Virgin Australia Financials 2019/20

[dajop]

Cost aside - it's my opinion that VA would benefit significantly from joining Star. They would need to re-align Velocity slightly so that deep discount economy passengers are not penalised (like they currently are).

Unfortunately the alliance ship has sailed, but agree with you here. As the alliances are such a construct of the US carriers, it could never happen, but shame that VA couldn't operate within star (with respect to DL and UA) like QF does within oneworld (with respect to EK and QR). Cosy with non-alliance partner, and almost hostile to the alliance partner, but it seems to work. Star would have to be the choice over Skyteam, SQ alone has more flights to/from Australia than Skyteam, and even without NZ, #*a flights >2x#Skyteam flights.

Also a shame NZ signed the deal with QF, as with Luxon going from NZ within the month, and JB gone from VA, there might have been a chance between two new CEOs. Or maybe not.

 

[jakeseven7]

Unfortunately the alliance ship has sailed, but agree with you here. As the alliances are such a construct of the US carriers, it could never happen, but shame that VA couldn't operate within star (with respect to DL and UA) like QF does within oneworld (with respect to EK and QR). Cosy with non-alliance partner, and almost hostile to the alliance partner, but it seems to work. Star would have to be the choice over Skyteam, SQ alone has more flights to/from Australia than Skyteam, and even without NZ, #*a flights >2x#Skyteam flights.

Also a shame NZ signed the deal with QF, as with Luxon going from NZ within the month, and JB gone from VA, there might have been a chance between two new CEOs. Or maybe not.

The NZ deal with QF was like a cannonball to the heart for VA. They lose the NZ feed into their domestic business which was huge and they had to enter the knife edge TT market themselves, losing money straight away.

Interestingly in the Australian interview, PS actually says withdrawal from international routes and replacing with codeshares on partner airlines will be a strategy.

So you would think he would be referring to HKG.... Surely they won’t exit LAX? And there is not option for TT...

 

[jakeseven7]

There was an interview on radio this morning with a Comm Bank analyst I think who called VA:

‘A good solid domestic airline but a lousy business’

It triggered a memory so I googled. And that is exactly what another Aussie airline was called, slightly more complimentary though:

‘Great airline, but a poor business’ - Sir Rod Eddington.

That airline was Ansett!

Both airlines had useless and complicated ownership structures and fleet configuration problems. I mean that’s probably all the similarities but was a trip down memory lane.

 

[dajop]

There was an interview on radio this morning with a Comm Bank analyst I think who called VA:

‘A good solid domestic airline but a lousy business’

You could say that (sans the domestic part) about many many airlines. A bit like the old joke about "how do you make a small fortune out of an airline".

 

[JMB1]

As much as the QFFs may love it, something has to be done about the QF/NZ alliance. Ignoring the obvious business flaws of VA, it's still incredibly uncompetitive behaviour. While they don't cooperate directly Trans-Tasman, having by far the two biggest competitors provide feeds for each others' flights is going to create a duopoly and is a huge blow to already struggling VA.

Call me bitter, but I won't be the only bitter one if VA gives up on the Trans Tasman market and prices jump.

 

[Must...Fly!]

I don't disagree. I really loved the alliance with NZ, the lounges were really nice and it made travel across the ditch wonderful. I miss the NZ lounge in Melbourne, even if there was no view they had the best showers I've seen in a lounge.

 

[HS-TQE]

The NZ deal with QF was like a cannonball to the heart for VA. They lose the NZ feed into their domestic business which was huge and they had to enter the knife edge TT market themselves, losing money straight away.

Interestingly in the Australian interview, PS actually says withdrawal from international routes and replacing with codeshares on partner airlines will be a strategy.

So you would think he would be referring to HKG.... Surely they won’t exit LAX? And there is not option for TT...

VA and VS together had just recently applied for a JV on the AU-LAX-LHR and AU-HKG-LHR route (possibly under direction of DL), therefore a "complete" withdrawal internationally is not likely to occur at this time. This is in addition to the VA/DL JV which operates until the end of 2020.

VA/VS have interim approval under the JV before final clearance in November

It is likely though that the JV may be modified to remove the HKG part.

Virgin Australia & Virgin Atlantic

On 3 June 2019, Virgin Australia and Virgin Atlantic applied for authorisation to enable them to cooperate in relation to services between Australia and the United Kingdom and Ireland via mutual mid-points in Hong Kong and Los Angeles, and any future mutual connection points (the UK/Ireland...

www.accc.gov.au

 

[dajop]

As much as the QFFs may love it, something has to be done about the QF/NZ alliance. Ignoring the obvious business flaws of VA, it's still incredibly uncompetitive behaviour. While they don't cooperate directly Trans-Tasman, having by far the two biggest competitors provide feeds for each others' flights is going to create a duopoly and is a huge blow to already struggling VA.

Under the agreement QF and NZ still are competing TransTasman, or at least they should be. I get it though, does seem a bit off and makes it more difficult for VA to compete.

 

[TheInsider]

As much as the QFFs may love it, something has to be done about the QF/NZ alliance. Ignoring the obvious business flaws of VA, it's still incredibly uncompetitive behaviour. While they don't cooperate directly Trans-Tasman, having by far the two biggest competitors provide feeds for each others' flights is going to create a duopoly and is a huge blow to already struggling VA.

Call me bitter, but I won't be the only bitter one if VA gives up on the Trans Tasman market and prices jump.

Maybe actually look into what the actual 'alliance' is first, It has nothing at all to do with trans-tasman flights and only to do with connecting domestic flights in both countries. It's not uncompetitive behaviour at all, it's basic codesharing with lounge access. It's actually more of a win for NZ as they have more options to send their own customers on in Australia. Where as QF still send passengers on JQ, sold as QF flights in NZ.

 

[JMB1]

Maybe actually look into what the actual 'alliance' is first, It has nothing at all to do with trans-tasman flights and only to do with connecting domestic flights in both countries. It's not uncompetitive behaviour at all, it's basic codesharing with lounge access. It's actually more of a win for NZ as they have more options to send their own customers on in Australia. Where as QF still send passengers on JQ, sold as QF flights in NZ.

I am fully aware of what the alliance entails. The Trans Tasman flights of either do not operate independently of the rest of the network. They rely, in part, on domestic feeder traffic from destinations without direct flights. Previously, QF only had a domestic feed in New Zealand from it's JQ flights. Now it also has codeshares on a number of NZ flights covering a wider range of domestic New Zealand destinations.

Previously NZ had a domestic feed in Australia through VA flights. They now have codeshares on domestic QF flights covering a wider range of domestic Australia destinations.

Yes they 'compete' Trans-Tasman, but now the two biggest competitors have a domestic feeder network on both sides of the ditch, while the third largest competitor only has a domestic feed on one side.

 

[blaz]

Tigers biggest issue is it is unreliable...they will cancel a flight at a whim ( based on bean counting). Virgin Australia’s issue is that the product is only marginally cheaper than Qantas, but the flight service seems meaner...especially free wine, drinks and meals. They need to become part of an an alliance on their international route.

 

[pauly7]

Speculation on what’s route will face capacity cuts / cancellation here:



Virgin Australia is reviewing all routes — which ones are most likely to go?

Virgin Australia is in a deep financial hole, with its latest $349 million loss capping years in the red.

Key points:

• Analysts say second tier cities outside Sydney, Melbourne and Brisbane are most likely to lose flights
• International is Virgin's heaviest loss-making area and cuts to New Zealand and Pacific Island flights are expected
• Qantas is expected to take advantage of its "injured and wounded" competitor

"It's seven years of losses worth over a billion dollars," said aviation expert Neil Hansford, from Strategic Aviation Solutions.

"When you're in a deep hole you stop digging, but they haven't stopped digging. Now they've come out with announcements that really should have been taking place over the last several years."

Full article:

Virgin Australia is 'reviewing all routes' — which ones are most likely to go?

The airline says it is "reviewing all routes" as it tries to cut costs and bounce back from a $349 million loss. Aviation analysts take a look at which ones are most likely to be cut back, or chopped altogether.

mobile.abc.net.au

 

[pilotsh]

With perhaps the biggest real differences in philosophy/culture/product that we could hope for to give us as consumers the best choices. And NZ with their Star Alliance membership would make them a far more attractive option to someone like me.

I was once a member of the NZ FF program, but I gave that up as it seemed too convoluted and uninspiring for me. If I could fly them domestically within Australia, maybe that view point would change.

Unless ANZ overhauls their FF program, I don't see that being a draw card. It is probably the worst FF program on the planet ATM. Although, people may fly with them more on another carriers' flight number. (Like how now people earn/burn QFF points on EK metal/flights.)

 

[williamsf1]

The worst mistake VA ever maid was to migrate to Sabre .......
You can have the best product on the ground and in the air ....
The hottest looking crew....

But if the core system of your business is rubbish, you will never get the bums on seats. The system does not fit at all into the partnership strategy, the website is poor.

I am sure VA will survive after the cleanout that is needed.

 

[TheInsider]

The worst mistake VA ever maid was to migrate to Sabre .......
You can have the best product on the ground and in the air ....
The hottest looking crew....

But if the core system of your business is rubbish, you will never get the bums on seats. The system does not fit at all into the partnership strategy, the website is poor.

I am sure VA will survive after the cleanout that is needed.

Was quite a strange decision considering Virgin International used to use Amadeus anyway. Domestically they used Navitare. Obviously they needed to move to a new system domestically, but sabre was a really odd choice.

 

[HS-TQE]

Recent article from AA suggests that HKG and LAX will be retained for now due to current partnership agreements.

“The group intends to further reduce flying across elements of its short-haul international and domestic network to meet demand and maximise route profitability, and expects H1 FY20 capacity growth to be negative,” Virgin Australia said.

The reference to short-haul international suggests Virgin Australia intended to, for now, maintain a presence its two long-haul markets of Hong Kong (served with Airbus A330-200s) and Los Angeles (served by Boeing 777-300ERs).

Virgin Australia to cut 750 jobs and overhaul management structure

Virgin Australia chief executive Paul Scurrah says the decision to cut 750 jobs is a difficult but necessary for the airline group.

australianaviation.com.au

A recent interview from Paul Scurrah also strongly hints that he will continue to proceed with the VS/VA Joint-Venture agreement, which is already at the interim approval stage (for AU-LAX-LHR and AU-HKG-LHR) which includes the SYD/MEL-HKG flights. Scurrah also described HKG as 'early days', hinting he's give it a bit of time before eventually deciding whether to axe it/remove it from the VA/VS JV.

 

[Melburnian1]

Does this sort of negative publicity have any adverse effect on bookings in the (a) business travel (b) leisure market or is such financial commentary ignored by most Australians (many of whom, who travel by air occasionally, are financially barely literate or illiterate anyway - look at consumer debt.)

 

[chicko_10]

Hi All, Long time lurker, first time poster.

Curious timing (perhaps someone from VA has been reading this thread!) but just filled out a survey for Velocity Voice that was specifically focused on airline alliances namely Star, OneWorld and SkyTeam

Questions included:

1. Are you aware of global alliances;
2. The importance of airlines to be part of a global alliance;
3. Likelihood to fly with specific airlines based on their airline alliance
4. Ranking of attributes most important in your selection of alliance airlines
5. Ranking of current airline alliances
6. Ranking of top aspects of airline alliances

 

[Must...Fly!]

Highlighting what I said earlier about NZ being a difficult place to fly with VA outside AKL.

Looking at a long weekend away to CHC next month per the happy hour sale. No direct flight on Monday. Only option CHC-MEL a 0645 departure via BNE at a pretty hefty surcharge. Nothing after that at all.

It's not a competitive proposition any more. With the NZ alliance there were much better frequencies and options.

And with respect to @TheInsider. The codeshare arrangement between QF and NZ is clearly to the detriment of VA even if competition on the Tasman still exists. With the exit of EK, the duopoly have combined and it's absolutely anti-competitive behaviour to a degree, even if dressed up otherwise.

 

[justinbrett]

I am fully aware of what the alliance entails. The Trans Tasman flights of either do not operate independently of the rest of the network. They rely, in part, on domestic feeder traffic from destinations without direct flights. Previously, QF only had a domestic feed in New Zealand from it's JQ flights. Now it also has codeshares on a number of NZ flights covering a wider range of domestic New Zealand destinations.

Previously NZ had a domestic feed in Australia through VA flights. They now have codeshares on domestic QF flights covering a wider range of domestic Australia destinations.

Yes they 'compete' Trans-Tasman, but now the two biggest competitors have a domestic feeder network on both sides of the ditch, while the third largest competitor only has a domestic feed on one side.

This is more of an issue with lack of competition in New Zealand than anything else. We wouldn't be having this argument if there was a reasonable competitor to Air New Zealand operating NZ domestic that Virgin could partner with (Like Delta instead of AA, Virgin Atlantic instead of BA etc). So in fact the ANZ monopoly in NZ is the problem.

The issue is a matter of access rather than competition - we've established that the airlines compete trans-tasman, but what you're talking about is the lack of flights Virgin has to connect to in NZ.

You cannot possibly complain about Air New Zealand choosing to use Qantas instead of Virgin to partner with in Australia - they are free to use who they wish, as there is healthy competition between Qantas and Virgin. We don't live in a regulated market where the government says they have to use Virgin because Qantas is too big. That's just ridiculous.

You have a fair point about the NZ side though, but there's no easy solution. Under the previous arrangement Qantas didn't have many flights to connect to - other than its own. Virgin is free to start its own flights there too.