Virgin Australia going back to "its roots" ?

[Bagpuss]

"There is also the suggestion that Mr Scurrah was looking at positioning the Virgin Australia away from John Borghetti’s full service offering with a redirected focus “closer to its low cost roots.” "

Virgin Australia Slows Projects To Increase Returns

simpleflying.com

"Mr Scurrah's message suggests he is considering where Virgin should sit in the market, with the potential to reposition it closer to its low-cost roots. "

Virgin chief puts projects on go-slow in plan to stop financial nosedive

An internal email sent to staff last week reveals the hard-nosed approach CEO Paul Scurrah is taking to improve returns at the airline.

www.smh.com.au

I wouldn't be surprised if this is more along the lines of ditching the Tiger brand and making changes to how Virgin Australia operates. For example "off-peak" services could be economy only and "peak" services offering economy and business class.

 

[jakeseven7]

Wow....

This is a potentially a huge game changer and a massive change in direction, moving back towards to the old DJ days.

Interestingly I heard that a lot of John Thomas' ideas (the guy JB managed to get fired - a key rival) are back on the agenda for consideration, with a focus on generating ancillary revenue through charging for extras like baggage etc. It sounds like Paul is much more aligned with JT's ideas than JB's....

The only thing is that landscape has changed a lot, JQ is very very strong now compared to when VA first started re positioning, VA couldn't go TOO low market now - they would also piss off their small share of loyal/locked in business customers too if they went too LCC...

I think there is almost one certainty though - Tigers days are numbered...

Here is an article on JT's departure to refresh people: He brought in the paid extra legroom seating and paid wi-fi:

Virgin Australia second in command John Thomas departs after less than a year

Virgin Australia's second highest ranking executive is heading for the airline's departure lounge after less than a year in the job.

www.smh.com.au

 

[dajop]

Wouldn’t be a surprise. At a time when DJ was becoming VA and becoming “full service” - most legacy carriers in Europe and North America were moving in the other direction busy emulating the hybrid “new world” carrier model that Virgin Blue and WestJet more or less pioneered. From revenue based loyalty programs, to basic fares that didn’t include luggage to cash for catering unless on high fare, to “space plus” (remember DJ’s original stab at premium economy domestically?) etc.

Also in the process of chasing the bigger corporates I think VA lost sight of the niche where it seemed to do very well over QF - SME’s.

 

[jakeseven7]

Wouldn’t be a surprise. At a time when DJ was becoming VA and becoming “full service” - most legacy carriers in Europe and North America were moving in the other direction busy emulating the hybrid “new world” carrier model that Virgin Blue and WestJet more or less pioneered. From revenue based loyalty programs, to basic fares that didn’t include luggage to cash for catering unless on high fare, to “space plus” (remember DJ’s original stab at premium economy domestically?) etc.

Also in the process of chasing the bigger corporates I think VA lost sight of the niche where it seemed to do very well over QF - SME’s.

Maybe they will move to a more 'business lite' product like Etihad with 'seat only' / 'seat plus food' / 'seat plus bag' etc etc. Maybe for all classes?

We might just see a massive unbundling of all 'extras' for all classes to enable them to compete with both QF and JQ? (Typing this as I drive past a VA billboard saying NZ flights are all inclusive now lol)

The challenge is that business people (that fly) HATE unbundled fares and QF had a very strong attack in the market for years from a 'all included' marketing angle and that eventually forced VA to compete (cue the micro sized muesli bars!).

 

[Bagpuss]

The challenge is that business people (that fly) HATE unbundled fares and QF had a very strong attack in the market for years from a 'all included' marketing angle and that eventually forced VA to compete (cue the micro sized muesli bars!).

A hybrid approach is possible so you can meet both ends of the market. I'm pretty sure some Eurpoean and US carriers have taken this stance already.

 

[dajop]

A hybrid approach is possible so you can meet both ends of the market. I'm pretty sure some Eurpoean and US carriers have taken this stance already.

Yes. With slightly different approaches. US carriers have unbundled everything, but give it back to elites. European carriers don't give anything back to elites, but 2 of the 3 mega carriers haven't yet unbundled catering. (So in US, as an elite on basic fare, you still get checked bag for free, whilst in Europe, you need to pay for a fare including a checked bag to get extra checked bag under elite allowance) .

Also different carriers (LCCs or otherwise) adopt different approaches. Take EasyJet - they offer "flex fares" at a constant fare, independent of underlying lowest fare, whereas Jetstar used to do that, now you pay an add on to the underlying fare.

Irrespective, plenty of different models for VA to look out. Will be interesting what they consider for long haul. Historically long haul passengers have resisted unbundling in economy, even where it is a fait accompli in short haul.

 

[AIRwin]

(Typing this as I drive past a VA billboard saying NZ flights are all inclusive now lol)

You were typing while driving?!

 

[jakeseven7]

You were typing while driving?!

No, in an Uber but thanks for your concern

 

[jakeseven7]

Yes. With slightly different approaches. US carriers have unbundled everything, but give it back to elites. European carriers don't give anything back to elites, but 2 of the 3 mega carriers haven't yet unbundled catering. (So in US, as an elite on basic fare, you still get checked bag for free, whilst in Europe, you need to pay for a fare including a checked bag to get extra checked bag under elite allowance) .

Also different carriers (LCCs or otherwise) adopt different approaches. Take EasyJet - they offer "flex fares" at a constant fare, independent of underlying lowest fare, whereas Jetstar used to do that, now you pay an add on to the underlying fare.

Irrespective, plenty of different models for VA to look out. Will be interesting what they consider for long haul. Historically long haul passengers have resisted unbundling in economy, even where it is a fait accompli in short haul.

VA wanted more corporate business, so they moved to a more inclusive ticketing strategy because their bundling system caused business and corporate flyers great irritation and they weren't getting any traction. QF were slaying them. So they changed.

What is not public, or shared is that whether the move to try and be more inclusive actually worked to attract more business pax to them. Financial results and now these actions seems to suggest it also hasn't worked very well - or at least to the extent that they hoped it would.

I think VA will need to approach another un-bundling experiment with great great care because in this time they've been playing around with JB's hopes and dreams, QF has through huge efficiency projects, got their mainline cost base down significantly, is making money, has fixed international (or greatly repaired) and will be able to exploit any enhancements that VA make in this area....

Its high risk territory will be very interesting to see what PS does with VA. What they won't want is going too far and being compared to JQ!!

 

[Bagpuss]

Its high risk territory will be very interesting to see what PS does with VA. What they won't want is going too far and being compared to JQ!!

Totally agree. They can't just become a LCC as there is a reliance (an expectation) from Singapore Airlines, Etihad, Delta etc. to provide a good product and connectivity.

That said I think JB was a bit "like a bull at a gate", rebranding, new business class, catering etc. it was a never ending rollout of change costing millions in which there was never really going to be a return on investment. The hype of better business class which people would pay more for also never happened. It's now a case of sweating the assets.

VA really needs a standout partner/shareholder so it can reap better financial leverages and that would be fuel and aircraft (leasing/maintenance) at the top of the list. Unfortunately, close to home this is where Air New Zealand would have had a heap of sense, further afield ... Waving at Delta Airlines ... Hello ????

Anyway, we all armchair CEO's on this and let's see what pans out. With PS, I dont think we will waiting too long to find out.

 

[docjames]

With all the “unbundling” in the industry, surely the scope exists to have a tiered product with short haul J, YX, Y and Y- (no luggage, no choice of seat, last to board etc). Allows a “loss leader-level” fare to compete with JQ, and a better product closer to the front of the aircraft for the “corporate accounts”. And delete Tiger which seems unable to be grown sufficiently to make money - if they can get the unit cost down sufficiently (deleting Tiger would be a good start.....) then Y- priced similarly to Jetstar would allow them to fill unsold seats / leisure routes. The major players in the US have been making inroads into this model for a while.

Another thing to consider is their AFL contract - part of the driver of YX was it gives 18 seats towards the front of the aircraft, plus the exit rows, which are routinely blocked for the AFL players/support staff to travel interstate. So that would factor into cabin fit out decisions to some extent.

 

[Zanzara]

Am I imagining that there's a bit of cost cutting going on at VA at the moment than previously? I've had a few flights being canxd & rationalised.

Food in the lounge hasn't changed much yet, the so called 'meal' has never really been more than a parsimonious token and couldn't get much smaller... Wine miniatures have being phased out for serves from large bottles - which is presumably cheaper.

 

[Bagpuss]

Am I imagining that there's a bit of cost cutting going on at VA at the moment than previously? I've had a few flights being canxd & rationalised.

They have carried out a preliminary network review which I expect will continue.
Other than that I don’t think there’s been much visibility yet.
JB, the previous CEO was “cost cutting” for many years.

 

[casanovawa]

With 4 or so large diverse airline share holders hard to see where any high level strategic direction is going to come from, or choosing to join a proper alliance etc...

But you'd think they'd have a pretty good idea of where the money is being loss, or an insufficient return being made and make some hard decisions there...

Hopefully there aren't too many cuts from the passenger experience as then Qantas can follow suit or up the cost... But shareholders have different concerns...

 

[clipped_wings]

Such an interesting thread if we want it to be.

Imagine you were SC - what would be your agenda?

An airline is a juggernaut compared to a micro business. But the fundamentals are the same. Deciding what it is you want to sell. Doing it better than anyone else and finding your niche market. Now, I understand that an airline has to amalgamate more than one ideal in order to be viable, and the fact they are a publicly listed company means they must answer to shareholders. Which loosely translates to "Profit at All Costs".

But how does a business decide what their product is, if they don't continuously check to see if a customer wants it? A wise trade employer once told me "The Customer has three options: Quality. Lead time. And Price. They only ever get two - and they trade in the third one to get those two. The trick is, making them feel like they got all three. Do that, and they will be repeat customers forever."

Surely PS could sit down with his team and deconstruct the VA model, so they can see what's working and what's not. And don't discount customer feedback as a valuable resource. "Why do you fly? Where to? Can we make it better/faster/cheaper for you? What is the most important aspect of flying for you?" If bums on seats is the Ultimate Goal - why not approach those bums on seats in the first place?

I know R&D is daunting, costly and time-consuming. But the banks do it. McDonald's has been doing it forever. It's a necessary tool for any dynamic working environment. (Not those pathetic, generic 2 minute email surveys, which are useless. It needs to be detailed, with complete and utter attention on the Customer) I think most FF's would kill to be heard. To be a part of the process.

Only then, can Virgin identify why people are flying on their planes. Or not. It's that simple. All those brains in the room don't have a hope in Hell of saving VA if they disregard the one thing that keeps them employed in the first place. The Customer.

We have to be the first place they look if PS has any hope of finding those roots.

 

[jakeseven7]

Such an interesting thread if we want it to be.

Imagine you were SC - what would be your agenda?

1) Shut Tiger

2) Un bundle J Class and offer a) seat only b) seat + catering + bag

3) Create a 'bogan' class Y offer and offer a) seat only, no seat selection, zero flex, and no FF privileges (nothing) or earning capacity - literally just the seat only, down the back and fight JQ there. Corporates won't book that.

4) Maintain other Y bundles because if they unbundle too much QF will crucify them (again) with corporate pax

5) Full strategic review of VAi and be prepared to pull some routes / return planes if required. Focus on domestic.

6) Try and begin building relationship again with NZ (slowly). NZ are a natural enemy of QF and QF just has to flick a switch to inflict NZ maximum pain and NZ know it, so a more 'trustworthy' long term partner like VA now the absolute joke leaders of JB and Chris Luxon and their school yard fights are history.

 

[BAM1748]

With Virgin changing things yet again, this will give certainty that Alan Joyce will be getting another bonus this year.

 

[codash1099]

A reasonable summary here:

What Virgin must do to save itself from financial ruin

Virgin Australia should go back to being a budget airline to turn the financially embattled airline's fortunes around, an industry insider says.

thenewdaily.com.au

 

[Bagpuss]

5) Full strategic review of VAi and be prepared to pull some routes / return planes if required. Focus on domestic.

With the new planned partnership with Virgin Atlantic I don't expect they will pull out of Hong Kong or the US. There could scope for them to fly into a different port other than LAX.
Unless they pull out of the US I don't see them returning any planes, they own all bar one of the B777's, though the A330's are fully leased.

I'd vote for a seasonal weekend SYD - LAS service, but that's just me!

 

[Tallfont]

If they are going to back "to their roots" well good on them! It just confirms what I have been saying for a couple of years. VA is an airline with an identity crisis.

After being VA Platinum for over 5 years and seeing declining service, A330's taken off East-West, deterioration of lounge food, drinks and service I moved back to QF 18 months ago. Best decision I have made. QF aren't the best in the world but in the Australian market their product is probably the most consistent.

I wonder if they are going to get the cabin crew to start telling silly jokes before the safety briefing like the "good old days" of VB.............