Can John Thomas save Virgin (Age article)

[pauly7]

Really interesting article on JB's successor at VA - JT. A worthwhile read.

Clearly he is already implementing a lot of his strategies to 'squeeze more ancillary revenue' out of customers via 'enhancements' and 'takeaways', although a lot won't be popular it is clear that VA needs a very firm hand to try and turn the business around.



John Thomas helped save the US airline industry. Can he steady Virgin Australia?


Thomas returned to Australia in September last year to run the day-to-day operations of Australia's No.2 airline – a move that has sparked strong speculation he will succeed John Borghetti at the top of the business.

Virgin ran at a $244 million loss last financial year and posted a $21.5 million loss for the six months to December, dragged down by investment in a three-year restructure, soft demand and strong international competition.

This tough environment has dragged Virgin's share price to equal its lowest ever point at 19 cents a share. This has happened even as Qantas has kicked upwards. Over the past three years Qantas shares are up 10.3 per cent against a broadly flat performance from the ASX top 200. Virgin at the same time has declined 63.46 per cent.

Thomas says he is applying to Virgin one the biggest lessons from his work in the US: that airlines can't turn a profit just selling tickets. They need to squeeze revenue out of customers in other ways.

Full article:

http://www.theage.com.au/business/a...-steady-virgin-australia-20170414-gvl01r.html

 

[puppysparkes]

The page is returning a 404 for me.

 

[PLANT]

Simple.... Overbook... Drag people off plane.... Problem solved... Yankee doodle dandy

 

[Bundy Bear]

From the age

In response to the oil crisis, Thomas – who was born in Wagga Wagga and raised in Sydney – masterminded one of the biggest innovations in commercial aviation history: he convinced airlines to make passengers pay to bring checked luggage.

Bring back checked bag fees for Virgin,

simples;

 

[straitman]

The link in post #1 has been replaced and now works.

 

[trippin_the_rift]

"masterminded one of the biggest innovations in commercial aviation history: he convinced airlines to make passengers pay to bring checked luggage."

FML

 

[pauly7]

The link in post #1 has been replaced and now works.

Thank you - don't know what went wrong there!
I don't know if we should be excited or scared about JT and his plans once JB is completely out the door. Excited because no doubt he is the firm hand needed to pull them back and be profitable, scared because exactly what methods he may use to get there! But if they keep on losing $ hand over fist they aren't much use to anyone, so all up - he has to be good news right...

 

[Marty_]

Because we all want our air travel to be more Americanised.

Said nobody. Ever.

 

[dajop]

So he wants to turn Virgin Australia back into Virgin Blue?

What's the big deal about US airlines and ancillary revenue? Oh hang on, until it happens in the US, it doesn't happen.

Europe carriers are doing the same and in Australia we are very familiar with carriers who squeeze extra out of their customers - they are called Jetstar and Tiger - and the Virgin itself was the pioneer of it in the domestic market, charging extra for most things when it first started, luggage, all food, all drinks, IFE ...

 

[JohnK]

Squeeze more from customers? Another LCC? Yep that will save Virgin.

 

[straitman]

So he wants to turn Virgin Australia back into Virgin Blue?

What's the big deal about US airlines and ancillary revenue? Oh hang on, until it happens in the US, it doesn't happen.

Europe carriers are doing the same and in Australia we are very familiar with carriers who squeeze extra out of their customers - they are called Jetstar and Tiger - and the Virgin itself was the pioneer of it in the domestic market, charging extra for most things when it first started, luggage, all food, all drinks, IFE ...

Squeeze more from customers? Another LCC? Yep that will save Virgin.

A few long conclusions being drawn here. Has anything actually been published about his plans:?:

Everyone, me included, complains about airfares yet also complain when the airlines do a few things to increase revenue so that they can actually stay in business. IF VA cannot balance the books they will at some point fold and then we'll all be back to getting ripped off/gouged by Qantas.

Does anyone have any realistic ideas on how they can turn their losses into profit without increasing their income:?:

Alternately what should they do to fix the problem:?:

 

[Bundy Bear]

A few long conclusions being drawn here. Has anything actually been published about his plans:?:

Everyone, me included, complains about airfares yet also complain when the airlines do a few things to increase revenue so that they can actually stay in business. IF VA cannot balance the books they will at some point fold and then we'll all be back to getting ripped off/gouged by Qantas.

Does anyone have any realistic ideas on how they can turn their losses into profit without increasing their income:?:

Alternately what should they do to fix the problem:?:

realistic

Add back the baggage fees,
Fly to places that actually make money with the right number of seats.
Make business class good enough and price it at the right price to make people pay for it.
Add more Tiger to routes that Virgin cannot make money on, (main difference is no business class and pay for everything) not Bali.
Get the food offering correct, East-west is generally ok but the short haul routes if its going to be cough food then don't serve it go to B.O.B.

 

[andyhui01]

If they are thinking of adding checked baggage fees + No Food, doesn't that make VA even more expensive than QF if they keep the current ticket prices (I can't see them reducing the prices). I think the balance between service/price is currently spot on for my needs (inc. benefits for SG/WP).

Isn't VA DOM actually a profitable business and the liability is with VA Intl? Why meddle when you have spent 5 years creating that sweet spot between LCC and QF?

 

[dajop]

A few long conclusions being drawn here. Has anything actually been published about his plans:?:

If you read my post, my criticism wasn't meant to be about his plans, whatever they are, but a criticism about comments about adopting things they do in the US, as if they are the source of all knowledge and wisdom. No need to learn from US carriers, perhaps learn from the history of the company itself, Virgin Blue was all over the ancilliary revenue game until the relaunch as Virgin Australia. They were charging baggage fees and charging for proper meals and drinks, and for better seating, and paraded themselves as a "new world" carrier, well before the legacy carriers in the US went down that path.

Perhaps the rebranding and re-invention as Virgin Australia was necessary to get rid of some of the baggage (pardon the pun) with the Virgin Blue name, but a return to some of the roots of the company may well help.

The difficulty is the competitive situation, any move will be difficult unless QF do the same. In the US, the big three were able to do this as they more or less share common shareholders (i.e. funds) on their share registry.

 

[Moopere]

Isn't VA DOM actually a profitable business and the liability is with VA Intl? Why meddle when you have spent 5 years creating that sweet spot between LCC and QF?

This is my understanding as well. Domestic is ok, International is struggling. Wasn't too many years ago QF was in the same trouble, QFi, if you believed the general chatter, was about to be spun off, cut off, closed, cut back, whatever was appropriate. As I recall, routes were dropped and a back end restructure ensued.

Someone else recently posted in another thread in response to one of my posts ... why not just cut off VAi and focus on the profitable domestic business? Theres probably some good advice there. Instead of beating yourself up in an overcrowded market with ridiculously fierce competition, just build your partnership network ... even better, join * ..but even if thats not possible, fine, properly build this alliance thing that they've been engaged in for years. It can work, but they need to be vigilant and stay on top of their partners to ensure customers are getting the recognition and support that they are supposed to be getting. Happy customers, happy partners, everyone making money without the risk of flying your own metal internationally if you can't pull a dollar out of it.

 

[JohnK]

Does anyone have any realistic ideas on how they can turn their losses into profit without increasing their income:?:

Alternately what should they do to fix the problem:?:

I'm sorry I don't have any answers but increasing airfares and squeezing more out of customers is not going to make Virgin more money. It actually may have the opposite effect although Qantas appears to be doing well from over inflated airfares.

 

[pauly7]

realistic

Add back the baggage fees,
Fly to places that actually make money with the right number of seats.
Make business class good enough and price it at the right price to make people pay for it.
Add more Tiger to routes that Virgin cannot make money on, (main difference is no business class and pay for everything) not Bali.
Get the food offering correct, East-west is generally ok but the short haul routes if its going to be cough food then don't serve it go to B.O.B.

Agree with most of what you say but honestly if I was them I'd just ditch food (for Y).

They aren't anywhere near QF catering and by having such a weak offering it simply damages their brand and costs them money. So my realistic proposal for them to make more money would be to completely ditch their complimentary 'food' in Y and revert back to 'paid for' there - and just maintain comp J catering.

 

[moa999]

Certainly an interesting challenge.

With the two brand strategy, there needs to be some differentiation between Virgin and Tiger, but id certainly expect Tiger to grow more quickly given Thomas's background

More interesting is the overall branding
Tiger - Brand is disappearing in SIN and it still carries baggage locally
Virgin - Atlantic no longer flies to Aus, America brand is going, and Branson's stake is not what it usef to be
So could we see a rebrand of both ?? (Total speculation of course)

 

[williamsf1]

This is my understanding as well. Domestic is ok, International is struggling. Wasn't too many years ago QF was in the same trouble, QFi, if you believed the general chatter, was about to be spun off, cut off, closed, cut back, whatever was appropriate. As I recall, routes were dropped and a back end restructure ensued.

Someone else recently posted in another thread in response to one of my posts ... why not just cut off VAi and focus on the profitable domestic business? Theres probably some good advice there. Instead of beating yourself up in an overcrowded market with ridiculously fierce competition, just build your partnership network ... even better, join * ..but even if thats not possible, fine, properly build this alliance thing that they've been engaged in for years. It can work, but they need to be vigilant and stay on top of their partners to ensure customers are getting the recognition and support that they are supposed to be getting. Happy customers, happy partners, everyone making money without the risk of flying your own metal internationally if you can't pull a dollar out of it.

VAIaccording to the last financial statement actually made a profit, the issuewith VAI was Bali, where they have already taken steps to fix (hence theprofit)

 

[Deleted member 29185]

I've only just stumbled across this post (sorry, interest in VA waned some time ago for me). I don't see any mention of JT taking over from JB but a few posts here are almost stating that as being a done deal. Is there any further info on that, or just speculation (the guy may have simply wanted to return home to Oz and that job was going). I've been saying for at least a year that JB has to go, so in my thinking it would not be such a bad thing, but ... why is anyone talking this guy up? It seems he's simply known as someone who shafts the pax just a bit better than others. That doesn't sound like a great innovator. As others have said, squeezing extra $$$ by charging for ancillaries is hardly innovative. He'll need more substance than that and JohnK is entirely correct IME in stating that he can't just ride in and return to a DJ model (with a business class) without adjusting the fares (and not in an upward direction either). That isn't a plan, it's suicide.

However, I do like his comment about offering pax options. The latest move to YX has been predominantly hailed as positive by us critics here on AFF. I also think pax have been desensitised to pay for service concepts. Right back in DJ days, the G2G Foxtel was really a great innovation, but people were not used to paying for it and largely didn't want to pay for it. Marketing has come a long way and decent marketing about the choices (and realistic prices) will result in more people comfortable in paying for services they want and not worrying about services they don't want. Many of us have bemoaned the loss of DJ after experiencing initial elation at the JB game change and then being continually thumped in the abdomen with disappointment, failed promises and roll-back of services offered. Something is needed and maybe Mr Bagman might have some answers. I just hope he looks at the business product. It's too dear at the moment, but not by much. He needs to either drop the price or provide an exceptional service, and consistently filling those seats will give him the $$$ they so crave. Simply jacking up the prices (as they have been doing) whilst decreasing the offer (as was the case with book in advance discount being morphed into the ludicrous business saver offering which can actually cost more than a full J fare is a classic example of an airline taking pax as idiots), doesn't go down well with any pax with an IQ marginally higher than a nat and airlines trying it out are certainly at risk of wearing the wrath. I'd love to know how many loyal DJ pax JB and his team of hollow promise makers, lost as a result of their unwavering belief that loyalty is blind. They need to reverse those mistakes and win back pax like myself who now happily share their previous VA loyal payments with VA's opposition! That won't be that easy.