Virgin Australia aims for second Asian route by end of 2018

By David Flynn, November 9 2017

Virgin Australia hopes to begin Airbus A330 flights on its second Asian route – most likely Hong Kong or on the Chinese mainland – by this time next year.

"We've got the aircraft, we're just missing the (airport) slots and we're working on that," Virgin Australia CEO John Borghetti said following the airline's annual general meeting held in Brisbane this week.

"We're working hard on getting additional slots in a couple of cities (which) could be Hong Kong or in China or anywhere else (in Asia)."

"I'd like to think by this time next year we will have those slots, but it's a process," Borghetti expanded.

"People said 12 months ago 'You’ll never get slots in Hong Kong, but we now have seven', so by this time next year I’m hopeful we will be flying" into a new Asian city.

Virgin opened its Melbourne-Hong Kong route in July 2017, with flights now running daily, and has its eye on both the Sydney-Hong Kong and Brisbane-Hong Kong corridors as well as the Chinese mainland – which are expected to be hubs used by airlines owned by or affiliated to Virgin Australia stakeholder HNA.

"By the end of 2018 we will be in mainland China," Borghetti assured Australian Business Traveller on the sidelines of the Melbourne-Hong Kong launch in July 2017.

But he stressed the Chinese capital wasn't on that list. "I have no intention of going to Beijing."

"We're leaving a lot of options open because it depends on slots, but i don't see a situation where in three years we are not operating to two places in China, and Hong Kong, and another place in Asia... I just can't see that not happening."

While this sounds like a stretch for Virgin's international fleet – which has all five Boeing 777s committed to Los Angeles and just six Airbus A330s – "you can always get aircraft", Borghetti said.

"It's actually not that hard... if we want an aircraft we can get one next month, because there are leasing companies that have got spots."

It's perhaps fortuitous that HNA also operates the world’s third-largest rental fleet, with over 900 jets valued at over US$43 billion.

"So I’m not really worried about getting aircraft, it's more about making sure your destinations work," Borghetti affirmed.

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.

TomHi

TomHi

16 Feb 2017

Total posts 3

"Virgin Australia hopes to begin Airbus A330 flights to a second destination in Asia – most likely Hong Kong or on the Chinese mainland – by this time next year." - Hong Kong wouldn't be a second asian destinstion but a second route if flown to from Brisbane for example as your headline suggests.

eminere

eminere

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1136

Yes I was confused by the wording.

reeves35

reeves35

24 Aug 2011

Total posts 561

As well as HNA's fleet, VA's other shareholders SQ and EY may also be able to supply RR powered A330s if needed. EY are currently reducing their A332 fleet whilst SQ are beginning to retire their A333s. Whilst the A333 is not the same as VA;s existing A332s, it would enable VA to consider adding a W class to their A330s if they believe their is sufficient demand.

JPeuty Banned

JPeuty Banned

07 Nov 2017

Total posts 29

David, just a question on your quote "By the end of 2018 we will be in mainland China,".

When you spoke to Mr. Borghetti, did he put a noticeable emphasis on the word will? It just seems a little strange for him to commit to something like that when has very strict ASX disclosure obligations as the CEO of a listed company.

FLX1

FLX1

31 Mar 2016

Total posts 644

@JPeuty:

"...strange for him to commit to something like that when has very strict ASX disclosure obligations as the CEO of a listed company."

Not strange anymore when VAu Holdings is currently studying how to privatize /de-list fm ASX per recent news....

Doubleplatinum Banned

Doubleplatinum Banned

Qantas - Qantas Frequent Flyer Platinum

07 Feb 2013

Total posts 558

So because they are 'studying' they aren't bound by the obligations any more? You need to do some reading.

FLX1

FLX1

31 Mar 2016

Total posts 644

@Doubleplatinum:

I didn't know CEOs for listed airlines hv zero flexibility in operational decision-making and therefore cannot back away later fm route plan stated earlier without infringing "disclosure obligation to shareholders", for ever reasons, such as will be in mainland China by 2018 changed to will be in mainland China in 2019 or whatever date....especially when there's no additional fleet CapEx involved as Borghetti already stated and will be in China can be defined as VA code marketed in China on code-sharing flights operated by HNA brand.

I recall when VA initially announced timing of HKG plan, they also ended up with a slight delay(thx to HKG slot situation). Was that non-compliant with disclosure rules too?

And the above are after "some readings" hv been done....

CloudsAbove

CloudsAbove

Qantas - Qantas Frequent Flyer

20 Jan 2016

Total posts 3

If we take the big 4 Chinese cities (excluding HK) into consideration and not anything else, then Guangzhou will be my first in the priority list given the sole competitor is only Southern China.

FLX1

FLX1

31 Mar 2016

Total posts 644

@CloudsAbove:

"Guangzhou will be my first in the priority list..."

Except CAN is:

1. Located too close to HKG in terms of geog mkt catchment area duplication.

2. Not a hub for any brands in the HNA empire. Conversely, it is THE fortress hub for CZ like SYD is for QF...

My top 3 bets are:

TSN(Tianjin)=A HNA hub and just 1.5hrs drive fm Beijing.

HGH(Hangzhou)=Not a hub for HNA(actually, neither for anyone) per se but it is a large focus city/semi-hub for HU. Less than 2hrs drive fm Shanghai.

PVG=1st destination in mainland China for QF...makes sense for VAu to repeat the same path.

UpUpAndAway

UpUpAndAway

QF

11 Jul 2014

Total posts 295

I don't think he will be chasing any cheap cheap A380 if they need to lease new planes I think he is an A350 or maybe a second choice of 787 man

FLX1

FLX1

31 Mar 2016

Total posts 644

@UpUpAndAway:

"I don't think he will be chasing any cheap cheap A380"

But he will be interested in chasing cheap cheap 330s...

Actually in the current mkt environment for older types, many lessors with used 330s will be chasing Borghetti instead.....

"if they need to lease new planes I think he is an A350 or maybe a second choice of 787 man"

Near-term availability(i.e. delivery within 2yrs) of vacant leasing positions in the mkt are still rare for both(more for 787 than 350 though). Besides, for such a tiny widebody fleet like VAu has today, doesn't make much financial sense to invest a lot more(qualified crew, maintenance infrastructure, etc. specific to 350 or 787) to adopt yet another type.

UpUpAndAway

UpUpAndAway

QF

11 Jul 2014

Total posts 295

Makes sense what you are saying, but Borghetti likes being a trail blazer he isn't a follower and getting old planes doesn't suit that type of person.

FLX1

FLX1

31 Mar 2016

Total posts 644

@UpUpAndAway:

"Borghetti likes being a trail blazer..."

Which is kinda an expensive strategic mgmt style and perhaps costly or @ least risky for shareholders....

Trailing-blazing with cabin product investment is 1 thing. Doing similar with fleet type is a completely diff magnitude of impact.

julius-grafton

julius-grafton

23 May 2012

Total posts 36

They badly need one more 777 to smooth out the LAX schedule and get consistent timings on the Brisbane flights.

Andy H

Andy H

Thai Airways International - Royal Orchid Plus

16 May 2011

Total posts 116

My money is on MEL-PVG, prime route for an Australian carrier to fly, SYD currently has three airlines with QF on that route, so it makes sense for VA to do it from MEL, and possibly build its Asian presence there. With HKG flights already, MEL already has a foot in the door, it would make sense for VA to expand into Australia's second largest aviation market instead of competing head on with QF at SYD. No doubt, Chinese numbers from MEL is just as compeling as SYD.

FLX1

FLX1

31 Mar 2016

Total posts 644

@Andy H:

"..instead of competing head on with QF at SYD."

Not to mention getting slots @ the right timing @ SYD is tricky @ best these days. If for SYD-HKG, it'll be a major nightmare for VAu as getting slots @ HKG is even more challenging than @ SYD.

MEL just seems to hv more headroom for VAu to secure the right timed slots to/fm China.

smit0847

smit0847

30 Aug 2013

Total posts 448

End of 2018?! Don't want to rush into these things lol.

I assume it will be MEL-PVG or BNE-PVG. Can't they just lease a slot and aircraft(s) from HNA? They could have this up and running within 3 months.

FLX1

FLX1

31 Mar 2016

Total posts 644

@smit0847:

"Can't they just lease a slot and aircraft(s) from HNA"

Leasing more 330s is easy as mentioned by Borghetti himself in the story. Leasing PVG slots fm HNA sister brands are much much harder as it doesn't work that way in China because the slot granting/transfer system there is totally opaque/non-transparent and often involve political manuevers...

timhill

timhill

Virgin Australia - Velocity Rewards

09 Jun 2014

Total posts 9

Is leasing more 330s really that easy for VA?? They need to be fitted, painted, crewed, etc. This is a huge expense that VA can't seem to afford. I get that securing slots at certain airports is hard but surely adding numbers to the fleet is equally as hard??

John Phillips

John Phillips

QF

03 Jul 2015

Total posts 8

Love the "anywhere in Asia" quote.

In other words, no plan. Anywhere will do.

russh7

russh7

22 Sep 2017

Total posts 10

He needs to learn that "Hong Kong is part of China". Keep on referring to them as two separate countries and it will be "no slots for you".

AlainC

AlainC

10 Nov 2017

Total posts 2

Hong Kong is a separate jurisdiction for aviation and other purposes. It enters its own international treaties for economic matters, for example. Conflating Hong Kong with China is simplistic and offensive to the local population - just ask them.

FLX1

FLX1

31 Mar 2016

Total posts 644

@russh7:

"He needs to learn that "Hong Kong is part of China"

In a weird way, your view aligned exactly with the current political climate @ the top level within the HK gov't and of course Beijing. In a subtle way, the main theme there today is convergence+integration......a long way fm the 1 country 2 systems and non-interference posture erected 2 decades ago.

I'm actually surprised someone here is so in tune with the recent trend in HK politics....

"Keep on referring to them as two separate countries and it will be "no slots for you"."

To be fair, Borghetti is just being businessman and he just want to get slots regardless of who's in charge for those slots. In the current regime, he still need to treat HKG and mainland as 2 separate & independent aviation jurisdictions to apply for approval for anything he wants to get done there i.e. if he wants to get HKG slots, no one in CAAC will talk to him. If he wants to get PVG slots, no one in HK CAD will talk to him.

SeaVisionBurma

SeaVisionBurma

Thai Airways International - Royal Orchid Plus

13 Jan 2017

Total posts 33

Disagree with this - Hong Kong is to be considered a separate entity from mainland China for another 40 years. Nobody is going to take offence and deny slots by considering them differently

mewettjohn

mewettjohn

Qantas - Qantas Frequent Flyer

26 Jun 2015

Total posts 16

Sydney to Manila would be interesting. Manila needs a new up to date fresh airline.

iambents

iambents

21 May 2012

Total posts 11

Surely "Virgin Australia aims for forth Asian route by end of 2018" with SYD>DPS, BNE>DPS and MEL-HKG already in place :)

Journeyman

Journeyman

Singapore Airlines - The PPS Club

11 Sep 2015

Total posts 22

Would be good to see some competition out of Brisbane for SQ and QF.

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