Virgin Australia buoyed by growth in business travel

By David Flynn, August 8 2016
Virgin Australia buoyed by growth in business travel

Business travellers continue to help Virgin Australia gain altitude in the dogfight against Qantas, with the corporate and government segment now responsible for 30% of the airline's domestic revenue.

That number was CEO John Borghetti's hard target for the 2017 financial year but ticked over ahead of schedule in the April-June quarter of this year and has helped put the airline on track to return to full profitability in the coming 12 months.

Virgin's international arm is now the only part of the airline in the red, but Borghetti expects this to turn around faster than ever following the rollout of its new business class (below) on all flights to Los Angeles and Abu Dhabi by September.

"Every day I get emails from passengers... just this morning I've had four emails from senior leaders in business who say 'we've just come off your flight in Sydney or Brisbane or LA, it's an unbelievable product' – they praise the seat, the meals, the service and the crew" Borghetti tells Australian Business Traveller.

(And yes, the CEO – a man who puts a premium on relationships – personally replies to every one of those emails. "They've taken the time to write to me, it'd be rude of me not to.")

AusBT review: Virgin Australia 'The Business', Sydney-Los Angeles

On key domestic routes – such as the Brisbane-Sydney-Melbourne triangle, services to Canberra and the east-west corridor – Virgin sees an even larger share of business travellers compared to the national 30% average.

Borghetti is hesitant to put a number against it – he's learnt to keep his powder dry when fighting a competitor as tough as Qantas – but affirms that "it's pretty damn good."

The airline saw a much smaller slice of the corporate revenue pie when it was Virgin Blue – the cheeky no-frills underdog nipping at the heels of Qantas and later Jetstar – and Borghetti relates that this came mainly from "smaller businesses, not the big end of town, the top 100 ASX-listed companies" which now fly with Virgin.

"We had to achieve that against a competitor that is not only significantly bigger than us but has enjoyed entrenched consumer behaviour over a number of years, so we had to break that rusted-on behaviour... that took a lot of hard work and sheer commitment."

The coming 12 months should not only see Virgin's international arm move back into profit but also expand to China, with Beijing and Hong Kong cited as new destinations as part of the alliance with Chinese colossus HNA, which now holds a 19.2% stake in Virgin Australia.

Read more: Virgin Australia plans daily flights to Beijing, Hong Kong

Follow Australian Business Traveller on Twitter: we're @AusBT

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

21 Jan 2014

Total posts 252

They are certainly taking business customers from QF, even here in TSV I have had a few recently tell me they have shifted across over the last year or two which is surprising because VA don't even have a lounge in TSV, most say a direct flight to SYD is one of the reasons and second it's much easier to get to higher status levels. The company I am with is QF so I won't be changing but I am surprised by those who have, they were all long term QF flyers.  

05 May 2016

Total posts 576

I love flying QF, but good competition is healthy and keeps the pressure on both airlines to provide a high quality product. Good to hear that VA is improving.

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 300

While they still have a way to go, they are moving in the right direction.

Virgin Australia - Velocity Rewards

26 Feb 2016

Total posts 101

When would HNA actually kick in? HNA has been operating direct flights from SYD to China, and more are on the way, but HNA's subsidiaries are still missing in the Velocity program.

sgb
sgb

Emirates Airlines - Skywards

30 Nov 2015

Total posts 745

With all their new charges just introduced that scenario may suffer.

Virgin Australia - Velocity Rewards

15 Aug 2012

Total posts 175

Haha, exactly what I was thinking! The FF aren't happy at all!

lets see the financials in 12 months if they actually go through with it.


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