counter-part over at Qantas) should be in the first group of people to get the Covid-jab. 

XWu
XWu

09 May 2020

Total posts 416

There is nothing wrong copying the JetBlue paperwork until the local aviation and ACCC gets involved when enough consumers make a big noise over dissatisfaction over their t & c. 

Ironically in some areas there are more protection afforded to US customers so if that was somehow transplanted over to Australia by VA or worse, clumsily deleted or amended, then Australian customers may expect VA to abide by their own T & Cs even if the local rules doesn't necessarily set the standard that high. 

All it takes is some seriously pissed off group of customers to take class action although I must admit the chances of local pax willing to go through the long legal process for a relatively small some of money may not be high

QF

11 Jul 2014

Total posts 629

I don't think there is anything wrong with copying anyone else, picking the best out from other products, even Qantas has done some copying of Virgin over the years. I've seen some really good ideas fail because they were new and people didn't pick up on them quick enough, and I know some really good marketing people who have never came up with an idea themselves ever, they just copied what worked.

05 Mar 2015

Total posts 292

Have to agree, with so many airlines around the world using different business models, different approaches to services etc, why not look at what is working well in some other market and see if it might be adapted here?

This doesn't mean you simply 'copy-and-paste' without taking a lot of other factors into consideration, and clearly the US market is very different to the AU market, but Virgin could do a lot worse than studying some of the JetBlue approach to see if it can be applied here.

I hope so, because JetBlue has carved out a nice little niche for itself, it's almost a 'boutique airline' compared to the giants of AA, United, Delta and Southwest, but it's proven that you don't have to be a big player to be a profitable player, and this is also where Virgin finds itself nowadays.

I really want this new Virgin to succeed and if borrowing a bit from JetBlue or any other successful airline helps, then all the better.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 474

I'm flying MEL-BNE on Tuesday, March 2nd.  Currently not in J-Class, but could change that quickly when I know what's different about the service from that on February 28th.  Anybody know what date  'Ms Jayne' is announcing the 'New Business Class' service?  

05 Mar 2015

Total posts 292

Doesn't the article make it pretty clear that Virgin will launch its new business class in late March? If you are flying on March 2nd that means you are a few weeks early. Besides which, if anybody here knew when the changes would actually be announced it would probably be ET itself.

Virgin Australia - Velocity Rewards

24 Jan 2018

Total posts 474

Actually, when ready properly, it does not.  The reference in the article to late March is the re-opening of the Adelaide lounge.  Other dates mentioned in the article are the March 1st launch of Rex and the re-launch some time before the commencement of the Easter holidays (Friday, April 2nd on Eastern seaboard).  So assuming Virgin would want at least a week before April 2nd (perhaps a little more) to properly inform the market of its new J-class service offering and thus fully harvest bookings, I'd expect a re-launch no later than Friday, March 19th.  Even then, that gives Rex a three (3) week head start !!  But I'm just guessing based upon what I'd want to do were I in Ms Jayne's position.  

Over the last 12 months I've gleaned there are many, many other learned readers on ET with far deeper insights into the aviation sector than you or I.  I was hoping to solicit 'informed opinion' on the subject, perhaps from someone with a closer affiliation to Virgin than YOU (or myself), perhaps from someone at Virgin who doesn't want to see Rex enjoy clean air after March 1st ?    After all, if ya never never ask - you'll never never know.   

You're absolutely right, Virgin has allowed Rex to take the lead on this. Rex will launch SYD-MEL flights including business class on March 1, Virgin will then be forced to follow Rex.

I am going to suggest that with Jayne Hrdlicka 'out of office' during the Australia Open due to her role as Chair of Tennis Australia we would not hear a peep from Virgin about its new business class until after the AO final which is February 21, so either Virgin would make its announcement ahead of Rex, ie that following week,  to try and steal some thunder, or leave it until at least a week after Rex, but either way have product 'in market' by the end of March, giving people enough time to book based on the appeal of the new VA business class. Oh and also I would not trust any anonymous person in a comments section as a legit source on Virgin's actual timing, if somebody replied to you saying "VA will reveal on March 5 and launch on March 15" you'd have no way to know if they are legit or not. Better to wait for info from a known, reliable and respected source.


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